Recently Prime Minister Lee Hsien Loong made a working visit to Buenos Aires, Argentina for the 13th G20 Leaders' Summit (photo).
Singapore and Hong Kong are the eternal competitors to be Asia's ‘Best Place to Do Business'. Rivalry comes naturally to these two places which are both thriving former British colonies in Asia that heavily depend on foreign investment for economic development. That is why it is so important for both of them to be seen among foreign companies as the best place to start or expand a business in Asia.
In the past decades, Singapore and Hong Kong have gone head-to-head when it comes to being the best places in Asia to do business in.
Looking few years back in time The World Bank's 2014 Doing Business report, which measures each country's regulations on 11 business life-cycle events such as starting a business, permits, contracts, credit and taxes, Singapore and Hong Kong top the Asian countries to do business in. Meanwhile powerhouse China ranked lower than several African nations.
According to the report, “around the world, starting a business takes seven procedures, 25 days and costs 32 percent of income per capita in fees.”
Singapore ranks so high because of its early adoption not only of electronic filing for public administration but also of a “trade single window” aimed at easing trade by allowing cross-border traders to submit customs data through a single gateway. According to the report, “trading across borders has been easiest in Singapore since 2007.”
The latest trend is that Singapore is beating Hong Kong as the best place in Asia to do business. According to economists, the island-state leads in innovative thinking, length of the welcome mat for foreign businesses, and proactive management of potential economic issues, like aging populations. There are other governmental reasons. While Singapore runs itself, China runs Hong Kong. Despite Hong Kong's autonomous status, China is known for its legal inconsistency.
Singapore's economy is also more capable of containing shocks, according to Marie Diron, associate managing director in sovereign ratings with Moody's Investors Service. In that category, Moody's gives Singapore a “very high” mark, while it gives Hong Kong a “very high minus.” According to Diron, Singapore earned that distinction through “proactive economic management” such as planning ahead how to accommodate an aging population and on introducing measures to help core sectors such as finance and asset management. As countries with few industries are more prone to succumb to shocks, Singapore is more capable to absorb shocks thanks to their diverse industries.
According to the World Bank's ranking of the easiest places to do business, “Singapore continues to be the economy with the most business-friendly regulation.” Additionally, “efficient dispute resolution is paired with good institutions (such as specialized courts), effective case management and sophisticated court automation tools. And litigants can submit their claim online, pay court fees online and serve the initial summons electronically.”
According to the report, “economies that rank well on the ease of doing business also score well on such measures as the Global Competitiveness Index and Transparency International's Corruption Perceptions Index.”
While Singapore offers world class transport infrastructure, language skills and overall economic freedom, it also comes in with lower “unit labor costs” making more cheaper and efficient for a foreign company to do business there.
Meanwhile, Hong Kong's salaries are higher, but this also translates into more productivity and cooperation in employee-employer relations. There are other reasons why Hong Kong is the right place for an investor to start a business. According to Healy Consultants, Hong Kong has a lower corporate income tax and is “strengthening its stronghold within the region. Despite its relative lower placing across the various categories of rankings, Hong Long could well still be the most ideal location for a certain investor to set up a company.”
What makes people nervous about Hong Kong is its dependence on China. Under a weaker Beijing system set of rules, patent protection, fair arbitration and other legal backing investors might rely could become harder to obtain. According to the Asian Century Institute, Singapore ranks world number 9 in rule of law and Hong Kong holds the 17th position.
“Singapore has been climbing up positions and is now generally considered a better offshore financial center than Hong Kong,” said Alicia Garcia Herrero, chief Asia economist with Natixis. “I would tend to agree and it can only get worse as Hong Kong rule of law is under threat.”