Singapore is well positioned to weather economic uncertainty in 2016, says Jacqueline Low, Chief Operating Officer, Asia.
New business formations
2015 was a year of ups and downs but overall there was a notable increase in the number of companies formed, underscoring the resilience of Singapore as a business friendly jurisdiction. It reflects the inherent strength of Singapore to sustain enterprises even amidst tumultuous economic conditions. Singapore authorities and companies have worked hard to ensure Singapore remains the business hub of South East Asia. With several tax treaties with trading partner countries, free repatriation of profits and no capital-gains tax, Singapore has cemented itself as a probusiness nation and a first class financial destination.
Amidst the challenging global economic conditions, Singapore’s commitment to being a business friendly jurisdiction will benefit the economy and community for the long term. From the recent budget announcement it is clear that emphasis will be placed on matters relating to the economy and the various measures which will help companies to battle the storm. We expect that business formation activity will gather momentum in the second half of 2016.
Type of business formation
In 2014, there was an increase in the number of Sole Proprietorships registered, which may have been the result of schemes such as the Productivity and Innovation Credit (PIC) taking effect. By December 2015, the tables had turned and Private Limited Companies were returning to favour and taking the lion’s share of business formations for the final quarter of the year.
Formation by industry sector
Previously, the top three industry sectors were wholesale trade, financial services and head office and management consultancy activities. The manufacturing sector was hit badly and while the first six months of 2016 will continue to be weak, it is expected to post a recovery from Q3 onwards.
Formation by foreign investor
Singapore continues to attract international investors and entrepreneurs, and I anticipate this will be a solid and ongoing trend for the year ahead. The share of foreign individual shareholders increased in Q4 of 2015 and continues to grow at a steady pace. Individuals from India, China and Malaysia continue to dominate. Individual investors are also increasingly coming from diverse countries such as Japan, Australia, Indonesia, the UK and France.
Singapore continues to attract and retain foreign companies, investors and entrepreneurs because of its strong business fundamentals, its strength as a financial and trade hub and its reasonable tax rates. However, we should take note that it is not insulated from the global economic conditions. I expect the regional economies and trade integrations to sustain the economic vibrancy here in Singapore. The strong employment numbers and growth in incomes will bouy domestic consumption and I look forward to the much-desired thrust in the global economy to drive and maintain this trend. The SME Working Capital Loan announced in the 2016 budget will be helpful in supporting SMEs that may have cash flow concerns or wish to expand.
The 2016 budget strikes a fine balance by incorporating measures to address the short and middle term challenges and schemes to transform and equip the nation, by means of enterprise, industry, technology and people specific plans to achieve long-term economic goals.
There continues to be interest in and growth of business formations in Singapore whether locally, where there is a continued push by the country for entrepreneurship amongst its people, or from outside Singapore. As the economic outlook in various other jurisdictions continues to slide, Singapore’s location, stable government, reasonable tax rates (both corporate and personal) continue to make it a viable place to do business and live. Asia remains the place to be and I believe there is still more the region can offer. There is no doubt that 2016 will see some degree of a slowdown but things should pick up by the second half of the year.
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