In a move to further liberalize its legal sector, the Singapore authorities have proposed to ease the entry requirements for foreign lawyers to practise corporate law in the city-state.

Singapore has been steadily introducing timely initiatives to strengthen its legal services industry and enhance the growth of its legal sector. Consequently, it has emerged as a key legal hub in the Asia-Pacific region. Recently, the Singapore Institute of legal Education (SILE) has proposed to ease the entry requirements for foreign lawyers to practise corporate law in the city-state.

Under the current system, foreign lawyers are required to pass a qualifying examination and hold a graduate degree in law from a list of universities that have been exclusively approved by the Attorney-General. However, given the restrictive nature of the qualifying criteria, the SILE has proposed that foreign lawyers who possess three years of experience and who have also passed a Foreign Practitioner Exam (FPE) be allowed to practise corporate law in Singapore in areas such as banking, finance, and Intellectual Property, irrespective of which University they graduate from or what law degree they hold.

If adopted, the proposal will further enhance Singapore’s position as a regional legal hub enabling it to attract high caliber foreign lawyers from various jurisdictions. Given Singapore’s position as a regional business hub, there exists a growing demand for legal services from businesses in the region, especially in areas such as mergers and acquisitions; trade disputes; and international arbitration. However, lawyers are in short supply in Singapore. One way of filling the market gap is by encouraging foreign lawyers to practise in Singapore.

According to Ms. Jacqueline Low, the the the Director of Singapore company registration agency Janus Corporate Solutions,

“It is important for the legal industry to grow in line with the financial industry. If you look at Hong Kong, New York and London you will notice that they are not only financial hubs but also legal hubs in their own right. Singapore is fast catching up as a legal center, especially with neighboring Hong Kong. The quality of legal services, robust arbitration infrastructure and growing pool of high calibre lawyers is what makes Singapore’s legal sector competitive.”

In recent times, the Singapore government has been focusing efforts on liberalizing and strengthening its legal services sector by way of tax incentives, strengthening the legal education infrastructure, and developing state-of-the-art business infrastructure. Today, there are more than 90 foreign law firms and about 920 foreign lawyers practising in Singapore.

This video is the first part of a three part series on Singapore’s role as an international center for arbitration.

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According to a recent Straits Times report, Indians account for one-fourth of the 1.79 million foreigners and Singapore Permanent Residents and their numbers seem to be growing. The Indian Embassy in Singapore confirms that there has been a 100% increase in the number of Indian nationals residing and working in Singapore as compared to two years ago. While majority of the Indian nationals are employed as foreign laborers in the construction sector, there is a sizable pool of professionals in high value add industries such as IT, finance, and engineering. There has also been a steady growth in the number of Singapore company formations by Indian entrepreneurs from around 1,500 in 2006 to about 3,000 today.

It is easy to see why Singapore is a natural pick for Indian foreign professionals and entrepreneurs. Singapore is instantly appealing as it is Asian country with a highly westernized environment. Given the strong socio-cultural ties that exisit between Singapore and India, adapting and settling down in the country becomes far easier.

Singapore’s enduring appeal lies in its pro-business and family-friendly environment. Most Indian professionals prefer to relocate to Singapore as it a) is within close proximity to the Indian sub-continent, b) offers a higher quality of life than India, c) is safe and low on crime, d) provides a conducive environment for raising children, e) has one of the lowest tax rates in Asia and f) is the world’s easiest place to do business.

Singapore’s Minister Mentor Lee Kuan Yew is reported to have said,

“We benefited from being open to immigrants from around the world, especially China, India and the region. Having educated immigrants here makes Singapore more competitive and dynamic. The majority of the new PRs and citizens are skilled workers and professionals in finance, IT and R&D. They bring new skills, global connections and a strong drive to create better lives for their families. Our immigration policies have brought in better educated and wealthy Indians who have made that qualitative difference to our lives.”

Commenting on the rising popularity of Singapore among the Indian migrant community, Ms. Jacqueline Low, the the Director of Singapore company registration agency Janus Corporate Solutions said, “Most professionals and entrepreneurs tend to relocate with their family. While factors such as remuneration, taxes, ease of setting up and doing business play a major role in the decision making process, it is the “soft” issues that drives one’s choice on where to settle – factors such as schooling, pollution and lifestyle. From both perspectives Singapore is the perfect choice. Singapore’s tax rates are low and highly attractive; it takes one day to setup a company in Singapore; MNCs are offering attractive pay packages to talented professionals; Tamil is one of Singapore’s official language; there is no dearth of choice when it comes to restaurants serving Indian cuisine; Singapore is home to Indian international schools; there are several Indian cultural clubs and associations that help various Indian communities to stay connected with their cultural roots; and Deepavali, which is one of the most significant festivals for the Indian community is one of Singapore’s major festivals. It’s the perfect destination for Indian expatriates.”

The 2010 ‘Quality of Living’ survey by Mercer Human Resource Consulting revealed that Singapore offers the best quality of life in the Asian region. Singapore was also rated as ‘The Best Place to Live’ for Asian expats by ECA International, early this year. UK magazine Monocle rated Singapore as the third most livable city in Asia in June 2010.

Here is a short clip on the Little India quarter in Singapore.

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The Accounting and Corporate Regulatory Authority of Singapore (ACRA) has outlined certain initiatives in order to raise the quality of audits and enhance Singapore’s position as a trusted financial and business hub.

According to ACRA, the public accountancy profession needs to enhance audit quality through the institution of internal quality control systems. Furthermore, public accountants are urged to exercise heightened vigilance and strive harder to keep up with changes in the business and professional landscape, including changes in clients’ needs and financial reporting standards.

The initiatives undertaken by ACRA to raise the quality of audits include the following: Issuing a guidance for audit-committees to help them better evaluate the quality of their auditors’ work; working in conjunction with the Institute of Certified Public Accountants of Singapore (ICPAS) to educate and prepare aspiring public accountants on their key responsibilities; recognizing talent who have international experience in the public accountancy profession; enhancing the Continuing Professional Education program for public accountants; and encouraging high quality corporate financial reporting. ACRA will also carry out a rigorous regulatory function of Singapore-based auditors and review public accountancy firms that are registered in the country.

With the phenomenal rise of Asia as the leading economic powerhouse, more entrepreneurs, MNCs, enterprises and investors are turning towards setting up a business in Asia. Singapore Company Incorporation is a popular choice owing to the ease of Singapore company setup, Singapore’s tax system, strategic location, political stability, and talented workforce, among other factors. Corresponding with the increase in Singapore company registrations, Singapore’s accountancy sector has witnessed robust growth in recent times. It is estimated that the industry has experienced an average growth rate of 5.7% between 2005 and 2009. There has also been a strong demand for Singapore’s accountancy services on an international level. Singapore’s accountancy sector accounts for 15% of the professional services industry’s exports.

Given that businesses operate in an increasingly volatile, complex and challenging environment, the need for high-value add accountancy services cannot be emphasized enough. Auditing plays a vital role in ensuring the reliability and credibility of a company’s financial information. Chief Executive of ACRA, Ms Juthika Ramanathan said,

“Firms that have robust quality controls and dedicate sufficient resources to their auditing will be in a much stronger position to sustain high quality audits even in a changing business and professional environment.”

Singapore is likely to emerge as Asia’s fastest growing economy with GDP growth rates soaring to unprecedented levels during Q1 and Q2 of 2010. Singapore’s economy is said to have grown 19.3% in Q2 2010 over the corresponding period in 2008, while Q1growth was revised up to 16.9% from 2008. Singapore’s stronger than expected economic performance has prompted its central bank to raise its GDP forecast for 2010 from 7-9% to an impressive 13-15%. Commenting on Singapore’s record level of GDP growth rates, Singapore’s Prime Minister Mr. Lee Hsien Loong said,

“I think this is partly because of the rebound from last year when the economy went into a downturn. It’s also because we have new projects which have come on stream now. The two integrated resorts have made a significant difference and boosted our tourism business.”

Foreign entrepreneurs and investors will now have to invest more capital in order to establish a company in the Republic of Korea under the revised investment visa rules. Foreigners who wish to set up a Korean company and relocate to the Republic to run their business must apply for an investor visa, also known as the D-8 visa.The D-8 visa that is usually issued for up to one year mandates a minimum investment of KRW50 million (USD41,239). However, Korean authorities have announced changes in the minimum investment requirement, raising the minimum limit from KRW50 million to KRW100 million (USD82,467). The revision is to ensure that this visa is made available only to those foreign entrepreneurs who are serious about starting and growing their business in the Korean Republic.

The increased investment limit has sparked concerns about Korea’s attractiveness to foreign investors. According to Korean daily Joong Ang, an official from a foreign chamber of commerce said,

“Raising the minimum investment amount isn’t the right message Korea should be giving foreigners when it is trying to attract foreign investment. Why should investors be penalized for the illegal entry of some foreigners?”

Although the Korean authorities reckon that the increased ceiling will not have a significant impact on foreigners, the move comes at a time when Asian economies are turning increasingly competitive and are introducing measures to woo foreign investment – be it lowering taxes, easing immigration policies, lowering entry barriers for foreign investors, or enhancing company incorporation procedures. Take Singapore for instance. Under the Singapore EntrePass visa scheme, foreign entrepreneurs are required to make a minimum investment of SGD50,000 (USD36,150). The capital requirements under the Singapore EntrePass Visa scheme is significantly lower as compared to Korea’s investment visa. Moreover, Singapore poses a more business friendly environment. Singapore company incorporation can be completed within a day’s time while it takes approximately 2-3 weeks to incorporate a company in Korea. Furthermore, Singapore’s corporate tax rate of <9% on profits up to SGD300,000 and 17% on profits above SGD300,000 is way below S. Korea’s corporate tax rate of 13% on profits up to KRW100 million and 25% on profits above KRW100 million.

The graph below indicates that there has been a steep decline of foreign direct investment in Korea in recent times. It is estimated that FDI inflows have fallen by 6.7% during the first half of 2010. FDI inflows during 2009 was down 57.6% as compared to 2008. By contrast FDI inflows into Singapore have been steadily rising since 2003.

With western economies suffering from a public debt crisis and raising taxes, foreign investors are turning towards business friendly and economically strong Asia. Among the Asian economies, Singapore and Hong Kong are likely to emerge as popular investment destinations owing to their pro-business climate. With Korea raising the investment ceiling, it is possible that businesses might turn towards other low-cost jurisdictions for doing business.

Singapore was ranked as the ‘World’s easiest place to do business’ in the World Bank’s Ease of Doing Business Report, 2010, while Korea was ranked as #19.

Watch this video to gain insight into South Korea as a place to do business.

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In Asia Japan is the only other country which shares an A1 rating while Singapore’s close neighbors Malaysia and Hong Kong have an A2 rating. Singapore’s high credit rating conveys that the Singapore based companies show strong commitment to fulfill their payment liabilities and thereby suppliers who extend loans or credit facility can be rest assured of repayment.

The rating is another feather in the cap for Singapore’s image as a commercial hub of the region. Companies operating out of Singapore readily gain a credible image which is very essential when they are dealing in trading businesses, where a lot of the transactions are carried out on credit terms. As procurement capital of Asia encompassing the requisite infrastructure Singapore attracts large number of procurement and indenting houses. For the supplier companies in regional manufacturing economies, the rating renders added assurance when dealing with Singapore companies.

During tough economic situation and amidst growing competition companies are forced to extend substantial credit terms to the customers. Asia is becoming a much sought after market but the nature of the market is such that there are many potential risks such as political risks and payment defaults which are beyond the control of companies. It is now a necessity to cover such risks when operating in politically tumultuous markets or in markets where probability of defaults are high. By means of a wide spectrum of underwriters Singapore provides comprehensive risk management solutions to companies engaged in cross-border investments within the region.

Commenting on the credit rating Ms. Jacqueline Low, the Director of Singapore company registration agency Janus Corporate Solutions said “Such credit rating sets some order amidst chaos, and this is essential when it comes to enterprises engaged in investments or trade across borders. For Singapore based companies this provides an additional edge to compete in the market apart from world class ports, infrastructure and a network of international financial institutions. Risk mitigation is a key concern for companies when they are striving to come out of the turbulence and risk insurance service providers ease their predicament largely and stimulate them to venture out.  Unsurprisingly the all-inclusive enterprise eco system attracts so many foreign companies to incorporate a company in Singapore or to open up a branch office”.

Singapore’s success in hosting corporate meetings, conventions and exhibitions has made it a meetings, incentive travel, conventions and exhibitions (MICE) hub in Asia-Pacific. Despite the economic downturn, the MICE industry in Singapore proved to be resilient with MICE firms finding a steady stream of projects over the last few years. With the recent opening of the two Integrated Resorts – Resorts World Sentosa and Marina Bay Sands – the MICE industry in Singapore is witnessing robust growth. Most of the convention, exhibition and conference centers in Singapore have clinched events for not only 2011 but for 2012 as well!

It is estimated that close to 6000 business events are held in Singapore each year. In 2008 alone, Singapore accounted for one-fourth of all the business events that were held in Asia and welcomed close to three million business travellers. The MICE industry generated around S$6billion (Approx. US$4billion) that accounted for 40% of the total tourism revenue for 2008. There was a slight dip in visitor arrivals during 2009 but the Singapore Tourism Board forecasts 11.5 to 12.5 million tourist arrivals for 2010.

Recognizing the importance of large-scale events, the Singapore government has wisely invested in infrastructure. The newly opened Marina Bay Sands was constructed for $5.5 billion and offers world-class exhibition space, hotel rooms, restaurants, high-end shopping and a casino. Singapore’s strengths such as strategic location, extensive air linkages, vibrant entertainment and recreation options, business friendly environment, and English speaking workforce help uplift its MICE industry. According to Melissa Ow, Assistant Chief Executive at the Singapore Tourism Board,

“What is unique to Singapore is our user-centricity, which means that experiences are built around the visitor, with the visitor’s needs and preferences in mind.”

Singapore’s robust MICE industry complements its services sector fuelling a demand for event organizers, travel agents, hoteliers, restaurateurs, and retailers. This in turn opens up business opportunities for local and foreign entrepreneurs, businessmen, and organizations to establish a presence in Singapore by incorporating a Singapore company.

Singapore expects to draw 17 million visitor arrivals by 2015. Resorts World Sentosa has secured more than 50 confirmed events through 2011. With mega events such as the FI Night Race, Youth Olympic Games, and Human Capital Summit that are scheduled to be held over the next few months, opportunities abound for Singapore’s MICE industry and services sector. If you are looking at starting a successful business venture in Singapore, it makes sense to set up a Singapore company in the MICE-related industry as it holds promise for years to come.

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The Singapore Accounting Standards Council (ASC) has issued a Statement of Intent on the likelihood of adopting a simplified version of accounting standards for SMEs in Singapore.

The Singapore Accounting Standards Council (ASC) has proposed that Singapore adopts the International Accounting Standards Board’s (IASB’s) final standard on International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) as the Singapore Financial Reporting Standard for Small Entities (SFRS for Small Entities). It has issued a statement to this effect and is seeking feedback from stakeholders and the public. If adopted, the differential reporting standard could benefit Singapore incorporated small to medium sized companies in a big way.

At present, all Singapore companies are required to prepare their financial statements in accordance with the Financial Reporting Standards (FRS) framework that is in line with standards issued by International Accounting Standards Board (IASB). There is no distinct framework for SMEs. However, in reality, small to medium sized companies do not require such high levels of accounting standards. The users of financial statements of SMEs are not really interested in long-term forecast of cash flows. What they are really looking for is information on current liquidity and short-term cash flows. Often, financial statements are a means to assess corporate performance. However, this may not be the case with SMEs as most of them are managed by the company owners themselves. According to a statement issued by the Singapore Accounting Standards Council (ASC),

“The ASC has received feedback that the application of SFRS on all companies imposes a reporting burden on many small private companies, given that the users of those financial statements often do not require the level and extent of disclosure that comes with the SFRS. The ASC also received feedback that most banks tend to place greater reliance on the personal guarantees/collateral provided by the directors and/or shareholders of these companies, rather than the financial statements when considering whether to extend loans to them. The ASC also observed that many jurisdictions which adopt IFRS limit their application to listed companies only.”

The launch of the new Angel Investors Tax Deduction Scheme by SPRING Singapore spells good news for Singapore start-ups who may no longer have to struggle for financing their business ventures. Under the scheme, approved angel investors who make equity investments of at least S$100,000 in eligible start-ups in a given year will qualify for a 50% tax deduction of the investment on their incomes at the end of a two-year holding period, subject to a cap of S$500,000 of investments in each year of assessment. The scheme is valid for investments made from 1 March 2010 to 31 March 2015. The angel investor must a) make the investment at an individual level, b) demonstrate the ability to nurture investee companies, and c) take up a board seat / advisory role in the start-up for the entire holding period.

The tax scheme is set to boost angel investment activity in Singapore and nurture more innovative Singapore start-ups. With the new scheme in place, SPRING Singapore hopes to bring in angel investments to the tune of S$600million by 2015.

Raising private equity is a challenge for most start-ups. Traditional sources of finance such as co-founders, family and friends are limited and banks or finance companies are unlikely to provide start-up funding as they usually provide loans only on a secured basis. That leaves start-ups with venture capitalists and angel investors. Since most venture capitalists in Singapore tend to invest only in high growth, late-stage start-ups, angel investors are the primary source of funding for early-stage start-ups. Business angels not only offer seed funding but also help nurture and groom start-ups by mentoring them, providing access to valuable connections, bringing in networking opportunities, etc. According to Mr. Tan Kai Hoe, Deputy Chief Executive, SPRING Singapore,

“Many start-ups begin with lean operations and find it difficult to engage business talent to help them develop the right strategies or connect to the right markets. Angel investors play a critical role in bridging this gap by bringing along their business skills, industry expertise, and business contacts that are invaluable to help in the start-ups’ growth.”

The rise of Asia is likely to spur the growth of business angels and Singapore start-ups can potentially benefit from them. According to the 2010 Merrill Lynch-Capgemini World Wealth Report, China and India are home to the world’s fastest growing group of millionaires. It is said that most of India’s and China’s wealthy individuals are entrepreneurs who have a high-risk appetite for alternative investments. In the aftermath of the economic crisis, more wealthy individuals are investing in private businesses where they have a better chance of returns rather than investing in public markets. By encouraging more angel investors to invest in Singapore’s numerous start-ups, the government fosters a pro-enterprise environment helping start-ups to grow and take their business to the next level. Thanks to the new angel investors tax incentive scheme, entrepreneurs who choose to incorporate a Singapore company will soon have more business angels to turn to for their early-stage funding requirements.

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Japan has one of the highest tax rates in the world, currently around 40%. The government of Japan has proposed to cut the corporate income tax rate to around 25% in a bid to spur economic growth. The government also plans to introduce incentives to attract overseas companies such as simplifying immigration procedures and setting up specialized economic zones. Furthermore, sales tax is likely to be increased from 5% to 10%. The sales tax hike is aimed at addressing Japan’s ballooning public debt that currently stands at around 950 trillion yen (over $US10 trillion). While Japan’s business community has welcomed the corporate tax rate cut, some economists remain skeptical of the long-term impact that it would have on the economy. Commenting on the proposed company tax cut, Shirakawa, chief Japan economist at Credit Suisse Group AG in Tokyo said,

“It would have only a limited ability to stimulate capital investment and therefore a limited ability to push overall economic growth.”

The government’s new growth strategy to transform Japan into a key business hub in Asia appears impressive but not very convincing, given that economies such as Singapore and Hong Kong are matured business hubs in the region with competitive tax rates, open immigration policies, and business friendly environments. Singapore in particular has gone all out to woo foreign investors and entrepreneurs. For instance, Singapore company formation takes as little as a day’s time with no restrictions on foreign ownership of Singapore companies. Foreign entrepreneurs do not require any special approvals from authorities for setting up a company in Singapore. Singapore’s tax system places it at a competitive advantage over other economies. Singapore’s effective corporate tax rate on profits up to S$300,000 is <9%, while profits above S$300,000 are taxed at a flat rate of 17%. Furthermore, startups enjoy a 0% tax rate on the first S$100,000 of profits for each of their first three consecutive tax filing years. Moreover, a number of industry-specific tax incentives lure foreign firms from various sectors to incorporate a company in Singapore. It is Singapore’s visionary policies and business friendly regime that has made it a formidable regional business and economic hub.

Even if Japan lowers its tax rate from 40% to 25% it remains far behind Singapore’s company tax rate of 17%. The bottom line is that Japan will have to ensure that its investment environment remains conducive and competitive to be back on the radar of foreign investors.

The following diagram that shows the tax rates for certain industrialized economies reveals that Japan’s current corporate tax rate is one of the highest in the world.

Image Source: Wall Street Journal

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