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While Hong Kong is losing attractiveness under Chinese influence, Singapore is implementing incentives to attract new business.
In the course of our publications, we have emphasized how important it is to have a market study that considers political and economic aspects before expanding abroad.
In this post you will see how international policy has had an impact on Hong Kong, one of the most attractive countries for the internationalization of companies, while indirectly encouraging the attractiveness of other business hubs such as Singapore.
Hong Kong has been characterized by a professional and neutral common law system.
However, since 2019 China's political inference has advanced by giant strides within Hong Kong's politics to end its autonomy in what is known as the"one country, two systems" system. Legislation on the issue sparked countless protests that turned violent.
Currently, the Chinese Communist Party continues to exert its pressure on the island's politics to include in the legislative agenda a statute containing life sentences for crimes such as subversion of state power or coalition with foreign forces. The specific concern is that the vagueness of the statute may impact contract disputes with Chinese companies.
Prior to this situation, Hong Kong was one of the world's most important arbitration centers. In 2019, the city handled at least 308 disputes involving USD$4.8 million. Now, many of the companies choose other arbitration centers with neutral characteristics within which are London, Paris and Singapore.
¡Learn more about International Arbitration here!
¿What does this have to do with my startup?
Mainly, if you have a startup, you probably plan to go to the Initial Public Offer (IPO). After each round, your investors will become more international and stricter in terms of paperwork. Remember, you will no longer be giving accounting notes, in this league equity sales require contracts that stipulate the court with jurisdiction to resolve disputes.
This is where Singapore comes into play. Why? Apart from being a state with attractive tax policies for telecommunications, it is the country that has benefited the most from Hong Kong's status as an arbitration hub in resolving private international law disputes. And already? Additionally, Singapore is one of the pioneer countries in economic integration, which makes it easier for your company to start operating in its territory.
In Latin America, two countries already have mechanisms in place to enable their companies to expand into the Singapore market.
Access to this market for Mexico is found within the framework of the Trans-Pacific Partnership Progressive Integration Treaty (TIPAT - CPTPP). For Chile it is also through the CPTPP and additionally through the TPSEP, a treaty that provides for specific issues within digital trade.
Peru is in the process of ratifying the TPPP.
The tax regime in Singapore
A major attraction for companies expanding into Singapore is the tax regime. Within the traditional lines of business, there is a corporate tax rate of 17% on income.
In parallel, there exist tax reduction schemes in which new startups are exempted from paying taxes..
In the case of angel investors, they benefit from a 50% tax deduction at the end of a 2-year waiting period.
Singapore's vibrant startup ecosystem
- Government benefits and support.
- Mentoring and support from international incubators.
- Active venture funding landscape.
- Excellent starting point for expansion in Asia.
- Innovate in conjunction with local research and innovation centers.
- Innovative pilot solutions with leading global corporations and government agencies.
These approaches probably seem very far away for the stage your startup is in. However, at exoap we think that having an idea of the opportunities is of great help when making an approach for a future expansion.
Remember that the most important thing is to have strong foundations that allow your startup to expand!
Sources:
Bloomberg: Hong Kong Rule of Law Fears Drive Arbitration Cases to Singapore
Noordhoff Uitgevers: International Business Law
Singapore Economic Development Board
Photos:
Singapore Lights – Rafael Wagner
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