Latest international survey shows Singapore is the easiest place to do business
Latest international survey shows Singapore is the easiest place to do business
Singapore ranks as the country with the least amount of regulation/red tape in the latest findings from the Grant Thornton International Business Owners Survey (IBOS), with just (8%) of businesses citing it as a major constraint on expansion plans.
Globally, regulation/red tape is the most significant constraint to business expansion in 2006. Singapore also scored the lowest percentage for most other growth constraints than their global counterparts in terms of cost of finance (5%), shortage of working capital (5%), shortage of long term finance (3%), and availability of a skilled workforce (9%). This is a reflection of a pro-business government’s continuing efforts to encourage and help entrepreneurs to succeed. In a question asked of Singapore respondents, “how has the government’s commercial interests in business impacted entrepreneurship”; nearly half (43%) cited a positive impact on entrepreneurship and 51% citing “no impact”.
Shortage of orders/reduced demand is the biggest constraint on expansion for Singaporean businesses (26%), although the figure is in line with their global counterparts (29%).
The survey of more than 7,000 business owners worldwide in 30 countries found that red tape is hindering more businesses in Europe than the rest of the world; with Poland (56%), Russia (54%), Greece (53%), Germany (52%) and The Netherlands (50%) putting them as the most bureaucratic countries in the survey.
Although Russia takes second place in the ranking, its bureaucracy appears to be decreasing with 4% fewer businesses claiming it a business constraint than in the previous year. In contrast, both Italy and Turkey have moved sharply up the table in 2006. Red tape is less of an issue in East Asia and North America according to the survey.
Kon Yin Tong, Managing Partner of Foo Kon Tan Grant Thornton said, “Medium- sized businesses are suffering around the world from red tape – it is the disease of modern business. Europe should be particularly worried, however, about the level of red tape it is facing in comparison with other geographic areas such as Asia.”
Lack of skilled workforce
Worldwide, the lack of a skilled workforce is the second most significant constraint to business after red tape; although the global level is similar to that seen four years ago despite strong economic growth. Singapore fared the best with this constraint, with just (9%) of businesses surveyed referring to the lack of a skilled workforce as a major constraint to growth. It augurs well that Singaporean businesses also expect a 16% increase in employment growth.
More than half the respondents from Botswana, Australia and Thailand cite lack of a skilled workforce as the main constraint on business expansion.
With regard to this, Mr Kon added “As the world economy slows, I expect to see a loosening of the pressures caused through a lack of skilled workforce in the W est, but I expect it to continue to rise in emerging markets such as India.”
Late paym ents
However, findings from IBOS 2006 show payment periods were a significant constraint for Singapore businesses – the average payment period for sales invoices stood at 59 days, significantly higher than the global average of 46 days.
Payment periods vary significantly among the 30 countries in the survey with Russia being the fastest payer of invoices at 26 days, followed by Mainland China, Germany and Poland. The slowest payers are Greece, Italy and Spain, with Greece experiencing a steady lengthening in average payment periods in recent years from 68 days in 2003 to 84 days in 2006. Similarly, Singapore’s 59 days translates to a lengthening payment period taking second place to Greece, from 44 days in 2003 to 59 days in 2006.
The average payment period worldwide has remained constant between 46-47 days since 2003 which masks divergent trends with improvement in France and Spain and significant deterioration in Greece, Singapore and Taiwan. In the context of Singapore Kon Yin Tong, Managing Partner was puzzled and commented “ That there has been virtually no improvement since 2004, despite that the economy has regained momentum with growth averaging over 7% in 2004 and 2005, boosted by an export revival in line with global recovery and buoyant consumer spending.” He added, “It may be that businesses are more prepared to extend longer credit terms in the face of competition.”
Profit m argin pressure
The 2006 survey found that profit margin pressure has increased within Singaporean businesses over the past year (+27%). Respondents from Singapore report that pressure from customers to keep costs down (78%) is a major driver on profit margin pressure; more so than for companies globally (56%).
Mr Kon attributed this to the country’s competitive landscape. “Singapore’s open free- market economy makes competition very keen, keeping selling price increases low.”
Besides Singaporean businesses, businesses from Botswana and Greece also stated that the main driver on profit margin was pressure from customers to maintain selling prices.
The 2006 survey found that there has been substantial increase in profit margin pressure experienced by a balance of 47% of respondents, with pressure the greatest in Taiwan (81%), Germany (74%), the UK (64%) and Thailand (60%). There appears to be no geographic pattern to the findings and the geographies are economically diverse.
Soaring oil prices and the third year of rising commodity prices was reflected in the survey with just under half of respondents identifying increased cost of fuel and raw materials as a major cause of profit margin pressure. To improve profitability, the survey found 87% of businesses are most likely to target cost reductions and 81% to opt for improving cash management - over 80% of Singapore businesses preferred the latter alternative as a means of offsetting the profit margin squeeze.
Singapore is an advanced, successful free-market economy, featuring an open and corruption-free environment, stable prices, and a modern, competitive industrial sector. The economy endured three years of unusually weak expansion caused by the global slowdown in the 2001 and 2002, and damage inflicted by the SARS outbreak in 2003, but it has regained momentum, with growth averaging over 7% in 2004 and 2005.
