What Do Singaporean Businesses Need From Their Wealth Managers?
Singapore has a well-earned reputation as one of the world’s most competitive economies. The country’s gross national income increased to USD 66,176 per capita in 2021.
The World Bank reports GDP growth in The Lion City is among the globe’s highest, at 7.61% annually.
Singapore also offers some of the most business-friendly regulations for local entrepreneurs, amid strong trade freedom and transparent government institutions.
That’s why more than 500,000 businesses and multinationals drive the country’s robust market.
Challenges still exist, though, so how can Singaporean companies maximize their overall worth? What financial strategies can they implement? Are there ways to unlock investment opportunities or improve tax efficiency?
How does a thriving enterprise choose the correct wealth management consultants for its needs?
Read on for insight into these questions and more.
Find out how medium to large Singaporean corporations can make the best choices for their financial futures.
Scratch the Surface of Singapore’s Economy
Singapore joins the Hong Kong SAR, the Republic of Korea, and Taiwan as The Four Asian Tigers. These countries have high-growth markets fueled by exports and rapid industrialization.
The nation has the freest economy in the world with a highly developed and open market environment. It’s also home to the world’s busiest cargo seaport and is among the globe’s top ten exporters.
The country’s top ten shipments for 2021 included:
- Machinery, including computers
- Mineral fuels
- Medical equipment
- Gems and precious metals
- Organic chemicals
- Perfumes and cosmetics
- Other chemical goods
Singapore is one of the largest trade markets in the Asia-Pacific region and implements a network of 27 free trade agreements (FTAs). They allow local exporters to enjoy benefits such as tariff concessions, faster access to specific sectors, and Intellectual Property (IP) protection.
Singapore’s Key Sectors
Trading Economics states Singapore had a gross domestic product (GDP) of USD 396.99 billion in 2021. It expects this figure to reach USD 425 billion by the end of 2022.
Two key sectors keep The Lion City’s economy ticking:
Service Producing Industries
Singapore’s Department of Statistics reports that the service sector generated nearly 70% of the country’s GDP in 2021. Trade, real estate, information and communications, administrative, and other industries employ about 1.95 million residents.
Finance is a major service in the sector and accounts for around 14.6% of the country’s GDP alone. It enjoys stable growth due to Singapore’s pro-business stance and legal transparency.
The nation is home to over 200 banks, many basing their operational headquarters in the country to service Asian Pacific regional activities.
These establishments are critical to Singapore’s role in financing local growth and facilitating trade, corporate finance, and infrastructure development.
Other monetary facilities include asset management centers, insurance firms, and capital markets.
According to Lloyds Bank, goods-producing industries form approximately 24.4% of the country’s GDP. This sector facilitates other services in the region requiring technologically advanced equipment.
Manufacturing contributed 22.3% of Singapore’s GDP in 2021, producing electronics, petrochemicals, biomedical products, scientific instruments, and telecommunication equipment.
The government is focused on automation to keep the industry competitive, encourage growth, and increase output. This strategy, known as Industry 4.0, aims to use artificial intelligence to digitalize the economy.
Foreign Investments in Singapore
Singapore uses its trade openness to attract foreign direct investments (FDI). The country is an appealing destination for asset placement due to transparent regulations, tax incentives, and political stability.
FDI in the nation increased to USD 26.323 billion in the first quarter of 2022. The countries investing the most in Singapore are the United States, the Netherlands, and Japan.
The Lion City draws significant investment in the following sectors:
The government also actively promotes the country as a research and development (R&D) innovation center. It offers study grants and partnerships with domestic investigative departments.
Navigating Singapore’s Business Environment
Singapore’s developed free-market economy and pro-business reputation make the country a favored location for international business expansion.
The nation is ranked the most accessible Asian country for foreign companies to set up operations. Reasonable tax rates, high availability of a skilled workforce, and a strategic location simplify running a business on the island.
Foreigners may own 100% of the stock in a company incorporated in the country without the need for local partners. The government places no restrictions on the amount of currency moved across the state’s borders, either, and no limits on profit repatriation.
Singapore ranked fourth in Transparency International’s 2021 Corruption Perceptions Index. This high score indicates business owners are less likely to be at the mercy of compromised officials. Public servants are well paid, and strict penalties prevent corruption.
The Property Rights Alliance ranks Singapore second in the world and first in Asia for having refined IP protection. Owners may register patents, trademarks, copyright, designs, and trade secrets with the country’s IP Office.
While the global average time required to start a business is 20 days, the island nation’s mean is only two.
Singapore and Corporate Taxes
Singapore’s accommodating tax regime is part of what makes it such an attractive investment destination. The legislation is easy to understand and applies a single-tier system to corporate and personal liabilities.
The country’s corporate tax rate is 17%, and no capital gains levies apply unless profit is the sale’s main purpose.
A new business receives a concession on its first SGD 200,000 of income and a yearly tax rebate. These exemptions mean levies are only payable after earning SGD 455,440 in profit.
Only income earned in Singapore is subject to tax. Foreign-derived dividends are exempt from levies, subject to a rate of at least 15% in their source country.
The Lion City’s Economic Expansions Incentives Act offers industry-specific deductions for certain activities. Lower rates are available to taxpayers carrying out services the government deems beneficial to Singapore’s economic development.
Common Challenges SMEs and Large Companies Face in Singapore
As the nation’s economy bounces back from the pandemic, SMEs and large companies are more optimistic about their operations.
The Singapore Business Federation’s National Business Survey reports that half of enterprises are satisfied with the local, regional, and global economic climate. Companies are also more confident about sustaining their activity now than in 2020.
However, doing business in the country isn’t without challenges. Many organizations are concerned about retaining talent and growing competition.
Other obstacles include the following:
Rising Operating Costs
An August 2022 study reported that 58% of Singaporean SMEs only had enough cash flow to sustain operations for six months.
High inflation and increasing costs of raw materials, rent, and utilities mean more operational expenses and lower profit margins. Companies need a complete understanding of their finances to prevent uncertainties.
Moreover, many SMEs with low liquid reserves face cash flow issues because of late-paying customers.
Protecting Ideas and Assets
Business owners often neglect to protect their IP rights, as the application process can be daunting. The theft of these ideas has become one of the most significant problems companies face in Singapore.
Enterprises must take steps to secure customer databases, finances, growth plans, and trade secrets.
Staying Up-to-Date With Regulations
Companies keep abreast of any laws, acts, or regulations that may impact the way they do business. Legislation changes often, and not knowing the latest developments puts corporations at risk.
Difficulties Securing Funding
Many enterprises in The Lion City lack capital, with more than 60% of companies seeking financing through bank loans.
These constraints sometimes lead to weak technological expertise and delay a company’s decision to invest in expansion.
Vulnerability to Crises
The COVID-19 pandemic negatively affected approximately 63% of Singapore’s business operations. Many enterprises suffered revenue declines, supply chain interruptions, and closures.
In particular, the limited financial reserves of SMEs make them more vulnerable during crises.
While the nation is known for its ease of doing business, some companies struggle to follow various regulations, including tax legislation.
The Inland Revenue Authority of Singapore (IRAS) has created three voluntary frameworks to increase corporate levy compliance and transparency.
Enterprises can participate in the Goods and Services Tax Assisted Compliance Program, the Tax Governance Framework, and the Tax Risk Management Control Framework for Corporate Income Tax.
Businesses can expect more scrutiny as the government focuses on bringing corporate tax governance in line with global standards. Companies should move quickly to manage risk and adopt new compliance initiatives.
How Can Singaporean Enterprises Overcome These Challenges?
One of the best decisions a company can make to overcome obstacles is to seek professional assistance.
Financial management consultants can help identify challenges and adapt processes to solve them. These professionals provide sound advice in asset management and wealth and succession planning.
Creating an investment strategy that plans for your future financial needs, ensures tax efficiency, and preserves capital is essential.
Business owners require a tailored approach to meet these objectives. As each client’s needs are unique, wealth management consultants provide five stages of service:
- Carry out an in-depth review of your company’s financial position, risk tolerance, and goals.
- Develop a comprehensive investment strategy and optimal tax plan, and explain the consequences of implementing these measures.
- Propose an in-depth, individualized retirement scheme.
- Put a succession plan into place that reflects the business owner’s desires.
- Provide ongoing asset allocation, monitoring, and reporting.
Consultants also assist in drafting legal documents setting out favorable client payment terms, helping companies optimize cash flow. Being in a better financial position means businesses can build reserves to strengthen and grow their operations.
Opportunities for SMEs and Corporations in Singapore
Despite the challenges, businesses in Singapore have many opportunities to thrive. Enterprises have several promising prospects to tap into for long-term growth.
The pandemic accelerated digitalization by driving consumers and businesses online.
Companies willing to embrace technology can look forward to increased productivity, optimized operations, and lower costs. The transformation also keeps enterprises resilient by helping them make informed decisions to protect critical assets.
The incentive for sustainable innovation is strong, with global environmental, social, and governance (ESG) focused assets projected to grow to USD 50 trillion by 2025.
Consumers are also more eco-conscious and want goods and services created with the planet in mind. This demand provides a huge opportunity to invest in a lucrative market while preserving the environment.
Supply Chain Innovation
At the height of the COVID-19 pandemic, the global supply chain was affected by the export bans many countries imposed. This disruption led companies to search for alternative sourcing locations, especially in Asia.
Singaporean businesses can capitalize on this opportunity, as many distribution centers have relocated to the country over the past two years. They should consider implementing a dual-circulation model that spurs domestic demand while catering to overseas markets.
Manage Your Wealth in Singapore
Appointing a knowledgeable wealth management team can maximize your business’ potential while minimizing risks and opening the door to new opportunities.
At Innovation Park, our expert consultants develop customized strategies to address obstacles and grow business. We provide end-to-end wealth management solutions to help Singaporean businesses:
- Optimize cash flow and earnings.
- Develop a solid plan for savings and loan repayments.
- Connect with investment opportunities, innovation grants, and subsidies.
- Execute international expansion.
- Benefit from an optimized tax strategy.
Feel confident about your future and turn your company’s objectives into wealth-building, financially advantageous moves.
Innovation Park combines resources and expertise to bring bespoke solutions and investment opportunities that benefit your business. Book a consultation with us to learn more.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.