With Chinese Takeover Looming, Hong Kong Firms Move to Singapore

Singapore’s campaign to woo foreign investment is gathering momentum among Hong Kong companies haunted by an uncertain future.

Many Hong Kong-based companies, worried about their fate after the British colony reverts to Chinese rule in 1997, see Singapore, a tiny nation-state at the tip of the Malaysian peninsula, as one of the best options for their operations.

Like Hong Kong, Singapore is a predominantly Chinese island but has large Malay and Indian minorities. It shares with the crown colony a reverence for commerce.

Kenneth Koo, managing director of Hong Kong’s Tai Chong Cheang Steamship Co., said Singapore’s tax incentives, cheaper labor and rental costs, developed infrastructure and pool of financial professionals made it the logical choice for his company.

He said it will probably shift its base to Singapore in 1994 or 1995.

In contrast to the eagerness at the corporate level, some Hong Kong nationals are not as excited about Singapore’s attractions.

“I had to come back (to Hong Kong) because I couldn’t find a job,” said Y. K. Wong, who spent a month in Singapore. “My wife and my son hated the hot weather and boring lifestyle.”

But companies seem to find Singapore to their liking.

Victor Lo, chairman of Hong Kong’s Gold Peak Industries Ltd., said its wholly owned GP Batteries International Ltd. subsidiary will be listed on the main board of Singapore’s stock exchange this month, the first primary listing here by a Hong Kong company.

“It was clear that Singapore was a more cost-effective location for us and had all the ingredients of being able to satisfy bank requirements in terms of infrastructure,” said William Wu, treasurer of Chemical Bank, which relocated its regional headquarters to Singapore from Hong Kong in December.

Bankers Trust Co., Morgan Guaranty Trust Co., Chase Manhattan Bank NA and Manufacturers Hanover Trust have either moved some operations to Singapore or plan to do so, industry analysts said.

“I don’t think any institution is going to say outright to anyone that they are concerned about 1997, but this is true of any bank that’s moving out of Hong Kong,” said a Western banker who asked not to be identified.

In early March, Singapore, which offers a low 10% corporate tax rate and an offer of permanent residency, sweetened its incentives by saying it would exempt the outside income of certain resident shipping companies from tax. It also said it would expand tax breaks for financial houses that underwrite and manage international securities issues.

“I think in the next five years maybe we could see quite a huge number of former Hong Kong-based owners operating in Singapore,” said Koo of Tai Cheang Steamship.

Koo and other Hong Kong company officials said their aim in coming to Singapore is to establish a foothold in fast-growing Southeast Asia, not to give up operations in Hong Kong.

Business executives and bankers say Hong Kong will remain a center for business with China after 1997.

“For a business corporation, business prospects are the first consideration,” said an official of Sun Huang Kai, a major Hong Kong brokerage firm with its Southeast Asia headquarters in Singapore. “Tax incentives are secondary, although it is important.”

Although Singapore, like Hong Kong, faces an acute labor shortage, companies with regional headquarters here could tap plentiful labor in neighboring Indonesia and Malaysia, a local bank economist said.

Lawrence Wong, corporate finance director of Schroder International Merchant Bankers Ltd., said he expected a successful listing by GP Batteries to prompt many Hong Kong firms to follow.