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Singapore outranks China, HK

Despite its size, Singapore is an attractive business destination for foreign technology companies looking to expand in Asia.

By Long Li Yann, ZDNet Asia

Singapore has emerged the top location for tech companies when choosing to establish operations in Asia, according to results from ZDNet Asia's inaugural Top Tech Index.

All but one of the Top Tech 50 companies have direct presence in the island-state. Following closely behind are China and Hong Kong in which 47 companies have offices. The list of countries excludes Japan and Korea.

Analysts whom ZDNet Asia spoke to were not surprised that most tech companies have chosen to invest in Singapore, citing the country's stability, geographical location and infrastructure as some of the key factors that matter to companies seeking to expand their presence in the region.

Said Gary Koch, IDC Asia-Pacific's associate vice-president for IT spending research: "Singapore has several factors going for it.

"Singapore has several factors going for it...such as shipping and air transport, living conditions, skilled and educated labor force, reasonable tax rates, low level of corruption, and a tradition within government policy to support and foster economic growth."
-- Gary Koch
IDC Asia-Pacific's associate vice-president for IT spending research

"Stability, safety, language, technology infrastructure, transportation center such as shipping and air transport, living conditions, skilled and educated labor force, reasonable tax rates, low level of corruption, and a tradition within government policy to support and foster economic growth," he added.

Graeme Philipson, an independent analyst and writer, agreed that the government's active involvement in pushing for the island state to be an "attractive business destination" has helped to win over global companies that want to set up operations in Asia.

Said Philipson: "Over the last 40 years, the government has consciously worked to make Singapore an attractive business destination, with high economic growth, low corporate taxes, and ease of setting up and operating a business."

While other metropolitan states, such as Hong Kong, have similar political and economical stability and climate as the island-state, Singapore's ability to produce innovative brand names has an edge over its rivals, according to one industry observer.

Rolf Jester, a vice president at Gartner, explained: "Singapore has a history of creating national champion firms that have gained regional and, even in some cases, global branding and competencies. Hong Kong has had more of a colonial past, somewhat limiting the local firms' impact."

Altiris, one of the fastest-growing companies in the Top Tech Index, currently has operations in India and Singapore only. Geoff Masters, Altiris' managing director who has responsibilities for Asia-Pacific and Japan, said the company will be looking to invest more in Singapore. The island-state acts as a direct central hub for Altiris to service its distribution partners located throughout the region.

"In the last year, we grew our Singapore operations by 300 percent, and we intend to keep investing further with more resources," he said. However, Masters does not rule out the probability of setting up shop in Hong Kong and China in 2006.

And indeed, the other Asian countries, which boast larger domestic markets for IT products and services compared to Singapore, will be looking to boost their attractiveness as locations to foreign tech companies.

Koch believes that tech vendors will have their eyes firmly fixed upon China, given that the "potential to address the burgeoning IT demand in China is best done in China".

Baidu, one of the fastest-growing companies in the Top Tech Index, has greater designs on China. "As [a] Chinese language search provider, Baidu is focused on Chinese language search technology and serving the Chinese speaking community. The search market in China is still in early development stage, and we will focus on this market," said Cynthia He, Baidu's manager for investor relations.

As for India, Gartner's Jester pointed out that the country's ability to cultivate IT companies that have gone global will score highly in the books of international vendors that are on the lookout for attractive locations to establish their Asian presence.

"India stands out as it is able to create tech firms with global brands. Think TCS (Tata Consultancy Services), Infosys, Wipro, HCLTech, Satyam, for instance," noted Jester.

Computer giant NEC intends to tap into India's burgeoning potential, according to a company spokesperson. The company, which has yet to have an office in India, recently announced plans to set up a subsidiary there. The subsidiary company, a proposed solution center, would initially have 50 people and provide functions such as consulting, customization, research and development, and sales.

Emerging locations
Although only 21 of the Top Tech 50 companies have offices in Vietnam today, analysts are optimistic about its potential as an IT hub for businesses. Jester believes that Vietnam will eventually overtake its neighbors--Indonesia and Philippines. The latter two countries still face "serious political and economic problems" to be a leading choice of location in the near future, Jester noted.

"Vietnam is a longer-term bright prospect--registering extremely rapid growth in recent years and has a fast-growing IT sector," Jester added.

Philipson agreed: "Vietnam has a large population, but its economic growth has been inhibited by its long recovery from a 20-year war and its communist philosophy. But it is now much more prosperous, and its government is learning from China that communism and economic growth can coexist. It is definitely an important emerging market."

In addition, much of Vietnam's appeal lies in its lower labor costs, as compared to matured markets such as Singapore and Hong Kong.

But a company's decision to invest in a particular country may not be based soley on geographical factors. More importantly, the decision is dependent on the technological expertise of a location's workforce, said IDC's Koch.

Explained Koch: "The world is becoming a much smaller and transparent place, where skills and collaborative creativity can occur anywhere. So the question may not be so much about geography but rather the technology arena."