Reuters - China may spell end for Hong Kong and Singapore

[Dave Farber <dave () farber net>]

> Date: Fri, 08 Aug 2003 00:30:11 +0000
> From: Robert Ho <ho3 () pacific net sg>
>
>
> As Singapore celebrates its National Day, we do some soul searching and 
> ponder
> some troubling questions and issues addressed in an old article below.
>
> What is disconcerting is the fact that recent events in Singapore seem to
> confirm the disturbing trend postulated in below article. The question 
> then is
> whether Singapore's policy makers have woken up from their deep slumber.
> Looking at recent policy implementations, the signs are far from encouraging.
>
> Robert Ho (ho3 () pacific net sg)
> Newsgroups: soc.culture.singapore
> China may spell end for Hong Kong and Singapore
> (Reuters)
>
> 15 March 2002 by Ovais Subhani
>
> Could a burgeoning China drive Singapore and Hong Kong the way of
> the dinosaur? Some economists fear the answer could be yes.
> China's emergence as a manufacturing powerhouse spells competition for
> every Asian economy, but none face a more compelling need to shape up
> for the challenge than the two city economies.
> Each has got a different response strategy -- while Singapore
> scrambles to reshape itself, Hong Kong is betting on the status quo.
>
> While most Asian nations can look within -- to seek growth in domestic
> consumption -- if their export engines start to sputter, the
> relatively small populations of Hong Kong and Singapore give them
> little choice but to look outside for growth.
>
> Hong Kong ranked ninth and Singapore 15th among the world's top
> exporters in 2000, according to the WTO, leaving each just a narrow
> space to expand export growth.
>
> To address the shortcoming each is taking a different tack.
>
> While Hong Kong is betting on geography, being well placed to plug in
> to the Chinese growth engine, Singapore is gearing up to become a more
> services- and knowledge-driven economy and reduce the impact of
> manufacturing cycles.
>
> SHANGHAI THREAT
>
> But the clock is ticking. Regional analysts said within 10 years the
> emerging industrial, port and commercial hubs inside China may not
> leave the rivals much to fight over.
>
> "The debate over the rivalry between Hong Kong and Singapore
> has...become a side issue, in the sense that you are pretty much
> fighting for the spoils rather than the real thing," said Paul Alapat,
> Nomura International's economist in Hong Kong.
>
> "It's inevitable. China has such a huge trained labour force and it's
> still cheap, it's going to be virtually impossible to compete."
>
> Low-cost Shanghai offers the most immediate and direct competitive
> threat. It threatens to soon deprive Hong Kong of much of
> China-related air and shipping traffic.
>
> In the future, many multinational firms now operating out of Hong Kong
> and Singapore could move their regional headquarters there, along with
> a large share of investments and financial and manufacturing
> activities.
>
> Last year, Shanghai's gross domestic product grew 10.2 percent, while
> Hong Kong saw growth of just 0.1 percent and Singapore's GDP shrank
> two percent.
>
> FADING AWAY VIABILITY
>
> International financial adviser Marc Faber, dubbed "Dr Doom" for his
> often gloomy views, said the viability of financial services centres
> such as Hong Kong and Singapore would fade as cheaper or virtually
> free communications allow investors to trade from their location of
> choice.
>
> "In future, there won't be a global financial centre," he said. "The
> institutions can be anywhere they want to be. You won't have to be in
> a financial centre any more."
>
> Faber, who predicted in 1990 that Shanghai would emerge as a major
> market, said more mainland cities have the same potential.
>
> "Hong Kong or Singapore, over time they will become relatively
> unimportant because in China there would be at least 10 cities that
> have economies the size of Hong Kong," he said.
>
> Andy Xie, chief economist of Morgan Stanley Dean Witter, said China's
> challenge to Hong Kong and Singapore could lead to a decline in living
> standards.
>
> "The issue is whether any plan can shield you from Chinese competition
> and hence preserve the living standard. I think the truth is somewhere
> in between," he said.
>
> Xie said investors may be willing to pay a premium for the developed
> infrastructure, tax incentives and business-friendly legal environment
> of Hong Kong and Singapore. But the size of that premium depends on
> how much they restructure their economies.
>
> SEARCH FOR GROWTH
>
> Alapat said both would have to seek new growth engines as
> manufacturing, for Singapore, and property, for Hong Kong, may not
> remain such effective growth drivers as before. "Most of the easy
> solutions are now behind us."
>
> Alapat said Hong Kong may be feeling the competitive pressure from
> China much more intensely at the moment.
>
> But Alapat and Xie both agreed that its proximity to China and North
> Asia would remain its biggest edge over Singapore.
>
> "Hong Kong doesn't need to restructure to the same extent as
> Singapore," Xie said.
>
> He said Hong Kong could continue to be a centre for China's Pearl
> River delta -- a very large economy of 80 million people with exports
> already above $100 billion dollars and growing.
>
> BRIDGE THE DISADVANTAGE
>
> Singapore, despite being cheaper than Hong Kong, still has to figure
> out the level at which investors would think its relative geographic
> disadvantage has been bridged.
>
> Sanjeev Sanyal, Deutsche Bank's regional economist, said Singapore was
> encouraging local companies to tap into growth outside the citystate.
>
> More than half of the earnings of telecoms giant SingTel are already
> generated overseas.
>
> Singapore wants to encourage knowledge-based industries like
> biotechnology, so the emphasis would be on incentives like low
> personal income tax, Sanyal said.
>
> "Given their track record one has to give them the benefit of the
> doubt that they will do it again. But having said that, when you make
> a one-directional bet and if it goes wrong, it goes wrong big time,"
> he said.
>
>
>
>
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