Foreigners turn to Singapore - Brief Article

Business Asia, Feb 11, 2000

Singapore, once overshadowed by business hubs such as Hong Kong and Tokyo, is winning over a growing number of companies seeking to put down roots in Asia through its lower costs and more cosmopolitan outlook.

In 1999, 27 foreign companies set up regional headquarters in the city-state, including Lucent Technologies, Honeywell, Cirque de Soleil and UPS Worldwide Logistics.

Singapore's Economic Development Board (EDB), which oversees foreign investments, said the rate of new arrivals marked a rise from previous years.

Singapore's main draw is its lower costs compared to other major Asian cities such as Tokyo and Hong Kong.

Some estimates of business costs in Hong Kong -- Singapore's main regional rival -- put them at around three times those of Singapore.

"Until recently, people were willing to justify Hong Kong's high cost base due to the perception that it was the price you had to pay for easy access into the China market," said Desmond Supple, economist at Barclays Capital.

But Supple said the market had adopted a more pessimistic view of the long-term business opportunities in China and questions the China premium required to stay in Hong Kong.

Singapore's authorities have deftly played on these concerns as part of their strategy to turn the city-state of about four million people into the region's premier business hub.

Dangling tax breaks and other inducements, they ran an aggressive campaign to lure firms away from their Hong Kong bases in the run-up to, and since, the territory's return to Chinese control in mid-1997.

Singapore's authorities also used the Asian economic crisis as a cue to further reduce its cost structure.

Analysts said there were other, more cost-effective cities than Singapore, such as Seoul and Kuala Lumpur, but the economies of South Korea and Malaysia were less stable and free than Singapore's and therefore less attractive.

Analysts said Singapore -- whose population includes sizable communities of ethnic Chinese, Malays and Indians -- has another trump card over competitors such as Sydney: its "Asian-ness".