18,689 new businesses were formed in Singapore in Q2 2014, registering a 15.4% increase from the previous quarter.
Trend Analysis - 11/04/2014
Janus Corporate Solutions has released the Q2 2014 Singapore Business Formation Statistics Report. The first quarter of the year opened with a record number of business formation. This momentum has further gained acceleration in the second quarter with a total of 18,689 new businesses registered. It is a significant QoQ growth of 15.4% and an increase of 16.6% against that of Q2 2013. The sustained momentum is testimony to Singapore’s role as a commercial hub of the region and the growing confidence of the business community on the rebound of western markets.
Private limited companies continued to be the dominant type with over 51% of the total registration being private limited companies; of these, 8,188 companies were exempt private limited companies. The exempt private limited companies continue to remain the most preferred type of entity because of its tax friendliness and relatively minimal compliance requirements.
The sole proprietorship category was a show stealer of this quarter, because of the phenomenally sharp increase in the number and share of such entities in the total business formation. Sole proprietorship is generally a preferred vehicle among people engaged in less risky small businesses, especially among freelancers. In March, during the parliamentary debate over the Budget 2014, attention was drawn to freelancers and self-employed people and policymakers were urged to design schemes specifically targeting the concerns of this group, which forms an integral part of the local workforce.
Subsequently in this quarter, we find that the sole proprietorship registration has dramatically increased by 32.6% against the preceding quarter and by 38.9% when compared to the same quarter last year. This category accounted for 40.4% of the total new business formation in the quarter, which is a significant departure from the general trend for this category. We assume that besides growth of entrepreneurial spirit in Singapore, the call for schemes to help freelancers and self-employed people may have urged them to register their business to secure a legitimate identity in order to gain access to such schemes.
Entrepreneurs continue to take advantage of the favorable share capital clause of the Singapore Company Act that allows businesses to be formed with share capital as low as S $1. As a result, in this quarter 74% of the businesses were formed with less than $10,000 share capital. There was a marginal increase in the number of businesses formed with a share capital of S$10,000 – S$100,000, which indicates that more high value businesses are being set up in Singapore.
Singapore, with its strong business friendly fundamentals and its strategic location amidst the burgeoning Asian markets, continues to attract foreign investors and enterprises to set up business operations there. Of the new business formed in Q2 2014, 31% had foreign shareholders, fortifying the strong reputation of Singapore as an efficient regional hub for international businesses. The share of business with foreign shareholders has declined marginally on the back of growing concerns about credit rate increase and tapering of quantitative easing.
While new businesses formations continue to be predominantly from wholesale trade and financial services sectors, the share of new businesses formation in the retail sector has registered a marginal growth. The strong domestic spending of consumers may have attracted more players into the retail sector.
Commenting on the continued robust growth in business formation Ms Jacqueline Low, Chief Operating Officer of Janus Corporate Solutions, says:
“The significant growth both in terms of QoQ and YoY, signals the growing confidence of the entrepreneurial community and investors in Singapore. The west is rebounding, China despite the slowed growth has stabilized and India is promising new potential as with the newly elected pro-business leader at the helm, ASEAN Community is close to reality. The overall scenario is good. The economic rebound and its momentum are sure to stay for the rest of the year and although the pace will be sluggish, the fact that it is set on an upward trajectory is in itself very reassuring. Eurozone is still an Achilles heel nursing the crippled economy, and the brewing storm in Iraq and searing tension in Ukraine are potential risks to this upward trend. On the home front, this quarter it was challenging, with a slump in services as well as manufacturing sector, but the integral strength of the economy and its competitive business quotient seems to have shored up the confidence of the business and investor community, which is evident from the business formation numbers. Economists forecast a sustained growth for Singapore with the recovery of its export markets and therefore the second half of 2014 should also be extremely good for new business formation.”
For Q2 2014 Singapore Business Formation Statistics Report please click here.
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