GuideMe Hong Kong

According to Cato International’s Economic Freedom of the World (EFW) 2011 Annual Report, Hong Kong is the world’s freest economy and for the 15th year running. Cato’s EFW report rates the economic freedom of 141 countries in five areas i.e. size of government, legal structure and security of property rights, international trade and regulation of credit, labor and business and access to sound money. Hong Kong scored  9.01 out of 10. Singapore came in at a close second (8.7) followed by New Zealand (8.2), Switzerland (8.0) and Australia (8.0).

The Heritage Foundation has also ranked Hong Kong as the world’s freest economy for 17 years running. Its Index of Economic Freedom, which rates 183 countries covers across ten
freedoms ranging from property rights to entrepreneurship. Hong Kong scored the highest in business, trade, fiscal, investment and financial freedom as well as property rights.

Analysis from GuideMeHongKong.com shows that Hong Kong has managed to secure top ranking in both economic freedom surveys because it has consistently encouraged an open economy through low taxes, an effective regulatory environment, low barriers to trade and a level playing field for business.

First of all, Hong Kong tax rates are one of the lowest in the world. Hong Kong has a progressive income tax system which starts at 2% and is capped at 17%. Businesses on the other hand are taxed 16.5%. Hong Kong does not impose capital gains or dividends tax. Hence, its tax system is very similar to the Singapore tax system, which is known to be very competitive as well. Additionally, doing business in Hong Kong is easy because Hong Kong employment visa schemes permit qualified entrepreneurs, professionals and investors to work and live in Hong Kong.

Hong Kong also implements regulatory and legal policies that have helped the city tide the effects of the the 2008 global financial crisis without closing itself off. As discussed in our blog on Hong Kong investment, Hong Kong’s low tolerance policy on corruption and high-risk banking has continually drawn investors and high net worth individuals. Its treatment of foreign banks as domestic entities have also strengthened its standing as an international financial hub. Incidentally, there has been speculation that HSBC may shift its headquarters to Hong Kong in a bid to sidestep recently-announced UK banking reforms. If HSBC were to relocate its headquarters to Hong Kong (a move welcomed by Chief Executive Donald Tsang), it could potentially save $600 million per annum in banking levies. The bank however commented that it has a consistent history of reviewing its domicile tri-annually since 1992.

In a recent “Think Asia, Think Hong Kong” symposium organized by HKTDC (Hong Kong’s Trade Development Council), Lord Green, British Minister of State for Trade and Investment and former Chairman of HSBC said, “There used to be the saying, ‘Go West, young man.’ Now it is ‘Go East, young person.’” He also urged British companies to look at opportunities abroad, as well as recognize the opportunities abound in Hong Kong.

Further analysis by GuideMeHongKong.com shows that as Asian economies remain strong in a period of global uncertainty, Asia, by way of Hong Kong presents entrepreneurs the hope of prosperity and tangible access to a vast and growing market. Many Hong Kong incorporated companies are aware of this as well. At the event, Douglas Flint, Group Chairman of HSBC Holdings said that Hong Kong is vital to HSBC’s future growth. According to a report by the Guardian, HSBC earns more than half of its earnings in Asia. Additionally, more than 60 business leaders at the event highlighted Hong Kong’s role as Asia’s services center in the consulting, financing, logistics, technology, accountancy, design, legal and infrastructure development sectors.

The resounding support from Hong Kong’s business community as well as its long-standing reputation as the most free economy indicates that more entrepreneurs, professionals and investors will consider Hong Kong as a place to do business.