5 Reasons Indian Start-Ups are Heading to Singapore

Singapore makes every effort to position itself as one of the best places to start or expand a business and it has definitely caught the attention of Indian start-ups. According to an article on Business Today called “Look East Policy”, the number of Indian start-ups in the city-state has grown from 1,100 to 4,000 between 2000 and 2012.

Here, we look at the 5 reasons why they see Singapore as the preferred location for their start-up operations.

Ease of Doing Business

In order for a start-up to thrive, it has to be provided with the right conditions. The ease with which business can be conducted depends on numerous factors and varies from country to country. According to the World Bank’s latest Doing Business Report, Singapore has been ranked number one in the world for ‘Ease of Doing Business’. In comparison, India has been ranked 134th. Singapore scored high points in areas that are important for entrepreneurs and start-ups; namely access to capital and credit, as well as how effectively insolvencies are resolved.

Better Infrastructure and Lower Corruption

Start-up companies need all the help they can get in order to achieve their maximum potential. Even the most dogged of entrepreneurs cannot operate in an environment that is hostile towards business growth. In the latest Global Competiveness Report released by the World Economic Forum, the most obvious differences between Singapore and India, with regards to fostering new businesses, becomes quite apparent. While Singapore is ranked 2nd out of 144 countries, India stumbles in at 60th.

Although India has a rapidly growing economy, it still proves to be a difficult place for businesses to operate from. A breakdown of the report shows that the lack of infrastructure and high levels of corruption are two of the biggest stumbling blocks for start-ups in India.

As a result, a neighboring country like Singapore that does so well in these rankings seems very appealing to budding entrepreneurs. In an interview titled “India needs more infrastructure, less corruption,” Thomas Pritzker, Executive Chairman of Hyatt Hotels, pointed out that unless these two major issues were addressed, doing business in India can be draining.

Singapore’s corporate tax rates under the full start-up tax exemption (SUTE) scheme

Corporate Tax Rates

Singapore has one of the most attractive corporate tax rates in the world. At 17%, it stands at half of India’s corporate tax rate. On top of this, Singapore offers start-up tax exemptions (SUTE) for newly-formed companies. So, even though start-ups can be eligible for numerous tax breaks in India, the eventual amount they end up paying is still greater than what they would have to pay in Singapore.

This has often been one of the prime factors why businesses choose Singapore as their hub for South and South-East Asia. It is only natural then that even start-ups would want to benefit from this. Singapore has a comprehensive Avoidance of Double Taxation Agreement (DTA) in place with India, which insures that Indian entrepreneurs are not penalized for establishing their start-ups in Singapore.

Availability of Skilled Workforce

According to an article on Forbes, “8 Reasons Startups With Good Ideas Fail”, not having the right team is one of the key reasons why a start-up with a good idea can fail. The level of talent available in the country is directly proportional to how skilled the employees of a start-up company can be. In this regard, Singapore certainly has beat India.

In addition, INSEAD has ranked Singapore 2nd on their Global Talent Competitiveness Index. This is in sharp contrast to the situation in India where, according to the World Economic Forum, the lack of a skilled enough workforce has driven down competitiveness and businesses have difficulty finding qualified employees to drive the company forward.

Better Access to Emerging Economies

One factor that works in Singapore’s advantage is its location. Any start-up based in Singapore places itself right at the doorstep of multiple emerging economies in South-East Asia, including Indonesia and Thailand. Singapore is very well-linked with the rest of the world thanks to its excellent infrastructure. For many start-ups, expanding to international markets in the early stages is crucial and Singapore provides a much better platform.

As long as the current performance gap between India and Singapore exists, it is very likely that more Indian startups continue heading to Singapore to set up shop.