Hong Kong’s reputation as a stable financial hub has been shaken by a controversial extradition bill that prompted massive protests, and its loss might just be Singapore’s gain, experts said.
The Chinese territory and the Southeast Asian city-state have long vied for the title of Asia’s top financial destination, attracting international business from around the world.
However, a decision by Hong Kong’s Beijing-backed government to introduce a bill allowing extradition to mainland China sparked concern among the business community and brought up to 2 million protesters into the street.
Hong Kong’s political crisis is “definitely a dent in its reputation,” said Lawrence Loh (盧耀群), director of the Centre for Governance, Institutions and Organisations at the National University of Singapore’s Business School.
“There will be some immediate benefits” for Singapore, he added, pointing to reports that tycoons were already shifting money from Hong Kong.
Hong Kong offers access to China, but enjoys freedoms unseen in the mainland, under the terms of its 1997 handover from Britain to Beijing.
It has a large expatriate community and prides itself on its reputation as a financial capital in the region.
However, its status is temporary — the handover agreement expires in 2047 — and in recent years there has been increasing concern about Beijing’s influence.
Companies were unsettled not only by the massive demonstrations, but also by the proposed law, which they feared could undermine Hong Kong’s reputation as a safe place to do business.
Opponents of the proposal worry it will entangle people in China’s notoriously opaque and politicized justice system, and threaten those critical of Beijing’s policies.
“Enacting such an open-ended law by fiat will only drive business to places like Singapore,” Port Shelter Investment chief executive Richard Harris wrote in the South China Morning Post.
Hong Kong Chief Executive Carrie Lam (林鄭月娥) has suspended the bill, but has refused to fully withdraw it from consideration.
That uncertainty could mean companies looking for a first-time base in the region would lean away from Hong Kong and toward Singapore, said David Webb, a Hong Kong-based investor who advocates for stronger corporate governance.
“If you are considering doing it [opening an office] for the first time ... then you would probably look at the potential for these laws to be resurrected,” he said.
Singapore has sought to promote itself as a less crowded, more orderly alternative to Hong Kong, though it is sometimes mocked as dull and criticized for its restrictions on civil liberties.
The media is tightly controlled and rights groups say financially ruinous defamation suits are used to silence critics and political opponents.
“Singapore is not known as a bastion of free speech, but it does have sovereignty on its side,” Webb said.
The city-state has also built a reputation for a strong rule of law — key in attracting businesses — and a growing number of foreign companies come to Singapore to settle commercial disputes.
The Singapore International Arbitration Centre, one of several similar centers around the world, received more than 400 cases last year and has seen its case-load increase four-fold over the past decade.
In Hong Kong, by contrast, critics say the extradition bill is the latest sign that a traditionally sound legal system is being eroded as Beijing seeks to assert greater control.
Still, any shift away from Hong Kong is likely to be more of a trickle than a flood, experts said.
“Investors in mainland China will still prefer Hong Kong over Singapore due to proximity,” Abhineet Kaul of consultancy Frost & Sullivan said.
“I do not believe that the uncertainty and loss of confidence has reached a tipping point where you will see the floodgates open,” Loh said.
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