Comparing ecosystems: Singapore, Jakarta, Bengaluru
In our very first issue of empower, we chose to conduct a regional examination of Asia. We chose three ecosystems — Singapore, Jakarta, and Bengaluru — are not only cities enpact is extremely active in, but stand out in how they represent major trends in the region.
Some of our other articles examining the city point out the individual struggles of each city, be it human capital in Singapore, quality of life and high-level governance in Jakarta, or a bustling domestic market in Bengaluru that often tempts companies to serve internal markets rather than expand globally. In this article, we will take a cross-cutting look across all three.
comparing ecosystems: baseline factors
You may recall from our article detailing how the SFI reflects the entrepreneur’s journey, that we consider some indicators as baseline factors for supporting a startup scene. Crucially these cover indicators from the Infrastructure, Macro-Political & Legal Framework, and Startup Scene domains.
At a glance, you can see that each city is well equipped in each area to support startups. Generally speaking, we may see the following:
1. Development as a factor
There is a clear difference in the development of Singapore in comparison to Jakarta and Bengaluru. The crudest analysis of this difference would conclude that Singapore is more advanced, however, in our data, research, and interviews, we’ve come across multiple areas in which Singapore’s startup ecosystem could gain from partnering with Jakarta and Bengaluru.
The phase of development for each has a significant impact on how the startup ecosystem develops and the type of innovation that is dominant: FinTech in Jakarta born out of a massive population and a lack of financial inclusion; emphasis in DeepTech solutions in Singapore from a lack of human capital and natural resources and a high trade economy; services trade, information technology, and biotechnology in Bengaluru from a scene teeming with talent and ideas.
2. Costs of living
Broadly speaking, the expense of each city has an impact on the phase of startups that are common there. Singapore is an expensive city, and therefore, it is a difficult place to bootstrap a business. Whereas in Jakarta and Bengaluru it is far easier to bootstrap and to do so for longer periods of time, so it’s more apt for companies to start from the bottom there
3. Crime is not a constraint
In Singapore, there is very little crime and informality is essentially nonexistent. Jakarta and Bengaluru, while having fairly high levels of informality, also do not report much, or any, trouble with crime interfering in their ability to start a business. Overall, in each city’s macro score, we can see that while there may be a modest amount of issues with regulation or corruption, businesses do not report it as an impediment.
Overall, each of these countries supplies the adequate baseline that startups need for support and growth. There are no strong disincentives to starting a business. Furthermore, each environment has presented its own challenges that startups are rising to meet.
Next, we will look at what factors differentiate each ecosystem.
comparing ecosystems: differentiators
1. Development as a factor, again
Singapore’s startup market is focused, generally speaking, on higher value-added products. Largely due to the competition and the cost of living, there is little room for ideas, products, or services that are not competitive or high value-added. For this reason, we see many high-tech solutions coming out of Singapore. On the opposite end, Jakarta focuses on taking advantage of its market size, creating consumer-facing businesses, and on bringing younger people into the economy. Bengaluru sits somehow in a mix of these two extremes; it is a single ecosystem where there are both huge high-tech investments and a massive market, and where engineers and highly skilled labor converge to create.
2. The unicorns tell a story
Not just the number of unicorns (in which Bengaluru surely dominates) but in the nature of the startups that tend to become unicorns. In Bengaluru, one of the largest startups is the e-commerce platform, Ola Cabs. The business model itself is not hugely innovative or original, but it is capitalizing on its market share. In Singapore, we see big AI companies, such as Trax, a testament to the country’s focus on high-tech solutions and to its lack of human capital and space. Finally, in Jakarta, enough cannot be said about the huge importance of FinTech, demonstrated by companies like the unicorn Ovo, which works to expand financial inclusion and capitalizes on the huge market of Indonesia.
However, the number of unicorns is not the full story. In Singapore, it is more common for big startups to go public sooner, at which point they are no longer considered unicorns.
3. Entrepreneurial culture
In Bengaluru and in Jakarta, our index shows that the entrepreneurial spirit is alive and well. This may well be due to the cost of living and the perceived payoff of taking the risk of starting a business in comparison to current comforts. Additional factors are cultural expectations of success and status. In Singapore, we see that the lack of prestige in startup culture is a big factor in why young talent is drawn towards more traditional pursuits, whereas in Jakarta and Bengaluru, not only is startup culture understood and respected, but there is a hunger for the lifestyle.
4. Trade can benefit startups
Among these three countries, there is a stark contrast in the role that trade plays in their economies. Singapore has long built a reputation as a trade economy: most regional trade goes through their ports, a lion’s share of flights to the region connect through their airport, and their trade as a percentage of their GDP is over 300%, by and far the largest in the index. In comparison, Jakarta and Bengaluru have average trade levels, with many urging for more free trade, particularly in ASEAN.
Trade impacts startups, as it creates avenues for regional and global expansion. The biggest companies in Jakarta and Bengaluru don’t necessarily need to go international, as their own markets provide plenty of revenue. This is not necessarily the case in Singapore, where ecosystem builders and entrepreneurs are not typically built for the domestic market, but for the regional and international one.
The context of each country has a transparent effect on trade as well. When considering Singapore’s population of around five million people — in comparison to the 270 million in Jakarta in over 17,000 islands and the 1.3 billion Indians — it is not hard to understand why Singapore would opt to serve the larger regional and international market, while startups in Jakarta and Bengaluru have often operated domestically for longer. In the end, active trade in the economy can likely make an impact on how soon and how likely their startups are to expand internationally.
Each has capitalized on its strengths
Through data, research and interviews, we’ve seen how startup ecosystems have developed distinctly in Singapore, Jakarta, and Bengaluru. With final SFI scores of 66.09, 43.23, and 48.45, respectively, we’ve seen that each city has comparable differences and strengths. While their SFI score attempts to distill these differences into a single number, or even into an index of 90 indicators in 6 domains, we’ve seen that the vibrancy, innovation, and hunger for startup culture is alive and well in each city in a markedly different way.
In Singapore, we see high levels of government involvement in nearly every aspect of startup culture. The government has worked consciously to promote entrepreneurship and innovation through research and development since at least the 1980s. In every way that a state can influence a startup ecosystem, Singapore is actively doing it. In this way, there can be no doubt they are a leader of how government intervention can positively create a more friendly startup ecosystem.
But as much as Singapore shows the strength of big state behavior to encourage startups, so too do Jakarta and Bengaluru show the power and might of human will to create a vibrant startup ecosystem. To these cities, entrepreneurship has been garnered as a pathway to environmental improvements by citizens, for citizens. Their startup scenes represent a fire and a hunger that catapults them to the center of the conversation when we speak about the power of entrepreneurship to build an economy from the ground up.
Some recommendations to address weaknesses
1. Recent regulations have raised the minimum salary required to obtain a work visa in Singapore. While this is no doubt intended to tackle the issues presented by immigration to the nation, it creates a pathway for only high-paid talent to enter the startup scene and blocks higher potential but lower-skilled/paid talent from entering (especially in combination with the high cost of living).
It is a delicate balance to find, and the factors that are best for the country writ large are not necessarily the choices that are best for the entrepreneurial scene. However, policies such as these can incentivize the next generation of talent to look elsewhere. While Singapore is the leader in our index today, this can easily be a precarious situation when it comes to staying competitive.
We recommend keeping in mind the next generation and future trends when crafting policies for talent entrepreneurs abroad, such as making it easier to attract high potential foreign talent could help create more innovative solutions.
2. Continue the initiatives to create a fiscal union in the reciprocal green lane between regional neighbors. Though it was halted due to COVID, increasing collaboration in the region will help the flow of ideas.
Surely, the world is watching to see, understand, and be amazed by these ecosystems and what role they will play in their regions and in the world.
1. Many entrepreneurs speak of the struggles of living and working in the congested Indonesian capital. With a difficult infrastructure and rising costs for those living there, improvements to basic quality of life could help keep and attract talent to the ecosystem.
2. Creating more incentives for funding and starting a business can help leverage the nascent potential of its massive human capital and help the country compete in the startup scene with giants such as Bengaluru and Singapore.
3. With low levels of financial inclusion and free-market practices that create a culture of opportunists that drain the system, Jakarta could benefit greatly from better regulatory quality. This would make sure more citizens have access to join the economy and that the market is fair for all involved.
1. At 18 days to register and 9.8% of the per capita income, the time and cost to register a business is the highest in India of the three. This is a common trend for countries like India that have a high population and a low GDP per capita. Making these processes easier and cheaper could remove a barrier for startup involvement.
2. At 30%, India’s corporate tax rate is among the highest in our index. Making the corporate tax rate more competitive and shoring up other regulatory aspects can attract more incorporation.
3. Much analysis has been done on India’s current trade partnerships, with an urging to create more transparent and beneficial trade partnerships. Evening the trade deficit and engaging in more regional trade can benefit startup culture.