Hong Kong and Singapore are former British colonies that rose to prominence as trading ports serving the region. Both are magnets for global talent and capital that developed into international financial centers. But they now have another similarity: Both have seen their growth rates fall in recent years. According to the World Bank, Hong Kong and Singapore grew by 1.5% and 1.3% in 2012. In the first quarter of 2013, their growth improved but they expanded at only 2.8% and 1.8%, amid rising costs and weak growth in key export markets.
Slower growth is not necessarily a cause for concern. As economies in transition, Hong Kong and Singapore are currently adapting their growth models to the competition from neighboring countries. I spoke to Jack So, chairman of the Hong Kong Trade Development Council, and Leo Yip, chairman of the Singapore Economic Development Board, to discuss their strategies for continual growth and development.
So and Yip say their economies are tied to the global shift of economic activity to the Asia-Pacific region. “Asia’s growth is not a short-term phenomenon,” says Yip, adding that “its scale and complexity provide momentum for decades to come.” A study by OECD predicts that China, India and Southeast Asia will grow by 7.4% per year over the next five years, largely driven by domestic consumption by a growing middle class. Given the growing interest of multinational corporations in the region, Yip believes Singapore is well-placed to benefit from the “varied” and “multidimensional” opportunities arising from the region’s “dynamic growth.” Citing Hong Kong’s strategic location in the heart of Asia, So calls Hong Kong the gateway for business flowing into and out of the region.
So notes that China has moved beyond being the world’s factory to become the world’s second-largest economy and a vast market for good and services. He says multinational corporations such as Starbucks SBUX -0.03% can use Hong Kong as a springboard to showcase their products and tap into China’s fast-growing middle class. China’s 12th five-year plan aims to boost domestic consumption, improve productivity and wages, and open up more industries to foreign companies. So adds that Hong Kong has signed the Closer Economic Partnership Arrangement with China, which gives it lower tariffs and preferential access to the Chinese market. Hong Kong is also China’s de facto international capital market, hosting the public listings of Chinese companies such as Tencent Holdings and Great Wall Motor , and serving as the world’s largest offshore renminbi center. “Hong Kong is bicultural,” So stresses, “it is both part of China and an integral part of the world economy.”
Hit By Slow Growth, Hong Kong and Singapore Rethink Strategi