Starting a business: Singapore versus Bangladesh
6 minute read
Today, Singapore has become one of the best places to have a business due to the various benefits it provides investors and business owners such as its top-notch infrastructure, strategic location, and multi-cultural workforce.
This article compares Singapore to Bangladesh when it comes to setting up a business in each country.
- Global ranking
- Incorporation and foreign ownership
- Directors and shareholders
- Foreign ownership
- Bank account
- Corporate tax
- General tax incentives
- External investment
- Workforce and talent
- Infrastructure and resources
- Governance and transparency
For over twelve years, Singapore has always ranked among the top three economies in the world for running a business. Starting a company typically takes around 5 – 7 working days. In Bangladesh, the timeline for opening a company can take up to a month.
Incorporation and foreign ownership
The most common form of entity for businesses in each respective country is the private limited company.
Directors and shareholders
A Singapore company is required to have a minimum of one director and one shareholder (who can be an individual or a corporate entity). Singapore also has a requirement to have at least one locally resident director – this is an individual who is either a citizen, permanent resident, or on a visa in Singapore. It is common for foreign-owned companies to utilise nominee director services where they need to fulfil this local director requirement.
In Bangladesh however, a minimum of two shareholders and two directors are required, who can be local or foreign (ie there is no local director requirement).
In Singapore, 100% foreign ownership is allowed. The only other legal requirement to starting a company in Singapore is having a company secretary, who keeps the company compliant with ACRA. If you plan on incorporating and relocating to Singapore, you are required to apply for an Employment Pass.
Bangladesh allows 100% foreign ownership but, there are policies that discriminate foreign owners. As a foreign investor, it’s important to have a local partner despite the fact that this prerequisite is not statutorily characterized. In certain key divisions, the Government of Bangladesh has set informal boundaries on foreign organizations’ capacity to strip from the nation.
A private limited company in Bangladesh needs to have a minimum of two and a maximum of 50 shareholders. Here, the director and shareholder can be the same person. A shareholder can either be an individual or another company. In most sectors, entirely foreign shareholding is permitted.
If you intend to incorporate in Bangladesh have no plans of relocating, you are allowed to visit via a business visa whenever it is required to attend to company matters. If you plan on relocating to Bangladesh, you are required to apply for a work permit.
If you would like to do business in Singapore and want to set up a Singapore bank account, banks require two directors (or a director and a company secretary) to be present.
For companies incorporating in Bangladesh, you must open a bank account in the name of the proposed company with name clearance obtained from the Registrar of Joint Stock Companies and Firms (RJSC).
Singapore has a record to have one of the lowest tax rates (17%) all over the world. In addition to the low tax rates, the general business friendliness of Singapore holds a significant factor in the developing economy and foreign investment in Singapore. This is significantly lower than in Bangladesh – 25%.
General tax incentives
There are some tax incentives available to businesses in Singapore. Once they apply tax exemptions to the taxable income, the income task rate for companies (small and mid-sized) in Singapore reduces drastically.
The income task rate in Singapore is 0% on the first S$100,000 taxable income for the first three filing years for newly incorporated companies that meet certain conditions and 8.5% tax on taxable income for up to S$300,000.
In Bangladesh, all the funds incurred to generate taxable income are usually tax deductible. At all times the reimbursement of tangible and intangible assets are tax deductibles at rates ranging from 2 to 50%.
Singaporean government works tirelessly in building the reputation of being one of the most ardent governments world-wide when it comes to developing businesses. They do this by investing huge sums of money annually into grants and initiatives to support and encourage small businesses.
Electoral politics do not determine the decision for investing in grants and initiative. This reason alone enables the project to function long-term. This has made Singapore become the perfect environment for start-up businesses.
On the other hand, Bangladesh small businesses find it very hard to get sustainable growth capital because of lack of financial assistance.
Singapore has been nominated by the World Bank to be among the first three locations in the world regarding the ease of doing business. In 2018, it was ranked #2 in the world.
The economic development of Singapore is due to the aggressive strategy to attract Foreign Direct Investors (FDI) through its open way of trading.
Compared to Singapore, Bangladesh has a negative reputation for foreign investment. Aside from being underdeveloped, extremely poor, and prone to severe natural disasters, it also suffers from socio-political instability.
If all these factors are overlooked, Bangladesh has an advantage of being strategically and geographically positioned between Southeast and South Asia. Its potential for high domestic consumption and wealth of its natural resources make it a good option for investment.
Workforce and talent
Research has found that 57% of CFOs in Singapore cite one of the best qualities brought by millennials to the place of work have been an increasing demand for soft skills (communication and problem-solving skills). It is followed by increased flexibility of 48%.
This refers to the acknowledgment of flexible working arrangements (working flexible hours or from home). 44% demand for increased collaboration and transparency to share and promote best practices and 39% increased mentoring program to encourage a supportive working environment.
Bangladesh has an abundant and cheap workforce, however, the large part of Bangladesh workforce consist of illiterate, underpaid, untrained, underemployed and unskilled workers.
Infrastructure and resources
Singapore has received recognition from the World Economic Forum based on its ranking standards where transport and energy infrastructure are key factors. These factors are what Bangladesh lacks, and despite the progress, they have made so far, they are still substantially deficient in term of quality of infrastructure when compared to other developing Asian countries.
Governance and transparency
Singapore has a method for assessing corporate governance practices of Singapore-listed companies known as the Singapore Governance and Transparency Index (SGTI). This method is integral to businesses because it ensures sustainable governance, which is an essential component in any modern business landscape where passionate stakeholders can demand a higher level of accountability and transparency for the integrity of the business.
Bangladesh lacks transparency and integrity, which has become an obstacle to governments who are seeking the growth and expansion of the economy and public services. This factor has made the private sector, citizens and foreign investors lose faith in the law and public institution of Bangladesh.
Although this is one of the significant problems they face, anti-corruption reforrms are in place to tackle the problem. They work with the citizens, government media and watchdog organizations to effectively combat the problem.
In terms of choosing a location to set up one’s business in South East Asia, Singapore provides the upperhand in almost all respects with regards to ease of doing business. Those willing to explore the Bangladesh market should still do so, but should also look into building their regional base in Singapore to take advantage of the stability the city-state has to offer.
Although Bangladesh’s population can make it a tempting target for companies looking for a market to conquer, Singapore provides several significant benefits to Bangladesh when choosing a location for your business.
Interested in setting up your investment vehicle or regional base in Singapore? Talk to us.