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SINGAPORE BECOMING NEW CORPORATE MECCA HIGH COSTS PROMPT MOVES FROM HONG KONG

By Published on .

SINGAPORE-This is the new hot spot for international business.

Auto marketer General Motors, management consultant Ernst & Young, toiletries marketer Gillette Co., electronics leader Motorola Electronics, cosmetics giant Revlon and advertising agency Dentsu, Young & Rubicam Partnerships have all opted to make Singapore their Asian headquarters within the past few months.

For many people outside Singapore, the island republic wears a stern countenance due to its legal penalties for importing chewing gum, littering or failing to flush toilets. In addition, magazines from Playboy to Cosmopolitan have been banned here for 20 and 10 years respectively and government guidelines have no-go areas in respect to nudity and sexual explicitness as well as political comment. Still, the regulatory climate has not suppressed commercial activity. Marketers are increasingly turning to Singapore because they have grown weary of Tokyo's high prices and leery of Hong Kong's imminent return to China in 1997.

Even the headlines over last week's caning of U.S. teenager Michael Fay have turned out to be a tempest in a rice bowl to American executives here. Norman Roberts, group VP for Gillette Asia Pacific, said the Fay case was "absolutely, totally and completely irrelevant" to companies doing business here.

Singapore "works for me," said Gary Burandt, DY&R's President and ceo who moved to Singapore from New York in March. Mr. Burandt said that with Asia DY&R's main growth area, locating in Singapore made geographical sense. Not only does Singapore have a leading airport worldwide-named such by the Pacific Asia Travel Association Travel Association Travel Mart Awards last month-it also boasts a first-class airline, an efficient road system, excellent telecommunication facilities and is an English-speaking community.

"More and more of our business is centered out here," he said. DY&R handles Revlon, Andersen Consulting, Toyota, DBS Bank and Singapore Telecom accounts, among others, from Singapore. And Mr. Burandt said more DY&R clients had moved or were considering moving out of Hong Kong because of the high cost of staffing an office there. "Compared with Hong Kong, Singapore is half the cost."

The rising cost of living in Hong Kong, especially for companies with expatriate staff, was underlined by a recent survey by the colony's Hang Seng Bank. It found Hong Kong soon was likely to overtake Tokyo as the world's most expensive business center.

When Richard Blossom was recently named exec VP, Revlon International and president-Asia/Pacific, he made no apologies for the fact that he personally chose Singapore as his headquarters. The reason: He based the decision on his experience living here for the past seven years as president-Asia Pacific for PepsiCo Foods International and the same post for Pepsi Cola International.

"In Hong Kong, the other leading candidate for a regional headquarters, costs are substantially higher for offices, housing and local labor," he said, adding that Hong Kong's greater proximity to China isn't an overwhelming advantage.

Hong Kong may also lose its status as Leo Burnett Co.'s Asia Pacific headquarters. Jeff Fergus, regional managing director-Asia Pacific, said Burnett plans to assess over the next three years (before Hong Kong reverts to China in 1997) whether to move to Singapore, Taiwan or another site.

Last year, Gillette was granted Operational Headquarters status by Singapore's Economic Development Board after moving its Asia-Pacific regional headquarters from Sydney to Singapore. This means income earned here will be taxed at 10%, about one-third of the standard corporate rate for foreign companies in Singapore.

Mr. Roberts said the tax incentive is attractive but was only a contributing factor in the company's decision to move to Singapore.

Gillette's advertising is still developed in what Mr. Roberts calls "the mother countries"-the U.S. for Gillette brands, the U.K. for Parker Pens and France for Waterman pens. Adaptions done for local Asian markets are spearheaded by McCann Erickson, Singapore.

Although Motorola Electronics has been operating in Singapore for 25 years, it wasn't awarded Operational Headquarters status until last October. Now, it is using Singapore as a base from which to manage and support a network of 19 subsidiaries from China to Australia. Motorola manufactures a range of equipment from pagers to printed circuit boards and sells its services throughout the region with the aid of marketing developed in-house in Singapore.

But 1997 aside, executives stress Hong Kong will remain important on their agenda if for no other reason than being close to China. "Hong Kong is on the doorstep [to China]," said Gary Brown, regional media director, Leo Burnett, Hong Kong. "We are one of the largest agencies in the People's Republic of China and to remain that way we can't [do all our business] from Singapore."

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