Singapore: A Thriving Business Destination Amidst Shifting Landscapes
In recent years, Singapore has emerged as a preferred destination for multinational companies and international talent, undergoing a significant economic transformation. The ongoing challenges faced by Hong Kong, including Covid-19 policies and US-China tensions, have triggered an exodus of firms and professionals to Singapore. This article explores the factors contributing to this shift, the implications for Singapore’s business environment, and how foreign businesses can leverage this transition through the Market Readiness Assistance (MRA) grant.
Hong Kong’s Historical Significance
For decades, Hong Kong has been the top choice for multinational companies, particularly in the financial sector, looking to establish a foothold in the Asian market. With over 9,000 multinational companies operating in Hong Kong in 2021, it served as a thriving hub for regional headquarters and offices. However, recent data reveals a notable change.
The Hong Kong Exodus
Between mid-2021 and mid-2022, more than 113,000 Hong Kong residents, representing 1.6% of the population, have made the decision to leave the city. The reasons behind this exodus are multifaceted. Some seek a new life in different countries, while others choose Singapore as their new base, primarily to escape the Covid-19 restrictions imposed in Hong Kong.
Singapore’s Appeal to Multinational Companies
A study conducted by the American Chamber of Commerce in Hong Kong revealed that 5% of global/regional headquarters have concrete plans to relocate, while an additional 50% remain uncertain about their future in Hong Kong. Among the options for relocation, Singapore has emerged as the most competitive destination. The city-state’s strategic location and pro-business approach have garnered favor among international companies, despite Hong Kong still maintaining its status as a global business hub.
The Rise of Singapore as a Business Destination
According to data published by the Singapore Economic Development Board, approximately 7,000 multinational companies have already established their operations in Singapore. Notably, nearly half of all regional headquarters in Asia are now based in the city-state. Singapore offers several advantages that have traditionally attracted international businesses to Hong Kong, including political stability and neutrality.
Shifts in the Business Landscape
The exodus from Hong Kong is not an isolated incident but rather a continuation of a trend observed over the past few years. Over the last four years, Hong Kong has experienced a 5% decrease in the total number of regional headquarters, with departures from 36 US and 34 Japanese regional headquarters being particularly prominent. While mainland Chinese companies have increased their presence, these numbers only partially compensate for the outflow.
The Impact of Covid-19 Policies
Geopolitical considerations aside, differing Covid-19 policies have played a significant role in influencing these corporate relocations. Singapore has gradually eased its zero-Covid policy since August 2021. By April of the following year, fully vaccinated travelers from around the world, including the US and Europe, were allowed to enter Singapore without pre-departure testing and quarantines. In contrast, Hong Kong has closely adhered to China’s zero-Covid policy, resulting in extended lockdowns and negative sentiment among residents and businesses.
The Toll on the Financial Sector
The financial sector in Hong Kong has been significantly affected. Many firms are downsizing and relocating non-China related jobs to Singapore, with some even offering options for their staff to relocate to retain talent, similar to the pre-1997 handover era. The Hong Kong Investment Funds Association has warned the government about the detrimental impact of Covid-19 travel policies, emphasizing the importance of international travel to maintain the city’s status as an international financial center.
Diversification of Family Offices
Singapore, traditionally home to family offices from Southeast Asian countries, is now attracting renowned family offices from Europe, China, Hong Kong, and the United States. Many are establishing their first office in the region, while others opt for a second office in Singapore to diversify risks and capitalize on the advantages of both locations.
Developments in Wealth Management
In response to this influx, major financial institutions such as UBS, HSBC, Citi, Deutsche Bank, and Julius Baer have expanded their teams in Singapore to cater to family offices. French asset manager Amundi offers outsourced chief investment officer services for family offices, while global custodian Northern Trust has set up a dedicated Global Family and Private Investment Offices team to provide customized asset servicing and advisory solutions.
Challenges and Opportunities for Singapore
- The rising influx of foreign companies and talent presents new challenges for Singapore. The rental market is experiencing a surge in demand, leading to intense competition for properties, especially in popular expatriate areas. Consequently, rental prices have soared, making it more challenging for both expatriates and locals to secure accommodations.
- Inflation has climbed to multi-year highs in Singapore, primarily due to internal and external factors. Rising food, fuel, and electricity costs are expected to further increase the cost of living. Moreover, the impending increase in the goods and services tax (GST) is likely to impact residents.
- Owning a car in Singapore is notably expensive compared to other countries. Strict requirements and associated costs, such as the certificate of entitlement (COE), make car ownership in Singapore prohibitively costly.
Implications for Foreign Businesses
The evolving business landscape in Singapore provides foreign businesses with enticing opportunities to establish a presence in the city-state. One such opportunity is the Market Readiness Assistance (MRA) grant. The MRA grant, a government initiative, aims to facilitate the entry of foreign professionals and businesses into Singapore.
This grant offers a streamlined process for foreign businesses to set up operations in Singapore, leveraging the city-state’s favorable business environment. It covers various aspects, including company registration, taxation, and permits, making it easier for businesses to navigate the regulatory landscape.
Application for the MRA Grant
The MRA grant application process involves submitting a detailed proposal to the relevant government agencies. The proposal should clearly outline the business’s intentions, the benefits it will bring to Singapore, and its plans for job creation and investment in the local economy.
The evolving business landscape in Singapore offers foreign businesses the opportunity to thrive in a diverse and flourishing market. For more information on setting up an MRA grant in Singapore, reach out to our experts and consultants.