Hong Kong organizes largest ever promotion in Jakarta

The Jakarta Post, Hong Kong | Business | Fri, August 14 2015, 3:28 PM
Hong Kong will come to Jakarta in a big way in the middle of September. The city, located just off mainland China, will host a week-long promotion of its fashion, jewellery and electronic products and services and try reaffirm to Indonesians its role as the best gateway into mainland China, the world’s second largest economy.

Labeled ‘In Style Hong Kong’, the large-scale promotion will bring to the Jakarta Convention Center and the Grand Indonesia shopping mall more than 100 Hong Kong lifestyle brands. Some of these include fashion retailers such as G2000, Giordano, Bossini, Chow Tai Fook jewelleries, watchmakers such as Edwin Cosi Moda, Memorigin and Charles Hubert and electronics companies such as Goodway and Gold Peak.

This will be the largest economic promotion campaign Hong Kong has ever undertaken in Southeast Asia, propelled by the rationale that Indonesia is the largest economy in the ASEAN region, and the country is therefore an attractive market for Hong Kong businesses. This is the rationale that Raymond Yip, Deputy Director General of the Hong Kong Trade Development Council (HKTDC) detailed to a group of Indonesian journalists last week.

“We expect some 10,000 trade buyers, importers, distributors, retailers, brand agents, franchisees and specialists to visit the exhibition, the largest ever promotion we will make in Southeast Asia,” added Yip.

HKTDC is organizing the whole promotional program, which will also be attended by Hong Kong Chief Executive CY Leung.

Yip said that the Hong Kong Design Award Display, entitled ‘Fame In Style’ and located at Grand Indonesia from September 14-20, would showcase a range of award-winning products in addition to ‘Batik crossover’ collections by six designers, namely Lulu Cheung, Walter Kong and Jessica Lau, Walter Ma, Aries Sin, Harrison Wong and Cecilia Yau. The purpose of ‘Fame In Style’ is to highlight Hong Kong’s creative and design power.

Yip said that as part of the promotion, HKTDC senior officials and business leaders would also hold a full-day symposium and services consultation and business-matching event at the main lobby of the Jakarta Convention Center on September 17.

According to HKTDC, Indonesia-Hong Kong trade ties amounted to US$5.1 billion in 2014 and Hong Kong was the 9th largest foreign investor in Indonesia, with $657 million of investment in 2014.

The symposium will brief Indonesian businesspeople on why and how Hong Kong, with a per capita income of over $42,000, has become the second largest private equity center in Asia, Asia’s second largest stock market, its third larget foreign exchange market and the third largest source of foreign direct investment in Asia, all in addition to being the most important entrance port to mainland China.

Business visitors also will receive comprehensive briefings on how they could benefit from using Hong Kong as a platform to make investments or enter the market in mainland China, particularly as the city is a new and emerging center of fashion design and creative enterprise. (vin)

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HK emphasizes role as platform for global supply-chain

The Jakarta Post | Business | Fri, August 14 2015, 3:43 PM

The Hong Kong government invited a group of Indonesian journalists, including Vincent Lingga of The Jakarta Post, for  a visit to Hong Kong last week in light of the In-Style Hong Kong in  Jakarta in September, dubbed as the largest ever economic and trade  promotion campaign Hong Kong will ever make in the ASEAN region.

Below is his report based on a series of interviews and discussions with Hong Kong officials and business executives:
Its  strategic role as the gateway to the world’s second largest economy,  mainland China, being an efficient regional logistics hub and the  world’s third-largest financial center are several of the strongest  advantages Hong Kong will offer to the Indonesian business community and  consumers during a big bang, week-long economic promotion in Jakarta  next month.

But the fundamentals that will continue to  strengthen Hong Kong’s role as the leading trading and financial center  in Asia are what Hong Kong Trade Development Council (HKTDC) deputy  executive director Raymond Yip calls the Hong Kong brand.

“The  Hong Kong brand embodies a strong rule of law, good governance, first  class infrastructure and a credible regulatory system in the financial  service industry,” Yip noted at a briefing.

All these advantages  have made Hong Kong the most efficient platform to access the Chinese  economy, concurred Indonesian Consul General Chalief Akbar in Hong Kong. 

“Indonesian companies intending to enter the market in mainland  China should take advantage of the complete pool of financial, legal  and knowledge resources available in Hong Kong,” Chalief added.

Jimmy  Chiang, the associate director general of Invest, the department of the  Hong Kong administration in charge of foreign direct investment (FDI),  cited another important role of Hong Kong as what he called the  ‘superconnector’ of investments between mainland China and the rest of  the world.

“About 60 percent of China’s investment overseas was made through Hong Kong,” Chiang said.

He  cited the 2015 World Investment Report of the Geneva-based United  Nations Conference on Trade and Development that named Hong Kong as the  world’s second largest FDI destination, receiving a total of US$103  billion last year, behind mainland China which got $129 billion.

The  report showed Hong Kong’s ranking surpassed the US, which attracted $92  billion, the United Kingdom ($72 billion) and Singapore ($68 billion).

Hong Kong also ranks second in FDI outflows with $143 billion in 2014.

“These  numbers underscored Hong Kong’s role as a super-connector, in which  foreign companies use Hong Kong as a base to invest in mainland China,  and mainland Chinese companies increasingly use Hong Kong as a platform  to make global investments and acquisitions and to raise funds,” Chiang  said.

Hong Kong is also the second largest stock exchange in Asia  after Tokyo, and is the sixth largest hub for foreign exchange trading.  According to the latest data at HKTDC, as of the end of May, there were  more than 1,780 companies listed on the HKE with a total market  capitalization of $3.2 trillion. About 50 percent of the listed  companies are mainland Chinese corporations.

But the relationship  between Hong Kong and mainland China seems complex. Beijing for the  most part has kept its promise to uphold the ‘one country, two systems’  mandate.

Officially, Hong Kong is considered a ‘Special  Administrative Region’ (SAR), which means that it is treated as a  separate country from an immigration standpoint and continues to  circulate its own currency, the Hong Kong dollar. Hong Kong also retains  an independent legal and judicial system inherited from the previous  British rulers.

The message HKTDC wants to convey to Indonesia  next month is that “If you want a piece of mainland China’s rising  economic power, it’s best to find a proven and safe entry point. Its  name is Hong Kong.”

Kenneth Choy, a senior executive of the Law  Society of Hong Kong, cited the experiences and expertise of the almost  1,000 local and 80 international legal firms in Hong Kong that are  important for firms intending to do business in mainland China.

“We  have deeper understanding of the laws, culture and business practices  in China, which is key to minimizing the risk of commercial disputes.  Yet more importantly, the international arbitration center here is  independent, credible and very reliable,” said Choy.

The basics  that make Hong Kong a model for free-market enthusiasts is the city’s  low taxes, unfettered capital flows and rule of law routinely earn  recognition as the world’s freest economy, Chiang noted.

Hong  Kong therefore has and will continue to play a pivotal role in the  modernization of the Chinese economy, providing capital, logistical  support, access to world markets, management know-how, technology,  equipment, design and research, marketing skills, procurement services  and quality assurance.

According to Chiang, the services sector  (financial, trading, tourism and real estate) accounted for almost 93  percent of Hong Kong’s $291 billion gross domestic product last year.

Even  though today most manufacturing companies have relocated out of Hong  Kong in search of lower-cost land and labor, notably in the Pearl River  Delta region (southern area of mainland China), industrialists remain  active in Hong Kong, operating their local offices as trading companies  and business headquarters that support offshore production.

They  mastermind and control the entire production process from their  headquarters in Hong Kong. Such an arrangement allows Hong Kong  companies to make the most of location advantages and division of labor.

 Today,  many Hong Kong traders still possess this dual operational status. They  perform non-manufacturing activities in Hong Kong, providing support  services such as marketing, order processing, materials sourcing,  product design and development, quality control, and logistics support  to their affiliated factories offshore, particularly in mainland China.

Its  long international business experience and knowledge about China make  Hong Kong the best partner for foreign companies to do business with or  in China, and for mainland Chinese companies to do business around the  world, noted Raymond Wong, the business development director of the  Geneva-based SGS, the world’s largest inspection, verification, testing  and certification company.

But advanced technology, research and  development activities have now become the new focus of the economy to  make Hong Kong another technology center in Asia, Wong added.

Hong  Kong’s extensive financial and business service cluster is unique in  Asia for its breadth, depth, sophistication and mix of international and  local firms. This cluster includes private banking, fund management,  corporate finance, currency trading, insurance, venture capital finance,  direct corporate investment, stock broking as well as support services  as laws, accounting, management consulting, executive search, public  relations, advertising, communications and information technology  support.

Hong Kong export trading firms have increasingly played  the role of packagers and integrators, matching demand from North  America or Europe with sources of supply throughout Asia and beyond.

Hong  Kong is able to play this role because it is the home to a number of  dynamic clusters of industries that are related to each other, that draw  upon common skill bases or inputs and that can reinforce each other’s  competitive position through dynamic interaction. They are capable of  bundling, integrating or packaging different aspects to create unique  combinations.

Its complete and most dynamic clusters of  industries facilitate a process to deliver products across the globe  involving financial and business service centers, suppliers,  distributors, port operators, forwarders, customs brokers, forwarders  and carriers in a finely-tuned chain operating in concert.

No  wonder, as of early this year more than 3,800 foreign companies had  their regional headquarters in Hong Kong for overseeing their Asian  operations.

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The petroleum-fund concept confuses fuel price-floating policy

Vincent Lingga, The Jakarta Post, Jakarta | Opinion | Sun, Aug 2 2015, 11:02 AM

This is another example of the acute absence of policy coherence that has damaged market confidence in the economic team of President Joko “Jokowi” Widodo’s Cabinet.


 
Minister of Energy and Mineral Resources Sudirman Said suddenly came out last week with a strange petroleum-fund concept to defend the government’s inconsistency in the implementation of its fuel price-floating policy. The price-floating policy was launched earlier this year to gradually phase out the wasteful spending of taxpayer money on energy subsidies.

The minister explained that the government would start building up what he called a petroleum fund next year to cope with the oil-price fluctuations. The petroleum fund would be amassed from any profits that would accrue whenever subsidized fuel prices were higher than the market price. This fund would be used to compensate Pertamina for any losses it may suffer whenever the market price were higher than the subsidized fuel price and the government decided not to make price adjustments.

Under this mechanism, the government would not have to adjust the subsidized fuel price with monthly market price developments. Put another way, the fuel price-floating policy would be abandoned, and the adjustment of the subsidized fuel price to the market price would not be based on a longterm energy policy to gradually phase out fossil-fuel subsidy.

Even though such technical details as the organization, legal foundation, accountability and operational mechanism of the petroleum-fund concept have yet to be worked out with the House of Representatives, the idea itself and the stated objective of the fund will only make the future direction of energy policy and development of renewable energy more uncertain and unpredictable.

We still believe that the best and most effective way to influence consumer behavior on fossil fuels and to encourage investment in renewable energy development is through a market-price mechanism. The most vulnerable segment of society should be protected from the fuel-price volatility, but the majority of the consumers should be educated to live with the true economic costs of energy.

The government’s plan to throw away the fuel price-floating policy through this unusual petroleum fund seems to be irrational because in the oil market nothing is simple. High volatility has been the main characteristic of fuel oil. The main reason is that the short-term supply and demand for oil are what economists call ‘price-inelastic,’ meaning that they don’t respond much when the price of oil changes. Motorists don’t immediately start driving less when gasoline prices rise.

On the supply side, drilling projects take a long time to start up, so higher prices don’t immediately translate into more supply, or lower prices into less. This means that the way prices typically return to normal — through increasing supply or diminishing demand — doesn’t really happen in the oil market as it does in most other natural resource commodities.

Consequently, by its nature, oil trading is beset by uncertainty and predicting oil prices is simply a mug’s game. It’s not just a matter of the precarious geopolitics of where most of the world’s oil reserves are located. There’s also the fact that predicting future demand requires forecasting the performance of the whole global economy, which is quite complex and prone to big errors.

Hence, the most sustainable way of coping with highly volatile oil prices is by floating them on market rates in a managed way. This way the monthly changes in the subsidized fuel price will be gradual, and any price increase would be incremental. This may be the best way to accustom the consumers to the market price mechanism. Most national and international analysts welcomed the government’s decision earlier this
year to gradually abolish gasoline subsidies by floating the price of fuel in line with developments in the international oil price and the exchange rate of the rupiah. The price subsidy of diesel oil and kerosene, which are used mostly by fishermen and poor households in rural areas, was then fixed at Rp 1,000 per liter.

There is another twist to the oil-fund idea. What Said defined as a petroleum fund is strangely different from the oil-fund concept used by most oil producing countries.

In 2012, the government and the House planned to stipulate provisions on the petroleum-fund in the final draft of the oil and gas bill. But the philosophy of the fund has nothing to do with fuel subsidies. Instead, the main objective of the petroleum fund as defined in the draft bill is designed to support the petroleum industry by improving the depth of geological data on oil concessions that will be tendered to mining companies.

The oil and gas concessions auctioned to oil contractors have become less attractive due to the acutely inadequate geological data on the oil blocks, while most of the unexplored, promising oil basins lie in deep seawaters in the eastern part of the country. These potential oil basins, besides being highly risky, require huge investment and advanced deepsea technology.

None of the countries that build and manage oil or petroleum funds use those funds for supporting wasteful spending on fuel subsidies.

In Norway and Azerbaijan, for example, the petroleum fund is legislated in a special law that stipulates that the oil fund is to be accumulated, managed and preserved for future generations, and the use of the fund is supervised by high-powered boards of commissioners.

The cornerstone of the philosophy behind the oil or petroleum fund is to ensure intergenerational equality with regard to the country’s oil wealth.

The main objectives of oil funds, which in most countries have become giant sovereign wealth funds, usually include the preservation of macroeconomic stability, ensuring fiscal-tax discipline, decreasing the dependence on future oil revenues and stimulating the development of renewable energy and providing inter-generational equality by retaining oil revenues for future generations.

The Norwegian oil fund has developed into a huge sovereign wealth fund with about US$900 billion worth of assets and the Azerbaijani state oil fund more than $37 billion as of early this year.

The writer is a senior editor at The Jakarta Post. Vincent Lingga

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