Last year, ECA International’s cost of living survey placed Hong Kong as the 33rd most expensive place in the world in terms of day-to-day living expenses for expatriates. The cost of living in Singapore was far cheaper – it was ranked way down at No. 68.
No longer. Last week, ECA ranked Hong Kong at No. 45 – and Singapore at No. 36. “Inflation in Hong is about 5.5% in the last 12 months, whereas Singapore’s is just under 4%,” explains Lee Quane, Regional Director, Asia, at ECA. “But the Singapore dollar has appreciated against the Hong Kong dollar by 10% in the last 12 months alone. So you take that 4% increase in prices, you factor in the 10% increase in currency, then obviously that puts Singapore above Hong Kong in terms of cost of living.”
Quane spoke to CFO Innovation’s Cesar Bacani about the latest survey, other ECA studies on accommodation and international assignee destinations, as well as how companies can deal with the rising cost of sending expatriates to other markets. Excerpts:
So it seems like it’s actually cheaper now to assign expatriate staff to Hong Kong rather than Singapore.
The total package in Hong Kong is still slightly higher than it is in Singapore, but the Hong Kong premium that companies used to pay to employ expatriates in Hong Kong rather than Singapore is much lower now than it was five years ago. The one thing that goes against Hong Kong is the higher cost of accommodation. While housing is increasing in Singapore a lot, it hasn’t gone up to the same sort of levels as in Hong Kong.
But Singapore has now overtaken Hong Kong in terms of cost of living – it’s now ranked higher. This means the relative cost of living has jumped much more in Singapore over the course of the last 12 months than it has done in Hong Kong.
Because of inflation?
And currency. Obviously in Hong Kong, everything is denominated in Hong Kong dollars, which is a relatively weak currency. So while you’ve got high price inflation, that’s being offset or counterbalanced by the weak currency.
Inflation in Hong is about 5.5% in the last 12 months, whereas Singapore’s is just under 4%, so prices have not gone up in Singapore dollar terms by anywhere near as much as in Hong Kong dollar terms. But the Singapore dollar has appreciated against the Hong Kong dollar by 10% in the last 12 months alone. So you take that 4% increase in prices, you factor in the 10% increase in currency, then obviously that puts Singapore above Hong Kong in terms of cost of living.
Does this mean that more companies will be choosing Hong Kong as regional base rather than Singapore?
Not necessarily. If you’re looking at total cost, the cheapest place is Karachi. It’s got the cheapest accommodation, it’s got the lowest cost of living, it is pretty much the cheapest place in Asia to move an international workforce.
However, no one will really move there because you don’t really have the market. One of the reasons why companies are in China is to produce for the world and for 1.3 billion people in China. You don’t have that in Pakistan. Likewise you don’t really have logistics to elsewhere in the world. You’ve also got the security issues, the corruption issues and so on and so forth.
At the end of the day, the company’s decision is [influenced by] cost but it’s also about market. One of the other surveys we also do is where companies send the most international assignees to. The results: the USA is No. 1, UK is No. 2, China is No. 3.