Singapore—The world watched in fascination as large protests rocked Hong Kong because of an extradition bill that many believe to be problematic for the city’s future.
Of late, the number of protestors, as well as incidents of violence, have grown. However, the Lowy Institute, a think tank based in Sydney, Australia showed how the chaos in Hong Kong benefits one of its neighbours, Singapore, especially regarding financial investments.
Jason Lim, writing for the Lowy Institute’s The Interpreter, says history is repeating itself. In the article entitled Hong Kong’s political trouble is Singapore’s gain, Mr Lim says after Singapore’s separation from Malaysia in 1965, Prime Minister Lee Kuan Yew seized the opportunity provided by pro-communist trade unions in Hong Kong.
The movement instigated protests in 1967 and Mr Lee visited Hong Kong repeatedly to urge manufacturers to start operations in Singapore.
Back then, the protests had also turned violent and had resulted in the deaths of 51 people. For several months in 1967, workers and students walked through the streets, “shouting slogans, assaulting police officers and planting bombs.”
As a result, “For the next few months, land values, stock market shares and bank deposits in the then British colony fell sharply. Local entrepreneurs also feared swirling rumours that China would invade Hong Kong. In May of 1967 alone, about HK$800 million was shifted out of Hong Kong by nervous investors.”
This proved to be to Singapore’s advantage. The Island republic had only recently begun its industrialisation process, and the Economic Development Board (EDB) began to search for areas to build factories for Hong Kong’s investors.
Goh Keng Swee, then Singapore’s Finance Minister, told parliament that in addition to tax incentives and possible citizenship, in the long run, businessmen from Hong Kong viewed Singapore as “a safer and more stable location” for their investments.
Mr Lim writes, “Prospective investors from Hong Kong were also impressed with the minimum of bureaucratic red tape since they only had to work with the EDB, which wanted ‘pioneer industries’.
“Pioneer certificates were issued to industries that manufactured new products not previously made in Singapore and were exempted from paying the standard 40% tax on company profits for five years or more depending on the size and type of investments.
“Pioneer industries were also expected to hire at least 200 people in a bid to keep unemployment down. In November 1967, nearly one-third of 44 new companies in Singapore granted ‘pioneer status’ involved Hong Kong capital that had moved to Singapore.”
The flow of investments, however, also began to slow down after the riots stopped in December 1967.
And in 2019, the ever-growing protests seem to have the same effect. Mr Lim quotes Malaysia’s The Sun Daily as saying “that Singapore had promoted itself as ‘a less crowded, more orderly alternative to Hong Kong’ with a reputation for a strong rule of law, a criterion in attracting businesses.”
By early July, talk of wealth managers moving to Singapore, as well as the wealthy themselves moving their assets out because Beijing might seize them was already abuzz.
However, Mr Lim makes the point that aside from the controversial extradition law, other factors have contributed to a possible shift in businesses to Singapore. “A survey by Asian Private Banker in 2018 found Singapore was more attractive than Hong Kong because it was ‘less connected to mainland China from a regulatory, political, and financial perspective.”
Additionally, in November of last year, “economists in mainland China had to sign a self-discipline agreement to take into account the interests of the Chinese Communist Party when writing their reports” something that was said to have “a ‘chilling effect’ on the finance community in Hong Kong as it made analysts’ work more difficult.
Mr Lim ends his piece saying,
“As the political chaos in Hong Kong in 1967 proved to be an unexpected gain for Singapore, so it looks to be again in 2019.”
“While the situation calmed in 1967 after the riots, Hong Kong after 2019 will not be the same again. The Special Administrative Region of China looks ahead gloomily towards the end of ‘one country, two systems’ by 2047 and a future uncertain.” / TISG