Doing Business - Singapore vs Japan
Today, countries that offer a strong platform for international trade and commerce where businesses can flourish are gaining the favor of investors. The key factors that are considered most important to investment decisions while selecting a suitable business location are: Legal and regulatory environment, stable government and political system, geographic location, availability of high quality personnel, openness to trade, taxation system, and the general living and business environment.
- Singapore ranked #1 in the World Bank’s ‘2011 Ease of Doing Business Report’ for the fifth time in a row, reaffirming its high degree of business friendliness. Japan’s 18th position shows that its regulatory environment is less conducive to the starting and operation of a local firm. Company registration in Singapore can be accomplished in a record time of 24 hours as it involves two easy steps (i.e company name approval and submission of incorporation documents) whereas incorporating a company in Japan can take up to 8 procedures and 23 days time. The World Bank ranked Singapore #4 for starting a business, #2 for investor protection, #4 for taxes and #1 for trading across borders. Japan ranked #98 for starting a business, #16 for protecting investors, #112 for paying taxes, and #24 for trading across borders.
- Forbes’ ‘2014 Best Countries for Business’ list shows that Singapore is the eighth best country in the world as a business destination while Japan is the 26th best. Singapore’s high ranking was due to its high degree of trade freedom (#1 vs Japan’s #59 ), lack of red tape (#6 vs Japan’s #68), high degree of investor protection (#3 vs Japan’s #35), lack of corruption (#7 vs Japan’s #15), and light tax burden (#5 vs Japan’s #96).
- The ‘2015 Paying Taxes Survey’ that was jointly released by PWC, IFC and the World Bank ranked Singapore #5 in the world for ease of paying taxes while Japan was ranked #122 among 189 economies owing to its complex tax system.
- The Forbes ‘2009 Tax Misery and Reform Index’ ranked Singapore #11 indicating its low tax burden whereas Japan was ranked #51 with a high tax misery score.
- In 2010, KPMG revealed that Singapore’s corporate tax rate was the third lowest among Asia Pacific countries while Japan had the the highest corporate tax rate at 40.7%.
- Singapore’s tax burden rank was #5 in Forbes’ 2014 Best Countries for Business’ list while Japan’s rank was #96.
- The Asia-Pacific Intellectual Property (IP) Scorecard 2009 reveals that Singapore is a regional leader in patent quality. Singapore’s IP framework is consistent with the international IP regime and it is a signatory to major conventions such as the Paris Convention, Berne Convention, Madrid Protocol, etc. Singapore has the second best IP protection regime in the world as per the World Economic Forum’s ‘2014-2015 Global Competitiveness Report‘ whereas Japan ranked #7.
- Singapore ranked #2 in the world in the World Economic Forum’s ‘2014-2015 Global Competitiveness Report‘. It ranked #1 for goods market efficiency; #2 for infrastructure, #5 for infrastructure, financial market development and labour market efficiency; and #3 for institutions. Although Japan was also highly ranked as #6 the WEF pointed out “The country’s overall competitive performance, however, continues to be dragged down by its macroeconomic weaknesses, with high budget deficits over several years (ranked 136th), which have led to the buildup of one of the highest public debt levels in the world (243.22 percent of GDP in 2013, corresponding to a 143th rank, or second to last on this indicator).’ Political instability, tax rates/regulation, inefficient government bureaucracy, and restrictive labor relations were identified as the most problematic factors for doing business in Japan.
- According to the Heritage Foundation’s ‘2015 Index of Economic Freedom‘, Singapore is the second-freest economy in the world while Japan was ranked #20. Singapore scored highly on all parameters reaffirming the ease of starting a business in Singapore, its openness to foreigner investors and entrepreneurs, its simple and low tax system, and excellent labor force. However the same cannot be said of Japan. According to the Heritage Foundation, “Government spending has been high, and deficit spending most recently has been funded by a multi-year increase in the sales tax. The financial sector is difficult for foreign investors and subject to political influence. Propelling Japan out of its decades-long malaise will require targeted reforms to improve economic freedom and remove institutional constraints.”
- Singapore ranked #3 in the IMD ‘2015 World Competitiveness Scoreboard’ while Japan ranked #27.
OPENNESS TO TRADE
- The World Economic Forum’s ‘2010 Global Enabling Trade Report’ ranked Singapore #1 for openness to trade among 125 economies while Japan ranked #25. The report found Japan to have one of the most protected domestic markets, a highly complex tariff schedule, limited openness to foreign participation, restrictive rules on FDI, and burdensome customs procedures. By contrast, Singapore scored #1 for domestic and foreign market access, efficiency of customs administration, efficiency of import/export procedures, regulatory environment, and availability and quality of transport services.
- Singapore ranked #1 for efficiency of bureaucracy among 12 Asian economies in a 2010 survey conducted by the Political and Economic Risk Consultancy (PERC) while Japan was ranked #5.
- Singapore’s #3 rank in Transparency International’s ‘2014 Corruptions Perception Index‘ shows that corruption is not a big issue in Singapore whereas Japan was accorded the 15th position.
- Singapore ranked #1 for public trust of politicians and #2 for burden of government regulation in the WEF’s ‘2014-2015 Global Competitiveness Report‘ whereas Japan ranked #21 and #64 on the same parameters.
- Singapore has consistently topped BERI’s ‘Labor Force Evaluation Measure’ for the past 31 years. Japan’s labor force is the sixth best in the world according to the 2010 report.
- Singapore has the seventh most motivated workforce in the world according to IMD’s ‘2010 World Competitiveness Yearbook’ while Japan’s workforce is the eleventh most motivated.
- A survey conducted by business school INSEAD last year shows that Singapore has the sixth best highly skilled workforce in the world.
- According to Aon Consulting’s ‘2010 People Risk Index‘, Singapore is the third-lowest risk city in the world for recruiting, employing, and relocating employees while Japan’s rank was #12.
- According to HSBC’s ‘2014 Expat Experience Report’ Singapore is the second best country in the world for expat life experience while Japan is ranked at #18.
- According to HSBC’s ‘2014 Expat Economics Report‘, Singapore ranks #3 in the world for expats while Japan is ranked at #25.
- Singapore is the world’s most favored immigration destination according to Gallup’s ‘2010 Potential Net Migration Index’.
- Singapore is the #1 place for Asian expats confirms ECA International’s ‘2010 Location Ratings System’ while the Japanese city of Kobe is the third best place to live for Asian expats.
- Singapore is ranked as the best country to work in in Asia by foreign talent according to the IMD ‘2010 World Competitiveness Yearbook‘.
- Singapore offers the best quality of Asia according to Mercer’s ‘2010 Quality of Living Survey‘.
AT-A-GLANCE COUNTRY RANKINGS: SINGAPORE VS. JAPAN
|Year||Category||Singapore’s Rank||Japan’s Rank||Source|
|2015||World’s Freest Economy||2||20||Heritage Foundation’s Index of Economic Freedom|
|2015||Ease of Paying Taxes||5||122||PWC, IFC, World Bank’s 2015 Paying Taxes Survey|
|2015||World’s Most Competitive Economy||3||27||IMD, World Competitiveness Yearbook|
|2014||Country with Least Corruption Perception||7||15||Transparency International’s Corruption Perceptions Index|
|2014||World’s Best Country for Business||8||26||Forbes’ Best Countries for Business Index|
|2014-2015||World’s Most Competitive Economy||2||6||World Economic Forum, Global Competitiveness Report|
|2011||Ease of Doing Business||1||18||World Bank, 2011 Ease of Doing Business Report|
|2010||Country Most Open to Trade||1||25||World Economic Forum, Global Enabling Trade Report|
|2010||Most Efficient Bureaucracy in Asia||1||5||Political and Economic Risk Consultancy Survey 2010|
|2010||Best Place for Asians to Live||1||3
|ECA International’s 2010 Location Ratings System|
|2010||World’s Lowest Risk City for Employers||3||12||Aon Consulting’s People Risk Index|
|2009||Country with Lowest Tax Misery||11||51||Forbes Tax Misery and Reform Index|