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Why Singapore Cannot Compete With Hong Kong In Wine

The highlight of the 29 October 2010 at the Mandarin Oriental Hong Kong were three bottles of Lafite 1869. Knocked down at HK1.8 million (US$230,000) each, all three bottles went to the same telephone bidder. The wine now becomes the most expensive bottles ever sold in history.

Story By Ch'ng Poh Tiong

Singapore and Hong Kong compete on a daily basis to be the best place in the world to do business. In the course of that, both cities go out of their way to attract outside investors.

These incentives include quick clearance through immigration at the airport; low corporate and personal income taxes; a safe, spacious living environment; and, if you have children, good local or international schools (and, if the latter, hopefully not too expensive).

In some areas where the two compete, Singapore excel over Hong Kong, and in others, the latter has an advantage. One glaring area where Singapore is far and ahead of Hong Kong is public conveniences. In Hong Kong, public toilets and rooms to change your baby's nappies are so scarce it would be easier to find coconut trees in the desert.

The flip side of the coin is food.

If you like Chinese food, overall, Singapore trails Hong Kong (except for Fujianese bak-kut-teh). Singapore hawkers and chefs don't seem able to cook unless they add garlic and, now, black pepper to everything, whether fish, scallops, pork, chicken or noodles. As for Singaporeans, we seem unable to put anything into our mouths unless we first drown it in chilli or other sauce (the amount of thick, sweet sauce spread over a plate of char-siew or Cantonese roast pork rice makes it, practically, a dessert) .

As a wine journalist, I am often asked – whether in Hong Kong, Bordeaux, London, Tokyo or Sydney – if Singapore will ever remove the tax on wine in order to compete with Hong Kong (in February 2008, the tax on wine was removed in Hong Kong).

As I am not in government I can't make an official reply. Instead, I give them a personal view based on observation.

Whereas Hong Kong identified wine as a commodity for exchange more than 10 years ago, Singapore did not. In fact, Singapore only saw it as a consumer product to be consumed by Singaporeans, residents, or visiting tourists. As such, the question was only whether to tax it. And by how much.

In Hong Kong's case, they identified wine not only as a consumer product but as something which could be traded between an overseas seller and a buyer, who may not necessarily be Hong Kong or if a Hong Konger, one who may be buying it in order to resell it somewhere else.

Hong Kong saw the opportunities wine presented beyond consumption and realized that wine exhibitions and wine logistics could be exploited. With these business activities came in-bound travelers who would be staying in hotels, eating in restaurants, placing overseas phone calls, traveling in taxis, making a few new suits or dresses at the tailor, and buying new computer games for their children.

Put in another way, while Hong Kong had a business strategy for wine, Singapore only had a tax policy towards it.

As early as the late 1990s, I saw delegations of Hong Kong business/government people visiting wine exhibitions in Bordeaux to learn how things were done and to lobby for Hong Kong as the venue to hold the first Vinexpo Asia which, indeed, was inaugurated in Hong Kong in 1998.

After that, Vinexpo Asia (the company that owns the exhibition is French) was moved to Tokyo in 2000 and 2002 because the Japanese felt slighted. Naturally, Hong Kong went into overdrive to get the exhibition back. But in 2004, there was no Vinexpo Asia because Vinexpo, the French-owned company, experimented with Vinexpo Americas in Chicago.

Hong Kong's persistent lobbying efforts were not in vain and paid off when Vinexpo Asia returned two years later (Vinexpo is held in Bordeaux in odd years and Asia in even years). Indeed, Vinexpo Asia has now become entrenched in Hong Kong since 2006, 2008 and 2010.

Today, the wine business in Hong Kong is no longer just about distribution and hosting international exhibitions. Since the removal of the tax in February 2008, auction houses (like record prices) have been falling over each other to sell wines in Hong Kong.

On the last Friday of October 2010, Chateau Lafite-Rothschild (the most sought-after wine in China) offered bottles directly from their cellar to buyers through Sotheby's the London auction house.

The highlight of the sale in Hong Kong was three bottles of Lafite 1869. Knocked down at HK1.8 million (US$230,000) each, all three bottles went to the same telephone bidder. The wine now becomes the most expensive bottles ever sold in history, beating Chateau Lafite-Rothschild 1787 (with the initials of Thomas Jefferson) sold to the late tycoon Malcolm FORBES at Christie's in London in 1985 for US$168,000.

Every one of the 284 lots in the 29 October 2010 auction at Mandarin Oriental Hong Kong was sold. In fact, Sotheby's collected HK$65.5 million (US$8.5 million), way over the pre sale high estimate of HK$19.5 million.

Wine's gravity-defying success in Hong Kong is due mainly to the big elephant or, should I say, giant panda, across the border. China is vacuuming up the majority of the most expensive wines in the world sold, either retail or by auction, in Hong Kong.

For that reason, Singapore will find it hard to compete – at least in wine – with Hong Kong. This will be the case even if it removes the tax on wine. The reason is because there will still be the 7% GST or Goods & Services Tax to pay on every bottle. For the three bottles of Chateau Lafite 1869, that would have meant another US$48,300.

All Rights Reserved · The Wine Review · 2013