Singapore tops Hong Kong for business

Singapore ranks ninth globally in its attractiveness to business

By Damian Grammaticas BBC Hong Kong correspondent

The city of Hong Kong has lost its long-held position as the best place to do business in Asia, according to a new global league table comparing economies around the world.

Instead the rival city of Singapore is now ranked higher in the annual survey complied by the business consultancy, the Economist Intelligence Unit (EIU).

The EIU's Asian rankings (Previous rank in brackets)

1 (2) Singapore

2 (1) Hong Kong

4 (4) Australia

4 (3) New Zealand

5 (5) Taiwan

6 (8) South Korea

7 (7) Japan

8 (9) Thailand

9 (6) Malaysia

10 (10) Philippines

11 (12) India

12 (11) China

13 (14) Sri Lanka

14 (13) Indonesia

15 (15) Vietnam

16 (16) Pakistan

The EIU cited concerns over Hong Kong's political environment, and worsening economic climate as reasons for downgrading it.

Hong Kong has dropped from fifth to eleventh place in the global league table, while Singapore has taken over as the highest ranked Asian economy in ninth place.

The results of this survey provide a rude shock for Hong Kong which has for many years been ranked as the best business location in Asia.

The city has a long standing and closely contested rivalry with Singapore when it comes to the question of which provides a better environment for business.

Reasons for pessimism

The EIU said it had downgraded Hong Kong because it foresaw problems for the territory in several key areas.

One is the political environment where there is considerable popular dissatisfaction with the government, but little sign of progress towards reforms that would make the administration more democratically accountable.

Other problems for Hong Kong include a lack of highly skilled English-speaking labour, and government policies which the EIU said appear to favour some business tycoons and their companies instead of real competition.

Hong Kong also faces a large and growing budget deficit, while the territory is likely to have to introduce new taxes.

And while Hong Kong still has the world's most liberal tax trade and foreign exchange regimes, there's a warning that its role as a middle man for foreign business with China is likely to diminish.

In Hong Kong, there are hopes that China's membership of the World Trade Organisation will increase the amount of goods and money flowing through the territory.

But instead, the unit believes that other Chinese cities are likely to attract foreign investment, to the detriment of Hong Kong.