Singapore has risen to second place on the PwC index,
overtaking New York and sitting just one place behind London as the world’s top
financial hub. It now appears to be next in line and the most dangerous competitor
to the British capital to take its crown as the world’s leading business hub.
For a country with a population of less than six million,
this could be seen as somewhat surprising to many. Given the financial might of
London, eclipsing it may also seem a long way away. However, there are a few
reasons why it could one day overtake London as the financial capital of the
world.
Brexit Effect
The UK’s decision to leave the EU in its historic referendum
at the end of June threw up a lot of uncertainty, for the financial markets,
trade and the future of Great Britain itself. Before the referendum there were
various threats made by big businesses to move away from London and relocate
elsewhere in Europe. If this were to happen then the city could struggle to remain
the world’s financial capital.
So far, the effect hasn’t been as bad as first feared, with
some companies going back on their initial claims. However a lot of uncertainty
remains until the UK has officially left the EU though, so things could change
in the future. If it were to have a negative impact on London’s standing as a
world leader in finance, then this could be good news for Singapore and help
the city surpass its rival.
Low Taxes
Along with Hong Kong and Dubai, Singapore offers some of the
lowest tax rates and highest efficiency levels for businesses. The corporate
tax rate is 17% in Singapore, making it highly appealing for entrepreneurs to
set up and base new businesses in the city. Compared to the USA where it is
35%, France 33.3% and 20% in the UK, from a business perspective, beginning in
Singapore can make more financial sense.
If it manages to maintain relatively low taxes, then it is
sure to attract more new businesses. However, these businesses will be those
looking to tap into the Asian market, so it is unlikely to take on any businesses
leaving London as a result of Brexit.
Legal Systems
Formerly a British colony, the legal systems in place in
Singapore are also highly familiar to many Western businesses looking to invest
in or expand into the country. This makes it easy to draw parallels between
London and Singapore, as the latter is clearly aiming to attract a similar mix
of businesses from all over the world to be part of its financial hub.
Singapore’s strict laws also ensure a fairly harmonious
socio-political landscape and maintain steady currency fluctuation in the
Forex markets, which is generally good for business. Additionally, its
corporate legislation is open and accessible. Having said that, the city-state has
recently been tightening rules for foreign workers, in a move that could dent
some of its plans to break the financial monopoly of the West.
Strong Social and Economic Health
Singapore provides incredibly fast and easy business
establishment procedures compared to other states due to a number of factors,
which has helped the country develop both socially and economically. Effective
government regulations and promotions have increased the ease of doing
business, along with the provision of quality infrastructure, transportation
and more.
This all explains why Singapore is consistently ranked in
the top five of World Bank’s ease of doing business rankings. Plus, with
English as its main language of business and Mandarin second, it makes trade
and working with many others people around the world a lot easier.
Singapore Financial Markets
The
SGX market is one of the strongest
in Asia, with over 700 listed companies on the Exchange. This has attracted
much investment from inside and outside of Singapore, helping it to grow. While
it is not at the same level as the FTSE or Dow Jones, it still signifies the
growing stature of the country’s financial prowess.
The Singapore dollar is a relatively minor currency compared
to other major currencies such as the Japanese Yen, US Dollar or Euro, but it
proves to be a popular choice on Forex trading platforms. It has also
strengthened as the country’s financial centre has grown and as it continues to
attract future investment then its currency will make gains with it.
