A
strong economy and sound financial structure serve as a backbone for any
country. A country is not fully independent unless it is economically stable. An
economically weak state always looks towards others for financial aids and
assistance and that is on the expanse of its external and internal independence.
Asia is the largest of all continents but most of world’s underdeveloped
countries are situated there. On the contrary, a few regions have shown an
unprecedented and enormous economic growth especially during the last three
decades of the 20th century. On top of the list are two small city-states of
Singapore and Hong Kong. The two states are major financial centers of Asia and
the world and main competitors and rivals of each other. Both are doing their
best to provide latest opportunities and facilities to their business clients
and to ensure a positive financial growth. The trade and commerce infrastructure
they have built is but with little flaws. The strength and weaknesses (though
very few) are discussed as follows.
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Singapore
The latest trends in communication, transportation, information technology,
banking, insurance, money markets and investment incentives coupled with its
geo-strategic location, Singapore has achieved a prominent rank in list of
world’s top financial centers. The city-state is regarded as number one location
for business activities because of its extraordinary economic infrastructure,
political stability, security, management potential, pollution free environment
and excellent work force. Weak in natural resources, Singapore regards manpower
as its only strength to sustain its thriving economy.
There are more than 10,000 companies, which are using Singaporean soils as their
operational base. The Sing government provides latest facilities in all
concerned sectors. Numerous local and foreign banks are working in a healthy and
competitive environment providing the best services to their corporate clients.
A number of insurance companies are there to provide captive insurance,
reinsurance and marine insurance on easy terms and conditions. A sophisticated
credit card system enables business houses to have an easy money interaction.
The MASNET financial network launched 1991, is aimed at providing a single
communication network to Singaporean financial sector. MASNET help ensure speedy
collaboration and coordination in business matters.
The advent of e-commerce has further supplemented the working of bankers and is
of great benefit to the clients. The speedy and easy online account balance
enquiries, funds transfer, bill payment, demand draft application and loan
applications are the blessings of IT. The Monetary Authority of Singapore (MAS)
has introduced advanced systems like MAS Electronic Payments Systems (MEPS) and
Real Time Gross Settlement (RTGS) for inter-bank payments and transactions. MEPS
is linked to Singapore Government Securities (SGS) and provides
delivery-versus-payment capability for SGS transactions. Similarly, there are
other IT-based systems for check-clearance, online debit-payment service and
cashless payments. The Sing government provides a highly stable and
peaceful environment for the investors and also introduces investment incentives
and reforms. Tax rebates and subsidies are provided to foreign companies
operating in the country. It has also announced cuts on airport landing
fees, shipping terminal charges plus a raise in pensions of the workforce.
Singapore assigns great importance to its highly skilled workers and provides
all possible benefits to them. Moreover, individual and organizational safety
and security provided by the state is the biggest advantage and incentive for
international investors in the wake of terrorist threats all over the globe.
It is because of above reasons that the Irving-based oil giant Caltex moved its
headquarters to S’pore. Singapore ranks fourth worldwide in terms of trading
volume in forex activities. It is number two in world in handling the largest
number of shipments and containers on its port.
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Hong Kong
March 2001 statistics indicates the operations of 333 foreign-owned licensed
banks and its authorized representative offices. The data gathered at the end of
November 2001, suggests the number of foreign countries as 39 operates in the
financial market of Hong Kong. The extraordinary volume of the external
transactions has secured Hong Kong the position of “10th largest” in the world.
Out of the world’s top hundred banks, 77 are present in HK. It is also the
world’s 4th biggest gold market. Other international renowned companies
including 119 overseas insurance companies, 321 overseas securities and
commodity dealers and nearly 1600 unit trusts and mutual funds are operating in
HK. December 2001 assessment shows that HK is the 2nd largest stock market of
Asia with the capitalization of HK $ 3946 billion. Trading in exchange fund
bills and notes was judged active with the daily turn over of HK $ 21 billion
from January to November 2001. The merger of banking commissioner and exchange
fund offices on April 2, 1993 culminated in the establishment of Hong Kong
Monetary Authority (HKMA) with the task to maintain the prosperity and stability
of the economy. Apart form the main objective of HKMA to maintain exchange rate
stability under the linked exchange rate system (US $ 1=HK $ 7.8) by the end of
2001, preliminary U.S. government statistics show that American direct
investment in Hong Kong totaled $25 billion. The HK financial sector boost up
when it assumed the role to work for China’s mainland. The mainland’s largest
listed companies are based in HK.
The stock market in HK offer a variety of products ranging from ordinary shares
to auctions, warrants, unit trusts and debt securities and 756 companies are
enlisted in HKSE. About 206 authorized insurance units are working in HK
providing general insurance, long-term insurance and composite insurance. The
Mandatory Provident Fund (MPF) system provides a cover to all employees and
self-employed individuals between the ages of 18 to 65.
Comparison
The comparison of Singapore and Hong Kong’s financial strengths and weaknesses
is the favorite subject of many interested quarters since the handing over of
Hong Kong to China. The otherwise conservative and controlled print media of
S’pore has exercised considerable strength to draw some parallels. The education
system of S’pore, which is inline with the western patterns of learning, has a
clear edge over the education policies of HK. In the long run, this presently
seeming narrow difference will cause the major division in all spheres of life.
Due to these varying factors, S’pore will benefit from correct vision of its
leadership.
A significant number of world’s business leaders are of the view that HK leads
in the financial sector. However, the truth is that Singapore enjoys 4th
position in the foreign exchange business worldwide whereas HK occupies 8th
position, far behind S’pore in the run. However, in all other financial spheres,
HK is prominently placed as leader. In stock market, HK is with 50% larger
shares as compared to S’pore. At the present HK is ahead with 40% more companies
and the figure will grow further as many Chinese companies are entering for
listing. In the insurance filed HK is leading S’pore with ten times grosser
premium. The external bank assets also show big difference between the two. The
individual investment of HK and S’pore in unit trusts is 11% and 2%
respectively. The GDP of HK is almost twice as that of S’pore. The real estate
rates in HK are very high are thus a source of discouragement for foreigners.
S’pore, on the other hand, is leading in safety, security, environment and
cleanliness standards. HK poses more problems to foreign investors because of
its weak security and high crime rate. Kidnapping for ransom cases are common in
HK and one Mr. Li Ka-Shing has being reported to have withdrawn U.S.$1.3 billion
of investment because of (along with other reasons) kidnapping of his son. One
can easily make out a conclusion from the above discussion about the strength
and weaknesses of both states and as to which is going to survive and sustain
its status in the coming years. The decision is up to the observers!
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