Amidst the challenges of Covid-19, Hong Kong’s attempts to retain its role as a global hub of multinational corporations (MNCs) finds the city losing steam to its competitor, Singapore.
While Hong Kong is scrambling to bring back the sparkle that once made the city attractiveto students, professionals, tourists, and businesses, some multinational corporations are quietly shifting their regional headquarters out. An 8.4% decrease since 2019 paints a gloomy picture of Hong Kong’s dwindling appeal among global businesses, with this proportion representing the number of companies that have relocated their regional headquarters out of Hong Kong. The Hong Kong Chief Executive John Lee remains optimistic though, with plans in place for the city to develop its “headquarters economy” and encourage foreign professionals to enjoy multiple entry visas into China. For many multinational corporations (MNCs), however, it may have come a little too late.
Companies like DHL point out one key issue – the stringent Covid-19 policies in Hong Kong. DHL’s managing director, Mr Christopher Ong, noted the importance of a multi-hub strategy, revealing that DHL has expanded operations in Singapore by over 50%, due to the alternative locations’ need as a contingency plan if one location gets shut down. “We have been expanding dramatically in Singapore. If a location gets shut down, we can’t fulfill our jobs. So through our multi-hub strategy, we are able to have alternatives.”
Other companies that have moved their Asia HQs out of Hong Kong include FedEx and British American Tobacco (BAT), both citing better international mobility and efficiency as key factors in their decisions. As BAT spokesperson stated, “Like any global company, we continuously evaluate our global operations. We decided that Singapore was the best fit for our headquarters moving forward, given its strategic relevance and commercial sustainability as our regional headquarters.”
At the finance sector, companies like National Australia Bank, Westpac Banking Corporation, Commerzbank, and Royal Bank of Canada have also migrated their operations to Singapore from Hong Kong. The void left by these MNCs has given Chinese enterprises an opportunity, with the number of China-based companies in Hong Kong rising by over 30% in the past four years. At the end of 2022, the number of Chinese companies regionally headquartered in Hong Kong had surpassed that of American ones with regional hubs in the city for the first time in at least three decades, Bloomberg reported.
While Hong Kong’s destiny is shaped by Beijing, Singapore has been commended for its ability to control its own destiny, attracting talent and capital from the region and beyond. Both engage in competition, not just to host the most number of headquarters, but also in terms of liveability and sustainability – factors equally crucial to keep and retain talents. Inaugural Asia Fellow of the Milken Institute and former US ambassador to the Asian Development Bank, Curtis Chin, sums up the challenge of becoming a headquarters economy aptly. “It takes more than a flurry of policy announcements, it’s about execution and perception. The reality, too, is that for some companies, the very notion of what is a headquarters has changed.”
As the world continues to navigate the uncertainties of the pandemic, Hong Kong and Singapore will undoubtedly continue to compete in attracting MNCs. The direction of that dynamic, however, is shaped by factors more complex than mere policy statements and will be an interesting trajectory to follow.
