MP Jamus Lim
Doing Business Easily But Doing It Right
Mr Speaker, the proposed amendments to the Accounting and Corporate Regulatory Act (ACRA) of 2004, along with other related acts, are designed to both improve registration procedures while making regulatory enhancements.
I support the Bill, but will flag some areas of concern. I will begin by discussing the two main thrusts of the Bill, pertaining to improving the business environment and enhancing corporate regulation. I will then move on to some more general reflections on the fundamental tension between these two objections. Since much of my speech pertains to the business climate, I will also state, at the outset, that I am an associate professor at a business school.
Improving the business environment
The amendments include several that are meant to improve the ease of business registration.
Clause 8 empowers the Registrar or Authority to obtain information related to ascertaining the veracity of registration from certain specified sources, including government agencies. By a similar token, expanding the recognition of financial statements prepared according to internationally-accepted standards, as embodied in Clause 48, will make it easier for foreign investors to register subsidiaries of their businesses locally.
Further simplifying the procedures involved setting up private enterprises—not least by making the different arms of government talk to one another—will continue to lighten the burden of regulation.[1] This, in turn, has the potential to spur further entrepreneurial activity,[2] promote competition,[3] stimulate the growth of existing businesses,[4] and even raise productivity.[5]
Of course, Singapore already does reasonably well by this standard. The most recent edition of the World Bank’s Doing Business report ranked our nation 2nd overall in terms of ease of doing business.[6] Even so, the “Starting a Business” subindicator—the one most related to the bill at hand—had us at 4th, behind New Zealand, Georgia, and Canada. It is a reminder that other economies do not sit still, even as we strive to continue to improve our own. Hence, any steps we can take to continue easing the process of new business formation should be welcomed.
Moreover, the amendments also enfold certain rudimentary personal data protections, especially pertaining to residential addresses. For example, the new Section 30C and D affords the exclusion of residential addresses from public disclosure, so long as contact addresses are available. Similar clauses apply the same to related Acts, such as Clause 14 for public accountants to list a distinct contact address for public inspection in the Accountants Act, or Clause 40 for directors, chief executives, or secretaries in the Companies Act.
These basic protections are to be welcomed, not least because, in an age of pervasive information dissemination where the Internet never forgets, individuals and their families should, at least, be able find refuge from public scrutiny in their homes.
Of course, this naturally begs the question of whether providing information that differs from official residency information inhibits police or judicial operations. Certain clauses (such as Clauses 19, 26, and 45) stipulate that documents may be directly served to contact addresses. I will note that Clause 26 specifically states that such documents may be sent by either “ordinary” or “prepaid registered post,”[7] but no such language is included in Clauses 19, 34, 45, or 65, albeit the preamble definition of “contact address”—which indicates the necessity of a “physical address at which the individual can be… contacted by post”[8]—may be sufficient. Relatedly, it strikes me as odd that there is no requirement that registered post be used, to ensure receipt. This is common practice for initial attempts at personal service, at least prior to any application for substituted service.
Enhancing corporate regulation
Several clauses take steps to enhance the corporate regulatory landscape.
Clause 39 allows the Registrar to unilaterally amend the register of directors for a company, with reasonable cause. But when paired with Clause 8—where information may be obtained from any authorized information service provider, which could include nongovernmental entities—problems may emerge, especially in a world where there may be incentives to generate fraudulent information, or even if, in the absence of malicious intent, such entities suffer from lapses that could corrupt their databases.
To be fair, the proposed amendments to Section 30A(4) relieves the person of liability if there is erroneous or inaccurate information collected, if they have not been offered an opportunity to verify said information. But it nevertheless raises questions about how much the government should be reliant on external information sources.
I’ll be the first to acknowledge that restricting data providers to only intra-government sources may be even worse, given capacity limitations in the public sector. But it nevertheless places a strong onus on the government to carefully verify the accuracy of information. I trust that this will be emphasized to public officials, as part of standard operating procedures, as they go about their due diligence processes. Furthermore, I hope that ACRA will clearly post information on their website that explain the appeals mechanisms available to individuals who wish to contest a disqualification.
The fundamental tension between easier business operations and sustaining effective corporate regulation
Sir, in introducing these two sets of amendments, the government is threading a fine needle: of easing what could otherwise be tiresome or onerous processes involved in individuals pursuing private interests, while also ensuring that these private interests do not come into conflict with broader public and social objectives.
In this sense, then, it is important to remember that we must guard against carrying any given pro-business policy too far. We must understand that supporting businesses does not imply coddling them from exposure to competitive market forces. Nor does not preclude taking care of other stakeholders—especially workers—in the economy. For these reasons, sensible regulation remains necessary.
Recent events surrounding the Doing Business report itself are instructive. The World Bank suspended the publication of indicators in 2020, in part because of backlash from how the measures failed to adequately account for pro-social considerations,[9] and perceptions that there was widespread gaming of the system.[10]
Worse, the indicators were accused of favoring a right-leaning ideology.[11] For instance, it included an indicator for “paying taxes” that seemed to suggest that lower corporate taxes were unambiguously better. As the Workers’ Party has argued on multiple occasions in this House before, a higher effective corporate tax rate—if directed appropriately—can yield many positive benefits, ranging from averting an increase in the GST[12] to providing further relief to SMEs,[13] to reinvesting more in our local companies.[14]
Another controversial indicator related to “employing workers,” where more robust labor regulations were treated crudely as a cost, thereby failing to the offsetting benefits to society of stronger employment protections. The indicator was justifiably excluded from the compilation of the aggregate index since 2011, but its presence in the report was nevertheless viewed as symptomatic of the report’s implicit biases.
More generally, we should also not allow the world to think that an easy business environment also means a permissive one. Some have even suggested that “Singapore-washing”—the process where foreign actors take advantage of our simple registration processes and global reputation for incorruptibility to incorporate fronts for dubious business activities—is some form of a quid pro quo for investing in our city state.[15] Such a mindset will undermine our hard-won brand name, and eventually come back to bite us.
Recent incidents have already raised questions about how indulgent we appear to be of illicit activities, especially with regard to financial flows. The sentences meted out for the $3 billion Fujian gang moneylaundering case—of between 13 and 15 months jail time—struck some as excessively lenient.[16] In a written response to the honorable member, Mr Leong Mun Wai, Minister Shanmugam indicated that this duration is comparable to other jurisdictions, although he did concede that further tightening of regulatory measures was warranted.[17] The decision to extradite the alleged malware operator Wang Yunhe to the United States, without also prosecuting him for crimes here, also raises question of why our laws do not appear to be sufficient to ensnare such criminal operations. After all, U.S. court documents reveal that the companies he registered here were shell companies used to “conceal the identity and illegitimate nature of his… proceeds.”[18]
I am aware that we will be debating the Anti-Moneylaundering Bill in this House next month, where these matters will very likely be debated at length. Nevertheless, I hope that we will reflect on whether our drive toward simplifying doing business here has erred on the side of becoming too permissive.
Conclusion
In closing, I urge this House to guard against allowing the undeniable benefits of a favorable business climate to entrench itself as ideology, divorced from the counterbalancing role of sound corporate regulation, and subsequently insulated from critique. Internal criticism of the Doing Business report contributed to the resignation of the Bank’s then-Chief Economist.[19] As we debate the present bill in Parliament, it is my hope that we remain clear-eyed on the value of considered, constructive criticism of our own business environment, too.
[1] Djankov, S., R. La Porta, F. Lopez-de-Silanes & A. Shleifer (2002), “The Regulation of Entry,” Quarterly Journal of Economics 117(1): 1–37.
[2] Norbäck, P-J., L. Persson & R. Douhan (2014), “Entrepreneurship Policy and Globalization,” Journal of Development Economics 110: 22–38.
[3] Bruhn, M. (2011), “License to Sell: The Effect of Business Registration Reform on Entrepreneurial Activity in Mexico,” Review of Economics and Statistics 93(1): 382–6.
[4] Klapper, L., L. Laeven & R. Rajan (2006), “Entry Regulation as a Barrier to Entrepreneurship,” Journal of Financial Economics 82(3): 591–629.
[5] Poschke, M. (2010), “The Regulation of Entry and Aggregate Productivity,” Economic Journal 120(549): 1175–1200.
[6] World Bank (2020), Doing Business 2020, Economy Profile: Singapore, Washington, DC: World Bank Group.
[7] Clause 26(a)(iia).
[8] See, for example, Clause 13(b).
[9] Cárdenas, M., L. Alfaro, A. Auerbach, T. Ito, S. Kalemli-Özcan & J. Sandefur (2021), Doing Business: External Panel Review Final Report, Washington, DC: International Bank for Reconstruction and Development.
[10] Manuel, T., C. Arruda, J. Azour, C-E. Bai, T. Besley, D-S. Cho, S. Guriev, H. Labelle, J-P. Landau, A. Maria & H. Wolff (2013), Independent Panel Review of the Doing Business Report, Washington, DC: International Bank for Reconstruction and Development.
[11] McCormack, G. (2018), ”Why ’Doing Business’ with the World Bank May Be Bad for You,” European Business Organization Law Review 19: 649–76.
[12] Hansard (2022) 95(50): Feb 28.
[13] Hansard (2024) 95(124): Feb 26.
[14] Hansard (2021) 95(40): Oct 5.
[15] Ren, S. (2024), “Singapore-Washing Has Hit a Wall,”
[16] Wong, S. (2024), “Are Sentences in $3 Billion Money Laundering Case Short Relative to the Sums Involved?”, Straits Times, May 19.
[17] Hansard (2024) 95(136): May 8.
[18] Wong, A. (2024), “Man Allegedly Behind Global Malware Network: Prosecution Ready to Present Case for Extradition to US,” Straits Times, Jun 12.
[19] Zumbrun, J. (2018), “World Bank Chief Economist Paul Romer Resigns,” Wall Street Journal, Jan 24.