Hong Kong is still drawing foreign talent and businesses as Singapore overheats

Singapore has become a victim of its own success, with the cost of living skyrocketing on the back of overheated property and car ownership markets
Meanwhile, Hong Kong’s strong recovery continues to offer abundant economic opportunities in one of the easiest places in the region to live and work

Bernard Chan

Published: 8:15am, 19 May 2023

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Hong Kong has an excellent track record of being a preferred location for international companies establishing operations in Asia. Our strategic location, international financial capability, common law system and ease of business make us attractive.

For example, insurer Manulife wishes to re-establish its corporate foothold in Hong Kong by changing the domicile of its Hong Kong unit from Bermuda. Manulife and other insurers are consulting the government and stakeholders to streamline the process. The initiative has the full support of the Hong Kong Federation of Insurers, and the Financial Services and the Treasury Bureau has begun preparatory work to develop suitable legislation.

The main reason the Canada-based Manulife chose Hong Kong is the scale of the business opportunity presented by “one country, two systems”.

According to Patrick Graham, Manulife’s Hong Kong and Macau CEO, the “Greater Bay Area makes up around 6 per cent of China’s population, but 11 per cent of the country’s GDP. The insurance penetration is close to 6 per cent in this region, which is less than one-third of the penetration in Hong Kong. It is just such a phenomenal opportunity.”

But it is not all plain sailing. US logistics giant FedEx is moving its regional headquarters from Hong Kong to Singapore. It will, however, maintain a strong presence here to provide vital support services for operations in the rest of the country, north and South Pacific, India and Africa.

Companies generally choose a location based on market potential, ease of doing business, an attractive tax regime, rule of law and access to a skilled workforce – but sometimes, geopolitics influences decisions.

It is reassuring that the Hong Kong Trade Development Council has dramatically increased activity through exhibitions, conferences and business missions across its global network of 50 offices.

In the next two months alone, the council is organising or taking part in events in Hong Kong, Guangzhou, Shenzhen, Shanghai, Italy, Malaysia and Thailand. The events cover everything from healthcare, climate and agricultural technology to artificial intelligence marketing trends, shoes, and baby and maternity products.

We are seeing increasing interest from foreign companies, some of which will set up a local or regional office here. Despite the prolonged global instability, recent economic hardship and continued deterioration in US-China relations, Hong Kong has returned to the international stage in a strong position and we are showing signs of economic recovery.

But other regional powerhouses also feel the effects of the geopolitical and economic turmoil. Singapore, for one, has become a victim of its success – the cost of living has skyrocketed on the back of an overheated property market.

Last month, Singapore’s government moved to cool the housing market by doubling the additional stamp duty for foreign buyers to 60 per cent – among the highest in the world. An even higher rate of 65 per cent applies to entities or trusts purchasing any residential property, except for housing developers, an increase of 30 percentage points.

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Singapore government doubles residential property tax for foreigners to 60 per cent

Singapore’s escalating property prices have had a dramatic effect on the housing rental market, with landlords cashing in or raising rents, even doubling them in some cases, forcing many tenants to move or downsize. Last year, the Urban Redevelopment Authority’s rental price index on residential properties rose by 29.7 per cent, the highest since 2007.

Car ownership in the city state is also prohibitively expensive and the cost of a certificate of entitlement, the permit to own and use a vehicle, has hit record highs. Bidding on the permits recently crossed S$103,000 (US$77,000) for smaller cars and S$124,000 for the “open vehicle” category – and that is before the costs of buying and running a vehicle. These events have left many foreign residents reassessing their options.

‘US$150,000 on a Corolla?’: Singapore drivers park car dreams as costs surge

In contrast, many of us take for granted Hong Kong’s quality of life and high standard of living. We have a distinct history and identity, a vibrant culture and an international outlook. There is also a low crime rate, excellent educational and medical facilities, and one of the world’s best transport systems providing access to outdoor activities to suit most tastes.

After three pandemic years, our economic recovery is well under way and visitors are returning to one of the easiest places in the region to live, work and flourish.

Our dynamic fusion of Eastern and Western cultures continues to offer abundant economic opportunities. This will attract the best talent while strong foreign direct investment will consolidate Hong Kong’s distinct advantage and increasingly important role in international affairs.

Bernard Chan is a Hong Kong businessman and a former Executive Council convenor