Strategic decisions relating to business locations are based on an evaluation of multiple factors. Tax and business costs have long ceased to be the parameter for identifying an ideal business hub; investors are keen on evaluating other important factors such as the country’s trade and political relationship with the rest of the world besides other factors such as the workforce quality, living standards, infrastructure and regulatory framework. Singapore despite being a small city-state has consistently outperformed in several international surveys that measure the attractiveness and competitiveness of business jurisdictions. The following is a comparative evaluation of the competitiveness of Singapore vs. Australia as business jurisdictions.
Singapore is the preferred business jurisdiction in the region for Australian companies and investors targeting opportunities in the South East Asian region. Singapore is Australia’s fifth largest trading partner and for Singapore, Australia is the 12th largest trading partner. Both countries have a long-standing bilateral trade and economic relationship and have agreements such as, the Singapore Australia Comprehensive Strategic Partnership, in place to extend cooperation and support to jointly promote innovation and entrepreneurship. In March 2017, Australia also launched its Landing Pad in Singapore; Launch Pad is a scheme to help Aussie startups expand into the Asian region. Australian companies, both large and small, have located their regional base in Singapore and moved some of the business operations to Singapore because of the distinct advantages that the island nation offers. So let’s explore how Singapore compares with Australia in key metrics as a business location.
|Population||23.8 million||5.5 million|
|GDP||USD 1.3 trillion||USD 292.7billion|
|GDP Per capita||USD 56,290||USD 52,888|
|FDI Inflow||USD 38.6 billion||USD 65.3 billion|
Political stability is a key factor that investors and businesses evaluate when they choose a business location. This is a critical factor that determines the policy direction and economic and trading relationship of a country with the rest of the world. Singapore’s political and policy environment are conducive to business. The political stability of the island-state has resulted in a cohesive policy direction that is highly in favour of enterprises. The country has embraced liberalisation as a means for economic prosperity. This has paved way for a vibrant enterprise ecosystem where enterprises of all sizes are able to thrive and progress.
Australia was politically stable but since 2010, the Prime Minister has changed five times. Having five PMs in a span of six years does not reflect well on the country’s policy environment, which is a major concern for the business and investor community. There is a rocky road ahead for the present government with wafer thin majority to implement the much needed economic and fiscal reforms.
The Economic Intelligence Unit’s, ‘Business Environment Ranking 2016’ placed Singapore on top of the 82 countries that it surveyed. The EIU forecasts Singapore to remain as the most investor-friendly location during 2017-2021. Singapore’s score, in terms of ‘institutional effectiveness’, surpassed all other countries surveyed. In contrast, Australia ranked 13th globally in the forward-looking survey. The report particularly raises concern over the political stability and lack of resolution in sight for the parliamentary gridlock.
In the ‘Political Stability Index 2015’compiled by the Globaleconomy.com based on data from the World Bank, Singapore ranked 11th while Australia ranked 41st.
Ease of setting Up Business
Singapore has one of the easiest regulatory frameworks to set up a business. It allows for 100% foreign ownership. Excluding key industries such as defense and media, there are relatively few restrictions on the kind of activities that may be carried out by a foreign company in Singapore, although some may require licensing by the appropriate government authority. However, it must be noted that there are restrictions for foreign-owned companies to own land.
Australia also has similar restrictions when foreign-owned companies acquire landed property or acquire an interest involving real estate. Likewise, there are restrictions and regulations for foreign investment in companies that exceed a certain valuation. There are restrictions on foreign ownership in certain key industries such as banking, shipping, airports, and airlines.
In the World Bank’s ‘Doing Business Report 2017’, for overall ease of doing business, Singapore ranked #2 globally and Australia ranked #15. While Singapore has consistently held on to its second rank globally for several years, Australia in contrast, dropped from 13th rank in 2016. For the ‘ease of starting business’ criterion, Singapore with sixth preceded Australia that held the seventh spot on the index.
Rule of Law must be strongly embedded in the judicial system of a country to attract foreign investment and international business. Singapore has always emphasised on the rule of law and the country has a strong reputation for its corruption-free governance, fair, efficient and predictable legal system.
Australia, being a commonwealth nation, also has heavily borrowed from the British legal system as well. Though both the former British colonies have influences of the British law, Singapore is greatly acclaimed for the transparency of the system that is free of corruption.
In the World Justice Project’s ‘Rule of Law Index 2016’, Singapore ranked #9 while Australia held the #11 spot. Singapore particularly scored over Australia in factors measuring regulatory enforcement, the absence of corruption, order and security, criminal and civil justice. Australia scored over Singapore in two key factors namely, open government and fundamental rights.
Internal and external peacefulness is key for economic vibrancy. A peaceful economy is the one that is prosperous where consumption and investment fuel the engine of growth.
Singapore strives to uphold a harmonious society and peaceful coexistence amidst its multi-racial population. Singapore’s crime rate has always remained low compared to its neighbors. The peace within the country reflects well on the human development indicators such as education, health, employment and social support. The country also maintains a politically neutral stand in the international and regional space.
Australia is also a multiracial and cultural society that welcomes people from the diverse ethnic group from around the world. Although the people of Australia uphold the tradition of ‘mateship’, there is discontent brewing over the refugee influx; also, there has been a spate of security incidents recently leading to Australia being put on high alert for terror threats.
In the ‘Global Peace Index 2016’, released by the Institute of Economics and Peace that examines the countries in terms of internal and external peace, militarisation, violence containment costs etc., Singapore ranked 20th. Australia ranked 15th on the list. Both the commonwealth countries score equally on two of the three broad themes – domestic and international conflict and societal safety and security. Australia outscored Singapore in terms of militarisation; Singapore’s defense budget is significant given its strategic vulnerabilities and the escalating tension the South China Sea.
Although tax is losing its relevance as a key determinant of the attractiveness of a business location, it is still a key criterion that would determine the profitability of business.
Singapore’s tax regime is one of the most competitive in the world. Australia’s tax rate is relatively higher. Singapore’s competitive tax rate along with other factors such as world-class infrastructure and superior enterprise ecosystem in the region make it an attractive location for setting up company.
|Headline Corporate Tax Rate||17%||30%|
|Tax Free Personal Income||Up to S$ 20,000||Up to AUD 18,200|
|Highest Personal Income Tax Rate||22%||45%|
|Employer Social Security Contribution||17%||9.5%|
In the World Bank’s ‘Doing Business 2017’ report, Singapore ranked 8th globally in terms of ease of paying taxes but in contrast, Australia is ranked 25th in the world.
Related Article: Complete Guide for Singapore Taxation
Singapore has a highly productive and skilled workforce that is multi-racial and multi-lingual. A significant majority of its workforce are English speaking. Although it is pursuing a stringent immigration policy following its economic restructuring measures, Singapore continues to welcome deserving foreign talent.
Australia has a vast labour pool and is also open to immigrant workers but there is difficulty in recruiting candidates with appropriate experience and qualifications particularly for accounting, civil engineering and ICT positions. Also, unlike Singapore, Australia has minimum wages rule that drives up the business costs.
In IMD’s ‘World Talent Report 2016’ Singapore ranked 15th and Australia ranked 17th in the world. Singapore especially scores well in terms of readiness of the talent pool – the availability of skills and competencies in the talent pool – where it scores the first rank in the world. It also holds relatively better scores in apprenticeship and employee training.
In the World Economic Forum’s ‘Global Competitiveness Index 2016-2017’, Singapore ranked second in the world in terms of Labour Market Efficiency. In contrast, Australia holds the 28th rank.
Access to Financial Services
Access to financial services such as banking, insurance and credit services is also a key determinant of a business location’s attractiveness. The resilience of the local currency, its convertibility and repatriation of profits are determined by the strength and resilience of the financial sector, which in turn is determined by the strength of the economy and political stability.
As one of the leading financial centres in the world, Singapore has a comprehensive network of financial market players in the form of national and international banks, finance companies, fund management companies, private equity firms and foreign exchange dealers.
In the World Economic Forum’s ‘Global Competitiveness Index 2016-2017’, Singapore ranked #2 while Australia ranked 6th in terms of ‘financial market development’. As for ‘ease of access to loans’, Singapore ranked #3 globally as against 14th rank of Australia. For ‘venture capital availability’ and the ‘affordability of financial services’ Singapore ranked third and second respectively but Australia is ranked 44th and 39th respectively.
Singapore, being a city-state without any natural resources, has always remained plugged into the global economy through its openness to trade and investments. Singapore continues to advocate and pursue economic integration with the regional and international economies; ASEAN Economic Community, Trans Pacific Partnership Agreement, Regional Comprehensive Economic Partnership Agreements are examples of efforts towards its economic integration. The country has a vast network of FTAs and DTAs signed with partner countries globally to facilitate trade and investment. More than 99% of the goods enter the country’s domestic market duty free.
Australia’s external trade is relatively low compared to the size of the economy. Although it has reduced the trade barriers substantially post globalisation for a very long time it has suffered from the impact of its geographical remoteness. The Down Under economy is trying to integrate into the international trade network but compared to Singapore’s 221% trade openness as a percent of GDP Australia’s 32% is subpar.
In the World Economic Forum’s ‘Global Competitiveness Index 2016-2017’, for ‘prevalence of trade tariffs’, ‘prevalence of non-tariff barriers’ and ‘burden of custom procedure’ Singapore ranked 2nd, 1st, and 2nd respectively; whereas, Australia ranked 37th, 22nd and 24th.
In the ‘Global Enabling Trade Report 2016’, published by World Economic Forum and the Global Alliance for Trade Facilitation, Singapore continued to hold on to its top spot for the fifth consecutive year. In contrast, Australia held the 26th rank on the index. The DHL’s ‘Global Connectedness Index 2016’, which ranks 140 countries on the basis of cross-border flows of trade, capital, information and people, ranked Singapore as #2 in the world while Australia was ranked #34,dropping six place from its previous 28th rank.
Likewise, the Heritage Organisation’s ‘2017 Index of Economic Freedom’, which ranks 180 economies around the world, rates Singapore as the world’s second freest economy while the Australia is ranked fifth on the list.
Singapore’s infrastructure, education, healthcare, housing and talent are top-notch contributing to its competitiveness as a business location. The country’s lack of market size and natural resources are compensated by its strategic location, transparency of regulatory framework and pro-business policies, making it an ideal and competitive business hub.
Australia despite its market size and abundance of natural resources has restrictive labour regulations, higher tax rates, bureaucratic hurdles and policy instability as major challenges for businesses.
In the World Economic Forum’s ‘ 2016-2017 Global Competitiveness Ranking’ that ranked 140 economies, Singapore ranked #2 while Australia held the 22nd rank. The index measures 12 criteria such as institutions, infrastructure, health, education, labor market efficiency, financial market development, technological readiness, market size and business sophistication, and innovation. Singapore was ranked #9 in the world for innovation while Australia was ranked #26.
Singapore has a strong national IP protection regime; the Intellectual Property Office of Singapore is championing the cause of affordability and ease of protecting IPs besides enabling businesses to commercially exploit and monetise IP. Though relatively a late entrant into the IP ecosystem Singapore has managed to excel among other countries of the world and supersedes other regional economies.
Australia lags behind Singapore in its ability to extract commercial value out of its R&R activities. In Bloomberg’s ‘Global Innovation Index 2017’ Australia ranked 18th in contrast Singapore ranked sixth. Notably though Australia was ahead of Singapore in terms if intensity of R&D activities, Singapore’s ranking was stellar in terms of patent activity, researcher concentration, manufacturing capability and high-tech density.
Singapore ranked fourth in the world for having the best IP protection in the World Economic Forum’s ‘Global Competitiveness Report 2016-2017’. In contrast, Australia ranked 18th.
Infrastructure and Connectivity
Singapore continues to sharpen its edge over the other economies by continuously investing in upgrading its infrastructure and digital connectivity. This is fundamental to drive technology adoption, business sophistication, business dynamism, collaboration and innovation. Besides technological sophistication in terms of mobile and Internet penetration, other physical infrastructure such as rail, road, airport and seaport is also top-notch in Singapore. It is well connected to most of the world’s major markets that could be reached in seven hours by air. Australia lags behind Singapore in terms of technological readiness especially in areas such as Internet mobile penetration, availability and adoption of latest technology. Besides Australia’s roads and ports are also not on par with Singapore.
Singapore ranked #2 in the world for having the best overall infrastructure in the World Economic Forum’s ‘Global Competitiveness Report 2016-2017’. In contrast, the Australia ranked #17. In terms of technological readiness, in Huawei’s ‘Global Connectivity Index 2016’ Singapore ranked #2 globally while Australia ranked #11.
Singapore is highly rated for its quality of living standards and is the most desired relocation destination for expatriates. The clean and green environment and the low crime rates along with cosmopolitan lifestyle amenities and choices make it a top draw among world-class talents. Australia because of its vast land and natural resources is capable of offering a better quality of life in terms of recreation, housing, and availability of consumer goods.
In Mercer’s ‘2017 Quality of Living Index’, Singapore ranked 25th in the world whereas two of Australia’s cities, Sydney and Melbourne, come within the top 20 spots. In HSBC’s ‘Expat Explorer 2016’, which surveys the expatriates’ experience of living abroad on three aspects – economics, experience and family, Singapore topped the league of 45 countries while Australia ranked 11th on the list.
Related Article: Moving to Singapore as an Expat
|The Economic Intelligence Unit/ Business Environment Ranking||Most Investor Friendly Business Location
|World Bank/Ease of Doing Business||Ease of Doing Business||2017||2||15|
|World Bank/Ease of Doing Business||Ease of Setting up Business||2017||6||7|
|Transparency International /Corruption Perception Index||Least Corrupt Country||2016||7||13|
|World Justice Project / Rule of Law Index||Country with best Rule of Law||2016||9||11|
|The Institute of Economics and Peace/ Global Peace Index||Most Peaceful Countries in the World||2016||20||15|
|World Bank/Ease of Doing Business||Ease of Paying Taxes||2017||8||25|
|IMD/World Talent Report Singapore||Country with the Most Talent Competitiveness||2016||15||17|
|World Economic Forum/ Global Competitiveness Index||Labour Market Efficiency||2016-2017||2||28|
|World Economic Forum/ Global Competitiveness Index||Financial Market Development||2016-2017||2||6|
|World Economic Forum/ Global Competitiveness Index||Ease of Access to Loans||2016-2017||3||14|
|World Economic Forum and Global Alliance for Trade Facilitation/Global Enabling Trade Report||Country Most Open to Trade||2016||1||26|
|DHL/Global Connectedness Index||Country Most Connected||2016||2||8|
|Heritage Organisation/Index of Economic Freedom||World’s Freest Economy||2017||2||5|
|World Economic Forum/Global Competitiveness Ranking||Most Competitive Economy||2016-2017||2||22|
|World Economic Forum/Global Competitiveness Ranking||Innovation||2016-2017||9||26|
|World Economic Forum/Global Competitiveness Ranking||Intellectual Property Protection||2016-2017||4||18|
|World Economic Forum/Global Competitiveness Ranking||Best Overall Infrastructure||2016-2017||2||17|
|Huawei/Global Connectivity Index||Digital Connectivity||2016||2||11|
|Mercer/Quality of Living Index||Cities with Best Quality of Life||2017||25||10 & 16
(Sydney & Melbourne)
|HSBC/Expat Explorer||Best Country to Live Work and Raise Family||2016||1||11|
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