Source: South China Morning Post
With Singapore hosting the Maritime Week recently, many observers and commentators have been waxing lyrical about the island-state’s status as the maritime capital of the world. When doing so, they refer to the size of the shipping industry.
Headlines have referenced the Menon report this year, which places Singapore at No 1. This report uses five metrics to benchmark maritime centres worldwide: shipping; finance and law; technology; ports and logistics; and competitiveness.
The outcome of any research is largely influenced by the assumptions fed into the modelling. Taking a more qualitative view of some of the fundamentals, particularly the impact of the “One Belt, One Road” initiative, I believe Hong Kong, which is listed at No 7 in the report, is in prime position to take the top spot – leapfrogging Shanghai, currently at No 4.
Thanks to China’s belt and road strategy, the nature of logistics, and transport and maritime routes, are likely to be transformed in South and Southeast Asia. This presents both opportunities and threats to a number of countries in the region. In my view, Singapore is most at threat, with Hong Kong more likely to take a leading role and replacing Singapore’s dominance in professional service provision. I would go further and argue that the belt and road will be the catalyst to drive home Hong Kong’s status as the professional services hub in Asia.
The debate about whether Singapore or Hong Kong is “better” in terms of ease of business and lifestyle is not new. Differing assumptions put into an economic model results in diverse views.
It has been argued that Singapore is “better”, particularly when taking “soft” issues into account (such as air quality, population density and living standards). These factors do play a role in differentiating two cities with similar business profiles.
Nonetheless, some of these perceived advantages are being questioned as we see recent reports of increasing levels of pollution in Singapore as well as a rise in the cost of living. We see reports naming Singapore as the most expensive city in Asia to live in, and read that a number of international firms are relocating to other Asian centres.
Geopolitical changes in the region are becoming more pronounced, with China exerting greater economic influence. The soft sociopolitical factors in work and life choices are increasingly being replaced with more robust measures as a response to the slowdown in the world economy.
Comparing the legal and financial frameworks of both cities, we see that both are embedded in the traditions of English common law. Practice and process are therefore similar, yet Singapore rated higher due to a more international feel in terms of the mix of arbitration and legal proceedings.
Singapore is also more English-based whereas Hong Kong uses Cantonese and Putonghua more.
But the belt and road initiative has seen the focus shift to seeking legal services that allow access to China. Hong Kong achieves this with a greater case load as well as a greater Chinese focus.
The kind of legal services that would be best located in Hong Kong to meet the requirements of the belt and road include shipping, rail, road and air, as well as tariff compliance, corporate compliance and tax law.
In terms of size, the level of investment that is likely to take place as a result of infrastructure spending through the region also points to Hong Kong as a preferred option. The city has in excess of 1,880 listed companies with a turnover of US$18.4 billion, compared to Singapore, with its 769 listed companies with a turnover of just over US$800 million.
This partly explains why it is quicker to do business in Singapore, but it also raises questions about Singapore’s structure to manage the volume of work.
Reports by the World Bank, IMD, Monitor Deloitte and McKinsey offer reasons to support the notion that Hong Kong would be better placed than Singapore, especially given the context of the new transport network being introduced by the belt and road plan. Some of the factors are: proximity to mainland China; maritime routes; cost of living; business legislation; public finance; skill levels; and employment law.
The nature of shipping and maritime routes are also shifting. Recent developments suggest Singapore is being sidelined as China seeks alternative and more secure maritime routes. Recent port developments and proposals that support this notion include: Darwin in Australia; Tanjung Priok, Indonesia; Port Klang in Malacca; Kyaukphyu, Mawlamyine and Dawei in Myanmar; Gwadar in Pakistan; Sri Lanka’s Hambantota; and Kra Canal in Thailand.
While the world has looked to Shanghai as the challenger to Singapore, the distraction will allow Hong Kong to consolidate its credentials and fill the service gaps. This focus has the city well-placed to take the leading role in business service provision to support the economic growth associated with the belt and road initiative.
Andre Wheeler is CEO of Asia Pacific Connex, with more than 25 years’ experience in international business. He is working towards his doctorate on the impact of China’s belt and road initiative on infrastructure and logistics in the Asean region.