Note: The following article (and linked whitepaper) was written by The Fiducia Management Consultants, an AGN International firm. (James Moore & Co. is also a member of AGN International, a worldwide association of separate and independent accounting and advisory businesses.)
Home to 60% of the world’s population and some of the largest and fastest-growing economies, Asia is rightly seen by growth-seeking companies as the place to be. At the same time, the region’s national boundaries and economic and cultural diversity beg the question of where to locate, and in which form.
The Fiducia Management Consultants whitepaper* looks at two of Asia’s preferred business hubs, weighing them up against each other at a time when uncertainty about Hong Kong’s future runs high.
Fiducia Management Consultants draw some key conclusions from their analysis:
Different industry, different story: Trends in one sector are not necessarily signs of a large-scale, cross-industry shift from Hong Kong to Singapore.
“Wait and see”: Most mid-sized companies are adopting a “wait and see” approach to Hong Kong’s uncertain outlook, quoting their established base, and the high costs plus unclear benefits of relocating, as main reasons to stay put.
First movers? Those considering to or already shifting investment out of Hong Kong, tend to be:
- Nimble but not small.
- Highly sensitive to data and privacy policies.
Expat exodus? A growing disenchantment and uncertainty among expats and locals in Hong Kong is raising fears of a talent drain, but it is difficult to confirm a trend amid the coronavirus pandemic, which is having a large but potentially temporary impact on sentiment and the job market.
A matter of trust: Beyond political stability, oft-cited factors behind Singapore’s robust business confidence include its far-sighted, responsive government policy and the proactive support of agencies – in particular, the Economic Development Board (EDB).
Opportunities ahead: Singapore will benefit from its geopolitical neutrality and the accelerating shift of supply chains and consumer power towards SEA. Hong Kong has the potential to revitalize its economy and catch up on innovation by carving a strategic role for itself within the Greater Bay Area.
Singapore leaps ahead: Singapore has overtaken Hong Kong in shipping and logistics and in technology and innovation, which became a policy focus much earlier than in Hong Kong.
Hong Kong consolidates: Hong Kong will keep its position as the preferred sourcing and purchasing hub in the region, and Asia’s larger financial center, in the foreseeable future, despite current challenges.
China via Hong Kong: Mainland-plus-Hong Kong setups will remain popular due to the special administrative region’s (SAR’s) favorable tax regime and free flow of capital and goods. But there is a trend towards having smaller, leaner Hong Kong operations due to cost pressures, with many using Hong Kong primarily as a holding entity.
Sweet vs simple: In terms of taxes, Hong Kong stands out for having a simpler system with zero VAT and no tax on offshore income, while Singapore offers a broad range of targeted grants and incentives, including preferential profit tax rates as low as 5% for regional/global HQs making a heavy enough contribution to the local economy.
Is it time for your business to phase out of Hong Kong? Is Singapore a better choice as a regional hub? This publication presents industry trends and “Mittelstand” voices that will help guide and give weight to any analysis of where to locate a business. Please click here to download the full Fiducia Management Consultants publication.
*This GBV contains extracts from the Fiducia Management Consultants report ‘Hong Kong vs Singapore: Which is Best for Business?’ published November 2020.
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