S'pore has edge over HK in Asian hub race: EDB

Hong Kong's Victoria Harbour. EDB chairman Beh Swan Gin said that with the city becoming more focused on servicing the Chinese economy, it has given Singapore a leg-up as a hub for companies' Asia-Pacific operations.
Hong Kong's Victoria Harbour. EDB chairman Beh Swan Gin said that with the city becoming more focused on servicing the Chinese economy, it has given Singapore a leg-up as a hub for companies' Asia-Pacific operations.PHOTO: REUTERS

Hong Kong less suitable for MNCs as it becomes 'more China-centric'

Hong Kong has become more "China-centric", enabling Singapore to take the lead when multinational companies look to set up their Asian headquarters in the region, according to the Economic Development Board (EDB).

With Hong Kong becoming more focused since 1997 on servicing the massive Chinese economy, it has given Singapore a leg-up as a hub for companies' Asia-Pacific operations, said Dr Beh Swan Gin, chairman of EDB.

"The importance of China to the Hong Kong economy has grown disproportionately," Dr Beh said on Tuesday.

"If you're a company that's thinking about coordinating, managing your activities across Asia, then Hong Kong becomes, I suppose, more and more China-centric and it becomes perhaps less suitable for those activities."

About 37,400 international companies base their operations out of Singapore, including 7,000 multinational corporations, with more than half of those running their Asia-Pacific businesses from the city state, according to the EDB website.

"The numbers speak for themselves," he said. "More companies are now having their Apac headquarters, or at least Apac non-China headquarters, in Singapore."

Dr Beh sees that lead continuing to widen as Singapore bills itself as an innovation-led economy, attracting investors with its strong spending on research and development, a still-generous tax regime, and targeted labour laws.

"We're a small country - we'll never be a self-sufficient Silicon Valley that constantly just generates from within," he said. "We believe we'll always need to attract industry leaders from outside."

Singapore's government spends the equivalent of about 1 per cent of gross domestic product on research and development, while the private sector contributes about 1.3 per cent of GDP, said Dr Beh.

The authorities are focused on raising the overall R&D expenditure to about 3 per cent of GDP, in line with other small, innovation-focused economies like Sweden and Switzerland, he said. Switzerland tallied about 3.4 per cent in 2015, while Sweden was at 3.3 per cent, according to figures from the Organisation for Economic Cooperation and Development.

Businesses scored an extra incentive from Singapore's 2018 Budget to boost that spending: The tax deduction for R&D project costs and consumables was raised to 250 per cent from 150 per cent.

While some, particularly smaller, firms have reported difficulty in hiring staff amid stricter rules for foreign workers since 2011, Dr Beh said he's confident that has not hurt Singapore's competitiveness. The Government's focus on attracting higher-skilled labour is more in line with the kind of businesses that Singapore wants to have based in the city, he said.

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A version of this article appeared in the print edition of The Straits Times on March 30, 2018, with the headline 'S'pore has edge over HK in Asian hub race: EDB'. Print Edition | Subscribe