Singapore, HK vie for Asia's top spot
Singapore, HK vie for Asia's top spot
By P. Parameswaran
SINGAPORE (AFP): Arch-rivals Singapore and Hong Kong have raised the stakes in their long-running battle for the coveted status of Asia's number-two financial center after Tokyo, analysts say.
The two economies, both badly hit by the regional recession, each announced bold measures under their recent deficit-bound annual budgets to beef up their roles as financial centers.
"If you look at long-term strategy in the budgets, it is the same," said Song Seng Wun, regional economist with G.K. Goh Stockbrokers.
"In fact, you can just interchange the budgets by replacing their names and size."
He said that given the Asia-Pacific's time zones in relation to Europe and New York, the region could support only two "first- rate" financial centers -- Japan and either Hong Kong or Singapore.
"At this juncture, Tokyo is there by default as it represents the second largest economy in the world.
"So, it is inevitable that Hong Kong and Singapore are trying to muscle each other out to, I suppose, capture the number-two spot," Song said.
Hong Kong had been Asia's de facto second financial hub, but its economic difficulties following the Asian financial crisis have given Singapore room to challenge that position, he said.
"Hong Kong is fighting back and that should not be surprising because it is not known yet whether volume for financial activities will grow to support three top-class financial centers," Song said.
In its budget tabled on Feb. 26, Singapore announced incentives to enhance fund management activities, deepen the capital market and attract foreign companies to base their global operational headquarters here.
Five days later, Hong Kong unveiled a budget without any tax incentives for the financial industry as a whole but announced a Singapore-style measure, a one-off 10 percent tax rebate for companies and individuals.
Singapore has adopted such a tax strategy in recent years to pump back some public funds into the private sector.
In its budget Hong Kong also emulated a Singapore move to merge its stock and futures exchanges and disclosed a time-table which will see the merged company listed by Sept. 30, 2000.
In November, the Singapore government announced a merger of the Stock Exchange of Singapore and the Singapore International Monetary Exchange, with the new entity to be listed in five years.
Jacqueline Ong, a regional economist with British financial consultancy IDEA, said that in terms of cost-cutting measures to sharpen its competitive edge, Hong Kong seemed to be lagging behind.
"This is partly due to the inflexibility of the Hong Kong dollar compared to the ability of the Monetary Authority of Singapore to depreciate the Singapore dollar," she said.
The Hong Kong dollar is pegged to the US dollar, which has climbed rapidly against the Singapore dollar and most Asian currencies since mid-1997.
"However, after talk of corporations moving major operations out of Hong Kong to Singapore for cost reasons, Hong Kong seems determined to at least measure up and compete according to qualitative criteria too -- especially with regards to financial markets," Ong said.
She cited as an example Hong Kong's move under the budget to deepen its debt market by allowing government Exchange Fund notes to be listed in the second half of 1999, as well as allowing the use of Fund paper as collateral for trading in stock options and futures.
The Hong Kong Exchange Fund manages government assets worth about US$117 billion and provides backing for Hong Kong's currency.
Singapore-Hong Kong ties were somewhat strained last October when the Singapore International Monetary Exchange announced plans to start a Hong Kong futures contract. A war of words between officials and the media ensued.
Some Hong Kong newspapers charged that Singapore was stealing the territory's business while Financial Services Secretary Rafael Hui described Singapore as an "offshore betting center."
Last week Hong Kong's Trade and Industry Secretary Chau Tak designated the debate, saying the government in tightly-regulated Singapore could use unpopular policies to boost competitiveness because it had total control of parliament, the media, trade unions and the people.
The Singapore government said the charges were "inaccurate and misinformed" while Singapore's Straits Times daily ran a stinging editorial entitled "Speak not in ignorance."