SINGAPORE and Hong Kong continue to be the top locations for multinational corporations (MNCs) to set up their regional headquarters (RHQs) in the Asia Pacific, but competition is intensifying particularly from other Asean countries.
In a report, real estate services firm Cushman & Wakefield said Singapore and Hong Kong are still the most prominent locations for MNCs to locate their RHQs because of their strong legal and regulatory frameworks, tax incentives, high quality education and healthcare systems, and a high standard of living for expatriate workers.
“Currently, the strongest competition is coming from Shanghai, which can offer quality local talent, a diverse economy and abundant office space at a cheaper rate,” the report said.
Shanghai being a city gateway into China is also a factor attractive to MNCs.
Aside from Shanghai, Cushman & Wakefield noted that emerging markets in Asia are starting to become attractive to MNCs.
“Emerging markets will continue to grow in size, raise their regulatory, educational and infrastructure standards and subsequently become more attractive to MNCs,” the report noted.
It identified cities in Asean countries as examples of these emerging markets.
“In this way we expect cities in Asean countries to rise to prominence within South East Asia and for Tier II cities in China to become more attractive as companies spread beyond Hong Kong, Shanghai and Beijing,” the report said.
“It is noted that attempts to attract MNCs are already being made in some of these markets such as Malaysia’s ‘InvestKL’ initiative as part of its Economic Transformation Program [ETP],” the report said.
“We expect to see smaller RHQs set up and for there to be numerous divisional headquarters across the region taking advantage of each city’s strengths,” it said.
“Divisional headquarters are often divided along the lines of business units, which are then located in markets that are most suited to their needs,” the report said.
The rise of divisional headquarters will create more opportunities for Asean countries to offer services in the manufacturing sector, it noted.