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."