In this comparative report, we look at the differences between doing business in Singapore and Vietnam.
This report refers to data from World Bank’s 2014 ‘Ease of Doing Business’ report and World Economic Forum’s Global Competitiveness 2013 – 2014 as well as 2014 Global Enabling Trade reports. It measures five indicators, namely company incorporation, corporate tax rate, foreign investment friendliness, intellectual property protection and workforce.
Vietnam’s economy has expanded rapidly due to the government’s persistent efforts on improving the investment climate and securing socio-political stability.
According to an article on the WEF Forum Blog, titled “Why foreign investment in Vietnam is booming”, Prime Minister Nguyen Tan Dung said that in 2013, FDI inflow exceeded $22 billion. This represents more than 35% growth from 2012. PM Dung said the government is committed to create a fair and attractive business environment for foreign investors.
However, The South Asian nation, has still a long way to go to catch up with its neighbor, Singapore.
|World Bank’s Doing Business (DB) 2014
Singapore vs. Vietnam
|Starting a business||3||109|
|Dealing with construction permits||3||29|
|Trading across borders||1||65|
According to the Doing Business report, starting a business in Singapore is easy. It takes only 2.5 business days and three procedures to get a business registered. Hence, it was ranked 3rd worldwide for the category of starting a business. Starting a business in Vietnam is not as easy. It takes about 34 days and 10 procedures to get a business registered.
Dealing with construction permits is also faster in Singapore. According to the Doing Business report, it takes only 26 days and 11 procedures to obtain the clearance and approvals necessary to build a warehouse and get the utility connections in Singapore. In Vietnam, it takes the same number of procedures but over 114 days.
In terms of taxation, Vietnam ranked 149th in the Doing Business report. On the other hand, Singapore was ranked 5th.
The corporate tax rate in Vietnam is 25%, slightly higher than Singapore’s, which stands at 17%. A business in Vietnam makes 32 tax payments a year. This is higher than the average of 25 payments in East Asia and Pacific. Businesses based in Vietnam also spend 872 hours a year filing, preparing and paying taxes. In contrast, Singapore businesses make five tax payments and spend 82 hours a year filing, preparing and paying taxes.
For more details on tax rates in Singapore, please visit our page on Singapore taxation.
Foreign investment friendliness
In order to attract investments, a country should also have the regulations in place to protect investors. In the Doing Business report, transparency of transactions, liability for self-dealing and the shareholders’ ability to sue officers and directors for misconduct make up the Strength of Investor Protection Index. Singapore scored 9.3 out of 10 while Vietnam scored 3.3. As a result, Vietnam ranked 157th for protecting investors while Singapore ranked 2nd.
In addition, the Singapore government supports an open trade policy and implements few barriers to external trade transactions. The 2014 Global Enabling Trade report ranked Singapore at the top position due to its trade friendly regulations and a business enabling environment. Vietnam stood at the 72nd place, and access to financing has been cited as the most problematic factor for doing business.
Moving forward, Singapore will place greater focus on sound and accurate financial reporting to avoid tax evasion and financial crimes as well to safeguard bonafide investors. An emphasis on compliance with regulations like FATCA and BASEL III will continue to ensure wealth protection for genuine investors and in-the-process attract higher foreign investment.
Intellectual property protection
Protection of Intellectual Property (IP) rights is an important factor in the knowledge-based economy and also a crucial factor for raising the confidence of foreign investors in a country. The World Economic Forum’s Global Competitiveness Index (GCI) ranks Vietnam at 116th position for intellectual property protection. Singapore stands second in the world and first in Asia for having the best IP protection. According to the IPOS, Singapore is keen to be a global hub for IP.
|WEF’s Global Competitiveness Index 2013 – 2014
Singapore vs. Vietnam
|Basic Requirements (60%)||1||86|
|Health and primary education||2||67|
|Efficiency Enhancers (35%)||2||74|
|Higher education and training||2||95|
|Goods market efficiency||1||74|
|Labor market efficiency||1||56|
|Financial market development||2||93|
|Innovation and sophistication factors (5%)||13||85|
In terms of labour market efficiency, the GCI has ranked Vietnam 56th worldwide. The country scored well in two indictors – women’s participation in the labour force as well as pay and productivity. However, for the remaining 8 factors, there is room for improvements.
Restrictive labor regulations are cited in the GCI as Singapore’s most problematic factor for doing business. However, the citystate scores very well in 9 out of 10 indicators in the pillar of labour market efficiency. Vietnam also supercedes Singapore in terms of women’s participation in the labour force, the only category which saw Singapore rank at 84th position.
In a Nutshell
Vietnam’s economy has expanded rapidly due to the government’s persistent efforts in improving the investment climate of the country and generating confidence in entrepreneurs by maintaining socio-political stability. However, Singapore is still the preferred business destination in terms of ease of company incorporation, low corporate tax rates, foreign investment friendliness, intellectual property protection and better educated workforce.