The Entrepreneurship Debate – The USA vs. Singapore
Both the United States and Singapore have fast-growing economies with substantial potential for foreign investment. They are known for their competitive business environment and ease of doing business. But they are, of course, quite different from each other.
The US offers a massive consumer market with a population of 328 million. Household spending in the US amounts to more than a quarter of worldwide household consumption. Moreover, the US has signed free trade agreements with many countries, giving businesses access to millions of more potential customers.
On the other hand, the Singapore economy is mostly based on the manufacturing and service sectors, which comprises one-fifth and two-thirds of the output respectively. Factors such as Singapore’s connectivity to neighboring markets, friendly tax regime, good employer-employee relations, and strict rule of law have allowed the economy to grow rapidly over the years.
The USA vs. Singapore: Entrepreneurship Comparison
There are several aspects to be analyzed when determining which country to choose for expanding your business. Here is a head-to-head comparison of the two:
Ease of Doing Business
According to the latest World Bank’s annual ratings, the US is in 6th place among 190 countries. Singapore ranks even higher, securing the 2nd position. The high ranking of both economies shows that they have a productive regulatory environment.
The lower ranking of the US as compared to Singapore signifies the higher number of challenges associated with starting a business in that country. Major objectives such as choosing the type of business entity and paying corporate taxes is more convenient in Singapore.
For instance, incorporating a company in Singapore takes 24 hours, while the same task could take up to 6 days and involves 6 procedures in the US. Singapore has sound business laws and a higher degree of transparency.
Every state in the US has separate court systems and laws. Nevertheless, federal law usually takes precedence over state rulings.
Moreover, the jury is considered a protective shield against any misuse of power. Therefore, the judge rules on law-related matters, and the jury determines the facts. In rare instances, a judge may overrule a jury.
On the other hand, the legal system in Singapore has its roots in English Common Law. In 1969, the system of trial by jury was put to an end. Singapore ranks 13th when it comes to rule of law, while the US stands in the 19th spot.
In the paying taxes section of the World Bank’s Doing Business report, Singapore ranks 5th while the US ranks 64th. The index is based on the number of tax payments, time taken for preparing, filing, and paying taxes, and the ratio of profits paid in taxes.
For example, in Singapore, a medium-sized enterprise would make 5 tax payments and take 82 hours in a year for preparing, filing, and paying taxes. On the other hand, in the US, a business of the same size and type would make 11 payments and take 175 hours to prepare, file, and pay taxes.
In the US, the federal income tax is at a progressive rate of up to 39.6% of the taxable income. The taxes for federal social insurance programs are levied separately. On the other hand, the progressive tax rate for personal income in Singapore is only up to 22%.
In fact, the US has a reputation of having one of the most difficult tax regimes in the world, which becomes a hindrance for startups. On the contrary, Singapore’s tax system is rather favorable for business development.
Overall, Singapore is more attractive for entrepreneurs when it comes to taxation. It features a single-tier tax system, double tax relief, and no tax on dividends and capital gains.
Intellectual Property Protection
Other than the business environment and tax regimes, protection of Intellectual Property (IP) rights enhances investor confidence. IP pertains to any invention, design, or brand over which a businessman has legal rights. Common kinds of IP include patents, copyright, trademarks, and design right.
As per the Global Competitiveness Report (GCR), Singapore stands at 2nd place while the US ranks 25th. The US has ratified international IP agreements such as the Berne Convention, the Paris Convention, the Madrid Protocol, and the Patent Cooperation Treaty. However, the US has not signed the Hague Agreement, which protects designs in different countries via a single filing.
Likewise, Singapore is a signatory to the Paris Convention, the Patent Cooperation Treaty, the Madrid Protocol, and the Berne Convention. Moreover, the Hague Agreement is also ratified by Singapore.
In Singapore, the expense of acquiring and in-licensing IP rights can be paid via cash or corporate tax rebates. This has been facilitated through the Productivity and Innovation Credit (PIC) scheme, which focuses on helping Singapore businesses invest in more value-added ventures.
Singapore is in the first spot for IP rights protection in Asia, which boosts confidence among entrepreneurs to help them grow, deploy, and manage their intangible assets throughout the region and beyond.
In both 2019 and 2020, Singapore was recognized as the most competitive across the globe according to the Global Competitiveness Report by the World Economic Forum. Singapore is also known for its low corruption levels and government efficiency (albeit an authoritarian state).
The country also ranked 1st and 2nd for the efficiency of labor markets and financial market performance respectively. As far as infrastructure is concerned, Singapore secures the top spot in the world.
The United States follows Singapore at the second spot in the Global Competitiveness Report. Issues that weakened the US’s ranking include goods and market inefficiency and unwise government spending.
According to the Heritage Foundation’s 2020 Index of Economic Freedom, Singapore secured the first position, while the US stands at the 17th spot. Singapore proved to be more efficient than the US in most aspects, such as ease of starting a business, operating or shutting down a business, ease of international trade, and protection of property rights against corruption.
The World Competitiveness Yearbook is published by the Institute for Management Development (IMD) also places Singapore at the top spot as in global economic competitiveness. The US, on the other hand, declined to the 10th position from the 1st in 2018.
Foreign Investment Friendliness
In order to attract and maintain the foreign investment, it is important for countries to have laws and regulations in place to safeguard them. This is popularly measured by the Sense of Investor Protection Index in the Doing Business Report.
The index takes into account factors such as transparency of transactions and the power of the stakeholders to sue the directors in case of misconduct. Singapore has a score of 9.3 out of 10, while the US followed close by with a score of 8.3.
This establishes Singapore in the 2nd position and the US in the 6th position worldwide. Hence, both countries offer substantial protection to investors.
In Singapore, you would be able to find a skilled and intelligent workforce that is trained to excel. Just like the US, there is no language barrier as the locals are fluent in English.
According to Business Environmental Risk Intelligence (BERI)’s Labor Force Evaluation Measure, Singapore houses the best human capital in the world. The US follows in the second position.
The WEF ranks Singapore as the 2nd best in labor-employee relations and the most productive labor force globally. On the other hand, the US sits at the 33rd and 6th on both these scales.
According to the Global Competitiveness Report, both the United States and Singapore have an efficient labor market. The US has a decent score when it comes to 4 sub-indicators, which are country capacity to retain talent, country capacity to attract talent, redundancy costs, and hiring and firing practices.
For other sub-indicators, the US had a fair performance as it ranked under 50 out of 148 for every sub-indicator. As far as women’s proportion in the workforce is concerned, the US scored better. Other than that, Singapore maintained a good score in most sub-indicators.
Benefits of Doing Business in the USA and Singapore
The United States and Singapore are both attractive venues for expanding your business. Here is an overview of some of the prime benefits of investing in the two countries.
Benefits of Investing in the US
A question that many foreign investors have on their minds is: Why invest in the United States? Here are the top 5 reasons to help you make up your mind:
Best Global Economy
The US is known for being the largest economy in the world. The country has an approximately 24% lead share in the world market. Moreover, it ranks 2nd on the Global Competitiveness Report, which evaluates the position of countries on the basis of factors like business dynamism, health, infrastructure, and market size.
The labor in the US is skilled, diverse, innovative, and mobile, making it highly versatile. The US has prioritized international collaboration with public and private sector companies so that the workforce is able to meet present century challenges.
Several states in the US offer financial incentives to foreign business owners to help them set up their companies in a particular location. The commercial real estate taxes have dropped and tax credits are also given to investors.
Businesses in the US have ample access to advanced technology, which makes it more appealing for business activities. Many foreign companies choose to expand to the US just to take advantage of the advanced technological innovations to boost their productivity.
Protection of Intellectual Property
The US has a robust legal system for international investors to benefit from. The predictability and transparency of laws go a long way towards the protection of intellectual property rights. The legal system focuses on strict law enforcement to protect your business against infringement.
Benefits of Investing in Singapore
Singapore is an economic powerhouse, thanks to its business-friendly policies. Here are the significant benefits of expanding your business to Singapore:
Singapore has a modern free-market economy that is based on finance, trade, and manufacturing. Services makeup 75% of the nation’s GDP and account for 80% of the labor force. Singapore has succeeded in achieving a low employment rate and a low inflation rate at the same time.
Favorable Tax System
Singapore has a simple and rational tax regime. It does not levy any tax on dividends or capital gains received from a company. This means that the shareholders can receive the dividends tax-free. Moreover, Singapore has one of the lowest value-added tax rates globally.
Reliable Legal Framework
Singapore’s legal system follows the pattern of the English common law. Singapore secures the first spot in Asia for the best intellectual property protection. With low levels of corruption and a robust dispute resolution mechanism, Singapore is the perfect place to gain entry into Asian markets.
Strong Government Support
The Singaporean government highly encourages innovation through incentives like FinTech sandboxes and SGInnovate. This makes it easier for small business owners to access communicate with mentors and venture capitalists. Small firms are given opportunities to innovate, scale-up, and globalize.
Singapore has a burgeoning economy due to its superior infrastructure. The country recently secured the top spot among 200 cities for the city infrastructure, which takes into account a variety of aspects such as healthcare, education, recreation, and transport.
The United States and Singapore are leading world economies that facilitate foreign businesses. The legal system in both these countries is robust and a highly skilled workforce is available. If you are eyeing the Asian market, Singapore is a great place to start. On the other hand, if your products or services are more geared towards a western or even global audience, then opt for the US as it has an efficient and conducive business environment.
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