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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