Strong Growth In Business Formation in Singapore As Economy Looks Up
New business formations in Singapore totaled 16,096 in Q1 2017, registering a 6.3% increase Quarter on Quarter (QoQ) and 1.2% Year on Year (YoY), according to Hawksford Singapore’s Singapore New Business Trends Report Q1 2017. This was reflective of positive business sentiments in both Singapore and major economies worldwide.
(I) Business Formation by Entity Type
In particular, Q1 2017 saw an increase in Sole Proprietorships and Partnerships against Q4 2016, with a surge in the number of Private Limited companies formed at 7.6% QoQ. This surge is largely attributed to the sharp rise in the registration of Exempt Private Limited Companies (EPCs), which accounted for the largest share of private companies formed during the quarter at 85.4%.
While Private Limited companies accounted for the largest share of the total businesses formed during the quarter at 55.8%, Sole Proprietorships held the second largest share of total businesses formed at 37.6%. The number of Limited Liability Partnerships (LLPs) formed also marginally increased from 3.8% in the preceding quarter to 4%.
An upsurge in the registration of small entities such as Sole Proprietorships and Partnerships is expected under tepid economic conditions such as that in the beginning of 2016. With predictability and business optimism picking up in 1Q 2017, the registration of these small entities is set to be on a declining trajectory.
(II) Business Formation by Share CapitalWhile 75% of companies were formed with a share capital of less than SGD $10,000 in Q1 2017, companies formed in the next share capital bracket (SGD $10,001 – $100,000) went up marginally by one percentage point to 20% QoQ.
Albeit a slight increase, the rise in companies formed with a higher share capital is reflective of the return of business optimism in Singapore, where a rigorous pro-business regulatory regime allows companies to be incorporated with a share capital of just one Singapore Dollar.
(III) Business Formation by Shareholding StructureWholly locally-owned companies accounted for half of company formations in Q1 2017 with a 2% increase QoQ. In a similar vein, the share of companies with both foreign and local shareholding marginally increased to 13% against 12% in the preceding quarter.
The rise of wholly locally-owned companies after consecutive quarters of decline suggests a resurgence of business optimism and renewed vigour among local enterprises and entrepreneurs in Singapore.
(IV) Business Formation by IndustryWhile the lion’s share of business formations continued to occur in the Wholesale Trade sector at 20%, formations in the Head Office & Management Consultancy Activities sector marginally increased from 11% in the preceding quarter to 12% in Q1 2017.
The rise in company formations in the latter sector reflects Singapore’s efforts in keeping its business environment conducive for corporate headquarters and consultancy firms in areas such as tax benefits, quality infrastructure, and intellectual property.
Examples of companies that have inaugurated their headquarters in Singapore in 1Q 2017 include New York-listed software firm Zendesk, as well as Israeli-based medtech and agritech incubator The Trendlines Group. This underscores Singapore as a global innovation destination.
(V) Business Formation by Shareholders’ Country
The share of foreign subsidiaries in total company registrations gained two percentage points over Q4 2016, with the British Virgin Islands and Australia being the top foreign source companies at 6% and 5% respectively.
The share of Australian subsidiaries, in particular, climbed 2% from the preceding quarter to 5%, thereby underscoring the traction of Singapore as a choice business location for companies from commodity-exporting economies like Australia.
On an individual level, Singapore continued to attract investors and entrepreneurs from Malaysia, China, India, Australia and Indonesia in Q1 2017.
“The bumper business formation figures in Q1 2017 are reflective of the strong investor confidence in starting new businesses in Singapore. As the easiest place to do business in Asia, Singapore remains the preferred investment destination,” said Ms Jacqueline Low, COO, Hawksford Singapore.