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Belt and Road Initiative: Connecting China, Hong Kong and Malaysia – Part 2

Belt and Road Initiative: Connecting China, Hong Kong and Malaysia – Part 2
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By Charles F Moreira, Editor

Hong Kong  has a vibrant startup ecosystem which saw the total number of startups grow from 1,558 in 2015 to 1,926 in 2016 and the total number of startup staff (including employees and founders) increase from 3.721 to 5,229 between these two years. This translates into an increase from just under 2.39 persons on average per startup in 2016 to 2.71 persons per startup in 2016, or a humungous increase in staff by 41% over one year.

In 2015, 50% of these startup founders were Hong Kong locals, 43% from mainland China and overseas and 7% were Hong Kong returnees. In 2016, Hong Kong locals comprised 62% of startup founders, 35% were from mainland China and overseas and 3% were Hong Kong returnees. Besides Hong Kong locals, returnees and those from mainland China, 20.7% of startup founder were from the United States, 13% from the United Kingdom, 10.3% from France, 4.8% from Australia, 4.7% from Germany, 3.2% from Canada, 3.0% from the Netherlands, 2.8% from Singapore, 2.2% from India, 2.2% from Italy, 2.2% from Japan, 1.8% from Taiwan, 1.5% from South Korea and 16.3%from other countries and territories. In 2016, there were a total of 48 co-work spaces, incubation and acceleration programmes for startups in Hong Kong, including 32 on Hong Kong Island, 11 in Kowloon and 3 in the New Territories.

Invest Hong Kong is a Hong Kong Special Administrative Region (SAR) government agency which helps investors with information to aid planning and evaluation, facilitates visa applications and finds schools for expatriates’ children, organises networking events and introduction to service providers, and provides public relations and marketing support for company launches and expansion.

Facilitating investment in Hong Kong and China

The Hong Kong – Malaysia Business Association (HKMBA) was founded in 2014 to help facilitate Malaysian businesses to invest in and trade with companies in Hong Kong and China and to also use Hong Kong as a gateway to China, the associations President Dixon Chew told the forum. The same companies in China also use Hong Kong as a gateway to Malaysia and other countries. The HKMBA currently has about 200 members from Malaysia, Hong Kong, China, Pakistan and Brunei. It also is a member of the Federation of Hong Kong Business Associations which has around 30,000 members across 41 chapters worldwide. The HKMBA organises a business event in Hong Kong each year for its members to meet their Hong Kong and China counterparts, followed by a visit to different parts of China each year.

“Malaysian companies should tap Hong Kong as a gateway to China, just as China companies use Hong Kong as a gateway to Malaysia and other countries”, said Chew.

In 2016, Hong Kong’s combined foreign direct investment (FDI) into Malaysia was worth US$10.6 billion and US$2.2 billion in FDI from mainland China. Between 2015 and 2016, Hong Kong’s FDI into Malaysia grew by US$3.8 billion. Meanwhile, Malaysia’s exports to Hong Kong have been growing at 6.6% year-on-year, whilst Malaysia’s imports from Hong Kong grew by over 6.1% year-on-year.

Chew also is Group Chief Executive Officer of Pensonic Holdings Berhad, a publicly listed Malaysian producer of electric home appliances which has been dealing with Hong Kong for over 20 years now, including using Hong Kong as the gateway for its supply chain from China.

Professional services

“The primary focus of the Belt & Road Initiative is on development of the physical Belt & Road infrastructure, which will in turn create needs for providers of finance & investment services, infrastructure & real estate services, maritime & logistics services, trading and dispute resolution services and for all these to take place, increased trade and exchange”, Peter Wong, Hong Kong Trade Development Council (HKTDC), Regional Director, South East Asia and India told the forum. “The HKTDC’s primary focus in South East Asia is on Malaysia, Thailand, Indonesia and Vietnam”.

Sixty percent of China’s outward investment goes through Hong Kong and an increasing number of China-based companies use Hong Kong as the gateway for their investments in ASEAN countries. At the same time there are risks in investing in the Belt & Road, whether outbound or inbound and with its established legal institutions and framework, Hong Kong can serve as an excellent arbitration centre, in case disputes arise.

As for professional services, Hong Kong can tie together a consortium of Hong Kong professionals with China money to work on projects such as the construction of highways, power plants, airport maintenance and so forth. For example, a Hong Kong architectural firm set up an office in Malaysia as part of the Belt & Road Initiative and there are ample opportunities for other professional services companies to do likewise.

Unlike Invest Hong Kong which is a purely government body, the HKTDC is quasi-government and plays a similar role for Hong Kong as MATRADE plays for Malaysia and one of the initiatives of the HKTDC is to provide matching services for companies seeking business partnerships with Hong Kong and China companies.

The HKTDC will be holding the In Style – Hong Kong expo and business symposium at the Mandarin Oriental, Kuala Lumpur on 7 and 8 November 2017. Besides being a business-to-business showcase of Hong Kong brands and design-led lifestyle products, the event will also showcase Hong Kong professional expertise in areas such as financial technology, arbitration, logistics and others which can help Malaysian companies expand overseas.

Advantages of Hong Kong

“One of the advantages of Hong Kong is that non-locals can own 100% equity in their companies, a cheque denominated in US dollars can be cashed within three days instead of 21 in Malaysia, the public transport system is efficient, buses run on time and luxury cars are relatively affordable”, said Fione Tan, the Hong Kong-based Malaysian Chief Executive Officer of the 28Mall.com and eOneNet.com portals. A mega Malaysian brand, the 28Mall.com portal established in 2016 enables cross-border business-to-consumer selling.

A source of talent.

“The biggest thing Hong Kong can offer is talent”, said Dr. Yu Runze, Forest City Chief Strategy Officer, Country Garden Holdings.

For example, due to differences in corporate and business cultures, it is not always easy to work with China companies but Hong Kong consultants and professionals have experience of working with them and understand their culture, so can help foreign owned businesses to more effectively work with China companies.

“Forest City is an holistic urban environment and aims to be a well operated urban space, so it has to address a sum of many issues”, said Dr. Yu.

For example, Forest City promotes low automobile use which requires a more extensive and efficient public transit facilities and a good traffic management system. Also, Forest City’s philosophy believes in more efficient use of space underground, such as for sewerage and other utilities.

So, the kinds of expertise Hong Kong can offer Malaysia would be in areas such as business & professional services, consultant engineers in urban development, infrastructure development, experts in structural projects as well as soft-skill talents in marketing.

The forum was jointly organised by the Hong Kong Economic and Trade Office, Jakarta and the Hong Kong Malaysia Business Association, with the support of Invest Hong Kong and the Hong Kong Trade Development Council.

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