Costs Of Running A Business In Singapore Increase Faster Than In Hong Kong
SINGAPORE – While the city-state has become a more attractive place to set up shop than Hong Kong, the costs of running a business in Singapore is rising faster than in the Chinese territory due to a number of factors, reported Bloomberg on Thursday morning (22 September, SGT).
With inflation surging to its highest level in 14 years, operating costs including the hiring of manpower, leasing of office space and power costs are increasing at a faster pace in Singapore than in Hong Kong, where price hikes have been more subdued.
For instance, while Hong Kong remains as the world’s priciest office market, the harsh COVID-related measures it imposed has severely impacted its office rents. In fact, office rents in the Chinese territory’s core business districts fell by 4 percent in June 2022 compared to December 2021.
On the other hand, office rental growth in Singapore’s central business district (CBD) has accelerated for a 3rd consecutive quarter. Still, office rents in Singapore are still lower compared to Hong Kong, but the gap is narrowing, said property consultancy Jones Lang LaSalle (JLL).
In addition, the cost of hiring talent in Singapore has also increased more than in Hong Kong, due to the former’s faster reopening.
“Singapore’s faster reopening and ‘living with COVID’ versus Hong Kong’s ‘zero COVID’ strategy is driving the divergence and higher increase in manpower and rental costs,” said Chua Hak Bin, an economist at Maybank Investment Banking Group.
Data isn’t available yet for this year, but salary hikes for government workers, which can have an impact on the wages in the private sector, have shown some remarkable differences. In Singapore, civil servants are expecting a salary increase ranging from 5 percent to 14 percent in 2023, while the authorities in Hong Kong proposed a 2.5 percent increment.
Finally, electricity prices in Singapore outpaced that in Hong Kong, with the former’s latest electricity inflation rate increasing to the highest on record.
Still, accelerating costs haven’t stopped the rate of new business formation in Singapore hitting a 17-month high in August. In Hong Kong, the figure has remained the same compared with 2021’s pace but fell from its peak in 2017.