Singapore Starting to Outshine Hong Kong as Financial Hub

Business uncertainty grows over security law

Hong Kong’s international business community, jittery because Beijing bypassed the government to impose a draconian national security law on the city, is inexorably beginning to turn eyes to Singapore as a more attractive financial hub, observers say, as uncertainty increasingly becomes a preoccupation.

Business organizations such as the American Chamber of Commerce in Hong Kong (AmCham), NGOs, human rights organizations, and civic groups are seemingly growing fixated on the implications of the law, particularly its effect on the legal system.

The two cities, both established under British colonial rule in the 19th century, have been in an informal competition to be Asia’s premier financial hub for decades. Singapore has become one of the richest countries in the world, with per capita gross domestic product of US$64,581, while Hong Kong lags somewhat at US$48,679. Nonetheless, they remain the two richest cities in Asia, ahead of Tokyo at US$39,289. There is deepening concern that the national security law imposed on Hong Kong by China will end the city’s acclaimed international status.

“Exactly how and how often mainland elements will be brought to bear on Hong Kong remains to be seen, “ said  Michael Hor, a Hong Kong University law professor, “but it is the uncertainty which affects the confidence of those who consider it important that Hong Kong preserves the criminal justice policies and practices it inherited from its historical connection with the Common Law.”

In contrast, Singapore’s criminal justice system is well known and, for the foreseeable future, is unlikely to change radically, Hor said. “The fact that there is a considerable international presence in Singapore must be evidence that, for those who choose to live or set up shop in Singapore, the line has not been crossed, and is unlikely to be crossed.

Nonetheless, Joseph Yam, a former chief executive of the Hong Kong Monetary Authority, defended Hong Kong on July 29 organized by the Our Hong Kong Foundation as the preferred place for financial intermediation between mainland China and the rest of the world and will remain so.

“The rest of the world will have to deal with the second-largest economy of the world,” Yam said. “There are financial deals or transactions that involve the mainland of China and the rest of the world. Those will grow and those will continue to take place notwithstanding the worsening US-China relationship, unless the US declares a military war against China,”

Hong Kong, he pointed out, has offices of 78 of the world’s 100 biggest banks, adding that sanctions imposed by the US over recent weeks won’t hurt Hong Kong’s role as an international financial center.

But while it may turn out to be that, in practice, it may be very much business as usual in Hong Kong, Hor said, “to many, this cannot be assumed. In the short term, people and businesses will have to decide whether to stay put and wait to see how the new law is implemented in practice, or to pull out and relocate to somewhere else with a more predictable future.”  

Many expatriates are considering leaving Hong Kong, said a British executive who declined to be named, citing feedback from his expatriate circle. He knows an American executive, he said, who recently migrated from Hong Kong to Thailand, which he prefers despite the kingdom’s history of military coups and a continuing military dictatorship.

“He is happier in Thailand and would never want to come back to Hong Kong because of the uncertainty over the security law,” the British executive said.  He himself is considering moving to Singapore after living in Hong Kong for decades due to uncertainties over the security law.

“The national security law reinforced my decision not to retire in Hong Kong,” he said. “Right now there’s uncertainty as to how the national security law is going to be interpreted, enforced and prosecuted. So the uncertainty is not good for making business decisions. I might be doing something illegal. That’s a worry.”

According to a survey by AmCham in early July, many of the respondents pointed to the ambiguity of the national security law. The poll of 183 AmCham members found 68 percent were more concerned about this law compared to one month ago.

The British executive expressed his liking for Singapore because its legal system has been in place a long time despite the authoritarian nature of the government and the lack of press freedom in the city-state.

According to the 2020 World Press Freedom Index by Reporters Without Borders, Hong Kong is in 80th place, far higher than Singapore at 158. Singapore’s Internal Security Act, a British colonial legacy, has been in place since 1960 and authorizes the Internal Security Department (ISD) to detain people without trial.

Hong Kong’s National Security Committee, which was set up weeks ago, is partly similar to Singapore’s ISD. Like Singapore’s ISA, the National Security Law authorizes the detention of suspects without full due process.

Singapore is undergoing steady liberalization, while Hong Kong has a “de-liberalization trend”, said Hor at a webinar on July 25 organized by the Hong Kong University Faculty of Law, comparing the security laws of both cities. “The new Security Law introduces elements which are potentially disturbing to some,” he said, citing the criminalization of new activities and the vetting of judges and prosecutors by the Hong Kong government. 

The security law makes it a punishable offense to indulge in sedition, secession, terrorism, and collusion with foreign forces.

Today, the Singapore government is unlikely to resort to measures as draconian as Operation Spectrum in 1987, Hor said at the webinar. In Operation Spectrum, while Lee Kuan Yew was prime minister, the ISD detained without trial 22 Singaporeans for their alleged involvement in a Marxist conspiracy.

Lee Kuan Yew and his generation of ministers were forged in the fires of more uncertain times, hence they were inclined to “nip in the bud” any potential trouble, Hor said. “Subsequent generations who have known only peace and prosperity will not perceive danger in quite the same way and are more likely to have greater confidence in the ability of the government to deal with the consequences of greater liberty.”


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