MNCs in Singapore are commonplace in a globalised country for many reasons. MNCs in Singapore, along with SMEs and startups, all need to comply with specific requirements when registering a business in the Republic.
What is a Multinational Corporation?
A multinational corporation/company (MNC) with operations in several countries. They are large companies that are managed by professionals who do not own the company. There are several MNCs in Singapore that have major operations within the country.
Pros & Cons of MNCs
Multinational corporations (MNCs) are powerful players in the global economy, wielding significant influence that can bring both advantages and disadvantages. Despite the benefits they offer like increased economic activity and access to goods, concerns exist regarding the unequal distribution of those benefits and potential harm to local economies. Let’s take a look at both sides of the coin.
Pros of MNCs |
Cons of MNCs |
|---|---|
| Creation of Jobs: Being a large corporation, they will require human resources. This creates more jobs for the country they operate in. | Profit-Driven: Most MNCs are interested in profits at the expense of employees or consumers. |
| Ensure Standards are Kept: The success of an MNC is due to consumers’ preferences to buy goods and services that they can relate to. If you’re visiting a McDonald’s overseas, it gives a sense of familiarity – this is done to ensure standards are kept. | Taxation: MNCs try to avoid funnelling profit through countries with the lowest corporate tax rates. |
| Rise in Foreign Investments: MNCs engage in foreign direct investments (FDIs). This helps to create capital flows to poorer, or even developing nations. | Cash Reserves: Most MNCs have cash reserves in overseas accounts, bringing deadweight welfare loss as it is not used for investment. |
| Business for SMEs: MNCs are usually new to a country and often engage SME companies in the location to support their operations. This creates business growth for SMEs and overall economic growth for the country. | Market Dominance: This makes it difficult for local small firms to succeed. |
| Scale of Investment for Host Country: When an MNC invests in any country, the scale of the investment is likely to be in a significant figure. Governments will often offer incentives to firms in the form of grants, subsidies and tax breaks to attract investment to come in big. This foreign direct investment (FDI) will have advantages for the host country. | Outsourcing of Jobs: MNCs will opt for cheap labour-cost economies through outsourcing causing loss of jobs in more developed countries. |
Registering A Business in Singapore
Whether you’re a MNC or a SME, there are 4 ways to expand and establish a business in Singapore. The types of business structures are listed below:
- Branch: The first way to register a business in Singapore is through the incorporation of a branch. A branch is an extension of the foreign head office company engaging in core activities.
- Subsidiary: The next business structure used for business registration in Singapore is a subsidiary. A subsidiary is a private limited company whose majority shareholder is a foreign company.
- Representative Office: The third type of business registration in Singapore is a representative office. A representative office is a temporary set-up with no legal status and cannot engage in any operations that generate profits.
- Related Company: The last and most common type of structure when it comes to Singapore business registration is a related company. A related company is the shareholder can be the same as a local and overseas entity (under a separate legal entity).
Reasons Why MNCs and SMEs are Setting Up a Business in Singapore
Singapore is ranked second in the East of Doing Business Report 2020 by the World Bank and hosts the largest number of headquarters in the Asian region. The country is home to about 46% of regional headquarters in Asia, it also hosts the regional headquarters of 59% of global technology MNCs. In addition, the country has over 37,000 international companies, including 7,000 MNCs with their regional headquarters in the country.
Top 3 Reasons Entrepreneurs Set Up a Business or MNCs in Singapore
Strong, Competitive Economy
With its ever-growing economy, and being the financial hub for the Asia Pacific region, Singapore has positioned itself in a pivotal role as a business epicentre within the heart of Asia.
Hence, that is one of the major reasons why MNCs continue to favour Singapore as a preferred business destination for incorporating a Singapore company. Most MNCs stand to benefit from Singapore’s open business and business-friendly policies.
Company Setup Incentives
Additionally, to encourage MNCs to come to Singapore and set up a base of operations, Singapore’s Economic Development Board offers these companies International Headquarters Incentives (IHQ) and Regional Headquarters Incentives (RHQ).
Moreover, companies that successfully get conferred with the RHQ status will reap the benefits of a concessionary tax rate of 15% for up to 5 years for all qualifying income which is derived from activities and business operations conducted in Singapore. Companies who obtain the IHQ status, on the other hand, enjoy tax rates of 0 to 10%.
Progressive Tax System
Moreover, designed with entrepreneurship growth in mind, its attractive and low corporate and personal tax rates are a big reason why MNCs continue to choose Singapore over any other country.
Singapore boasts an extensive network of free trade agreements and double taxation agreements, crucial frameworks that facilitate and safeguard the interests of the country’s investors.
Conclusively, Singapore continues to cement itself as one of the best places in Asia to incorporate a company, thanks to its strategic location, stable economy, tax relief, equally stable political environment, and top-notch infrastructures.
How Singapore Companies Can Establish Themselves as MNCs?
Aside from bringing MNCs and foreign investors into Singapore, the government is also helping local companies go global to boost their economy. Henceforth, to nurture Singaporean companies into future MNCs, the government offers grants and schemes that provide financial support for venturing overseas. These programs act as a springboard for companies looking to expand their global footprint.
Market Readiness Assistance (MRA) Grant
The Market Readiness Assistance (MRA) grant empowers local Singapore companies to expand into new international markets. It covers up to S$100,000 per new market across three key areas.
- Overseas market promotion
- Overseas business development
- Overseas market set-up
Strategic Brand and Marketing Development Grant
The strategic brand and marketing development grant is to help local companies enhance their branding. Establishing a strong brand foundation is essential for businesses seeking access to new markets.
Market Access Grants
Under the market access support, local businesses can tap into 3 key grants:
- Mergers & Acquisitions (M&A)
- Pilot Project & Test Bedding
List of some of the MNCs that have set up a base in Singapore
| 3M | Ernst & Young | Kentucky Fried Chicken | SATS |
| Accenture | ExxonMobil | KPMG | Schneider Electric |
| AXA | Far East Organization | MapleTree Group | Seagate |
| Bank of America Merrill Lynch | Fraser & Neave | Marina Bay Sands | Sembcorp |
| BNP Paribas | General Electric | MayBank | Shell |
| CapitaLand | Great Eastern | McDonald’s | Siemens |
| Caterpillar | GlaxoSmithKline | Medtronic | Singapore Airlines |
| Citibank | Hewlett-Packard | Micron Semiconductor Asia | Singtel |
| Continental Automotive | HSBC | Novartis | Standard Chartered Bank |
| Dairy Farm International | IBM | OCBC Bank | Starhub |
| DBS | InterContinental Hotels Group | Panasonic Asia Pacific | UOB |
| Deloitte | Johnson & Johnson | PricewaterhouseCoopers | |
| Deutsche Bank | JP MorganChase | Procter & Gamble |
FAQs
The Singaporean-based Multinationals in foreign countries gives the Singaporean government recognition and publicity among those foreign governments. Also, the companies are a source for Singaporean citizens who find employment with such companies.
- Getting electricity: it will take you close to a month to get an electric connection because of the process involved.
- Culture: Singaporean culture emphasizes relationships. Therefore to do business, you need to first work tirelessly on building relationships and this could take time.
- The process of implementing contracts and liquidation is longer compared to other countries.
No. The incentives and tax concessions have a limit. This is because Singapore desires to have strong Singaporean companies establish headquarters in Singapore.
Yes. However, this is not so prominent among Singaporeans because the tax regime is more beneficial to those who sell successful brands or acquire such as opposed to development. Therefore once a Singaporean company sees itself successful, it opts to sell. An example is the Raffles Hotel or Tiger Beer. A company that buys a brand is entitled to tax amortization as opposed to one that develops a brand of its own.
Having multinational corporations outside Singapore can help these businesses diversify common risks and lower production or service costs.
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