Hong Kong loses top business rating

The return of Hong Kong to China has resulted in a dramatic slide in the region's attraction for international business, a research group has said.

The former British colony was ranked as the best place to locate over the last five years, but is set to be relegated to sixth place in the coming five years, according to the Economist Intelligence Unit (EIU).

Top spot to do business in next five years

1. Netherlands

2. UK

3. US

4.Canada

5.Singapore

6.Hong Kong

7.Switzerland

8.Ireland

9.Denmark

10.Germany

Source: EIU

The Netherlands topped the poll as the best place to do business in the next five years.

The EIU said that, unlike many economies, the country had no obvious weakness in its business environment - the political system was stable, the workforce was flexible, the macroeconomic environment was strong and the financial sector was efficient.

Political 'interference'

In contrast, Paul Cabey, an EIU economist specialising in Hong Kong and China, said that a string of incidents showing political interference in what had been a bastion of free trade had provoked Hong Kong's fall from the top.

"There have been several incidents which suggest that the rule of law was not as strong as it was before," said Mr Cabey.

He pointed to widely assumed political interference in the sale by Cable and Wireless of its Hong Kong Telecom subsidiary as an example.

The Hong Kong government said the rankings did not reflect realities in the former British colony.

It said the incidents of political interference cited were totally unfounded.

"The sale by Cable & Wireless Plc of its shareholding in Cable & Wireless HKT is entirely a commercial decision.

"It is a matter for the boards of directors of the respective companies to determine in the interest of their companies and their shareholders," it said in a statement.

UK clings to second place

The UK retained its number two slot for the five years to come.

The EIU said a flexible workforce, a foreign investment-friendly government and deep capital markets were pluses for London, despite high rents and poor transport.

The region showing the most improvement in the business environment was eastern Europe.

North America remained, as it had for the past five years, as the best region in the world to do business, the report said.