Setting up a company in a foreign country can be a daunting decision that requires careful consideration and systematic analysis. While certain countries make it very easy for business investors to do business and achieve sustainable growth, other countries delay this process. This article will help you assess the company establishment procedure in Singapore and Indonesia while looking at the resources each one provides for budding investors.
IE Singapore Insights on Indonesia’s Consumer Sector reported that there are several main reasons for investing in the Indonesian consumer sector:
- Rapid urbanization;
- increased income levels;
- good demographic patterns;
- and changing lifestyle trends.
The report also explained that Indonesia’s consumer sector would be worth an estimated S $ 1.38 trillion by 2030 as Indonesia’s consumer class triples to 135 million, making it the world’s largest middle class after China and India.
Although Indonesia has been classified as a new industrial economy, Singapore is currently a more suitable place to do and grow business. This is because the city-state’s score is much higher on almost all parameters than in Indonesia.
World Bank’s Doing Business (DB) 2020
Singapore vs. Indonesia
|Setting up a business||4||140|
|Dealing with construction permits||5||110|
|Trading across borders||47||116|
Setting up a company
Setting up a company in Singapore is quite simple, with the process completed online while scanning and attaching relevant documents. Meanwhile, starting a business in Indonesia can be more complex and time-consuming for foreigners.
In Indonesia, companies that foreigners fully own are called Perseroan Terbatas Penanaman Modal Asing (PT PMA). They must have two shareholders and a minimum paid-up capital of IDR 10 billion (approx. S$1 million). Often it takes more than 3 months for all the steps in the incorporation process to be completed.
In Singapore, a company can be 100% foreign-owned, with a minimum of $1 paid-up capital, one resident director, and one shareholder. It only takes 24 hours and two procedures to set up a company in Singapore.
For more detailed information about setting up a company in Singapore, refer to:
Dealing with corporate taxation
Indonesia’s marginal corporate tax rate is 25%, while in Singapore, it is 17%. According to the Doing Business 2020 report, Singapore was ranked 7th worldwide for attractive tax rates and online tax filing procedures. Indonesia instead was ranked 81st for the same parameter.
The World Bank also reported that businesses in Indonesia make 52 tax payments a year and spend 259 hours a year filing, preparing, and paying taxes. In contrast, businesses in Singapore make five tax payments a year and spend 82 hours a year filing, preparing, and paying taxes.
Companies in Indonesia are required to submit annual reports to their General Meeting of Shareholders (GMS) after the close of each financial year. Several companies, such as public companies and companies with a turnover of more than IDR 50 billion, must have their financial reports audited by a public accountant. Moreover, public companies must submit financial reports to Indonesia’s financial services authority, Otoritas Jasa Keuangan (OJK).
The fastest and easiest type of visa for doing business in Indonesia is a business visa. However, a 60-day visa must not involve work or accept payment in Indonesia. Expats working in Indonesia can apply for a limited stay permit called KITAS. After holding it for three years, individuals can be eligible for a permanent residence permit called KITAP.
In Singapore, foreign professionals, managers, and executives must hold an Employment Pass to work in the country. On condition, they must withdraw a minimum monthly salary of S$ 4,500. If foreign entrepreneurs wish to start and run a new business in Singapore, they can apply for an EntrePass. However, this requires a strong background of the applicant. The most preferred working pass for foreign professionals, managers, and executives in Singapore is the Employment Pass.
Foreign investment friendliness
The Singapore government offers various incentives for foreign businesses that want to start a business in Singapore. The 2016 Global Enabling Trade report placed Singapore at the top because of its trade-friendly regulations and a business-friendly environment. In comparison, Indonesia ranked 65th.
Despite increasingly stringent labor regulations, Singapore offers a highly educated and skilled workforce. Overall, Singapore has good labor market efficiency, scoring highly in 9 out of 10 indicators. Singapore is in the top position for Labor Market Efficiency, while Indonesia is ranked 103 for the same parameter.
In a nutshell
The above analysis reaffirms Singapore’s favorable position regarding doing business. The ease of doing business in Singapore is one of the main reasons why more investors and traders prefer the city-state over Indonesia. That is also because of Singapore’s low corporate taxes, foreign investment friendliness, and stable regulatory environment.