Incorporating a Business in Asia?
Singapore or Malaysia?
Singapore or Malaysia?
The developing economies in Singapore and Malaysia have created a unique contrast for expanding business people to take advantage of, but the benefits of each region are not the same. Depending on the strategies and practices of a company, certain disadvantages can become great financial disincentives. The global economy is being bolstered by numerous functioning economies within the Asian region — namely Japan, South Korea, and China — with Singapore qualifying as a developed economy in line with its neighbors. Malaysia, while technically emergent in its progress, is still poised to succeed within the region. It represents a smaller and easier stepping stone for entrepreneurial business people to find a foothold in the Asian region without entering into the kind of competition they are likely to find in a place like Singapore.
So what exactly are the differences between the two financially ripe regions?
Named the easiest place to do business in the entire world by a World Bank 2010 business report, Singapore has plenty of noticeable improvements over less developed areas like Malaysia (which ranked on that same report at number twenty-three). The tax rate alone is a stark contrast with Malaysia, incorporating a flat 17% corporate tax rate and qualifying resident companies for tax exemptions that reduce into a 9% tax rate throughout all taxable income amounts. Malaysian resident companies, by comparison, are all mandated to pay the region’s corporate rate of 25%, and in a similar Forbes study, Singapore was ranked as number five — well ahead of the 31st spot that was occupied by its competitor.
These disparities are prevalent in economic studies, but they don’t necessarily mean that businesses can’t find unique opportunities in the comparatively inferior Malaysian market.
The elephant in the room is the ‘reasonably’ working environment of Malaysia, which has not developed its economy enough to create the modern day business deductions and loopholes that would allow companies to exploit similar strategies of success in the region as they would for many domestic markets. Singapore ranks as the easiest place to do business because its economy is relatively new and flourishing, but also because its economic model is comparable to the models of greater China, Japan, and even the United States.
The Difference Between Developed and Emergent Economies
The real dividing line between these two regions is the state of their market, and the expected consequences each state eludes to. The fact that Singapore is considered a developed economy inclines it to have more competition and a quicker expiration date on many of the lax mandates and regulations that typify so many new markets in the Asian world. Although Malaysia is farther behind on the progress scale, they also provide a longer opportunity for businesses to take advantage of a unique environment that is markedly different from local opportunities and may present new income and expansion possibilities that weren’t present under more familiar models.
The facts and figures will ultimately sway companies one way or another, and in the realm of statistics, Singapore retains its dominance. Malaysia not only has markedly higher income rates, but Singapore’s overall tax burden is substantially reduced in comparison. The IP protection offered in Singapore came in third place under WEF’s 2010 World Competitiveness Report, while the rights and laws afforded to properties ranks at equally impressive heights in worldwide comparison charts.
Where these figures fall off slightly is in the competitiveness of the market. Singapore’s environment is a draw for businesses, and therefore more and more businesses are pulling there, and the swarms of companies have created a challenging environment out of a success story. Malaysia, on the other hand, was ranked number 26 in global competitiveness under that same WEF study, which will mean different things for different businesses.