Is Singapore Set To Profit From Hong Kong’s Unrest?

Alasdair Lane

Political stability, light regulation, the rule of law – that’s how you attract foreign business. Up until recently, nowhere did it better than Hong Kong. But the city’s dizzying decline into civil revolt has thrown two of the three – stability and law – into disarray. For every loser in commerce, there’s a winner – and the Hongkongers’ longtime rival Singapore looks poised to profit from the unrest. No gain is to be found in their competitor’s calamity, officials say, but already there are signs to the contrary.

Appalled at a bill permitting the prosecution of citizens in mainland courts, Hong Kong erupted in protest in March. The offending legislation was soon dropped, but the movement – now driven by wider grievances – has only intensified. Amid the arson, assault, and rampant destruction of property, businesses have been forced into unscheduled closures. Democracy may be in motion, but the city-state’s economy has ground to a halt.

If anywhere stands to gain from the upheaval, it’s Singapore. The two cities have much in common: both are former British colonies, have light-touch regulation, efficient bureaucracies, and attractive corporate tax rates. In the World Bank’s ease-of-doing-business table, Hong Kong ranks fourth, and Singapore second. This slender difference speaks to the duo’s rivalry, with both striving to be Asia’s foremost foreign business gateway.  

In those stakes, Singapore can hope to profit from the Hongkongers’ uprising, experts believe. Has business investment sentiment been impacted in the Chinese city? “Absolutely, no doubt about that,” says Damien Ryan of Teneo Strategy, a Hong Kong-based communications strategy firm. Fears over staff safety, uninterrupted business hours, dependable transport links all worsen every time the streets roil with protest. Singapore is, by contrast, an oasis of calm – and one that can offer that which investors crave above all: stability.

This comes at a cost, human rights groups often argue – an illiberal democracy that can, at times, appear quasi-authoritarian. In the half-century since independence, the Southeast Asian city-state has been ruled by the same party, and has had just three prime ministers. Free speech, the right to assemble, and other key tenets of democracy are stringently regulated, much to the ire of civil liberty activists. But Singapore’s government is unapologetic – above all else, pro-business policies must be upheld.       

This principle has served the city spectacularly well. Its rapid political, social, and economic development has made it a desirable locale for big business in search of an Asian foothold. No fewer than 4,200 firms base their regional headquarters in Singapore, among them the heavyweights of Google, Facebook, and Twitter. Hong Kong hosts a relatively meagre 1,400 – and that divide looks set to expand.

According to the American Chamber of Commerce in Singapore, some 80% of businesses surveyed were disinclined to invest in Hong Kong amid the unrest. Of those with operations in both cities, just less than a quarter were considering pulling out of the Chinese metropolis – though only 5% have immediate plans to do so. The findings seem consistent with those of Goldman Sachs, a global banking giant, who say up to $4bn has flowed from Hong Kong to its rival since the violence flared. 

Singapore’s ascendancy pre-dates the protests, however. While Hong Kong provides unmatched access to Asia’s biggest market, China, Singapore is arguably better placed for investment in the continent as a whole. The next generation of economic leviathans – India, Vietnam, Indonesia – all enjoy close connections with the city-state – links that’ll only grow more lucrative as China’s financial fortunes wane. 

But Singapore is as vulnerable to the tectonic shifts in global trade as any well-integrated economy, and tough times lie ahead. It enjoys good diplomatic relations with both the US and China, but the two’s ever-intensifying trade spat is bad news. An outward-looking nation, Singapore is being buffeted by rising tariffs – exports fell a sobering 11.2% in July, the fifth straight month of double-digit decline.   

And in an ironic twist, the travails on their long-time Hongkonger rivals may, in time, hurt more than they help. The city’s troubles only add to the worsening worldwide economic picture, and do little to inspire investor confidence in the Far East. It’s a point not lost on Singaporean Prime Minister Lee Hsien Loong, who noted recently that “we cooperate with them, we compete with them. They will do business and we will do business with them and with China […] the instability affects the whole region.”

Experts are largely in agreement. For all that Singapore offers, it can’t compete with Hong Kong’s access to China, which – despite its economic ailments – remains the ultimate goal for many foreign investors. “Hong Kong offers a unique role as an intermediary for capital to flow into and out of mainland China,” says Alexander Chipman Koty, Associate Managing Editor at Asia Briefing, a foreign investment practice.

“Despite gradual liberalization in mainland China, Hong Kong still offers a much more business-friendly environment underpinned by international openness, an independent legal system, and low taxes”.