Singapore and Hong Kong are two of the world’s busiest and most significant logistics centres. Their long history of economic stability and advantageous location make these cities the perfect starting point for international companies looking to expand their business in Asia Pacific’s thriving markets.
This article stacks two of these Asia’s most favourable business destinations against each other and provides an overview of both locations based on the PEST framework to help you establish why Hong Kong and Singapore may be the best launchpads for your business in Asia.
The role of PEST in analysing a company’s international expansion strategy
Expanding your business globally poses numerous challenges due to differences in countries and locations. Language, culture and the velocity of business development, currency, and technology are all factors to consider.
PEST analysis helps better understand the external elements that influence the strategic business environment. They are cumulated into political, economic, social, and technological factors.
I. Political factors
Singapore is one of Southeast Asia’s most stable countries. Its secure and pro-business political climate has increased its credibility as an international business centre, with many enterprises deciding to establish operations here. The Singapore government’s hallmarks have become high levels of honesty, strict law enforcement, corruption control, market-friendly policy design, and proper policy implementation.
Singapore’s judicial system has received worldwide recognition for its transparency and efficiency, and the country is viewed as Asia’s least bureaucratic. Businesses in Singapore are not overburdened by red tape or operations slowed down by bribery or a lengthy legal process. The government regards access to law as a vital economic asset that should be maintained and exploited to improve the country’s status as a top corporate destination and a leading legal centre in Asia.
Hong Kong is a Special Administrative Region of the People’s Republic of China, with a great degree of autonomy in every area except for defence and foreign affairs. Hong Kong’s political, economic, and judicial systems are preserved under the Sino-British Joint Declaration and the Basic Law. This arrangement is known as “One China, Two Systems.” It is also regarded as one of the world’s least corrupt economies.
For years, Hong Kong has been recognised as Asia’s top trading and financial centre. Unfortunately, recent political unrest and uncertainty threaten to change this, prompting many competing financial centres in the region to reconsider their positions and even roll out their red carpets for organisations. But even despite this challenging situation, Hong Kong remains the investment gateway to China, the world’s second-largest economy, and boasts a stock market that is ten times its own size (by market cap).
II. Economic factors
Singapore is a prosperous city-state with a free-market economy. It is a major financial, shipping, aviation, and trading hub for the Southeast Asian region, with a pro-business trade and economic government policy. With a GDP per capita of almost $65,000, it is one of the world’s wealthiest economies.
Economic activity is dispersed throughout a wide range of industries. Electronics, engineering, biomedical manufacturing, oil refining and chemicals production dominate the country’s manufacturing, contributing over a fifth of the GDP.
The services sector accounts for more than two-thirds of GDP, with financial and commercial services seeing rapid expansion. After London, Hong Kong, and New York, it is the world’s fourth-largest financial centre and a fast-growing wealth and insurance management centre. What is more, it is the world’s second-largest private wealth management hub following only Switzerland and is projected to become number one in the nearest future.
Singapore’s COVID-19 response has prioritised planning as it aids in pursuing its goal of becoming a “global-Asian node of technology, innovation, and enterprise.” Accelerating modernisation and globalisation, fostering up-skilling and re-skilling, stimulating growth in new sectors (e.g., FinTech, cyber, and advanced manufacturing), and profiting from further ASEAN economic integration are among the country’s current top priorities.
Hong Kong’s economy is defined by several characteristics, including free capital flow, low taxation rates, a well-developed financial sector, and a trustworthy legal system. The city is frequently regarded as one of the most important global financial centres after London and New York. Most of the world’s biggest banks are housing their regional headquarters here.
The four primary businesses driving Hong Kong’s economy are financial services, tourism, commerce and logistics, and professional and producer services.
Hong Kong’s most significant advantage over Singapore is having the world’s economic powerhouse and the world’s second-largest market as its backyard. It offers Hong Kong-based purchasing and sourcing offices easy access to the country’s vast and well-developed supply chains. Having staff in Hong Kong and across the border continues to be a popular solution for corporations with suppliers or own work facilities in South China.
Hong Kong has also repeatedly proven itself to be one of the world’s most resilient financial centres. It has successfully weathered the severe acute respiratory syndrome (SARS) outbreak and the Asian and global financial crises in the past, and it is now successfully overcoming COVID-19 disruptions.
III. Social factors
While most metrics are nearly identical in Singapore and Hong Kong, the quality of life in many people’s eyes gives Singapore the upper hand. Singapore is considered an easier environment to adjust to when relocating from another country. The social and ethnic fabric of the city is a unique mix of cultures and people, resulting in a cosmopolitan lifestyle.
Foreign enterprises in Singapore have access to a pool of highly-skilled, multilingual talent. Thanks to the country’s outstanding education system and welcoming immigration policies, the local workforce is considered both talented and highly driven.
The country is also known for its multiracial society, which is both diverse and cohesive. Its residents come from a wide range of backgrounds, allowing it to provide workforce solutions that require bilingual and multicultural sensitivities. Furthermore, English is considered a first language, allowing international businesses to enter the local market and quickly conduct their operation.
Hong Kong has a pool of experienced and entrepreneurial professionals who are familiar with the business cultures of the fast-growing Mainland cities. Most local business professionals can communicate in English and Cantonese (the city’s most widely spoken language), while many people can also communicate in Mandarin (the official language of Mainland China).
There are 22 degree-granting higher education institutions in Hong Kong. Four Hong Kong universities are currently ranked among the top 100 institutions globally by Quacquarelli Symonds (QS), reflecting the outstanding quality of our educational system.
With its dynamic cosmopolitan lifestyle, liberal immigration regulations, and numerous opportunities for professional growth, Hong Kong offers attractive prospects for experts worldwide. A variety of admission schemes were implemented to drive Hong Kong’s professional and financial development as a diverse and high-value-added economy that is attractive to highly-skilled talent.
IV. Technological factors
Singapore is one of the most technologically advanced countries in the world. It prides itself on having one of the best IT infrastructures in the world and the world’s fastest internet. The country is home to 80 of the world’s top 100 technology companies, and that’s why it’s also often referred to as Asia’s technological capital. It is the headquarters of 59% of tech MNCs in Asia, including Google, Facebook, and Netflix.
The Economist Intelligence Unit’s Asia Digital Transformation Index ranked Singapore first in digital infrastructure, ahead of South Korea, Hong Kong, and Japan. Research, Innovation and Enterprise 2025 Plan (RIE2025), one of the country’s most promising projects, has outlined a five-year S$25 billion investment strategy to equip Singapore for potential epidemics.
It also included expenditure in communication technology R&D, with an emphasis on 5G and the development and implementation of artificial intelligence (AI) models across the country.
The Singapore Intellectual Property Office (IPOS) has also established the world’s fastest patent registration process, which cuts the time required by 80%. This is a fundamental prerequisite for many tech companies aiming to expand into the region.
Hong Kong also has a very technologically advanced environment. It is well-known for its world-class ICT infrastructure and high-speed Internet access. Over 800 technology enterprises are housed in the Hong Kong Science Park. On a worldwide scale, many of these companies have displayed significant levels of product innovation capability. As a result, some of them received Consumer Electronics Show innovation prizes (CES). SenseTime and WeLab are two world-class AI technology enterprises based in Hong Kong.
Fintech, artificial intelligence, robotics, health tech, smart city, and Internet of Things (IoT) technology are becoming more attractive to investors and start-ups, thanks to efforts by the government and bodies such as HKSTP, as well as prioritisation of funding and resources for fintech, artificial intelligence, robotics, health tech, and smart city and Internet of Things (IoT) technology. Hong Kong is a perfect test and development site for smart city technologies due to its advanced infrastructures, such as the highly anticipated 5G rollout, a dense metropolitan environment, and a significant supply of potential smart city applications.
Additionally, freedom of information and the absence of censorship on content transmission offer a safe environment for the development of web-based businesses such as big data, media, cloud computing, and the Internet of Things.
We have provided multiple insights on various business-related aspects in order to demonstrate why Singapore and Hong Kong may be the best launchpads for your business. And in conclusion, it is important to point out that both cities are highly competitive landscapes and offer plenty to satisfy any entrepreneur. So, the final decision on which location is going to be more beneficial for you personally really depends on your strategy and your industry.
For those willing to penetrate deeper into the Mainland Chinese market, Hong Kong provides a significant advantage. The Mainland and Hong Kong Closer Economic Partnership Arrangement allows entrepreneurs to access Mainland China while still benefiting from the market-based policies of one of the world’s freest economies.
As for start-ups and new businesses looking to expand in Asia in general, Singapore is the best option. With government tax incentives and pro-business policies, the city-state makes launching a new business both simple and affordable. Finally, Singapore’s vast network of double taxation treaties and trade agreements provides greater access to not only Asian markets, but to global ones as well.
Acclime has a strong presence in both Hong Kong and Singapore. We are dedicated to our employees and clients in both regions. As a result, we strive to advise clients on the best market and governance solutions in their industry sector following their business strategy.