vol. XVI no. 1

				- by M.J.T. Rowse Director-General of Investment Promotion Invest Hong Kong Government of the Hong Kong SAR As China's financial capital, Hong Kong has much to offer investors. It also serves as the gateway to the vast resources of mainland China. To hear firsthand about Hong Kong, The State of Business enlisted Mike Rowse, Director-General of Investment Promotion, Invest Hong Kong, for the government of Hong Kong to write the following exclusive account of the impact the city has on an entire continent. Rowse came to Hong Kong in 1972, and has lived there ever since. After time as an English tutor and a tabloid journalist, he joined the Independent Commission Against Corruption on its establishment in 1974. After serving in both the Operations and Corruption Prevention Departments, he switched to the Government proper in 1980 as an Administrative Officer. Most recently, he served as the first Commissioner for Tourism (from May 1999 to September 2000), and in July 2000 he was appointed the first Director-General of Investment Promotion. In August 2001, he became the first expatriate civil servant in Hong Kong's history to Naturalise as a Chinese National. Hong Kong has long been an ideal place for investors. Over the past few decades, the city has gained increasing global renown as a regional and international centre for finance and trade, and we have attracted many of the world's most prestigious companies to our city. The worldwide recognition of Hong Kong as an investment destination can be illustrated in the United Nations Conference on Trade and Development's (UNCTAD) World Investment Report 2002, which showed Hong Kong as the second largest foreign direct investment recipient in Asia in 2001 after mainland China. The report also named Hong Kong as the best-performing host economy for foreign direct investment in Asia. In 2001, foreign direct investment in Hong Kong totaled US$22.8 billion, of which US$1.5 billion came from the United States. Many overseas companies have also set up base in Hong Kong. We are now host to more than 3,100 regional headquarters and regional offices. More than 20 percent of them - 670 - are regional arms of U.S. companies, and we definitely have room for more. Hong Kong's Advantages Why do so many investors establish operations in Hong Kong rather than in other cities in the Asia-Pacific region? Hong Kong's advantages are many and well known. We operate a level playing field. We practise the rule of law scrupulously. We have a corruption-free and effective civil service, a free press and free flow of information, a simple and low tax regime, an independent judiciary, a world-class banking system, a skilled and knowledgeable workforce and, to top it all, an unrivaled location. Hong Kong offers free-market policies that are a magnet for international businesses large and small. The Heritage Foundation ranked Hong Kong as the world's most open economy for nine consecutive years. Foreign investments in Hong Kong are not subject to any special approval procedures, regulatory regimes or requirements, and investors' profits can be transferred overseas at will; there are no foreign exchange restrictions. After-tax profits are attractive in Hong Kong. In a survey conducted by the American Chamber of Commerce, our taxation system received a satisfaction rating of 97 percent. That response is hardly surprising in view of our low corporate profit tax rate of 16 percent. Furthermore, Hong Kong's tax regime is simple and predictable. No tax is levied on foreign-sourced income of any kind, and there is no estate duty on non-Hong Kong assets. There is no capital gain tax, no VAT or sales tax and no tax on dividends or bank interest. That makes Hong Kong's tax incidence much lower than it is in virtually all other developed economies. Another important consideration for foreign companies is the ready availability of skilled managers and quality manpower. Our management quality and experience in international business are outstanding, for trade has been the bloodstream of our economy for decades. Foreign investors in Hong Kong certainly appreciate the city's exceptional connections to the rest of the world. We have what is probably the world's most user-friendly airport, with direct flights to more than 40 cities in mainland China and more than 100 cities worldwide. We have the world's busiest and most efficient container port too. Apart from being an aviation and maritime hub, Hong Kong is also the communication centre for thousands of foreign companies in the Asia-Pacific region. Our advanced telecommunications infrastructure is ideally suited to the tasks of global and regional coordination. Keen competition among telecommunication service providers has resulted in very low international rates. It costs less per minute to call the United States from Hong Kong than it does to call between some U.S. states. For companies wanting to stay in touch with region-wide market information and competitor intelligence, Hong Kong is also the best place to be. Its critical mass of corporate decision makers and finance professionals generates information exchange vital to the companies based here. Business intelligence also gets a boost from the region's largest concentration of business journalists. Companies that need to be aware of new ventures, upcoming corporate deals or trends can expect to be more ³tuned in" in Hong Kong than anywhere else in the Asia-Pacific region. Investors bringing their families with them will also feel a special buzz when they make their new home in Hong Kong. The city is safe, has the world's most comprehensive public transportation network and hosts a year-round feast of exciting social, cultural and recreational activities. Spouses with dependent visas are free to work, and their children can attend international schools offering curricula based on those of their home countries. Gateway to Mainland China Apart from the above important internal factors, Hong Kong is blessed with a key natural resource: its geographical location. Flanking the mouth of the Pearl River Delta (PRD), Hong Kong is perfectly situated for trade with mainland China; the whole country is our natural hinterland. Next door to us, 35 million people live in the PRD area. It has effectively become our modern manufacturing base, where Hong Kong companies now employ some 5 million people. This trend in the delta and Guangdong province will continue. It will bring increasing economic benefits not only to Hong Kong but also to the mainland. The complementary strengths of Hong Kong and the rest of the PRD have combined to produce substantial growth. Hong Kong is the hub for business, logistics, finance and services for the region. What about the PRD? With interlocking clusters of internationally successful industries and services and the active participation of a continuous stream of upstarts as well as numerous small and medium enterprises, the PRD displays great flexibility in meeting changing market conditions as one of the world's leading power bases in manufacturing. The PRD has the highest per capita income on the mainland, and its population of over 35 million is also becoming an increasingly attractive consumer market, an enormous opportunity for international businesses. The combined GDP of Hong Kong, Macao and the rest of the PRD reached US$260 billion in 2001, placing the region among the top 20 economies in the world. The combined GDP of Hong Kong, Macao and the PRD will reach well over US$500 billion in 10 years' time. The concentration of business and professional people here strengthens Hong Kong's role as the gateway to mainland China. People here understand how China works and know how to deal with its businesspeople. We share the same culture and heritage and have had over 150 years of successful trading with the mainland. Little wonder that 180,000 Hong Kong firms have joint ventures in China. Hong Kong has been consistently the largest source of foreign direct investment (FDI) in the PRD and the whole of Guangdong province, with a total of US$79 billion realized direct investment at the end of 2001. Indeed, Hong Kong has contributed enormously to the success of the PRD, and at the same time we have accumulated substantial benefits for ourselves. For foreign companies planning to enter the China market, Hong Kong will be their perfect partner. Invest Hong Kong The Hong Kong government is committed to nurturing a business-friendly environment for all investors, providing an equal footing for all of them. It has embedded a pro-business culture within the administration and actively seeks to develop new streams of positive support to meet target markets' ever-changing requirements. The objective of Invest Hong Kong is to spearhead Hong Kong's efforts to attract inward investment. Invest Hong Kong offers an extensive range of practical assistance, from promotional advice and procedural guidance to site visits, official contacts, specific information and aftercare services - in fact, everything that overseas companies might need to establish or expand their operations in the dynamic Hong Kong economy. I believe that any company choosing Hong Kong for overseas investment will have found a winning formula and a loyal partner on its road of success. Top

Copyright © 2003 Robinson College of Business/Georgia State University.