Pursuing investment strategies
Last month Malcolm J. Naudi visited Hong Kong, conducting over 20 interviews, briefings and meetings in four days. Here he looks at the Hong Kong government's efforts to attract investment, through a department called InvestHK.
Parallels abound between Hong Kong and Malta. Both of us are island peoples, with links to Britain through more than a century of colonialism. We have an island, trading mentality and a strong will to succeed.
We are both on the fringes of a greater economic reality. Malta is a full member of the European Union. Hong Kong, since it became a Special Autonomous Region of China ten years ago, is given full freedom to pursue its economic destiny. So both are keen to push their gateway roles - in the case of Malta to the EU and north Africa; with Hong Kong to mainland China and other neighbouring countries in Asia.
Various government spokesmen talked of efforts at greater integration with the mainland, yet statements from the highest levels of the Chinese leadership point to Hong Kong's economic independence and capitalist economic system being retained for at least another 40 years.
The five pillars of the Hong Kong economy are: financial services, including insurance and real estate; tourism; transport (sea and road) and logistics; air transport, including cargo; and business services, including trading and outsourcing.
InvestHK, the government department that seeks to attract inward investment to Hong Kong, actually focuses on nine priority sectors, which Charles Ng, associate director-general of Investment Promotion at InvestHK elaborated in great detail when I interviewed him last month.
While InvestHK has offices in 26 countries, employing 130 people, Mr Ng is responsible for operations in the UK, Germany, France, Italy, the Nordic countries, Belgium, Turkey, Korea, Australia and New Zealand.
He is also responsible for the department's corporate services and for attracting and retaining foreign direct investment in four priority sectors: business and professional services; financial services; transportation; and special projects.
The other key areas Hong Kong seeks to attract, for which it has sector specific experts prepared to provide their services free of charge, are: information technology; technology (especially electronics and biotechnology); telecommunications; media/multi-media; tourism and entertainment; and consumer, retail and sourcing.
Like all the sector heads, Mr Ng comes from the private sector, while his civil servant colleagues, working in the various teams, deal with government policymakers, the bureaucracy and facilitating liaison with the relevant parts of the civil service and commercial organisations.
One of my key questions to Mr Ng was to make a distinction between InvestHK and other Hong Kong government agencies that operate outside Hong Kong, including the Hong Kong Trade Development Council (HKTDC), whose office in Milan has often had links with Malta.
"The main aim of InvestHK is to bring in and retain strategic and foreign inward investment in Hong Kong. So, we would go out and help any company from overseas or mainland China that is interested in setting up or expanding in Hong Kong," he said.
"We would be the one-stop shop for them. We would provide them with comprehensive advice (and) information, (and) arrange some programmes for them to meet with people whom it is important to make contact.
"We would advise them on how best to open a company in the most cost-effective way. We provide assistance on things like immigration, licences, settling kids in international schools and such things to make it easy for them. This is provided free of charge and in full confidentiality."
The HKTDC, on the other hand, helps Hong Kong-based companies who want to trade and do business with the rest of the world. "You may be a Maltese company but once you set up in HK you become a HK-based company. So, if you want to expand and sell your products to Asia, China and also to the rest of the world - and anybody interested to come to import and export - the TDC takes care of that."
InvestHK works closely with the HKTDC making referrals to each other. Investment support services include supplying up-to-date information needed to make informed business decisions, including corporate environment reports, profiles on economic sectors, comparative analyses of the costs of setting up business in Hong Kong, vital government statistics and regulations, and key publications.
Once companies arrive in Hong Kong, InvestHK continues to support them with advice and assistance on matters like visas, trademark registrations, incorporation, and other administrative, legal and financial matters.
InvestHK's target customers in Malta and the EU would vary from country to country, Mr Ng said. "We try to target (individual countries) because some sectors are stronger in some countries than others - if it is transportation and shipping; financial services. We would look at it from a clustered (perspective) and we try to maximise results."
Turning to the challenges InvestHK faces in an ever globalised world Mr Ng said: "We are working in a very dynamic environment.
There is a lot of competition, so we cannot sleep on our laurels. We are working on a strategy to look at the next three years (and) on our business plan for next year.
"We take a very targeted approach. We work with colleagues in 26 locations throughout the world to identify companies and prospects that are not yet in HK whom we think would like to take advantage of the situation."
At the end of the day, Mr Ng pointed out, "we want people to be in a win-win situation; to be successful in China. We want companies to put the right part of their business here. We do not expect people to set up a labour intensive manufacturing plant here. That will work with our counterparts on the mainland.
"We do a lot of joint investment promotions with cities in China encouraging them to set up the factory on the mainland and their management and treasury centre here because they can enjoy all the advantages HK has to offer."
More information on investing in Hong Kong will be given during a seminar, organised by the Hong Kong Economic and Trade Office, and the HKTDC, on November 29 in the afternoon at the Malta Chamber of Commerce, Valletta.
20071025-business--hongkong2.jpgPriority areas
Financial services
Charles Ng said InvestHK works closely with the Hong Kong Monetary Authority and the various authorities that issue licences. "Hong Kong is known as a top centre for corporate governance. We have a large number of high net worth individuals here."
Like some other Asian countries, Mr Ng recalled that Hong Kong was affected by the 1997 Asian crisis, the 2001 dot com crash and the 2003 SARS, "but we have seen a major pick-up and the stock market is very robust. We are very excited about it because our economy is becoming more integrated with mainland China."
On the one hand there is a lot of overseas interest in using Hong Kong as a platform, since it has a good pool of professionals and qualified people who understand the east and the west well. On the other hand, Hong Kong is seeing a lot of mainland companies using it as a platform.
"The overseas companies want to use Hong Kong to tap into the China market or the greater China market: Taiwan, mainland China and Hong Kong; as well as the Asian market. We have seen a major increase in companies setting up their regional headquarters in Hong Kong in the past 10 years from 1,700 (in 1997) to 2,895.
"We are blessed with our location, as part of mainland China, and we enjoy the one country, two systems. People feel very comfortable putting their HQs or regional HQs here because of the rule of law, corporate governance, Anti-Corruption Commission and pool of talent."
In terms of mainland companies coming to Hong Kong, Mr Ng said over 3,000 such companies have come to Hong Kong; 365 last year alone listed on the HK Stock Exchange. "We believe there is scope for more. We believe a lot of them are future Fortune 500 companies. They use Hong Kong as their first stop to IPO, raise capital and to expand to the rest of the world."
Transportation and logistics
Trade is very important for Hong Kong, Mr Ng affirmed. "We have 105,000 trading companies in Hong Kong. A lot of them have regional HQs here, but they also have their buying offices or their supply chain management centre here.
"So, they are basically managing production in China. They either outsource it to a factory or work with a factor, or they work with factories in Vietnam, Thailand and even as far as India and Bangladesh. We have a Consumer Service Related Team.
"They buy their raw materials through here and manage their trade financing. Quality control is very important, (with) all the large testing organisations based in Hong Kong." This fits in with transportation and logistics, Mr Ng added, because supply chain management groups are buying raw materials through Hong Kong, using its robust infrastructure for maritime, airline and fleet management. "Hong Kong is a leader in maritime transportation. We had 23 million TEUs last year, number two after Singapore."
With some 80,000 factories owned and operated from Hong Kong, the transportation loop is important. "When China opened up in 1979, a lot of Hong Kong manufacturers moved their factories up north to Shenzhen, Dongguan and Guangzhou in the Pearl River Delta about an hour to two hours from here," Mr Ng said. "We see a lot of transport crossing the border to Shenzhen, which is the busiest border crossing in the world."
Hong Kong has the only deep sea port in the region - proper infrastructure, as well as an international airport - freight forwarding, as well as maritime. "We have a very good infrastructure. It is a bit more expensive than the mainland but people use it because it is more reliable and transparent."
Consumer service
Retail is a very important element in Hong Kong. "There are very few places where you will find ten Gucci and Louis Vuitton stores, some within five or ten minutes of each other," Mr Ng said. "These places are not cheap. One of the challenges for us, in a way, is to find the right spots because everyone want to be in the same spot because of the traffic."
Hong Kong is blessed with two distinct seasons, even though it is not very cold. "There is a very big demand here. People are very trendy, especially because of the high net worth individuals. These people can afford to buy luxury items and new products.
"We are very spoilt in Hong Kong: 70% of the products are bought by local people. Apart from the high net worth individuals you have the ex pats - CEOs and their families - and the mainland Chinese.
There is no VAT and no import duty in Hong Kong. Products are 17-30% cheaper. "You have a very big merchandise mix here. Last year we had 25.3 million visitors, of which about 12 million were from mainland China."
Business professional services
Ninety-five per cent of Hong Kong's GDP comes from services. As the China economy becomes more integrated, there is a lot of money being invested by Hong Kong-based companies in the mainland.
Apart from many professional firms, there are top class business schools, medical facilities and consultants in all fields. "Hong Kong is a hub for design. Hong Kong has strong intellectual property rights legislation that protects them. They do the design here, they trade mark it and patent it here."
IT and technology
A science park promotes the formation of new companies in an incubated environment. "We see the science park as a key focus, working with universities, (and) research and development centres. A lot of the small companies are very niche, but they have cutting-edge technology."
Telecommunications and media
Hong Kong is very open. People from all countries can express themselves. "A lot of media organisations, like CNN, are here because of the regime. It is easy for them to work," Mr Ng said.
"There are a lot of interesting things going on in China. Everybody has one to two mobile phones; people in Hong Kong are at the forefront in terms of innovation, wanting to add features. Niche companies can always find opportunities to tap into this market."
Tourism and entertainment
This makes up 5 per cent of Hong Kong's GDP. There are two groups of companies: the tour operators and travel companies; and the MICE (meetings, incentives, conventions and events). In terms of incoming leisure travel, Hong Kong has a Disneyworld, Ocean Park and Macao.
"When Macao gets its Las Vegas strip, we will be unique in the world in having Disneyworld and a Las Vegas strip within half an hour when we build the 35 km bridge linking it with Hong Kong."
Tourists do not just experience the east and the west, but shopping and food, with about 10,000 restaurants.
On the MICE front, Hong Kong has the large number of shows and exhibitions. "We added the Asia World Expo a couple of years ago and we just had the Asian Outer Space Show. Hong Kong offers these very strong consumer goods shows."
Among the new projects are the West Kowloon Cultural Centre, which will bring a lot of theatre, shows and companies, and the cruise terminal at the old Kai Tak airport will be ready by 2012.
"We have a special project team that is looking at industrial products, food processing and furniture and fixtures - B to B type of companies."
We are both on the fringes of a greater economic reality. Malta is a full member of the European Union. Hong Kong, since it became a Special Autonomous Region of China ten years ago, is given full freedom to pursue its economic destiny. So both are keen to push their gateway roles - in the case of Malta to the EU and north Africa; with Hong Kong to mainland China and other neighbouring countries in Asia.
Various government spokesmen talked of efforts at greater integration with the mainland, yet statements from the highest levels of the Chinese leadership point to Hong Kong's economic independence and capitalist economic system being retained for at least another 40 years.
The five pillars of the Hong Kong economy are: financial services, including insurance and real estate; tourism; transport (sea and road) and logistics; air transport, including cargo; and business services, including trading and outsourcing.
InvestHK, the government department that seeks to attract inward investment to Hong Kong, actually focuses on nine priority sectors, which Charles Ng, associate director-general of Investment Promotion at InvestHK elaborated in great detail when I interviewed him last month.
While InvestHK has offices in 26 countries, employing 130 people, Mr Ng is responsible for operations in the UK, Germany, France, Italy, the Nordic countries, Belgium, Turkey, Korea, Australia and New Zealand.
He is also responsible for the department's corporate services and for attracting and retaining foreign direct investment in four priority sectors: business and professional services; financial services; transportation; and special projects.
The other key areas Hong Kong seeks to attract, for which it has sector specific experts prepared to provide their services free of charge, are: information technology; technology (especially electronics and biotechnology); telecommunications; media/multi-media; tourism and entertainment; and consumer, retail and sourcing.
Like all the sector heads, Mr Ng comes from the private sector, while his civil servant colleagues, working in the various teams, deal with government policymakers, the bureaucracy and facilitating liaison with the relevant parts of the civil service and commercial organisations.
One of my key questions to Mr Ng was to make a distinction between InvestHK and other Hong Kong government agencies that operate outside Hong Kong, including the Hong Kong Trade Development Council (HKTDC), whose office in Milan has often had links with Malta.
"The main aim of InvestHK is to bring in and retain strategic and foreign inward investment in Hong Kong. So, we would go out and help any company from overseas or mainland China that is interested in setting up or expanding in Hong Kong," he said.
"We would be the one-stop shop for them. We would provide them with comprehensive advice (and) information, (and) arrange some programmes for them to meet with people whom it is important to make contact.
"We would advise them on how best to open a company in the most cost-effective way. We provide assistance on things like immigration, licences, settling kids in international schools and such things to make it easy for them. This is provided free of charge and in full confidentiality."
The HKTDC, on the other hand, helps Hong Kong-based companies who want to trade and do business with the rest of the world. "You may be a Maltese company but once you set up in HK you become a HK-based company. So, if you want to expand and sell your products to Asia, China and also to the rest of the world - and anybody interested to come to import and export - the TDC takes care of that."
InvestHK works closely with the HKTDC making referrals to each other. Investment support services include supplying up-to-date information needed to make informed business decisions, including corporate environment reports, profiles on economic sectors, comparative analyses of the costs of setting up business in Hong Kong, vital government statistics and regulations, and key publications.
Once companies arrive in Hong Kong, InvestHK continues to support them with advice and assistance on matters like visas, trademark registrations, incorporation, and other administrative, legal and financial matters.
InvestHK's target customers in Malta and the EU would vary from country to country, Mr Ng said. "We try to target (individual countries) because some sectors are stronger in some countries than others - if it is transportation and shipping; financial services. We would look at it from a clustered (perspective) and we try to maximise results."
Turning to the challenges InvestHK faces in an ever globalised world Mr Ng said: "We are working in a very dynamic environment.
There is a lot of competition, so we cannot sleep on our laurels. We are working on a strategy to look at the next three years (and) on our business plan for next year.
"We take a very targeted approach. We work with colleagues in 26 locations throughout the world to identify companies and prospects that are not yet in HK whom we think would like to take advantage of the situation."
At the end of the day, Mr Ng pointed out, "we want people to be in a win-win situation; to be successful in China. We want companies to put the right part of their business here. We do not expect people to set up a labour intensive manufacturing plant here. That will work with our counterparts on the mainland.
"We do a lot of joint investment promotions with cities in China encouraging them to set up the factory on the mainland and their management and treasury centre here because they can enjoy all the advantages HK has to offer."
More information on investing in Hong Kong will be given during a seminar, organised by the Hong Kong Economic and Trade Office, and the HKTDC, on November 29 in the afternoon at the Malta Chamber of Commerce, Valletta.
20071025-business--hongkong2.jpgPriority areas
Financial services
Charles Ng said InvestHK works closely with the Hong Kong Monetary Authority and the various authorities that issue licences. "Hong Kong is known as a top centre for corporate governance. We have a large number of high net worth individuals here."
Like some other Asian countries, Mr Ng recalled that Hong Kong was affected by the 1997 Asian crisis, the 2001 dot com crash and the 2003 SARS, "but we have seen a major pick-up and the stock market is very robust. We are very excited about it because our economy is becoming more integrated with mainland China."
On the one hand there is a lot of overseas interest in using Hong Kong as a platform, since it has a good pool of professionals and qualified people who understand the east and the west well. On the other hand, Hong Kong is seeing a lot of mainland companies using it as a platform.
"The overseas companies want to use Hong Kong to tap into the China market or the greater China market: Taiwan, mainland China and Hong Kong; as well as the Asian market. We have seen a major increase in companies setting up their regional headquarters in Hong Kong in the past 10 years from 1,700 (in 1997) to 2,895.
"We are blessed with our location, as part of mainland China, and we enjoy the one country, two systems. People feel very comfortable putting their HQs or regional HQs here because of the rule of law, corporate governance, Anti-Corruption Commission and pool of talent."
In terms of mainland companies coming to Hong Kong, Mr Ng said over 3,000 such companies have come to Hong Kong; 365 last year alone listed on the HK Stock Exchange. "We believe there is scope for more. We believe a lot of them are future Fortune 500 companies. They use Hong Kong as their first stop to IPO, raise capital and to expand to the rest of the world."
Transportation and logistics
Trade is very important for Hong Kong, Mr Ng affirmed. "We have 105,000 trading companies in Hong Kong. A lot of them have regional HQs here, but they also have their buying offices or their supply chain management centre here.
"So, they are basically managing production in China. They either outsource it to a factory or work with a factor, or they work with factories in Vietnam, Thailand and even as far as India and Bangladesh. We have a Consumer Service Related Team.
"They buy their raw materials through here and manage their trade financing. Quality control is very important, (with) all the large testing organisations based in Hong Kong." This fits in with transportation and logistics, Mr Ng added, because supply chain management groups are buying raw materials through Hong Kong, using its robust infrastructure for maritime, airline and fleet management. "Hong Kong is a leader in maritime transportation. We had 23 million TEUs last year, number two after Singapore."
With some 80,000 factories owned and operated from Hong Kong, the transportation loop is important. "When China opened up in 1979, a lot of Hong Kong manufacturers moved their factories up north to Shenzhen, Dongguan and Guangzhou in the Pearl River Delta about an hour to two hours from here," Mr Ng said. "We see a lot of transport crossing the border to Shenzhen, which is the busiest border crossing in the world."
Hong Kong has the only deep sea port in the region - proper infrastructure, as well as an international airport - freight forwarding, as well as maritime. "We have a very good infrastructure. It is a bit more expensive than the mainland but people use it because it is more reliable and transparent."
Consumer service
Retail is a very important element in Hong Kong. "There are very few places where you will find ten Gucci and Louis Vuitton stores, some within five or ten minutes of each other," Mr Ng said. "These places are not cheap. One of the challenges for us, in a way, is to find the right spots because everyone want to be in the same spot because of the traffic."
Hong Kong is blessed with two distinct seasons, even though it is not very cold. "There is a very big demand here. People are very trendy, especially because of the high net worth individuals. These people can afford to buy luxury items and new products.
"We are very spoilt in Hong Kong: 70% of the products are bought by local people. Apart from the high net worth individuals you have the ex pats - CEOs and their families - and the mainland Chinese.
There is no VAT and no import duty in Hong Kong. Products are 17-30% cheaper. "You have a very big merchandise mix here. Last year we had 25.3 million visitors, of which about 12 million were from mainland China."
Business professional services
Ninety-five per cent of Hong Kong's GDP comes from services. As the China economy becomes more integrated, there is a lot of money being invested by Hong Kong-based companies in the mainland.
Apart from many professional firms, there are top class business schools, medical facilities and consultants in all fields. "Hong Kong is a hub for design. Hong Kong has strong intellectual property rights legislation that protects them. They do the design here, they trade mark it and patent it here."
IT and technology
A science park promotes the formation of new companies in an incubated environment. "We see the science park as a key focus, working with universities, (and) research and development centres. A lot of the small companies are very niche, but they have cutting-edge technology."
Telecommunications and media
Hong Kong is very open. People from all countries can express themselves. "A lot of media organisations, like CNN, are here because of the regime. It is easy for them to work," Mr Ng said.
"There are a lot of interesting things going on in China. Everybody has one to two mobile phones; people in Hong Kong are at the forefront in terms of innovation, wanting to add features. Niche companies can always find opportunities to tap into this market."
Tourism and entertainment
This makes up 5 per cent of Hong Kong's GDP. There are two groups of companies: the tour operators and travel companies; and the MICE (meetings, incentives, conventions and events). In terms of incoming leisure travel, Hong Kong has a Disneyworld, Ocean Park and Macao.
"When Macao gets its Las Vegas strip, we will be unique in the world in having Disneyworld and a Las Vegas strip within half an hour when we build the 35 km bridge linking it with Hong Kong."
Tourists do not just experience the east and the west, but shopping and food, with about 10,000 restaurants.
On the MICE front, Hong Kong has the large number of shows and exhibitions. "We added the Asia World Expo a couple of years ago and we just had the Asian Outer Space Show. Hong Kong offers these very strong consumer goods shows."
Among the new projects are the West Kowloon Cultural Centre, which will bring a lot of theatre, shows and companies, and the cruise terminal at the old Kai Tak airport will be ready by 2012.
"We have a special project team that is looking at industrial products, food processing and furniture and fixtures - B to B type of companies."