GUIDEMESINGAPORE INFO

Doing Business in Singapore vs Malaysia

Today, there are numerous opportunities for entrepreneurs to setup a business in different countries. In an ever evolving business landscape, going global seems to have become the order of the day. Moreover, with the ascendancy of the Asia as an economic powerhouse, it is only natural to turn to the region for business setup and expansion. Given that there are many attractive business destinations to choose from in the Asian region, it is important to invest adequate time and resources in finding the most suitable location.
Choosing the right business destination will directly impact the success of a business. Assessing a country’s performance in various international rankings, surveys and studies is often a good way of researching a particular economy. In this regard, a comparison of country rankings between Singapore and Malaysia shows that Singapore is a more business-friendly location. Summarized below are the contrasting factors between both the economies:

IP Protection

• Singapore’s strong IP protection regime won the 3^rd spot in the WEF’s ‘2010 World Competitiveness Report‘ while Malaysia’s rank was #33.
• Forbes magazine also highly rated Singapore’s property rights regime as the 8^th best in the world whereas Malaysia’s 39^th rank demonstrated its weak IP protection regime.

Global Competitiveness

• Singapore is the 3^rd most competitive economy in the world according to the WEF’S ‘2010 World Competitiveness Report’ whereas Malaysia ranked #26 in global competitiveness. An inefficient government bureaucracy, inadequate access to financing, political instability, inadequately educated workforce, restrictive labor regulations, corruption, inadequate supply of infrastructure, and tax regulations were the most problematic factors for doing business in Malaysia. By contrast, Singapore’s institutions were assessed as the world’s best. It ranked 1^st for lack of corruption, government efficiency, efficiency of its goods and labor markets and 2^nd for its financial market sophistication.
• The Heritage Foundation’s ‘2010 Index of Economic Freedom‘ ranked Singapore’s as the 2^nd freest economy in the world while the Malaysian economy ranked 59^th. According to the Index, “Corruption and a judicial system that remains vulnerable to political influence remain significant challenges to economic freedom in Malaysia.” Singapore’s freedom to conduct business and trade, its low tax rates, low government spending, liberal foreign ownership policy, flexible labor market, and freedom from corruption are what makes its economy competitive in the region.
• IMD’s ‘World Competitiveness Scoreboard for 2010‘ places Singapore in the top spot while Malaysia came in 10^th. Singapore ranked as #1 for business efficiency, #2 for government efficiency, #5 for economic performance and #11 for infrastructure.

Openness to Trade

• Singapore’s economy is best suited for trade according to the WEF’s ‘2010 Global Trade Enabling Report‘ whereas Malaysia ranked #30. Singapore secured the #1 rank for domestic and foreign market access, customs administration, efficient import/export procedures, regulatory environment, and quality of transport. Malaysia’s domestic and foreign market access was rated as #31, customs administration was #48, efficieny of import/export procedures was #29. Furthermore, the WEF noted that the quality of Malaysia’s business environment had deteriorated considerably since the last assessment.

Innovation

• According to the ‘2010 Global Innovation Index‘ released by INSEAD and the Confederation of Indian Industry Singapore ranks #7 in the world for innovation while Malaysia was accorded the 28^th spot. The Singapore government has been actively encouraging companies to invest in R&D and engage in activities that will spur innovation. The new ‘Productivity and Innovation Credit Scheme’ that was launched this year provides tax deductions for companies that spend on areas that make them more innovative.
• According to Forbes’s ‘2010 Best Countries for Business‘ index Singapore scored #10 for innovation whereas Malaysia’s score stood at #24 on this parameter.

Bureaucracy

• Bureaucracy, red-tape and corruption is one area where Singapore winds hands down over Malaysia. The ‘2010 Corruption Perceptions Index‘ released by Transparency International shows that Singapore is the least corrupt nation in the world. By contrast, Malaysia’s rank was #56.
• Earlier this year, Singapore was ranked as having the most efficient bureaucracy in Asia, by the Political and Economic Risk Consultancy while Malaysia secured the 7^th place.
• According to the WEF, Singapore has the Highest Public Trust of Politicians, Least Burden of Government Regulation, and Highest Transparency of Government Policy Making. Malaysia ranked #35, #17, and #37 on the same indicators.

Labor Force

• Singapore’s labor force is the best in the world according to BERI’s ‘2010 Labor Force Evaluation Measure‘.
• Singapore’s labour regulations are the most business conducive in Asia, while Malaysia’s are the second most conducive according to the IMD ‘2010 World Competitiveness Yearbook‘.
• Aon Consulting’s ‘2010 People Risk Index‘ ranks Singapore as #3 in the world for low risk of recruiting, employing, and relocating employees while Malaysia ranks #51.

Living Environment

• According to the IMD ‘2010 World Competitiveness Yearbook’, foreign talent rank Singapore as Asia’s best country to work in while Malaysia is the 3^rd best.
• ECA International’s ‘2010 Location Ratings System‘ cited Singapore as the best place to live for Asian expats.
• Mercer ranks Singapore as offering the best quality of Asia in its ‘2010 Quality of Living Survey‘.
• Singapore is the most desirable immigration hot-spot according to Gallup’s ‘2010 Potential Net Migration Index‘.
• According to HSBC’s ‘2010 Exapt Economics Report‘, Singapore ranks #4 in the world for expats’ financial quality of life.

At-a-glance Country Rankings: Singapore vs. Malaysia

Year	Category	Singapore’s Rank	Malaysia’s Rank	Source
2010	Ease of Doing Business	1	23	World Bank, Ease of Doing Business Report
2009	Country with Lowest Tax Misery	11	17	Forbes Tax Misery and Reform Index
2010	World’s Most Competitive Economy	3	26	World Economic Forum, Global Competitiveness Report
2010	Country Most Open to Trade	1	30	World Economic Forum, Global Enabling Trade Report
2010	World’s Most Competitive Economy	1	10	IMD, World Competitiveness Yearbook
2010	World’s Most Innovative Economy	7	28	INSEAD and the Confederation of Indian Industry’s Global Innovation Index
2010	World’s Freest Economy	2	59	Heritage Foundation’s Index of Economic Freedom
2010	Asia’s Most Business Conducive Labor Relations	1	2	IMD, World Competitiveness Yearbook
2010	World’s Best Labor Force	1	-	BERI’s Labor Force Evaluation Measure
2010	Country with Least Corruption Perception	1	56	Transparency International’s Corruption Perceptions Index
2010	World’s Best Country for Business	5	31	Forbes’ Best Countries for Business Index
2010	Most Efficient Bureaucracy in Asia	1	7	Political and Economic Risk Consultancy Survey
2010	Asia’s Best Country to Work In	1	3	IMD, World Competitiveness Yearbook
2010	World’s Lowest Risk City for Employers	3	51	Aon Consulting’s People Risk Index

On a Final Note

The above analysis reaffirms Singapore’s dominance over Malaysia as a business jurisdiction. By realigning its tax policy, easing the company formation process, wiping out bureaucracy, nurturing an innovative economy, building a formidable work force ,and offering a high quality of living, Singapore has emerged as one of Asia’s most best-friendly locations.