Singapore and Hong Kong are among the most competitive and successful economies in the world. They both offer major advantages for any foreign businessman who intends to invest in the Asian markets, such as taxation incentives, close connection to mainland China and ASEAN countries, pro-business environment, educated and talented workforce and also a plethora of high-net individuals to do business with. Also, entrepreneurs will be very pleased to hear that opening a company in Singapore or Hong Kong is a relatively easy and quick procedure.
However there certain differences between the opportunities presented by these two city-states and we intend to take a closer look at what they have to offer
Advantages of Investing in Singapore and Hong Kong
Both city-states are gateways between their region and the rest of the world: Hong Kong for Mainland China and Singapore for ASEAN countries (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam).
The Association of Southeast Asian Nations is an organization that was created for both economic and political purposes. One of its main roles is to accelerate economic growth and social progress among its members. ASEAN covers a land area of 4.4 million square kilometers, has a total population of approximately 625 million people and its combined nominal GDP had grown to more than US$2.6 trillion in 2015. At this moment the combined economy of ASEAN countries ranks as the seventh largest in the world and it is expected to become the sixth largest by 2019 according to the estimated rankings of the International Monetary Fund.
Hong Kong is an economic and financial gateway to China and continues to be seen as the best and most convenient platform for international companies and foreign investors conducting business operations on the mainland.
Despite their small sizes, each city-state is home to one of the top five busiest container ports in the world. Singapore exports goods with a value higher than any other Southeast Asia country despite being the smallest in the region. Its total exports were valued at S$518.922 billion last year. It relies highly on intermediary trade, which means it buys raw goods and then refines and prepares them for re-export.
Hong Kong exports amounted to $528.2 billion last year and its most important business partners are China, the United States, the European Union, Japan and the United Kingdom.
Both city-states constantly score near or at the top of multiple rankings. Singapore has placed first in The World Bank’s Ease of Doing Business Index since 2006, while Hong Kong has been in the top four since 2007. They both rank at the top of the Index of Economic Freedom, Hong Kong as number one and Singapore on the second place. According to the Global Competitiveness Index, Singapore ranks as the second most competitive economy in the world after Switzerland, while Hong Kong takes the seventh place. They are mature, sophisticated and powerful economies.
Both Hong Kong and Singapore benefit from a highly trained, multilingual workforce adapted to the rapid growth of its business environment. The participation rate of Singapore resident labor force rose for the third successive year to a new high of 67.0% in 2014 as its unemployment rate remained at approximately 2%. Hong Kong’s unemployment rate was 3.3% last year while its participation rate revolved around 61%.
According to a Manpower Group study, Hong Kong continues to be the highest-ranked state for contingent workforce operations in 2014.
Banking and Financial Hubs
According to a Bloomberg report, the Hang Seng Bank from Hong Kong was listed as the best capitalized in the world. And the good news don’t stop here. From top ten banks present in this ranking, four belong to the two city-states.
The highest concentration of banking institutions in the world is in Hong Kong. Out of the largest 100 international banks, over 71 are currently conducting operations here. It is also home to the largest concentration of fund managers in Asia with more than 290 fund management companies spread throughout Hong Kong’s territory. In addition, its rapidly maturing capital market make the city-state one of the prime options for foreign investors.
Within a short time-frame of only a few decades, Singapore has established itself as a thriving financial center renowned internationally. This financial center offers a broad range of financial services including investment banking, insurance, treasury services and popular, high standards wealth management. Singapore benefits from deep and liquid capital markets that represent the engine and a key source of funding for the region’s growth and development.
Legal Framework and Taxation
Along with robust banking systems and transparent legal framework a large amount of foreign capital has entered Hong Kong and Singapore during the past decades due to low taxes and perfectly adapted business environments. For example, offshore companies in these jurisdictions that are not serving local customers can be structured so that they will pay no local taxes. There is no estate or capital gains tax in Singapore or Hong Kong, therefore making them a great choice for both investors and wealthy retirees.
The corporate income tax in Hong Kong is 16.5 %, the VAT tax does not exist and there is also no withholding tax on dividends or interests. Moreover, foreign profits are exempt from tax. There is no share capital required at the incorporation of a business.
In Singapore the minimum share capital is 1S$ and due to the simple procedures and lack of bureaucracy, the new company can be set up within a short timeframe, usually a week. There is also no dividend tax, no tax on interest for non-residents and the corporate tax amounts to 17%
Differences between Singapore and Hong Kong
Both city-states provide excellent options for investors, however depending on the type of company, business objectives and overall financial goals, entrepreneurs might want to consider both the differences and strong points offered by each one.
For example, Singapore is a renowned hub for entrepreneurship and it offers a safer environment for venture capitalists. It is also preferred for protective wealth management policies. On the other hand, Hong Kong is known as an international financial and banking hub. It is home to a greater number and variety of banking institutions so investments banking and equities are definitely a strong point for it.
Both states offer a variety of options so that every investor can find what he is looking for. However, we do recommend consulting a professional in the area you plan on investing, before actually taking the final decision. They will surely know how to guide you through the legal requirements and assist you through the entire procedure.