Singapore is losing its attractiveness to global multinational companies (MNCs) as a location from which to manage business in Asia, a new survey by The Economist Corporate Network (ECN) suggests.
Concerns about inflation, soaring property prices and staff shortages are taking some of the shine off Singapore's reputation as a regional headquarters hub, says the 2013 Asia Business Outlook Survey (ABOS).
Singapore has also lost some popularity as a priority market for investment growth, slipping from being the fifth most important Asian market in 2012 to seventh this year, behind China, the Indian sub-continent, Indonesia, Malaysia, Thailand and Vietnam - this, even though more than a third of the MNCs polled plan to raise their level of investment here.
"Singapore continues to be highly regarded as an investment destination, but its role as a regional management hub for global multinationals is coming under pressure," says Justin Wood, ECN director, Southeast Asia.
Responses from 207 senior executives surveyed across Asia mostly reflect the views of Western multinationals in Asia. More than three-quarters work for large companies headquartered in North America or Europe.
Of the 74 respondents whose regional HQ was in Singapore in Q3 last year, more than half saw rising costs as either a major constraint or a reason to relocate. Close to 40 per cent thought so of property prices, while about a third found the shortage of staff troubling.
Hong Kong faces problems that are just as acute. Property prices and inflation were major concerns for more than 40 per cent of the respondents based in Hong Kong.
But this is perhaps "mitigated by the fact that costs have long been so high there that firms have already recalibrated their expectations" while Singapore's spike in costs is "a more recent shock", the report notes.
While these challenges dim the allure of Singapore and Hong Kong, companies are not likely to start looking for an alternative regional management hub right away, the ECN thinks. "It is still vitally important to have a critical mass of management in places where travel is convenient and the financial system works well," it said.