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21 Jun 2020
The continued protest in Hong Kong has taken a rather uneventful turn with violence causing numerous deaths and injuries. A spin-off of this is the severe damage that has not just been caused to individuals alone, but also businesses. In October 2019, a news article by the South China Main Post indicated that Hong Kong’s economy lost at least HK$2.8 billion in a very short period. The sectors mostly hit by these protests in Hong Kong are the hospitality sector, the retail sector, and the transport sector.
The Protests in Hong Kong; its effects on the economy
Since June 2019, the Hong Kong Protest has remained on global news. The turmoil created by protests in Hong Kong is only bested by news of the COVID-19 pandemic in recent times. The protest in Hong Kong started in March 2019 to speak against an extradition bill that created an extradition treaty with Hong Kong and China. The bill has since been withdrawn, and replaced with a national security bill in May 2020 that sparked further outrage and protests.
At the rate at which the protest in Hong Kong is impacting the economy, some business owners are looking to pivoting away from present-day Hong Kong to establish a base somewhere else. Geographically and politically, too, Hong Kong shares closeness to Malaysia, Thailand, Singapore, Taiwan, and some other countries. Likely, businesses looking to move a base of their operations somewhere else will most probably be considering any of those countries.
Why is Singapore the pick of the bunch?
A new American Chamber of Commerce in Singapore (AmCham) survey released on 12 Sep 2019 indicated that among those companies considering to relocate, 91% of Hong Kong businesses aim to move to Singapore.
Through the following reasons, this post looks at why Singapore is the best alternative base for affected businesses in Hong Kong. We also make brief statistical comparisons between Singapore and other South-East Asian jurisdictions like Malaysia and Thailand.
- Ease of Doing Business
The Ease of Doing Business Report is prepared by the most qualified persons at the World Bank Group. This report goes through extensive research and evaluation to come up with a list that identifies the best places to do businesses in the world. Not just in Asia. Questions relating to tax, procedures for establishment, investor protection, electricity, contract enforcements are all considered thoroughly to come up with this list.
Through an era spanning 2007-2016, Singapore topped the Ease of Doing Business rankings. For ten consecutive years, Singapore was simply the prime choice for doing business as far as countries go. The conditions in Singapore make it very conducive for businesses to start-up and thrive. In recent times, Singapore is now ranked second on the Doing Business Report, with New Zealand the only country faring better in this area.
One example that shows why you should establish your business in Singapore is the registration process for new businesses. In Singapore, the entire registration process takes only a day to complete. The process is also easily completed digitally. However, in countries like Malaysia, registration of a company takes around two to three days.
It is important to note that the Doing Business report indicates that Hong Kong is in the third spot on the Ease of Doing Business Index. This means that the business conditions in Hong Kong and Singapore are already similar. It also means that businesses that have started in Hong Kong would find the same efficient service in Singapore and have an even better experience due to the economic unease brought about by the protest in Hong Kong. This is unlike in Malaysia and Thailand, who rank 12th and 21st, respectively, on the Ease of Doing Business Index.
Singapore is already looking like the best option. But more reasons make Singapore the right place to establish your business.
Political stability is a key factor in driving foreign direct investments (FDI) into an economy. With the protest in Hong Kong dragging on for over a year now, Hong Kong’s economy is regressing, and it doesn’t look like the situation will change soon. Unlike Hong Kong, Singapore is currently stable politically. This state of affairs offers much-needed security to business owners looking to move away from the troubled state in Hong Kong.
Attractive Tax Policies
Singapore’s tax rates are one of the lightest in South East Asia and the world at large. In the World Economic Forum’s Global Competitiveness Report 2018, Singapore ranked 11th, while Malaysia ranked 81st in the total tax rate.
Additionally, Singapore has the lowest corporate income tax rate in the world at 0% to 17%. Although Thailand has a corporate tax rate of 20%, which is also one of the lowest in the world, it is still not as low as Singapore’s. An instance of Singapore’s generosity with tax policies is that for the first three years of taxable income, non-resident corporations are exempted from taxes.
Another initiative by the Singaporean government to help the situation of taxes is the Double Taxation Avoidance Agreements, which protects Singaporean suppliers from incurring taxes on profits made overseas while paying tax locally.
Further comparison between Singapore and Thailand tax systems reveals that businesses in Singapore have an easier time making tax payments and filing returns. For instance, Singapore businesses make five tax payments a year and spend only 82 hours a year filing taxes. Thailand businesses, however, make 22 tax payments a year and spend 264 hours a year filing taxes.
The Ease of Doing Business Report states that the government of Singapore offers incentives for foreign businesses to help make international trade easier. Open trade policy is common in Singapore with few barriers to external trade transactions. In 2014, the Global Enabling Trade Report ranked Singapore first because of its friendly trade regulations. In the same 2014 report, Thailand was ranked fifty-seventh.
Moreover, Singapore is attractive to foreign investors because it’s geographical location allows easy access to mainland China. China is the biggest market in the world. Hong Kong businesses already know this, and these businesses will be looking to continue to have access to Chinese consumers. This segues into Singapore being a better choice.
Singapore is also strategically located. It is close to the emerging markets of India and China. Singapore also has the best maritime industry in the world with amazing port structures. These make the transfer of large cargo easy.
Over the past ten years, Singapore has been constantly rated by world experts as an amazing destination for businesses to thrive. Hong Kong has been a close competitor with Singapore within the same time frame. But, with the recent protest in Hong-Kong, it has become necessary for businesses to move if they wish to sustain in a more stable business environment.
Moving is always better when the new destination is as good as the old one. With Singapore, the new destination is even better. Singapore is not just the best option in South East Asia. It is the best option in the world. World experts have asked all the smart and technical questions businesses ask. The answer leads to just one destination that could serve as an eco-chamber for the blossoming of start-ups and businesses generally—Singapore.
If you’re looking to move, Malaysia and Thailand are good options, but Singapore is by far, the better of both, and the best as other southeastern Asian countries pale in comparison to what Singapore has to offer. For business owners looking to pivot their businesses for global dominance in a fiercely competitive global market, they must begin to ask the right question— “why cope when you can thrive?”