Singapore seems to be getting too expensive for multinational corporations (MNCs). More than half the senior executives surveyed by the Economist Corporate Network have no plans to increase investments in Singapore because of soaring property prices, rising costs of living and shortage of staff.
Singapore ranks seventh in the Economist Corporate Network’s Asia Business Outlook Survey 2013. China remains the top investment destination followed by the Indian subcontinent, Indonesia, Malaysia, Thailand, Vietnam, Singapore, South Korea, Philippines, Australia, Japan, Hong Kong and Taiwan. Singapore and Hong Kong are described as “overheating hubs” because of the rising costs.
While nearly 35 per cent of the 207 respondents said they would increase investments in Singapore in 2013, almost 54 per cent said they would stay in the market but not invest more and about 10 per cent said they have no investment plans at all.
Nearly 74 per cent plan to increase investments in China, 54.1 per cent in the Indian subcontinent, 53.5 per cent in Indonesia, 43 per cent in Malaysia, 38.6 per cent in Thailand and 37.7 per cent in Vietnam.
The report says: “ Our survey shows that companies are struggling in Singapore and Hong Kong with soaring property prices, rising cost of living concerns, shortages of staff and scarce school places.
“Such issues are starting to cause some firms to think about moving their regional management teams out of these traditional hubs or else to look at new organizational structures.”
The report says: “For companies that are considering a new location for their management team, how do other centres stack up? In our survey, we also asked about Shanghai, Tokyo and Kuala Lumpur. No city is perfect, but these other places do offer alternatives.”
More than three quarters of the respondents represent multinationals with more than US$1 billion in global revenue – and 35 per cent, $10 billion or more. Forty-one per cent of the MNCs have headquarters in Europe, 35 per cent in North America, and most of the remaining 24 per cent are Asian companies, with a “smattering” coming from Australia and South America, says the report.
About the rising costs of living, soaring property prices and staff shortages in Singapore and Hong Kong, the report says:
“Will this cause companies to look at other places to put their regional management
hubs? In all likelihood not. It is still vitally important to have a critical mass of
management in places where travel is convenient and the financial system works well.
However, that doesn’t mean that firms are doing nothing. Anecdotally,some firms
are moving parts of their operations that don’t need to be in their regional hubs into
less expensive cities in other countries.”
The report can be downloaded from the Economist Corporate Network.