Solid price inflation has made Singapore the most expensive city in the world. Yet its pro-business policies, vibrant entrepreneurial ecosystem, optimal business environment, excellent infrastructure, low-tax system, lack of bureaucracy and strong legal environment have attracted Indian entrepreneurs to start up in the city. Last year, Big Data startup AdNear had moved its headquarters from India to Singapore. Another Indian startup Milaap, an online crowd-funding platform, is also headquartered in Singapore.
Here’s what has given a leg-up to entrepreneurship in Singapore:
Promoting entrepreneurship since school
The Singapore government has taken cognisance of the key role played by new businesses in spurring economic growth and therefore tries to nurture entrepreneurs from school level itself. “At the high school and university level the government is promoting entrepreneurship by supporting student entrepreneurs through multiple grants and lots of mentorships and events. In addition, a committee is dedicated to the cause of promoting entrepreneurship at the university level,” said K Ganesh, a serial entrepreneur cum investor who also runs an incubator for startups.
“They promote entrepreneurship through the overseas campus programme of National University of Singapore and immersive ‘work at startups for a year’ programmes that enable them (students) to understand the atmosphere, challenges, lifestyle and the opportunities in pursuing entrepreneurship,” he added. Encouraging students to work in a startup also ensures adequate supply of manpower to the existing startups.
In contrast, India’s mainstream higher education curriculum is a complete mismatch for the industry’s requirements. Students have to take up additional corporate training programmes to ensure employment. At the same time, companies have to train fresh graduates for at least three months before they can become economically productive.
“The Indian government must also help set up incubators in colleges to give budding entrepreneurs a platform. The government needs to invest in physical spaces that can be leased out to startups. In association with industry bodies, the government can help promote startups in markets abroad,” said Rajiv Jayaraman, CEO, Knolskape, a Singapore-based experiential learning company.
“At a working professional level, government organisations like the Infocomm Authority and other cultural authorities are involved in pushing entrepreneurs in their space. Hence it becomes a combination of vertical and horizontal integration of entrepreneurs into the existing business ecosystem,” Ganesh added.
No red tape
Most importantly, absence of red tape allows businesses to be set up easily. The ‘Entrepreneur Pass’ helps non-Singaporeans set up companies in Singapore. “Incorporating a company in Singapore took me half a day! The low paid-up capital requirement along with the simplicity of the process made it a breeze. No wonder Singapore is ranked highly in the Ease of Doing Business Index,” said Jayaraman.
The Singapore government has also created an extremely stable and efficient business infrastructure where red tape and bureaucracy are rare. As a result, Singapore holds the number one spot on The World Bank’s Ease of Doing Business rankings. Most of the typical day-to-day transactions with the government can be completed within hours and a majority can be done online. In contrast, it takes a week to incorporate a company in Silicon Valley and in India it takes about a month.
According to Ganesh, without a sophisticated venture capital (VC) ecosystem, government grants were the primary way for startups to grow at all levels – seed to VC stage. However, now there is a good mix of VC and government support, which means more capital is flowing in. “In India, it’s mostly the VC culture and that becomes difficult to control centrally as it all depends on VCs’ mood at the time. In Singapore, the government also does a lot of ‘matching’ schemes. So, if entrepreneur brings in X, government gives 4X, etc,” said Ganesh.
The government backs startups via equity financing schemes, cash grants, business incubator schemes, and debt financing. In comparison, in India the government has schemes like Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). While banks are also supposed to provide SME credit of up to Rs 5 lakh without demanding any collateral, they are very hesitant to offer these schemes and they almost never offer them to IT startups due to lack of stock/inventory.
Three of Singapore’s largest banks (OCBC, DBS, and Standard Chartered) offer special lending schemes and banking services focused exclusively on startups.
The Singapore government also offers a tax break if the profits are lesser than $100,000 in the first three years. A typical businessman in India has to pay income tax, service tax, value-added tax, excise duty, shops and establishments’ tax, professional tax and also participate in employer provident funds and employee state insurance schemes. Each tax is managed by different departments and involves various compliance activities, including monthly payments, quarterly returns and annual returns.
Each state has different rules with different forms, which change regularly. With Software as a Service (SaaS) and Cloud Computing trends, traditional definitions of VAT and Service Tax do not apply. Most IT companies are now paying both goods tax and service tax simply to ensure compliance. The Indian government is yet to roll out the unified GST to simplify taxation. There is also no clarity on taxation for tech companies with respect to VAT versus service tax.
“Singapore’s proximity to India, which makes execution for Indian startups easier, and the fact that Singapore being a developed market, make it an attractive destination. There are a lot of organisations in India that promote entrepreneurship education and are doing a great job. Where Singapore has an edge is probably in the area of investments in research and a solid legal system to protect IP,” Jayaraman concluded.