biz.hk Feb 2011 by The American Chamber of Commerce in Hong Kong

Journal of The American Chamber of Commerce in Hong Kong www.amcham.org.hk

February 2011

ble Availa

NOW

Your Best Guidebook for Settling in Hong Kong Living in Hong Kong is a compendium-style all-you-need-to-know guide for newcomers to Hong Kong. Its goal is to provide an up-to-date definitive source on all manners of needs. They range from things to know on the first reconnaissance here through finding a home, school, getting settled when arrived and enjoying life in Hong Kong. This consumeroriented book is designed as a sort of â&#x20AC;&#x153;hotlineâ&#x20AC;? with useful phone numbers and contacts to other sources of help. Living in Hong Kong will be sold through the Chamber office/on its website, and leading bookshops in Hong Kong. AmCham members often buy the book for their relatives and friends who are new to Hong Kong. With a diversified membership (currently 35% are Americans), the book is one of the best-selling publications for AmCham. Contact: AmCham Publication Department Advertising Manager: Regina Leung Direct Line: 2530 6942 Email: rleung@amcham.org.hk

February 2011

Contents

Vol 43 No 02

Publisher

Richard R Vuylsteke

Editor-in-Chief Daniel Kwan

Assistant Editor

COVER STORY Fueled by strong domestic economic growth, Chinese state-owned companies and private enterprises are increasingly exploring the opportunity of “going global” through merger and acquisition in a number of overseas markets. What can Hong Kong do to accommodate in their pursuit of global expansion?

Kenny Lau

Advertising Sales Manager Regina Leung

biz.hk is a monthly magazine of news and views for management executives and members of the American Chamber of Commerce in Hong Kong. Its contents are independent and do not necessarily reflect the views of officers, governors or members of the Chamber. Advertising office 1904 Bank of America Tower, 12 Harcourt Rd, Central Hong Kong Tel: (852) 2530 6900 Fax: (852) 2537 1682 Email: amcham@amcham.org.hk Website: www.amcham.org.hk Printed by Green Production (overseas) Group 2A Sun Yip Street, Chai Wan, Hong Kong Designed by Overa Creative Co Rm A, 12/F, Sun Fai Comm Bldg, 576 Reclamation St, Mongkok ©The American Chamber of Commerce in Hong Kong, 2011 Library of Congress: LC 98-645652 For comments, please send to biz.hk@amcham.org.hk

AMCHAM NEWS AND VIEWS 04 Chairman’s Memo Rob Chipman reiterates the important role Hong Kong is positioned to play in meeting the needs of Chinese companies involved in M&A overseas

07 New Business Contacts 63 executives joined AmCham’s business network last month

36 Mark Your Calendar

COVER STORY

08 China’s M&A Take-off An in-depth report on Chinese companies in pursuit of global expansion through merger & acquisition and how Hong Kong can become a bridge between Mainland and foreign markets

12 The Changing Landscape of Chinese Outbound Investment Daniel Rosen and Thilo Hanemann of the New York-based research firm Rhodium Group talk about China’s changing outbound foreign direct investment

14 Private Equity Powers Economic Growth A conversation with K O Chia, President of Hong Kong Venture Capital & Private Equity Association, on the potential of a Mainland private equity and funds market

Single copy price HK$50 Annual subscription HK$600/US$90

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2 • 2011

ENVIRONMENT

TRADE & INVESTMENT

HEALTH & WELLNESS

Evan Auyang, Deputy Managing Director of KMB and Chairman of AmCham’s Environment Steering Group, shares his view on finding a sustainable solution to Hong Kong’s roadside pollution

Comparable to the renowned trade fairs Cannes and American Film Market, FILMART 2011 is expected to attract a record number of attendees and create fanfare no less than other industry tradeshows

People are increasingly taking detoxification (detox) as a way to purify the human body and maintain a sustainable healthy living. Learn about the therapy from holistic healer Chan Cudennec

ENVIRONMENT

16 Calling for Positive Engagement to Tackle Air Pollution

AMCHAM BALL 30 The 2011 Social Event of the Year in the Making

KMB Deputy Managing Director Evan Auyang discusses the roles of government, NGOs and businesses for effective change in air quality

A look of what goes on behind the scene in preparing to bring to life the best party in Hong Kong

ENERGY

HEALTH & WELLNESS

20 Energy Committee’s Decade of Success Upon the 10th anniversary of a committee founded to promote a favorable business environment, former chair Colin Tam reflects on his involvement in the energy sector

TRADE & INVESTMENT

24 The Winner Goes to … FILMART Film producers, investors, movie stars, and artists will converge in Hong Kong for the Entertainment Expo in March and April in a record year

32 Detoxification: The Path to Sustainable Health An introduction to a therapy designed to rid of toxin accumulated in the human body and the science behind it

TALK-TO-AUTHOR 34 The Asian Dilemma

Chandran Nair tackles the issue of how Asia should develop itself in his new book, Consumptionomics: Asia’s role in reshaping capitalism and saving the planet

28 The Sweets and Sours of Film Co-production Learn about how Hong Kong’s film industry is partnering with major US studios from chatting with Executive Producer of October Pictures Chu Chen On

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2 • 2011

Chairman’s Memo Board of Governors Chairman Robert Chipman Vice Chairman James Sun Treasurer John Sigalos Executive Committee Frank Lavin, Anita Leung Belinda Lui, Charles Wellins Governors Brian Brenner, Tom Burns, Jacob Cefolia, Janet De Silva, Rob Glucksman, Peter Levesque, Charles Ma, Toby Marion, Ross Matthews, Andrea Richey, Catherine Scown, Leland Sun, Colin Tam, Elizabeth L Thomson, Richard Weisman, Frank Wong, Sara Yang Bosco, Shengman Zhang Ex-Officio Governor President

David L Cunningham Jr Richard R Vuylsteke

Chamber Committees AmCham Ball Apparel & Footwear Business Briefing China Business Communications & Marketing Corporate Responsibility

Kay Kutt Andre Leroy Don Meyer Wendy De Cruz

Energy Entrepreneurs/SME Environment Financial Services

Sean Purdie Donald Austin Bradley Punu Kuresh Sarjan Catherine Simmons Peter Johnston Hanif Kanji Ross Matthews

Food & Beverage Health & Wellness Hospitality & Tourism Human Resources

Susan Reingold TBA

Noble Coker Peter Liu

Information Technology & Telecom Rex Engelking Intellectual Property Alvin Lee Law Eric Szweda Pharmaceutical Stephen Leung Real Estate Brian Brenner Senior Financial Forum Alvin Miyasato Senior HR Forum MaryAnn Vale Sports & Entertainment Ray Roessel Taxation Evan Blanco Trade & Investment Patrick Wu Transportation & Logistics Brian Miller Women of Influence Jennifer Van Dale Lee Georgs Young Professionals Roger Ngo

Kung Hei Fat Choy! On behalf of the wonderful staff of the American Chamber of Commerce, let me wish you all a happy, healthy, peaceful and prosperous Year of the Rabbit. Chinese legend has it that the Year of Rabbit encourages saving, sound investments, a slower pace of life, and enduring love. After the Year of Tiger in 2010 which has been dramatic, tense, and exciting, taking Rob Chipman Chairman life at a measured pace should be a welcome change. January was a very busy month for the Chamber and I can safely say that we started off the year on the right foot. One of the highlights for me was welcoming back past chairman John Kamm who spoke to a large audience at the very time Chinese President Hu Jintao was dining in the White House with President Barack Obama. John has unparalleled insight into China and Sino-US relations, and if you have not had a chance to hear him speak, don’t miss him the next time he is in town. I was able to attend the kickoff meeting of the Transportation & Logistics as well as the Taxation Committees. I was very impressed with the energy and level of interest shown by the many members who attended. I know the other Committees are busy formulating priorities and setting out agendas, and I encourage you to join a Committee, get involved, and make a difference in AmCham. This month, biz.hk has a number of interesting stories and many of them tied into the cover story of M&A activities in China and overseas. You’ll see an article regarding investment outward from China, which is a key area for AmCham. We feel we are uniquely positioned to play an important role by leveraging all of Hong Kong’s considerable business advantages. In addition to financial services, we have several articles that focus on the environment, which along with furthering our China agenda and maintaining Hong Kong’s competitiveness constitute AmCham’s top priorities for 2011. We have an interview with Evan Auyang of KMB and an active member of the Chamber. Roadside pollution is a key homegrown air-quality issue and Evan’s insights are well worth studying. Also worth highlighting is the Energy Committee which celebrates its 10th anniversary in February. Colin Tam, who now serves on our board and a past chair of the committee, gives an excellent account of what the committee has achieved and its future agenda. Many of you know that AmCham’s annual ball is coming up on Saturday, April 16. Many of you also know that the Ball is dear to my heart, having served two consecutive years as co-chair. This month, the 2011 chairperson, Mrs Kay Kutt talks about the Ball and gives us just a taste of the great evening ahead. Be sure and mark your calendar for that special evening, always the highlight of AmCham’s social calendar. Spring has arrived. As the Chinese saying goes, a year’s plan starts with spring. In March, the Chamber will have plenty of interesting events and meetings by our 28 committees. We look forward to seeing you more at the Chamber.

Rob Chipman Chairman

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2 • 2011

香港美國商會中國商務專題研討會

赴美投資系列

隨著中國經濟迅速發展，中國企業赴美投資的態勢不斷增強，中國第一能源、尚德電力、比亞迪、鞍鋼等大型企業都先後走出去，在美國設廠投資。為了更有效的利用美商會會員之長，幫助中國有條件的中小企業瞭解和策劃如何“走出去”進行對外投資，美商會中國事務核心小組與會員公司德勤國際稅務中心（亞太區）以及其法律夥伴合作，舉辦首個以普通話作為主要交流語言的赴美投資系列研討會，為有意赴美投資的公司提供條件分析和投資前的基礎知識，當中包括赴美投資考慮、法律、財務和稅務、人力資源、公共關係、政府關係以及進退策略等。

2010年12月15日

赴美投資考慮綜述

2011年1月21日

美國併購

2011年3月中

赴美投資構建和融資（創建投資）

2011年5月初

赴美經營

2011年6月尾

赴美經營－初步瞭解（II）

2011年8月中

歸國或退出美國市場策略

－

費用：

初步瞭解（I）

100 港元

每節

（歡迎非會員參加）費用包括研討會講義、茶點供應

歡迎媒體歡迎任何有意赴美投資的人士參與，詳情請瀏覽香港美國商會中國事務部網頁

http://www.amcham.org.hk/index.php/China-Affairs.html 香港美國商會中國事務主任張先生電話：2530-6928 電郵：lcheong@amcham.org.hk

或聯絡

香港美國商會中國事務總監羅女士電話：2530-6915 電郵：dlo@amcham.org.hk

AMCHAM Means Business

Members Directory

MEMBERS DIRECTORY

w w w. a m c h a m . o r g . h k

2010/2011

www.amcham.org.hk

Over 500 pages in three major sections, including a complete guide to chamber services, corporate sponsors and AmCham Charitable Foundation. This directory lists nearly 1,900 members from over 700 companies and organizations. ISBN 978-962-7422-03-7

LC 98-645651

New

Business Contacts The following people are new AmCham members: Accenture Co Ltd Mark McCalla Business Director

Alphaeight Institute Irene Leung Senior Consultant

Banco Santander, SA - HK Branch

Carlos Infesta Head of Global Banking & Markets, Asia-Pacific

BST Consultants Pte Ltd Ricky Yu General Manager, Asia

Caterpillar (HK) Limited Mark Thompson CFO

Charles Schwab HK Ltd Elisa Lieu VP, Financial Consultant Wilfred Lau VP, Financial Consultant

China United States Exchange Foundation Alan Wong Executive Director

CLS Communication HK Ltd Noel Narciso Business Relationship Manager

Community Business Limited Robin Bishop Chief Operating Officer

Crown Motors Ltd

David Lee Public Vehicles Manager

Crown Worldwide (HK) Limited Susanne Osterholm Regional Marketing Manager APAC, Crown Worldwide Holdings Ltd

Dow Jones & Co

Wendy De Cruz VP Asia-Pacific, Corporate & Financial Markets

Executive Centre

Michael Weintraub Associate - Corporate Finance

ExxonMobil Hong Kong Ltd

Hang Lung Properties Ltd

Irene Cheung Manager-Special Projects, Chairman's Office Martina Ing Manager-Special Projects, Chairman's Office

Hasbro Far East Ltd

Marty Cahill VP, Quality Assurance & Compliance - Far East Amit Chakraborty SVP & GM

Headstrong (HK) Limited Kenny Wong Associate Managing Consultant

HK University of Science & Technology

Steven DeKrey Sr Associate Dean, Dir of Masters Programs & Adjunct Prof of Mgt-HKUST Business School Chris Tsang Associate Director (Postgraduate Programs) Julie Liew Head, HKUST-NYU Stern MS in Global Finance Mei Kwong Consultant (Career Services) Stephen Shih Head, MBA Career Services & Corporate Relations Veronique Lafon-Vinais Adjunct Associate Professor, Finance

HSBC

Jaron Campbell Senior Vice President

Inter-Asia Venture Management Ltd James Man Associate Director

Interlux Company Limited

Catherine Maillet Human Resources Director - Asia Pacific

Jones Lang LaSalle

Andrew McGrath Director, Business Development Marketing, Greater China Anne-Marie Sage Head of Residential Leasing & Relocation Services, Hong Kong Jane Murray Head of Research, Asia Pacific Melissa Whelan Analyst, Tenant Representation, Hong Kong Sylvia Koh Head of Corporate Consulting, Asia Pacific Brian Brenner National Director - Tenant Representation, Hong Kong

Jessica Chong Communications Manager

JPMorgan Chase Bank

Fox Electronics

JPMorgan plc

General Electric International, Inc

JT International (Asia Pacific) Ltd

Herb Chaney Vice President and Director Foster Lee Associate Director

Government of HKSAR - Invest Hong Kong

Andrew Davis Associate Director - General of Investment Promotion

Hanbo Enterprises Ltd Albert Liu Strategic Planner

Sofia Shen

Michael Brown Senior Vice President Pierre Binetter Regional General Counsel, Asia Pacific

Kronos Asia Holding Ltd Becky Davis Senior Account Executive

Landor Associates Designers & Consultants Ltd Monica Au Client Managing Director

Links Recruitment John Eyres Managing Director

Molson Coors Brewing Company Tony Hicks Managing Director, Asia Pacific

Polo Ralph Lauren Sourcing Co Ltd Evita Chan Vice President of Merchandising Michelle Li Vice President

PricewaterhouseCoopers Zareen Tehsildar Manager

Red Bull

Samuel Shih Managing Director

Resolute Capital Partners Thomas Powell CEO

Richard Ivey School of Business (Asia) Jorge Choy Director, EMBA & Executive Programs

Russell Reynolds Associates (HK) Ltd Sophia Liao Executive Director

SGT Limited Edgar Tung CEO

Sheraton Hong Kong Hotel & Towers

Charles Woo Managing Director/Area Managing Director, Hong Kong & Macau

Tag-It Pacific Ltd David Housley Vice President

Tech Results (Macau) Limited Ardyth Klander Managing Director

Thomson Reuters Hong Kong Ltd

Jesper Bruun-Olsen Managing Director, Asia-Pacific - Tradeweb

Time Warner Inc

Anran Luo Policy Analyst, TimeWarmer, Int'l Relations and Public Policy, Asia Pacific

TNT Express Worldwide (HK) Ltd Sam Hung Director of Operations

VF Asia Ltd

Frederick Chan Senior Product Safety Manager Scott Thomas Vice President, Asia Sourcing, Footwear Teik-Shin Cheah Vice President, Asia Sourcing, Outdoor Apparel Veit Geise Vice President, Asia Sourcing, Jeanswear & Imagewear

View our other members at:

http://www.amcham.org.hk/index.php/AmChamMembers.html

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2 â&#x20AC;˘ 2011

COVER STORY

China’s M&A Take-off By Wilson Lau

Consolidation is the buzzword of many industries in Mainland China today. Squeezed by rising costs and competition, moving up the ladder has become ever more urgent for Chinese businesses who have dominated the bottom end of the value chain for decades. Fuelled by a strong currency, a growing number of Chinese companies – whether state-owned or private enterprises – have been exploring opportunities of “Going Global”. Merger and acquisition by Chinese companies – both at home and abroad – are now closely monitored by investors worldwide. However, the record of Chinese companies going international so far has been mixed. Some analysts believe it boils down to a lack of international business experience and knowledge of the “international code of practice”. Cross-border investments are complicated. Highly specialized skills are required to establish business strategies, to manage asset transactions, and to operate overseas units. Unlike the initial acquisitions, these tasks cannot be outsourced to consultants. So how can Hong Kong help?

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2 • 2011

he global map of investment is being redrawn. The positive trends of fiscal balance, robust economic growth, high savings, rising living standards, and favorable demographics have all shifted eastward to favor the Asia Pacific region. The implication of this change in economic leadership is significant for investors. The slow growth in developed economies serves to further heighten the attractions of emerging markets’ equities and their revenue generating assets, as well as corporations in developed markets which derive a large proportion of their revenues from these faster-growing areas. The strong flow of capital, plus the unstoppable surge in consumer demand, has further elevated the desirability of the Asia Pacific region as an investment market. Italian-based global fashion powerhouse Prada SpA has announced its plan for an initial public offering at the Hong Kong Stock Exchange – the only Chinese exchange fully open to foreign investors. Prada has jumped on the bandwagon of foreign companies, including the French skin-care product specialist L’Occitane International SA, that have preferred to go public in Hong Kong rather than their home markets. Hong Kong has long been recognized as the established platform for Mainland Chinese companies to raise fund. According to the Hong Kong Stock Exchange, 592 Chinese companies are listed in the Exchange. They have leveraged Hong Kong’s efficient financial market which offers free flow of information and capital to support their fund raising activities. Meanwhile, Hong Kong benefits from this convergence of international fund activities.

Driving forces Without a doubt Mainland China has been the main driving force of the strong growth in the investment and financial activities in the region. The past year was the bumper year for merger and acquisition (M&A) deals concluded by Mainland Chinese corporat-

David Brown

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ions. Whether domestic, inbound or outbound deals, all records in both the number and value have been broken and the only way seems to be up for 2011, judging from the continued strong economic growth of the country. A record 4,251 announced transactions valued in excess of US$200 billion were recorded in the 2010 calendar year. This represents a 16 percent increase in the number of deals and a 27 percent rise in value compared with those recorded in 2009, according to PricewaterhouseCoopers Ltd. Driven by the need for industry consolidation and moving up the value chain, coupled with the continuing growth of China’s economy, domestic M&A transactions, including the strategic and financial ones, dominated the M&A market in China. “The development of the domestic industries is towards consolidation. The M&A activities were very broad across many different sectors and wide spread across different regions in China,” says David Brown, PwC Greater China Private Equity Group Leader. “It is expected that growth in M&A activities in China to continue because it has been part of the ‘Five Year Plan.’ The growth rate in the domestic M&A market is generally in line with the China’s economic growth.” Private equity activity is the fast-growing area in China’s M&A market. PE activity with China targets surged by 66 percent to nearly 580 transactions in 2010 and more than two thirds of these were initiated by domestic funds. “The rapid development of private equities in China over the past two years has been encouraged by the Chinese Government which recognized private equities as an excellent source of capital for private enterprises,” says Brown of PwC. “It is a feature in the Chinese market that it tends to be more difficult for those private companies to get bank financing or they are not quite ready to go into the equity market for IPOs as the source of capital. Private equities and venture capitals help support entrepreneurial businesses in China. I think the Chinese Government recognizes that.” (see story on page 14)

“Chinese companies have to move up the value chain because of the inflation issue, including the rapid wage inflation in the various manufacturing centers.”

Insatiable appetite Outbound M&A deals by Mainland Chinese companies also witnessed spectacular growth last year. In 2010, outbound deals surged by more than 30 percent to a record of 188 transactions of aggregate value of US$38 billion, up from 144 deals at a combined value of US$30 billion in 2009. The largest single deal was China Petrochemical Corp’s – also known as Sinopec – US$7.1 billion acquisition of a 40-percent stake Repsol YPF Brazil SA. “China’s appetite for overseas assets is insatiable, with natural resources remaining a key industry target, as the country aims to secure the resources it needs to fuel its engine of economic growth,” says Brown. Apart from the continued strong interest in natural resources, there has been an increasing number of acquisitions of overseas high technology companies, as Chinese corporations seek to bring knowhow back to the Mainland, Brown adds. “Chinese companies have to move up the value chain because of the inflation issue, including the rapid wage inflation in the various manufacturing centers,” he says. “For the economy to continue thriving, they need to move up the value chain. Similar to other countries which have emerged as low-end manufacturing economies focusing on exports, over time they have matured and have to focus on more of their domestic consumption market and move up the value chain.”

Lessons learned However, capital is only one of many success factors in global business expansion. In the past decade, a number of Chinese companies have made the courageous moves to go global. While many successful cases went unreported, there are a few unfortunate ones which have tumbled and learned their lessons the difficult and often expensive way. China National Offshore Oil Corp (CNOOC)’s failure to acquire the American oil firm Unocal Corp in 2005 is often cited as the prime example of how politics can block M&A bids by Chinese firms in the US. Huawei Technologies – Mainland China’s largest telecommunications equipment manufacturer – also failed to buy software supplier 2Wire and Motorola’s wireless equipment unit in

“Hong Kong is a good testing ground for Chinese companies in their pursuit of global expansion and they are able to gain experience in international business operations.”

2010, and networking gear supplier 3Com Corp in 2008 because of national security concerns in the US. Chinese companies not only ran into obstacles in the US. The merger between China’s largest carmaker Shanghai Automotive Industry Corp and South Korean Ssangyong Motor in 2009 was fraught with multiple difficulties, including problems with the strong labor unions. It eventually collapsed after Ssangyong filed for bankruptcy protection in 2009. Another example is Baosteel’s now-abandoned steel slab project in Brazil. Some policymakers and companies in China may blame protectionism and high host-country entry barriers as some of the woes to their overseas foreign direct investment projects. But the truth is Chinese investors often lack the management skills and international experience needed for long-term investments abroad. Consultants and financiers can help putting together the M&A deals, but the companies simply cannot outsource the management of the overseas units after the M&A transactions. (see also sidebar: China’s Outbound Investment)

The testing ground “It will be costly for these Mainland companies which neglect the international code of practice and jump directly into a market with substantial commitment and investment, and it is important for them to learn how these overseas markets operate,” says Victoria Tang, Associate Director-General at InvestHK – the Hong Kong government agency tasked with attracting investment to the city. The best way for Mainland companies to familiarize themselves with international operations is

Victoria Tang

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2 • 2011

Hong Kong as a free-trade logistics hub to help it expand its international business.

Quality professionals Hong Kong has attracted these Chinese companies which aim to go global because of the city’s wealth of experience and its international connections. The city does provide opportunities for companies like Suning to get exposure of international operation. Simon Galpin, Director-General of Investment Promotion at InvestHK, says: “We recognize that we have to focus on the more strategic aspect – if Mainland companies are looking for a very large market, low-cost land and labor, we are not the place. But Hong Kong is a great place to manage that strategic aspect.” “We are trying to promote Hong Kong as a great platform for Mainland companies from which to base their M&A activities. These companies can set up subsidiaries in Hong Kong which is a great place to raise capital, not only through IPOs but also through the private equity market and the large number of international banks. Hong Kong also has a competitive tax regime and the legal system and all the support system a company needs if it wants to make investment elsewhere,” he adds. The professional services providers in Hong Kong help Chinese companies minimize the risk which may arise from business expansion, Galpin adds. “Hong Kong helps facilitate Chinese companies’ alignment of their operations with the international regulations and rules and Hong Kong is a good testing ground for Chinese companies in their pursuit of global expansion and they are able to gain experience in international business operations.” For Hong Kong to continue attracting private entrepreneurs from Mainland China, it’s critical that the city can maintain its strong reservoir of high-quality professional services specialists and other professional talent. They have been giving strong support to many Mainland corporations, whether in fund-raising, or in strengthening the corporate governance area, or marketing and branding building skills. All these are essential in enabling Mainland companies to build their international operations through Hong Kong.

Outbound deal - Top 10 sectors by number of deals, FY09 vs. FY10 Raw materials Industrials High Technology

Consumer Staples

12 11

Conglomerate Healthcare

25 22 24 18 19

Energy and Power

Simon Galpin

Consumer Products and Services

Media and Entertainment

Retail

4 2

FY10 FY09

Note: Raw materials include mining, metals and chemicals. Source: PwC analysis

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2 • 2011

China’s Outbound Investment

to find a place – ideally a gateway to the international marketplace – to set up an initial base, Tang stresses. “They can learn about international operations [here in Hong Kong] and hence it is not only that they conclude the M & A deals, and they also learn how it is going to work,” she continues. “In this sense, these companies will benefit from setting up bases in Hong Kong. [Although some Mainland companies] might have started launching the M&A deals on the Mainland, they have ended up choosing to set up their bases in Hong Kong.” With assistance from InvestHK, a total of 52 Chinese companies established operations in Hong Kong in 2010, many of them using the city as a base from which to go global. The 52 Chinese companies account for 18 percent of the 284 businesses InvestHK helped bring to Hong Kong last year. These companies are in a diverse range of industries. Primarily, they are in the financial, transport and manufacturing sectors, and some are in the innovative technology and hospitality industries. Around 30 percent of the Mainland companies are from the southern China, such as Guangdong Province. Eastern and northern China both account for about 25 percent each. Another 10 percent came from western China. “It is the highest number of Chinese companies setting up businesses here through our help in four years. We have seen positive outcome from our ‘On Your Marks, Get-Set, Go’ program which was launched in 2007,” Tang of InvestHK says. The biggest InvestHK’s project from Mainland China in 2010 was the HK$215 million takeover of Citicall by Suning Appliance Co Ltd, China’s largest retailer of electrical appliances. The company aims to use

China’s Outbound Investment risks put Chinese firms at a great disadvantage in competitive takeover bids.

Daniel H. Rosen

Thilo Hanemann

Daniel H. Rosen and Thilo Hanemann of the Rhodium Group, a New York-based research firm, co-authored a research report – China’s Changing Outbound Foreign Direct Investment Profile: Drivers and Policy Implications – in 2009. The report gives an in-depth look into the practices and lessons learned by Mainland Chinese companies investing abroad. They will soon publish a new report on Chinese investment in the US. biz.hk talks to the two authors about the ambitions of Chinese firms and the hurdles they face in expanding in foreign markets biz.hk: What are the real drivers behind China’s Outward Foreign Direct Investment (OFDI) in the past 10 years? Do they share some common “strategic intent”? What are the trends in the next few years? R&H: The factors shaping China’s outward FDI have changed rapidly in the past decade. In the past, only critical natural resource deals or lightweight trade facilitation offices got invested overseas. Now, a whole spectrum of investments is occurring. Today, the most important factor encouraging outbound investment is the diminishing return on traditional, domestic investments. It used to be easier to make an extra profit by investing locally; with the low hanging fruit on that tree picked, opportunities abroad are more attractive. The majority of Chinese outward investment is now driven by such commercial motives, and firms’ incentives to invest abroad will further increase in the years ahead. That said, there are still deals that are driven by high-level strategic interests, for example Chalco’s 2008 stake in Rio Tinto or last year’s plans to launch a counter offer to BHP’s bid for Potash Corporation. biz.hk: What are the real obstacles to direct Chinese investment overseas, in particular in the US? R&H: By far the most important obstacle China’s firms face is that they have not learned at home how to operate in well-regulated, rule-of-law constrained markets, or how to manage high-skill workforces in mature economies. They are simply not at home abroad. In addition, Chinese firms have to overcome political hurdles on both sides: in host countries, they often face skepticism and political resistance; at home, they have to go through burdensome bureaucratic processes to get approval and obtain the foreign exchange necessary to make overseas investments. These political

biz.hk: Some of China’s “major” overseas investments in the past few years have performed poorly. What are main reasons behind their poor performance? R&H: Some of everybody’s major overseas investments underperform: the attitude that all endeavors should come out above average is symptomatic of the burden of ignorance firms from China (and other markets with unreliable statistics and corporate governance) have to deal with. For those Chinese deals that underperformed, the reason was often poor decision-making about where and what to invest in. These are skills that Chinese investors can only develop the hard way, through experience and toil, over many years. There is no way to reverse engineer or expropriate that skill. biz.hk: Overseas investment by Chinese firms often needs to go through complicated approval processes at home. This may deter private businesses from expanding overseas. What can the government do to support private companies going abroad? R&H: Approval processes are getting easier. Nonetheless, barriers remain and further liberalization would ease the task for smaller, private firms. Another direct step Beijing could take is to open the capital account and permit market forces to determine exchange rates, thereby opening up the access to foreign currency and alleviating some of the overhang of uncertainty about the exchange rate risk entailed with establishing operations abroad. Private firms – like Huawei – are often getting caught up in the dragnet of suspicions about the relationship between firms and the Communist Party in China: only government can improve the sense of transparency about China’s business-government relations that is damaging private Chinese firm prospects for investment approvals abroad. So instead of reiterating the picture of a national “going global” effort, the government should give firms more autonomy in overseas investment decisions and improve transparency, for example, by strictly enforcing corporate governance rules or committing to existing international investment norms and rules. biz.hk: On the side of the recipient countries, what are the usual blind-spots vis-à-vis Chinese investments? R&H: With regard to national security concerns, it is often difficult to clarify the state’s interest in a firm in China and how that interest might affect management decisions. In many sectors, that ambiguity need not make a difference to the host country (like textiles, or auto parts); but in a number of sectors of interest, that might matter immensely. With regard to attracting Chinese firms and helping them to make investments, investment promotion agencies and local authorities in many nations including the United States still have to do more work to understand the cultural concerns and challenges facing potential Chinese investors. Chinese language capabilities are scarce, there are issues in obtaining visas and local regulatory approvals, and OECD cost structures seem shockingly profligate to many Chinese firms accustomed to cut-throat competition and cheap inputs. biz.hk: Some of China’s overseas acquisitions are concentrated

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in countries with rich resources but unstable/troubled regimes. Do you think market forces/norms will steer Chinese investors in these countries to adopt “Western” standards in areas such as corruption, environment and legal? R&H: There are good business reasons why OECD countries created norms to guide commercial behavior in states with weak governance or high levels of corruption. In the long-run, these norms are better for business, for the host country, and for the quality of competition and innovation. Also, Chinese firms will gravitate toward these norms too: doing otherwise presents some short term benefits, but these are ephemeral. Being from a country that is still developing in some regards is not an adequate excuse for Chinese firms to eschew these better business practices. The increasing presence of Chinese multinationals in mature economies with consumers and media that are very sensitive to labor and environmental issues will accelerate this process.

InvestHK To attract and assist more Mainland Chinese corporations to establish their operations in Hong Kong, InvestHK has launched the “On Your Marks, Get-Set, Go” program and “Join Hands with Hong Kong in Going Global” initiative as well as a series of industry-specific workshops. “We are actively reaching out to companies on the Mainland to promote our services. As we work closely with our four Investment Promotion units in China – in Beijing, Shanghai, Chengdu and Guangzhou, we are sensitive to the needs of companies in different regions. We have been further strengthening the staffing resources in these units and we recruited the head for the Investment Promotion Unit in Beijing last year,” says Victoria Tang, Associate Director-General of InvestHK. In the past three years, staff of InvestHK visited seven provinces as part of the “Get Set, Go” program, which was launched in partnership with the Ministry of Commerce and the Economic Affairs Department of the Liaison Office of the Central People’s Government in the Hong Kong SAR. The provinces include Jiangsu, Zhejiang, Shandong, Sichuan and Fujian.

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InvestHK has identified these provinces as the fast-growing areas with a high concentration of privately owned enterprises. “In the coming years, we will focus on inland cities, including Suzhou, Hangzhou, Ningbo, Wuhan, Dalian and Nanjing. We will also hold more sector-specific workshops to meet the development needs of the companies. InvestHK also plans to further enhance its ‘after-care service’ to companies already set up operations in Hong Kong,” she says. The “Join Hands with Hong Kong in Going Global” launched by InvestHK aims to encourage Mainland enterprises to leverage the comparative advantages of Hong Kong and the Mainland to develop the international market for infrastructure projects. The campaign was kicked off with a forum last month. “We have brought together around 150 Mainland Companies and over 70 Hong Kong corporations and professional associations. In this ‘Going Global’ program, we have adopted a sector focus on construction and project management,” says Tang. “ “Apart from the exchange of the Hong Kong and Mainland companies throughout the forum, we have arranged site visits to several infrastructure projects, including the Central-Wanchai Bypass Development Phase Two ‘trunk road’. It should be valuable experience for Mainland companies to find out how they can forge collaboration with their Hong Kong counterparts.” Hong Kong’s well-developed research capability has also helped attract Mainland investors. In the innovation technology industry, InvestHK has helped Beijing Genomics Institute – one of the world’s premier genome sequencing centers – establish its Hong Kong operation through its Guangzhou Investment Promotion Unit and the Innovation and Technology Unit in Hong Kong. “Apart from its research capability] Hong Kong has the advantage of the rule of law and the intellectual property rights protection,” says Tang explaining why Beijing Genomics has chosen Hong Kong for its research lab in 2008.

Private Equity Powers

Economic Growth

K O Chia

ditor’s note: On January 26, K O Chia, President of Hong Kong Venture Capital & Private Equity Association, gave a talk to a packed audience at one of the AmCham events jointly hosted by the Trade and Investment and Entrepreneurs Committees. Chia, a veteran in the private equity industry, gave an insider view of the PE markets in Hong Kong and Mainland China. He talked to biz.hk after the presentation and the following is an excerpt of the interview

biz.hk: What are the conditions for Hong Kong to become a funds hub? Chia: There are two aspects of a funds hub. The first is that it is a hub for the source of capital in the sense that governments and institutions would invest in [these funds] as an assets class. Today, if you look at the insurance companies, university endowments, they are not allowed to invest in this high-risk [sector] in Hong Kong partly because of regulations. Today, Hong Kong Monetary Authority is beginning to look at private equity as a sector [for investment]. In the past, traditionally there were zero assets there. In doing that, you are not just talking about the private equity industry but you are putting capital to work in that sector. A case in point, the Government of Singapore Investment Corporation is a huge government’s initiative that has been investing in private equity and venture capital globally. Hong Kong has never done that. So this is one of the key areas [for a funds hub] and government institutions are beginning to look at this sector. The second is looking at the laws and regulatory situations, tax structure and all the foundation structures, and how they can all come together as one platform. One city [we] really should look at is Boston. If you are a fundraiser and if you don’t go to Boston, you don’t get access to the source of capital. Boston and New York are very close. So, that’s the kind of

phenomenon I am talking about. In Asia, there is actually no apparent major source of funds hub. All our PE firms raise capital that’s foreign capital. So there is US endowment, US pensions, US insurance companies or European pension companies – all these are foreign. We don’t have indigenous source of capital. Now, if you look at China for instance. China Investment Corporation sees private equity as an asset class that it puts money into. Chinese government says that too. So this is already coming from the top because they see [PE] as a pillar for economic development and want to reap the benefits from. That’s a critical element that I think Hong Kong needs to look at if it wants to become a funds hub. biz.hk: What are the critical factors for that to happen? Chia: It’s the mindset. It’s also because we – private equity – as a sector are very small. We are just a drop in the bucket compared to the mutual funds, and other fund managers out here and they are much better represented. Understanding that PE can become an economic development pillar is critical. biz.hk: Hong Kong has designated creative and innovation industries as pillars of economic growth. Can PE help in this regard? Chia: Yes and no. Yes in the sense that

there is [PE] capital. There is also another scenario that I have highlighted earlier. One of the eco systems of the whole success of the PE industry is the availability of managerial talents who can scale companies on a global level. That’s lacking in Hong Kong. biz.hk: Doesn’t Hong Kong have a lot of world-class managers? Chia: No, we don’t. The world-class managers we have are mainly in sales and marketing. They’ve never run global companies. Their background are in sales and marketing, and they have only managed Asian or regional offices. They have never run a research and development house. They have never done product planning, let alone taking companies on a global level. These are different skill sets. biz.hk: One of Hong Kong’s attractions is that we have a large pool of people who come in and out of Hong Kong – the professionals you talked about. They are not necessarily home grown managers. Can Hong Kong just import managers that we need? Chia: Absolutely. This comes back to government policy. To most executives, looking at a location [to live] is really not just looking at purely from a work angle. It’s family, accommodation and school space – which is the biggest headache here. It’s looking at: is the environment

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ENVIRONMENT

Evan Auyang

Calling for Positive Engagement to

Solve Air Pollution Problems

By Daniel Kwan

AmCham submitted its response to the Government’s consultation on Hong Kong’s Climate Change Strategy and Action Agenda late last year. In the document, the Chamber outlines its views on what Hong Kong should do to address challenges posed by climate change and how it would work with the Government to achieve its targets. The response is drafted after in-depth discussions by the Chamber’s Environment Steering Group (ESG) comprising members from the Environment, Energy, Transport and Logistics, and Real Estate Committees. The paper examines some of the macro environmental issues and in particular underscores the Chamber’s concern about Hong Kong’s air quality problem. Evan Auyang, Deputy Managing Director of Kowloon Motor Bus and the Chairman of the ESG, talks to biz.hk about roadside pollution, steps taken by bus companies to cut emissions, and his views on what organizations like business chambers can do to shape the discussions and find solutions to the problems

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urely, Hong Kong has a serious air pollution problem. For 75 percent of the days as of mid-February, air quality in Central – as measured by the Government’s Air Pollution Index – exceeded 100, which is considered by some experts as the threshold for safety warning. For years, environmentalists, business leaders, and academics have urged the Government to take decisive actions to address the problems. On roadside pollution, lawmakers have pressed officials to accelerate the replacement of old buses and replace them with new ones that meet latest European Union emission standards – Euro IV or V. There are still about 1,700 buses on the road that conform to Euro I, meaning their particles emission is up to 18 times higher than the latest Euro IV or V models. Under the franchise agreements, companies would retire buses after 17 years on the road. To the Government’s credit, some improvements have been made but progress has, unfortunately, fallen short of most people’s expectations. Most often, it was criticized for its “carrot-butno-stick” approach in implementing air pollution control policies. Surveys by human resources companies have consistently painted a poor picture of Hong Kong’s air quality problem and how this has weakened the city’s competitiveness in attracting international talents. The blame used to focus on imported pollution from Guangdong. Today, even government officials admit that roadside pollution – mainly exhaust from heavy goods vehicles, diesel light goods vehicles such as mini-vans (see box), and buses – has become an acute problem affecting Hong Kong’s competitiveness.

Positive engagement Evan Auyang, Deputy Managing Director of KMB, openly stated that franchised buses are indeed a source of air pollution, especially on busy corridors. He further points out that despite being a polluter, bus companies can play a constructive role in solving the problem. He however stresses that solutions would only come from positive engagement and all stakeholders – not just the Government – must play their parts. Discussions and debates should be based on facts, not hearsay or half-truths. The Government, Auyang suggests, can achieve higher impact by engaging even more with businesses. Dialogue and incentives are more effective tools in getting results than arm-twisting or exerting pressure. “While the Government does speak to businesses, there should be even more consultation when designing practical solutions. After all, the business community

Breakdown of RSP & NOx contributors in Hong Kong by transport type RSP contribution

NOx contribution

by type of ground transportation

Public non-franchised & private buses 6 Public & private 6 light buses Franchised buses 6

Heavy goods vehicles 23 Diesel light goods vehicles**

100% = 1,600 tons * Including petrol light goods vehicles ** Including diesel private cars

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Taxi Public non-franchised & private buses 6 Public & private 7 light buses

53%

2008 EPD data

Petrol private cars* Motor-cycles

Taxi

Source: EPD

by type of ground transportation

Franchised buses

54%

Diesel light goods vehicles**

Heavy goods vehicles

100% = 20,000 tons * Including petrol light goods vehicles ** Including diesel private cars

has a stake in it,” Auyang says. “Sometimes, companies like us are genuinely concerned about air pollution because we are the largest bus company in Hong Kong and being socially conscious and responsible is essential for business sustainability.” “Look at our board composition and we have quite a few ex-senior civil servants who are genuinely concerned about air pollution in and of itself which is not just about CSR,” he says. “In addition to ensure sustainability of our business, we’ve got to contribute to improving air quality and this is a clear priority for us.” “We have highly skilled engineers who possess the expertise to propose pragmatic solutions to drive better environmental performance. For example we are now exploring a number of electric, zero-emission technologies. So I don’t see why we can’t speak more about our views on solutions that we feel work for everyone.”

Sustainable solutions

In assessing different solutions, Auyang points out that the discussions should focus on sustainable and commercially viable measures. The yardsticks for measuring the effectiveness of a solution should be based on facts and science. For example, the popular notion that the best solution in improving bus emissions lies in replacing all lower Euro standards buses with higher Euro standard buses should be more critically examined. Currently, the Government is working with the bus companies to implement a quicker and more cost-effective solution in retro-fitting Selective Catalytic Reduction devices on buses which would elevate their emission standards in both Particulate Matters (PM) and Nitrogen Oxides (the two primary roadside air pollutants) to Euro IV standards. Auyang says that as at the end of 2010, nearly all below Euro IV KMB buses have been fitted with Particulate Filters, which means the entire KMB fleet already performs at Euro IV standards or above for PM emission. Moreover, Auyang reckons that the wholesale replacement of the bus fleet with newer diesel technology is not sustainable. In 2013 or 2014, the new Euro VI technology would become available, and this would produce 80 percent less NOx than the latest Euro V engines. Therefore, recommending that Hong Kong replace all buses with Euro V now may not be a long-term solution when Euro VI is just around the corner. It makes sense to take upcoming technologies into account when considering the speed of replacing the old buses. In Auyang’s view, the “bet” on a sustainable bus fleet replacement strategy lies not in diesel but in electric, which produces zero roadside emissions. Not so long ago, deploying the pure electric bus for mass transport was more like science-fiction. Now, many first and second tier cities in Mainland China have already extensively deployed electric buses as public transport. These come in various forms such as battery, supercapacitor or electric-hybrid. “The reason China seems to be way ahead of developed countries in electric bus technologies is because of the Chinese government’s massive investment into developing world-class electric vehicles,” says Auyang, who noted that Mainland China is now facing a serious air pollution problem given its rapid urbanization. These buses are considered suitable for Hong Kong given the city’s density and short distance of travel. “That’s why in KMB’s view, it’s actually important that we quickly move towards electric [buses],” Auyang says. “We [KMB] have recently written proposals to the Government to ask for support in deploying commercially ready electric buses on actual routes. As we cannot do it all alone, we have asked for funding support from the Government. Our view is, if we are betting on something, we better bet on electric.” KMB is currently testing a zero-emission super-capacitor bus and is optimistic about its feasibility of adoption in Hong Kong. When fully charged, the bus can run continuously for five kilometers with air-conditioning. And unlike trolley buses, super-capacitor bus does not require an extensive network of continuous overhead cables to operate. The bus has been in use in Shanghai for four years and a few US cities

are discussing importing the technology for trial use. In Canada, Montreal has already ordered a fleet of super-capacitor bus for commercial deployment.

Chamber business

Auyang, who joined KMB about a year ago, says he certainly shares the frustration of many people about air pollution in Hong Kong. He himself suffers from an eye allergy due to bad air, and says that he had considered not returning to Hong Kong when he was in the US 10 years ago because of Hong Kong’s poor air quality. But in discussing solutions, he nevertheless cautions that any solutions must be economically sound to be sustainable. “There is a lot of room for businesses, even bus companies, to be greener and do well at the same time. Businesses do have a lot of energy to drive change and we should leverage this energy,” says Auyang. He points out that although roadside pollution remains most immediate and real to most people, imported pollution should not be overlooked since Hong Kong is next to a huge manufacturing center within the Pearl River Delta. Hong Kong could obviously do what it can locally, but air quality can still be poor if the city fails to work together with Guangdong cities to reduce pollution across the border. “Whenever I spent any extended amount of time outside of Hong Kong and then come back, I tend to have eye allergies which sometimes need doctor attention. I don’t think that’s just roadside pollution, but a general air quality [problem],” he says. “Roadside is a huge issue but Hong Kong cannot just focus on roadside [pollution] either. It needs to clean up on all fronts., The solution must be multi-pronged and not focused on just one particular issue or sector.” In his view, Auyang says business chambers can play an active role in facilitating discussions by focusing on business solutions which are practical and fact-based. In addition, businesses in Hong Kong are blessed with large pools of professionals and experts – engineers, former scientists, financial wizards – who are smart and pragmatic problem solvers. Chambers can be the platforms for sensible dialogue and exchanges. Auyang says he understands that everyone is getting impatient with the perceived slow-paced progress so far. There is also ample evidence that expat families are leaving Hong Kong out of concern of air quality problems. But beyond creating awareness, Chambers such as AmCham should strive to play a constructive role to engage for all-round solutions backed by businesses. “You’ve got to focus and start to engage in a way that’s less skeptical. If we focus only on the negatives and ignore real constraints, it doesn’t help to engage and it drains energy from those who are genuinely trying to make a difference,” Auyang says. “To this end, understanding different stakeholder interests, political barriers as well as where the positive energy can be harnessed are critical to making a difference.” 2008

2007 Emissions Number Standard of Buses

Emissions (tonnes)*

Number of Buses

Emissions (tonnes)*

482

RSP 20

NOx 230

SO2 <10

<10

1344

680

<10

2695

920

<10

310

<10

1226

320

<10

Pre-Euro

609

RSP 20

NOx 280

SO2 <10

Euro I

1351

670

Euro II

2711

900

Euro III

1205

Euro IV

<10

Notes: # figures as at year end * rounded up to the nearest 10 tonnes

As at end February 2010, there were a total of about 5,800 buses from the various franchised bus companies in operation. Among them, about 2 300 or 40 percent were between 12 and 17 years old. The number of buses aged 12, 13, 14, 15, 16 and 17 years were 770, 390, 400, 350, 250 and 140 respectively.

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Main causes

here are many causes behind Hong Kong’s roadside pollution, but two stand out as the key culprits. One of which is the heavy traffic in some of our busy corridors and therefore one of the low-hanging fruits to solving the problem is by rationalization of bus routes, especially the duplicated routes on busy corridors. Little known is that while Hong Kong has one of the world’s most convenient and affordable subway networks, bus companies are made to run services parallel to the MTR due to demand from passengers and opposition from district councilors and legislators to reduce services. In Hong Kong, having a point-to-point service on buses is considered important for passengers. According to official data, the government proposed to cancel 24 routes and to reduce the service level of another 81 routes in the three years from 2007 to September 2009. During the “consultation”, the District Councils objected to 59 of them. The resistance to change is strong. Joanne Ooi of Clean Air Network wrote in her blog after witnessing one of the debates in the Legislative Council last year: “Every LegCo member with the exception of Miriam Lau (Transport Constituency) made the point that it was unacceptable for service and routes to be cut unless bus passengers were given significant incentives to accept the resulting inconvenience. By ‘significant’, Kam Na Wai cited an example which suggested that an average fare concession of 25 percent would be reasonable if a bus rider was forced to make a transfer and wait an additional 15 minutes because of changes resulting from rationalization. By the same reasoning, any fare increase would be ‘totally unacceptable’, said Wong Kwok-Hing. The plight of the grassroots bus passenger was underscored by Wong and Andrew Cheng Kar-Foo. The former pointed

out that these bus riders, who customarily spend hours every day commuting, were loath to give up point-to-point service because it would deprive them of, say, their ability to nap during the trip.” The second key contributor to the roadside pollution problem is Hong Kong’s large pool of heavy vehicles and diesel cars. They together contributed 76 percent of the Respirable Suspended Particulates (RSP or Particulate Matters, “PM”) and nearly 70 percent of nitrogen oxides (NOx) emissions from road transport in Hong Kong, according to Environmental Protection Department data in 2008. Even though franchised buses are a key source of pollution on busy corridors, they collectively produced only six percent of the RSP output. Therefore heavy vehicles like trucks and light vehicles such as mini-vans actually deserve even closer scrutiny. The Government is plainly aware of the shares of responsibility. It introduced a voluntary scheme in 2007 to encourage owners of pre-Euro or Euro I vehicles to scrap their old trucks and replace them with new ones which comply with Euro IV emission standards. The scheme subsidized the owners by 12 percent and 18 percent of the replacement cost respectively. Pre-Euro diesels are up to 34 times more polluting than Euro V’s. When the scheme ended in March last year, 23 percent of the pre-Euro vehicles (9,142) and 21 percent of Euro I vehicles (4,230) were replaced. The scheme only had a limited success, spending only 18 percent of the HK$3.2 billion the government earmarked for the program. The Government refused to extend the scheme when it expired last year despite demands from the industry and lawmakers. Instead, it introduced an upgrade to encourage replacement of Euro II diesel commercial vehicles. The new scheme – also voluntary – provides grants of $17,000 to $203,000 to owners who replace their old vehicles with Euro IV standard ones. Although officials stress that they fully support the replacement of old diesel vehicles, the new scheme only targets 26 percent of the Euro II vehicles – a percentage chosen apparently based on the relatively low take-up rate from the previous scheme – and is not mandatory despite strong calls from environmentalists. In the same spirit, the Government has offered to fully fund retro-fitting of all Euro II and Euro III franchised buses with Selective Catalytic Reduction devices under a trial program currently underway.

Evan Auyang

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ENERGY

Committee’s Decade Long Success Story AmCham’s Energy Committee celebrates its 10th anniversary in February. Colin Tam, a pioneer in the industry and one of the founding members of the committee, shares with Kenny Lau his career, the energy market and its future, history of the committee, and its recent visit to Gansu Province

hen member states of the Organization of Petroleum Exporting Countries (OPEC) imposed an oil embargo on the US in 1973, Colin Tam witnessed firsthand the impact of the energy crisis of the 70s. He was a young electrical engineer at American Electric Power in the midst of a severe shortage in oil supply during those years, which led to rising prices of fuel and an unprecedented disruption in the energy market. With more than 30 years of experience in the energy business, Tam is now an industry veteran who has a thorough understanding and broad knowledge of the industry and regulatory environments in the US and Asia. “I have always been with the energy sector since I got out of school,” he recalls, noting a career spanning from large public utilities franchises and chemicals companies to forming private enterprises.

A life-long career Tam is particularly passionate about energy infrastructure assets in emerging markets around the world. As CEO of AEI Asia, he looks after business activities including thermal and wind power generation, natural gas distribution, and water desalination facilities across Asia. Prior to joining AEI, Colin Tam founded Meiya Power Company, a leading foreign independent power producer (IPP) company with a gross ownership of over 10,000 megawatts installed power generation capacity. During the decade-long entrepreneurship, the company became the largest North American-based investor in China for power generation and more than doubled in total shareholder value by 2007 since it was established in 1993. In addition to various senior executive roles in the energy industry, Tam has become an advocate for a responsible and efficient energy market. He is a co-founder and chairman of the Independent Power Producers Forum (IPPF), a network of over 600 senior executives involved in the IPP business in Asia with the primary objective of providing a "voice" for the IPP industry for policy decision makers across the continent.

Colin Tam

Making a difference When the US Congress was debating in the mid-1970s on a law in response to the energy crisis of the decade, Tam was an active participant supporting the proposed major changes in the direction of national energy policy. The new law was meant to secure a more stable, efficient, and competitive energy market through domestic legislative measures. “It was a vital piece of legislation, particularly important to industrial companies that relied heavily on energy to manufacture their products,” he points out. “I was active in promulgating the required regulations since the passage of that law representing the industrial consumers in the 1980s.” Upon passage of the National Energy Act of 1978, Tam testified in regulatory proceedings as an expert witness on behalf of Industrial Energy Group (IEG), a trade organization for the energy and petrochemical sectors, in favor of the Public Utility Regulatory Policies Act (one of the five laws under the 1978 Act). Tam was the Chairman of IEG in 1986. The law aimed to deregulate the US utilities sector by disintegrating regulated, monopoly electric utilities and allowing other more efficient, independent power producers to take part in the value chain. “Before the law, a power company in the US generally had a franchise providing electricity to retail consumers in a particular market with power plants, transmission networks and distribution rights,” Tam notes. “What the law did was to allow power generation to be a competitive business where you could auction and buy electricity at the wholesale level.” The new law was to introduce competition to an industry traditionally owned and operated by either governments or entities with monopoly franchise and create market-oriented business practices from which consumers could benefit. “In a regulated scheme, utilities companies don’t have much incentive to be efficient and are more reluctant to take calculated technology risks that could lower the cost of energy supply,” Tam says. Passage of the 1978 law brought US electricity costs down. “That was a new model, first in the world,” Tam says, noting the phenomenon of deregulation also took place in Europe, where the

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UK government privatized the power supply industry some years later.

Energy Committee

friendly and efficient energy technologies and government policy. The committee is now focused on renewable energy and business opportunity in supplying emerging markets with green technology and equipment as well as investment, in line with US President Barack Obama’s National Export Initiative and US Secretary of Commerce Gary Locke’s promotion of US green technology in meeting global energy needs.

As Europe started to uptake privatization, Asia also “began to catch the fever” in the 80s and 90s. That’s when Tam repatriated to Hong Kong to develop business in China for Air Products & Chemicals, a multinational corporation for which he was Head of Electricity and Fuel Supply, responsible for worldwide power and oil purchasing as well as the energy conservation program of the The global energy market is faced with the challenge of sustaincompany. ability, Tam stresses. “The biggest issue in the energy sector is how “Energy was a big thing at that time as the industry in Asia was the world can come up with a sustainable policy and approach to in a transition from a national provide the ever-increasing need of monopoly to privately-owned but energy for economic development.” regulated enterprise, most notably in In spite of recent technological Australia and New Zealand,” he says. breakthrough over energy conservation “In the process of privatization, there and efficiency allowing Western were many debates about what business countries to consume less energy per models to adopt.” unit of GDP while expanding GDP “American companies came to Asia growth, global demand continues to to participate in the need for new power “shoot up” at a rapid pace. It is because generation in the region, often in single of emerging markets. “China and India capital-intensive infrastructure investare growing fast, but their per unit GDP ment worth billions of dollars,” Tam energy demands are much higher than says. The influx of US companies their developed peers,” Tam points out. looking to invest in the region amid “Energy efficiency is an area where deregulation was the reason for the China has to improve in the longer term official formation of the Independent if it wants to maintain its economic Power Producers Forum (IPPF), which growth miracle of the past decade.” then led to the creation of AmCham’s In meeting its growing energy needs, Energy Committee 10 years ago. China is going by the conventional way In celebration of the 10th Anniversary of “I was involved in the original of sourcing more supply of fossil fuel, AmCham's Energy Committee: member launch of the IPPF in December 2000 namely oil and coal. “They are going all Dominic Yin, left, committee chair and appointed as its founding Chairover the world from Africa to Latin Sean Purdie and vice-chair Grace Lam man,” Tam recalls. “At that time, America, from Russia to the Middle then-President of AES-Transpower Bill Ruccius and the newly East to do that,” Tam notes. “But they also realize they can no appointed IPPF Secretary General Joel Laykin initiated meetings longer rely only on conventional coal-fired power plants, and they with the leadership at AmCham to explore the possibility of an understand the need to push for energy conservation and efficiency Energy Committee.” and to focus on wind-, solar-, hydro-, and nuclear-powered energy. “AmCham governor Frank Lavin, who was Chair of the “To do that, they need new technology, and the US can provide Business Expansion Committee at the time, gave his support and a lot of that,” he adds. “The US and Europe have the technology approval in tandem with Frank Martin (former AmCham that can be applied to vast markets like China and India. And that’s President),” he adds. “Frank cleared the way for the immediate where AmCham can come in, bringing the US green technology launch of the Energy Committee on January 17th 2001. Ruccius community and emerging markets together.” became its first chair and served for several years while I took over The fact that China looks to become a low-carbon economy and the Chairmanship in 2004.” continues to explore in the field of renewable energy presents a The committee is a platform for executives in the energy tremendous opportunity for US companies. They can supply business to promote a favorable business environment for US equipment and technology as well as investment in infrastructure. investment in the region, Tam points out. “That was the primary As China is investing heavily to develop renewable energy goal of forming the committee, and AmCham had played a very resources, AmCham is poised to play a key role in bridging the two significant role in that regard.” sides for economic cooperation. The Energy Committee today remains a platform for AmCham members to share information and exchange views about energy issues, stay abreast of industry trends and developments, and network with other industry players. Last November, AmCham’s Energy Committee led a delega“The energy sector is always changing in forms of new regulation to tour wind- and solar-based power projects in Gansu tion and government policy, and not everybody can keep up with Province and meet with local officials to learn about the history what goes on all the time.” Tam says. “The committee is to create a and policy of China’s western frontier development program. Led forum for people interested in learning trends and news about the by Tam, delegation included representatives from US companies energy sector.” and members of the Independent Power Producers Forum. “It is also a platform where you have a chance to let the govern“Gansu Province is very remote and distant but it is part of an ment know what you think,” he adds, noting the committee as an area with rich resource deposits. Gansu represents the beginning advocacy group reflects positions of the industry on regulatory and of the western resources landscape. It is rich in natural resources other energy-related issues, particularly those on environmentally like oil, gas, wind, and solar,” Tam notes. “It has the largest and

Sustainable future

Gansu success

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oldest oil refinery in China and is one of the most important centers for the aerospace and defense industry.” “Gansu has a very unique and important position in China’s “Go West Program,” he adds. “It has been regarded as the stepping-stone in policy of western frontier development. A reason we chose Gansu is because the area has been designated for the development of renewable energy in the Western frontier.” Because of its ideal geographic location, Gansu is one of the four major development centers for windand solar-powered energy, Tam points out. “It lies within the wind belt that extends from Xinjiang to Qinghai and Inner Mongolia, and all the way to Jilin, crucial for the development of wind-powered energy.” Gansu is also personally significant to Tam since he is the first American to invest US$100 million in the province in the first US-Sino partnership for a 2x300 MW power facility in 1994. Jiuquan City is now a location where three of the world’s top five wind turbine manufacturers have set up assemble plants. “During the trip last November, we had briefings from an array of people including officials from the local government and local industry groups. A former executive governor escorted us to visit some of the wind and solar installations in addition to historical sites such as Dunhuang,” Tam says. “Not only did the government provide essential information, but participants also established a good network of business relationships.” Four participating companies are now having business discussion with potential partners in Gansu. The combined business scope could be as high as US$4 billion in total investment, Tam points out. “This definitely highlights the value-add AmCham can provide.”

“Energy efficiency is an area where China has to improve in the longer term if it wants to maintain its economic growth miracle of the past decade.”

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Gansu

Former Execu tive Vice-gover nor of Gansu Province Guo K un, left, and C olin Tam

YCIS is Recognised for Global Vision As educator Yew Chung International School (YCIS) provides the setting for children to achieve a truly international and global mindset, enabling them to become our future leaders. The process ideally begins during the early stages of their childhood, equipping them with all they will need in a global learning environment.

By Cathy Ben-David

YCIS nurtures students to be bilingual, global minded and caring global citizens

hese days when we open a newspaper or switch on the television, we are exposed to stories and issues from around the globe; the generations preceding us could never have imagined such access. To be successful in the new globalised world, we need to be forward-looking and develop a global mindset to prepare our next generation. The mere fact that more and more employment, business, investment and students’ studies commonly involve stepping out of our homelands and into the “global village” proves the transformation our world is undergoing. An article published in Newsweek magazine in June 2010 focused on the changing world suddenly requiring a new type of professional; “As emerging markets take off, soft skills that were previously seen as gloss on the CV – adaptability, foreign language skills, ease in other cultures – have suddenly become part of the core Job Descriptions of top managers. …Companies now speak of the ideal manager as the perfect combination of East and West.”

Why Global Education? Global education is a word very much used nowadays to promote third culture learning for children who are often not living in their

native country. Global education is a process by which we hope to encourage children to gain a greater understanding of the world around them so that they can easily and effectively adapt to whichever country they move onto. To ensure this becomes a reality at YCIS she continuously researches the curriculum content to ensure these expectations are met. The content and subject matter of the curriculum will extend far and wide; jointly enabling the student to achieve the learning goals whilst expanding their global knowledge. “International” should mean the understanding of cultures.

Language is the Key to Global Success

Today more and more schools are realising the value of Chinese language, with English and Chinese being the two main languages of the world. Research proves that the early years of a child’s development (from zero to eight years old) are crucial for potential growth. Various aspects of their lives including personality, intellectual development, sociability, critical thinking and communication depend upon the materials and opportunities. YCIS classes start in Early Childhood Education (ECE) with a 50% English / 50% Chinese language

based programme. Bilingualism is also adopted in the Primary Years, where students are submerged with 75% English and 25% Chinese. The Co-Teaching class has two fully qualified Co-Teachers, one native English speaker and one Chinese; YCIS is the pioneer for “Co-Teaching” whereby the students’ welfare is overseen by both teachers, communication quickly becomes comfortable with either language. Through language a young person can swiftly implement social awareness and understanding too. In May 2010 Dr. Betty Chan, the Director of YCIS, earned the prestigious title honorary degree of Doctor of Humane Letters from the University of Illinois in USA; the university acknowledged that Yew Chung International Schools, staffed by both Chinese and Western professionals, utilizes curricula that embraces both Western and Eastern cultures. In a recent interview Dr. Chan was asked,

“What are the characteristics of students who receive a YCIS education?” “Firstly all of our students study two languages English and Mandarin Chinese. As these are the two most widely spoken languages in the world it means our graduates can communicate with the majority of the world’s population. Secondly our students receive a strong character education and engage in community service which teaches them to be responsible world citizens, with a strong moral outlook being able to respect people from all cultures. Lastly our students are taught by the highest quality teachers who make them academically strong. Therefore, our students are globally minded, socially aware and have the knowledge and study skills to reach the top positions in their chosen field.”

An education feature brought by YCIS

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2 • 2011

TRADE & INVESTMENT

The Winner Goes to …

FILMART By Daniel Kwan

If you are an executive in the film and entertainment business, your calendar for March and April is likely to be very full. The Entertainment Expo Hong Kong – Asia’s leading entertainment industry gathering – is due to kick off in about three weeks’ time. From March to April, film producers, investors and bankers, buyers and sellers, artists and movie stars, and film buffs will converge in the city for events including trade show and workshop, festivals, and awards. One of the highlights is FILMART which now ranks together with Cannes and the American Film Market as the world’s top three trade fairs. According to organizers, FILMART 2011 is expected to see another record year of attendance

f Angelo Bell – an independent film producer in California – has his wish, he will be visiting Hong Kong soon. With a little bit of luck, he may even see one of his dreams come true. No, Bell is no ordinary American tourist and he probably won’t go shopping on Nathan Road or in Causeway Bay. Instead, he will be mingling with the more than 5,000 visitors from around the world at the Hong Kong International Film and TV Market (FILMART) – Asia’s premier tradeshow for the film and television industry. Bell wants to make an epic martial arts fantasy he names “Legend of Black Lotus” – and is looking for partners and financing for his project. He hopes his story which has a Chinese angle will find sympathetic ears in this part of the world. When he attended the American Film Market (AFM) in the US, he came across several production companies from Mainland China and Hong Kong. Eager to meet up with his potential partners, Bell pins his hope on FILMART. Fortunately, he receives a much-needed boost from the Hong Kong Trade Development Council which granted him free hotel stay and access to the tradeshow. What he needs now is the air ticket to come.

“If my campaign isn’t funded I won’t be able to take advantage of a huge opportunity that was the culmination of months of hard work,” Bell says on YouTube to appeal for funding support in February. “I need to be in Hong Kong.”

Top three FILMART which opens on March 21 is one of the anchor events of the Entertainment Expo Hong Kong (see box). Since it was established 15 years ago, FILMART is now widely recognized as one of the top three trade fairs for the film industry worldwide, ranking alongside Cannes in France and the AFM in the US. Raymond Yip, Assistant Executive Director of HKTDC, says FILMART has come a long way and is now widely recognized as the Asian platform for trade and deal-making in the industry. When FILMART was launched in 1997, only 75 exhibitors and about 500 visitors came. Last year, the turnover jumped almost 10 times, with 548 exhibitors and about 5,000 participants. “The comment we used to hear back then was there was no need for an Asian market because whether you want to buy or sell, you either go to Cannes in France, or to Santa Monica in Los Angeles,” Yip says.

“We firmly believed at that time that the Asian market would come of age one day and by then, sellers and buyers would come to Asia.” “Time has proven that we are right. We have managed to change the ecology of the film industry,” he says. “Now, western filmmakers – if they want to promote in Asia – they will come to the FILMART in Hong Kong.”

China phenomenon The rapid growth of the Asian markets – China in particular – is clearly the key driving factor behind the change. Box office sales in China have set records year after year. China Daily reported in January that moviegoers in China last year bought tickets worth RMB10 billion, up from RMB6.2 billion in 2009. Although China’s market is still small compared with the US (box office sales there totaled US$10.6 billion in 2009), its momentum seems to show no sign of slowing down. According to the same China Daily report, China on average adds three new theatrical screens each day, bringing the country’s total to 5,690 screens in about 1,800 cinemas. This explains China’s insatiable appetite for entertainment content material.

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Raymond Yip

Although China has an import quota of 20 western films each year, the country has a large television network and the demand for television documentary is huge. Naturally, Mainland buyers and financiers find FILMART an ideal venue to meet producers and directors. For example, big players who will come this year include the China Film Promotion International (CFPI), the China International TV Corporation (CITVC) and TG Film & TV Program Net. In addition, the prospects of co-production are on top of many western producers’ mind. Of the top ten blockbusters in China last year, eight are co-production projects with Hong Kong’s involvement, according to Yip. “If you work with a Hong Kong partner, you stand a very good chance of making your film into a blockbuster,” he says. Yip points out that Hong Kong enjoys the unique advantage of being well-positioned and blessed by a large pool of filmmakers and professionals who are

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recognized internationally. “In the creative industry, we believe that we understand the Mainland market better than our counterparts overseas. We also understand the overseas market better than our Mainland counterparts. This is the strength of Hong Kong and we are the bridge between the two sides,” he says. In fact, co-production will be a focus for FILMART 2011. A four-day “Co-production Lab Hong Kong” workshop featuring panel discussions, individual pitching, consulting sessions, market presentations and advice from experts is included. The program is organized by Ateliers du Cinema Europeen (ACE) and Sinapses Asia, with support from HKTDC, the Hong Kong Asia Film Financing Forum (HAF), and other organizations including the European Union’s Media International.

“Having a USA Pavilion will help the small companies because it will help to raise the profile of their presence and make it easier to support them.” USA Pavilion HKTDC is confident that FILMART 2011 will set another record in attendance. First, the trade promotion agency is mobilizing its 11 offices in Mainland China to bring buying groups to Hong Kong. Secondly, the event will for the first time include a pavilion for exhibitors from the US. The pavilion, the first US pavilion at FILMART, will be subsidized by the International Trade Administration (ITA) of the US Department of Commerce (DOC) through its Market Development Cooperator Program (MDCP). “Having a USA Pavilion will help the small companies because it will help to raise the profile of their presence and make it easier to support them,” says Eric Crowley, US Commercial Consul of the US Consulate General in Hong Kong and Macau. “There will be a lounge in the USA Pavilion that companies can use for business meetings and for us to provide counseling services and other types of support services,” he adds. The Commercial Consul says US commercial missions last year recruited about 100 buyers in the region to participate in FILMART. He expects a similar turnout this year. According to Crowley, it is not the first time the DOC has approved the MDCP grant to support US companies to exhibit in Hong Kong. Eco Expo Asia – a trade fair on clean energy and new environmental technology held last November – was the first beneficiary. The MDCP is one of DOC’s strategies to implement President Barack Obama’s National Export Initiative (NEI). The NEI – announced by President Obama in January last year – aimed to double US exports in five years and create 2 million US-based jobs. In November,

HKTDC signed the Pacific Bridge Initiative (PBI) with DOC, becoming the first foreign government agency to enter into a formal agreement with the US to support the NEI. Crowley says that the film and creative industry is one of the nine target sectors identified under the PBI for special support and that the Commercial Service will make use of trade shows, seminars and conferences, and media out-reach to support US companies to achieve the export targets. The other sectors include licensing services, education, and food and beverage. Under PBI, HKTDC will promote not only its own events but also trade shows in Hong Kong that US exporters may participate, Crowley says. “As a quasi government organization, HKTDC understands on a macro level the importance of promoting Hong Kong as a platform [for trade] so they will not just promote their own events but also events that are organized by other private sector trade show organizers,” he explains.

Film financing One of the attractions of FILMART is that the tradeshow is held alongside a host of events including the Hong Kong - Asia Film Financing Forum (HAF) which brings Asian filmmakers with their film projects to Hong Kong for co-production ventures with film financiers, producers, bankers, distributors, and buyers. Past participants of HAF include many of Asia’s top filmmakers such as Jiang Wen and Zhang Yuan from Mainland China, Tsai Ming-liang from Taiwan, Peter Chan and Stanley Kwan from Hong Kong, Brillante Mendoza from the Philippines, and Bong Joon-ho from South Korea. Many of their projects have won awards in international film festivals in recent years.

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An increasing number of financiers from Mainland China are participating in HAF. According to official data, last year saw a 10 percent rise in the number of film financiers from China. In 2010, the three-day forum helped arrange 500 private meetings between producers and directors and would-be co-production partners, up about 10 percent from the 468 meetings taken in 2009. “Through the financial forum, we help film projects to find investors,” Yip of TDC says. “I can tell you that many of these blockbuster films get their financing from the film financing forum.” One of the movies that benefited from HAF, Yip recalls, was the 2004 box office hit – Crying Out Love, In The Center Of the World – by Japanese director Isao Yukisada. FILMART’s prospect looks promising, says Yip.

“Once you’ve got people converging in Cannes or AFM, you are half way to success,” he says. “In spite of our short history, we are getting bigger and better in terms of attendance and we are coming closer to those world’s events.” “Film is an industry of people. At the end of the day, you need the players to converge,” Yip says. “It’s not only the film producers or distributors. You need the directors, investors and the different industry players to converge. This is what we are trying to do [in FILMART].” “FILMART is the Asian solution to Cannes and the AFM … We have turned the whole equation around and buyers and sellers are coming to Asia and Hong Kong.” For those who are curious: yes, Bell will come to FILMART. He has scored a winner raising US$1,500 in just seven days.

The seventh Entertainment Expo Hong Kong takes place from March 21 to April 17. This year’s Expo will consist of 10 major events covering a global mix of film, TV, music and digital entertainment. These 10 events are: 1) Hong Kong Independent Short Film & Video Awards (ifva) (16 - 20 Mar) 2) The 35th Hong Kong International Film Festival (HKIFF) (20 Mar - 5 Apr) 3) Asian Film Awards (AFA) (21 Mar) 4) Hong Kong - Asia Film Financing Forum (HAF) (21 - 23 Mar) 5) Hong Kong International Film & TV Market (FILMART) (21 - 24 Mar) 6) The 4th Digital Visual Effects Summit (22 Mar) 7) Hong Kong Asian-Pop Music Festival (HKAMF) (23 Mar) 8) IFPI Hong Kong Top Sales Music Award (IFPI TSA) (25 Mar) 9) Pixar: 25 Years of Animation (28 Mar - 11 Jul) 10) The 30th Hong Kong Film Awards Presentation Ceremony (HKFA) (17 Apr) An official Gala Opening will be held on March 21 to kick-off the month-long expo.

Rita Lau, Hong Kong Secretary for Commerce and Economic Development, joins HKTDC Executive Director Fred Lam and Peter Lam, Chairman, HKTDC Entertainment Industry Advisory Committee, along with representatives of the 10 major expo events at a press conference held on February 16.

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The Sweets and Sours

of Film Co-production

any film buffs can still remember the scene where Batman jumps off from the International Commerce Centre tower in Kowloon in the blockbuster, The Dark Knight, four years ago. The movie won universal acclaim and was a box office success. Hong Kong also shares a bit of the limelight with the breathtaking harbor views captured in the movie. Chu Chen On, Executive Producer of October Pictures, was actively involved in the co-production of The Dark Knight, one of his many other international projects. He talks to biz.hk about the benefits and challenges Hong Kong’s film industry faces biz.hk: Can you tell us something about your company, October Pictures? Chu: We are a production service company. Moviemakers often go to a lot of places to make movies. Areas we service are usually Hong Kong, Mainland China and Macau, and we have offices in Beijing and Seoul. Since the moviemakers cannot always bring their own teams when they film abroad and only key members of the crew can go, they need the support from local companies. So we are like their guides, assisting them in hotel accommodation, filming, finding locations and local casting. Our clients are not just the studios. They can be commercial producers from around the world. biz.hk: Do major studios also require your services? Chu: They do. Most of our clients are the major studios. We have just finished the project with Contagion with Warner Brothers Pictures. The Dark Knight is also with Warner Brothers. We also work on

pictures with Paramount, Universal and Fox. They need services from local companies. One of the reasons is that they have very big crew and shooting time is tight. They have significant running cost every day. The filming schedule usually is very packed and this requires very efficient coordination and organization. biz.hk: What’s the average size of their crew? Chu: Usually it is about 50 to 60 people. The total will be about 200 to 300 people after you add the local staff. This is considered big by Hong Kong’s standards. biz.hk: Does it mean that small and independent producers will even need more support from companies like yours? Chu: Yes or no. Yes, they do. It’s true that the small studios may not be able to a lot of things themselves. They however may have a much lower budget. biz.hk: People talks about co-production

a lot and how Hong Kong is expanding by targeting the Mainland market. What are your views? Chu: I have expressed the worry in previous interviews that when we are all making movies in China and targeting the Mainland market, how should we – the Hong Kong film industry – position ourselves? Our edge is that we are very flexible and we have international talents. We can provide financing and a well-established financial system. At present, we are not making full use of this because the Mainland market is gigantic and they have enough funds for financing. I am concerned that our industry is not developing. My worry is that more and more of our people have moved and worked in China, there is less and less work in Hong Kong. In Los Angeles, their film industry accounts for about 20 percent of their economy. I asked the Hong Kong Development Fund how much the Hong Kong film

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industry contributes to the economy – the answer is only four percent. Put this differently, you may argue that Hong Kong can live without a film industry! My worry is that as we make more and more movies for the Mainland market, the day will come that we may not need Hong Kong movies anymore. Have you noticed that all those big budget movies released during the Chinese New Year are all in Mandarin and not in Cantonese? In a few years’ time, what jobs can we offer our young people who want to join the film industry? We won’t have any junior positions through which they can learn and polish their skills anymore. Since much of the production is now in Mainland China, we have eliminated a lot of the junior positions. biz.hk: There are co-production projects directly between China and US companies. The Karate Kid, starring Jackie Chan and Jaden Smith last year, is an example. In other words, Hong Kong does not necessarily have a role to play. Chu: It’s true. It depends on what markets they are targeting.

came to us two years ago in FILMART and the movie was produced last year. It was submitted to Oscar for nomination for Best Foreign Language Film. It was not chosen at the end. biz.hk: Do you feel a sense of crisis in the industry in Hong Kong? Chu: I do. Many people do say that to me. A lot of our experienced crew members are now making movies in China. In some cases, foreign producers face difficulties to look for experienced crew when they are filming in Hong Kong. There are a lot of junior people in Hong Kong who are not yet capable of handling the job. For example, we have graduates from the Institute of Vocation Education and the Academy of Performing Arts. What would be the first jobs for these young people? They may become assistants. But how can they be assistants if their supervisors are all in China? For a producer or director in

China, why should he hire juniors from Hong Kong? biz.hk: At the same time, the market in Hong Kong is not big enough to support more local-based productions. Chu: There will be some projects such as what we’ve seen over the Chinese New Year. The number will be few. The reality is simple. Let’s say you are a young electrical graduate and you want to do lighting for movies. How many local projects in Hong Kong you may do in a year? Ten? biz.hk: For the average moviegoers, most people will not be aware of these challenges the Hong Kong film industry faces. Chu: True. Probably not too many people will notice how many Hong Kong people work in movies like Let the Bullets Fly. People will only remember that Chow Yun-fat is one of the stars in the movie.

biz.hk: In other words, it doesn’t matter what expertise Hong Kong can offer. Chu: It’s natural because you are not in the consideration. It is a question of what business model they want to take. biz.hk: So this also means that for co-production, Hong Kong should aim for a bigger market and not just Mainland China. Chu: It’s because we have a very international business model. Our legal and accounting system is world-class. We have free flow of capital and very friendly tax system. I may say these are really qualities that still make us competitive. We may not be able to claim that we have an edge in China. We can’t say we know the China market better [than locals] in doing business with government and other parties. We don’t have the connections they have. It’s true that on some technical areas, we may be a little advanced and we may teach some of the local staff how to do things or some new technology. They learn quickly. They probably don’t need us anymore after a few times. This goes back to my point that if we don’t train up our young people in Hong Kong [because jobs have been moved to China], then we won’t have a film industry anymore. biz.hk: Any example you can share with us? Chu: One example is this movie, Amaya, which we co-produced with Lativa. They

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AMCHAM BALL

g n i k a M e h t n i r a e of the Y l annual AmCham Bal d ne w no re e th r fo g eparin behind the scene in pr on es go t ha w of By Kenny Lau ok A lo

ach spring, hundreds of guests in formal attire gather for a grand evening of great dining and entertainment at the annual AmCham Ball. The Ball has earned a reputation of being one of the greatest social events in town from past years, and 2011 is no exception. “The AmCham Ball is unique in that it embodies the spirit of the American Chamber of Commerce in Hong Kong, a slice of America while embracing the Hong Kong flair for elegance and glitterati,” AmCham’s 2011 Ball Committee chair Kay Kutt notes. This year, the event will take place on Saturday, April 16 at the glamorous Four Seasons Hotel under the theme and mystique of the “Moonlight Masquerade.” The theme was chosen months ahead as the committee began consolidating ideas in preparation for the upcoming Ball. “This theme embracing ‘simple elegance’ was selected as it conjured images of mystery, elegance and romance,” Kutt points out. “It will be an elegant and lively evening.” As in previous years, guests at the AmCham Ball this year can expect an evening full of elegance and fun, Kutt says. “All in an environment where corporate entertaining, socializing, and lively dancing come together till the early hours of the morning,” she adds. “Without a doubt, the Four Seasons is a fantastic venue and we’re confident our guests will enjoy the evening.” As of late February, the Ball Committee is well in the midst of the final preparations: The rundown of the evening is penned while the band has been selected and being rehearsed. “The majority of the decisions have been made and we are in the execution phase whereby our selected event management company, CiEvents, is preparing the final strokes on their image boards,” Kutt notes. “We are certainly in the ‘home stretch.’” “The final touches will be put to the Ball and I’m sure the team is readying their ball gowns, tuxedos and polishing their dancing shoes in preparation for the evening,” she adds.

Master of ceremony “The AmCham Ball is always a great way to catch up with old friends and, of course, meet new ones as well,” says Phillip Yin, an anchor for Bloomberg Television, who served as master of ceremony at last year’s Ball. “The event is grand but also intimate.” “What stands out each year is the theme and decoration of the Ball,” he says. “Last year’s 1920s genre was certainly memorable. Being the MC was a pretty unique experience because I got to see all the behind-the-scene work, and the best part was giving away big raffle prizes.” As with other events with a live audience, having a good MC is an essential part of the AmCham Ball. And the MC needs to be someone able to communicate issues and concerns quickly and effectively, Yin says. “Normally, you don’t have a lot of time to think and plan in front of a live audience. Much of you do can sometimes be reactionary.” “Besides thinking on your feet, an MC needs the ability to guess or forecast how the audience will react to each word and action that may be occurring on stage,” he adds. “The ability to know the audience intim-ately is the great challenge but it is also the most rewarding aspect.”

Phillip Yin

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eople are increasingly talking about detoxification (detox) as a way to get rid of effects of excessiveness during the festive period. Others people do it to manage weight and a large number of people practice it to reverse symptoms of diseases. However, some think that to regain health by detox is baseless. Nevertheless, advocates swear by it and vouch for its efficacy in attaining mental clarity, releasing addictions, getting rid of chronic symptoms such as skin rash or respiratory difficulties, to name a few. Detox is based on the fact that the body is under constant assault from toxins such as air pollution, pesticides, artificial sweeteners, sugar, and alcohol. These poisons accumulate in the body and cause symptoms such as headaches, fatigue, mind fog, pain and a variety of chronic diseases. Periodic cleanses through therapeutic fasting or semi- fasting can help the body eliminate toxins and therefore prevent the onset of diseases. Fasting is a natural way of healing the body. During detox, the digestive system can rest, allowing the body to use its energy and enzymes to focus on the elimination of toxic debris and wastes. Fasting also stimulates the endocrine system to repair and regenerate damaged cells throughout the body. It takes at least three full days of fasting for the body to start detoxifying the blood and tissues and allow the removal of toxic residues from the body. It takes up to seven days to completely purify the bloodstream, cleanse the lymphatic system and rid all residual wastes. When I did my first detox, I was

amazed how clear my mind became and by the energy that I experienced. After the third day, my skin cleared up and the persistent rash I had had for years disappeared. Thereafter I became a convert to this natural way of rejuvenating my body. Other people report the reversal of health challenging symptoms, such as disappearance of mind fog, pain and discomfort. Most importantly, one feels the sense of well-being and being able to connect with the self. One becomes calmer and less affected by external stresses.

then a detox may be uncomfortable. The person may consider a pre-cleansing by eating light meals and focus on raw and living vegan food. People who include raw and living food experience improvements in physical and mental form and develop a stronger immune system and manage their weight.

There are different types of detox:

What are some of the popular myths about detox?

• Therapeutic fasting, where no food is consumed for five to seven days (minimum) and only clear vegetable broth, cleansing shakes of hydrated bentonite clay and psyllium husk are mixed with water or juice, green vegetable juices are consumed. Herbal supplements are also used to support the body • Semi-fast, which is to reduce intake of food for seven to 30 days like one meal per day with vegetable juice for two other meals • Organic protein powder plus superfoods and liquid such as juice or lactosefree milk for meal replacement • Water fasting from seven to 30 days The type of detox to choose from depends on the person’s readiness and toxic levels. One needs to know or seek professional advice on what’s the best choice for them based on toxicity assessment. If a person has a heavy metal load,

Myth #1: I get so hungry during a detox that I give up after the first day. Response: If one is embarking on a detox for the first time it is preferable to prepare the body by eating lightly mainly vegetables and fruits and refraining from meat protein. One can begin with a semi-fast which means eating a light salad mid-day and cleansing with two to three shakes per day, mixing diluted fresh apple juice with hydrated bentonite clay (prepared from highly activated volcanic powder) and psyllium husk. One does not feel hungry with this cleansing shake. The hydrated clay sweeps through the digestive tract especially through the crevices of the internal folds of the stomach and intestinal canal. When mixed with water, psyllium husk becomes gel like and removes toxic build-up in the colon.

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Myth # 2: Cleansing detox is worthless or even dangerous. Response: Weight loss is one of the many benefits of detox. However, the real reason the body loses weight is because the body begins to loosen up toxic build-up and shed the unnecessary load. If a person’s objective of a detox is only to lose weight, the person may revert to old eating habits after the detox, and it is likely that he/she will regain the weight. A cleansing detox should embrace the mental and emotional aspects in order for the effects to be sustainable. Some doctors think that detoxification diets can be dangerous as it gives people a false sense of security of being healthy. I am of the opinion that disease and chronic conditions are caused by blockages to the body’s self-healing mechanism and detox can be effective in reversing many health challenges. The body accumulates toxins as by-products of metabolism, food additives, air pollution and negative thoughts. A detox or two a year will help the body rejuvenate itself. If one jumps back to old eating habits the issue associated to the weight may return. Once a person experiences clarity of mind and purpose, he/she is prepared to make shifts in order to enjoy enhanced quality of life. Ridding the body of toxins will ease the toxic overload on the eliminative organs such as colon, liver, kidneys,

lungs and the skin. Myth # 3: “I felt ill, had headaches and pain when I detoxed. Never again!” Response: A person who is highly toxic and dives into a real-deal detox may be stirring up the toxins too quickly and may experience the symptoms usually in the reverse order he/she went through. The secret to a smooth detox experience is to adequately prepare physically, mentally and emotionally two to three days before the start date. One should also increase water intake to dilute the toxins being released and exercise or move the body to stimulate lymphatic movement.

addictions such as smoking 5. Exercise to enhance the effects of detox 6. Have adequate rest and sleep, especially during the first three days 7. Engage in reflective or contemplative practices such as meditation and Yoga 8. Expect emotional and mental shifts when the body is releasing the toxins

Don’ts

Do’s

1. Allow stress to ruin your cleansing experience 2. Go for negative thoughts 3. Eat any meat protein or drink alcohol or coffee as they are acidic and defeat the purpose of detoxification which alkalizes the body towards health 4. Eat too quickly or too much when one breaks the fast. It is advisable to move in a slow transition with soups and predigested food such as smoothies. Introduce solid food slowly. 5. Go back to same eating habits as before

1. Prepare for the detox by cutting out alcohol and meat three to seven days before starting 2. Determine the desired goal and objective of detox, ie weight loss, health reasons 3. Avoid going to places where you may be tempted to break your fast 4. Choose the opportunity to get rid of

Detox has been practiced by many with serious health conditions and they have reported good results especially when carried out at the onset of the condition. However, it must be pointed out that most had to adjust their lifestyle to embrace more reasonable ways of nourishing their bodies after detoxification.

Here are some “dos”and “don’ts” for detox:

Chan Cudennec

About the Author Chan Cudennec, former banker turned holistic healer is the founding CEO of SOL Wellness. The company offers the way to a renewed sense of life through nutrition and detox. SOL’s customized signature detox includes therapeutic treatments such as homeopathy, kinesiology, bowen therapy, energy healing, do’s and don’ts of pre/post detox and raw and living food preparation. She can be contacted at chan@solwellness.com

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What is Mucoid Plaque? Mucoid plaque can accumulate and coat the intestinal tract. It is formed by gel-like secretions from the intestinal glands. As it is highly adhesive it can trap partially digested and putrefying matter. Over years the coating prevents the absorption of nutrients from ingested food. Overeating, eating poor food combinations, processed foods, coffee, alcohol, pollutants, toxic chemicals and heavy metals all contribute to the formation of mucoid plaque.

TALK-TO-AUTHOR

The Asian Dilemma

handran Nair is the founder of the Global Institute For Tomorrow (GIFT), an independent social venture think tank. His new book, Consumptionomics: Asia’s role in reshaping capitalism and saving the planet, tackles the controversial debate of how Asia should develop. Why Asian countries cannot follow the unsustainable path of WesternWestern style consumption-led capitalism? What are the social, environmental, and economic dilemma Asian countries current face? He talks to biz.hk about his new book, what it hopes to achieve, correlation between poverty and the middle class, and the roles of NGOs

biz.hk: Why Asia should not follow the Western model of consumption as a driver for economic growth? Nair: My point is to challenge the Western narrative of how we can help the world. Asian governments are all getting on the consumption bandwagon. I am not saying the West is wrong but their political needs are very different from here. Let us get away from what I call the silly discussion we have today about resource constraints and the environment, which is all about green technology, innovation and finance. It is an attempt not to confront the reality. Innovation and finance are very important but will not solve the problem of resource constraint. Governments in Asia must tackle this. If they don’t, let us all forget about this superficial discussion. In terms of climate change, the West is focused on how to maintain the standard of living while limiting emissions. But, the majority the population in Asia does not even have access to basic human needs. What we ought to do is to alleviate poverty while reducing the potential risk in the growth of emissions and environmental degradation. It needs to be a very different economic cycle than the one we are used to seeing in most developed nations. Will it be difficult? Absolutely. To even attempt to try this, we must put a pin in the bubble of the Utopian ideas of liberal economists.

discourse is one that is not acknowledged as reality and that there are very few platforms for discussion. I am hoping that this book will enter the mainstream of policy and business. Is anyone going to listen? I hope so. One thing I am very clear is that many people in highest levels of government in the region and around the world are thinking about this. I can say for sure that the idea outlined in the book is not a new one. Many people have talked about it. But, I can say that I am the first one from this part of the world who has put this argument together in a book that is not anti-capitalism, anti - people, or anti - business.

biz.hk: Why write a book? Nair: We have a dilemma and everyone is aware of it. The problem we have is that the

biz.hk: What is the underlying implication for governments in Asia? Nair: I am not suggesting we will be this

biz.hk: What do you believe Asia needs to do? Nair: We need a new configuration, and that is a political configuration that needs to reform the current process. By creating hope and confidence in a discussion, policy makers will start to get involved. I am not saying we should stop everything that is not a green agenda. It is not a revolution. It is essentially a question of how can we create equitable prosperity for more. My argument is that the current process will create greater disparity and eventually impoverish most of us.

unification of Asia moving in one direction around these issues. However, the nations of Asia must independently, if needed, act at the local level within their national boundaries in resolving these issues. Rather than spending so much time talking about international agreements, many of the countries in the region should focus more on local issues that they need to deal with. If they dealt with issues locally, they would make a global contribution as well. I would argue that the risk of disharmony comes from this disenfranchisement of the majority. If you look at China and India, the majority of people are still poor. And if you look at most parts of Asia, yes, we are seeing an economic shift upward in Asia, but let us not forget the majority of Asians are still poor. The legitimacy for governments will come only as a result of addressing the issue of a more equitable spread of wealth. I am asking Asian governments to think afresh what prosperity for the people means. Car ownership, for example, is not a human right. Instead of looking at the old definition of prosperity and how we measure economic achievement, we need to think very differently so we can uplift more people. I am not anti-capitalist or anti-economic growth. But extreme capitalism will destroy it all. What we need to do is to recognize of limits of our resources and live within those limits. biz.hk: Why is the growth of a “middle

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class” irrelevant in tackling poverty in Asia? Nair: The definition of “middle class” and the likes are economic definitions of the 20th century. The expansion of a middle class as a consumption base to drive economic growth is an old way of looking at the world. In the 21st century, for the future of Asia in the resource-constraint world, we need to deal with the poverty issue more directly. Taking people out of poverty means access to basic human needs, which include shelter, safe food, water, sanitation, education, and healthcare. Whether you want to call it the growth of a middle class, it doesn’t matter. But it must be the primary objective. The current economic model of consumption-led growth doesn’t foster this because it has a disproportionate consumption of resources for a segment of the population, which is increasingly depleting the resources and access to these basic rights the majority needs. And we are not talking about poverty in the sense of charity or philanthropy, but uplifting people so that people can have better access to basic needs. What this will do is make our society more equal. Poverty is a problem we all see and continue to hope that some solution will emerge. Much of the discussion on poverty alleviation is about financial aid and economic development down the old road while philanthropy has become a “buzz” word that is not going to solve these problems. biz.hk: What about the exponential growth of the world population? Nair: Population growth is a very explosive issue. Controlling the population is a very difficult task because it is essentially trying to intervene in people’s decision. The only government that has ever intervened in the reproductive systems of people is the Chinese government. These are the most unpopular decisions the world has seen, and the Chinese government now has to manage the consequences of it. Although we are going to be in a very populated world, there is enough to go around, but not if we consume in excessive ways that consumption-led systems allow us or not if 20 percent of the population consume 80 percent of the existing resources in the world. We have to find a very different balance. But better education and better welfare systems will result in people making better decisions about population. Population is a critical issue, but I am not sure if it is one that you can impose restriction. biz.hk: Should governments be able to intervene?

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Nair: In a crowded planet, we have governments to set rules to protect all people. When we reach a state in the world where energy levels are so depleted, governments should have to intervene. Governments need to wake up to the fact that poverty alleviation creates stability. It means abandoning the old Western notion that you can come out poverty by consumption. Economic activities must be subservient to resource constraint, not the other way around. It should be around resources, not people. Resources are limited and must be equitably shared by the current and future generations. In that context, the right of the individual is second to the right of the group. There will be constraints on what you can and can’t have. We are not talking about oppression, but society as a whole must come to some terms about what is good or bad. In fact, many societies are coming to terms about what individuals should and should not be allowed to do. biz.hk: What role should NGOs play in Asia to help “reshape” capitalism?

Nair: NGOs have very important roles to play. But they are also double-edged, given where Asia is. Western NGOs need to think about their promotion of Western ideals as the world is changing rapidly. There is a tendency for people in Asia to look towards Western NGOs but we need to move beyond that. What some NGOs are advocating should be the cold action of government. Right now, it is government against NGOs or NGOs against government. This is very unhelpful. My focus is the role of the state in a resource-constrained world. Just talking about environmental issues is peripheral. If you make it a political agenda and look at it almost as a civilization issue, the civilization in the 21st century on planet earth is going to be shaped by how Asian nations are determined to act, simply because of vast demographics. There are just far too many people. Frankly, decisions made in New York or London are kind of irrelevant, not because they are not made by important people, but because the demographics are here. We need to be careful how we make these decisions in the coming years.

“What we ought to do is to alleviate poverty while reducing the potential risk in the growth of emissions and environmental degradation. It needs to be a very different economic cycle than the one we are used to seeing in most developed nations. Will it be difficult? Absolutely. To even attempt to try this, we must put a pin in the bubble of the Utopian ideas of liberal economists. ”

Mar Joint Business Community Luncheon: 2011-2012 Budget

The Honourable John Tsang Financial Secretary of the HKSARG We are deeply honoured that Mr Tsang has accepted our invitation to talk to the Hong Kong business community on 1 March. It will be an excellent and timely opportunity to learn directly from Mr Tsang his further elaboration on this year’s budget and how he would lead us for dealing with the global financial crisis and sustaining the economic prosperity for future growth of Hong Kong.

Venue: HKCEC Convention Hall (Old Wing) 1 Harbour Road Wanchai, Hong Kong Time: 12:00 - 2:00pm (Lunch included) Fee(s): Member Fee: HK$530 Non Member Fee: HK$630 Corporate Table Fee (10-12pax): HK$6,800 MEDIA WELCOME

Mar Changing the World through Courage,

Tenacity and Ingenuity

Steve Crawshaw

From Albania to Zimbabwe, from across Africa, the Americas, Asia, and Europe, he will offer some stories that celebrate courage, perseverance, and the resilience of the human spirit – of ordinary people whose aim was to bring down dictators, change unfair laws, fight injustice, and raise one’s voice in freedom by defying those who would deny it. Steve Crawshaw is the international advocacy director of Amnesty International. From 2002 to 2010 he worked for Human Rights Watch, first as UK director and then as United Nations advocacy director. He was a journalist for many years, first with Granada Television in the UK and then joining the Independent at launch in 1986. He reported for the Independent on the eastern European revolutions, the collapse of the Soviet Union, and the Balkan wars. Other stories included interviewing Burmese opposition leader Aung San Suu Kyi and witnessing the fall of Serb leader Slobodan Milosevic.

Apr AmCham Ball 2011

Moonlight Masquerade

AmCham’s 2011 Ball is the perfect way to host a memorable evening for your clients and to show appreciation for their support of your business during the mystique of the Moonlight Masquerade. The AmCham Ball promises to be better than ever in 2011 with fine dining and great entertainment. Get ready to celebrate with AmCham on Saturday, April 16, 2011 at the glamorous Four Seasons Hotel. Corporate sponsorships for AmCham’s ‘must-attend’ annual ball are available with Exclusive VIP tables and VIP tables depending on your wish to enjoy a cozy evening with close friends, entertain business clients/colleagues or thank associates and partners for their support over the past year. In addition, you can choose to promote your company with a Pre-Dinner Cocktail or Lounge Hour. There is also a range of other Grand Draw Prizes, Raffle Prizes and Advertising opportunities so that each sponsor can be assured of broad coverage and publicity through AmCham’s integrated marketing and public relations campaign. For more information and guidance on your choice of sponsorship, please contact Ms. Jin-ah Lee, Senior Manager, Membership & Chamber Services. You can reach Ms. Lee directly at (852) 2530-6924 or at jlee@amcham.org.hk. We are looking forward to seeing you on April 16, 2011!

Time: 12:00 - 2:00pm (sandwiches & beverages provided) Fee(s): Member Fee: HK$250 MEDIA WELCOME

Venue: Four Seasons Hotel 8 Finance Street, Central Time: 6:45pm - 1:00am

For information, see website: www.amcham.org.hk Tel: (852) 2530 6900 Fax: (852) 2537 8824 Email: cli@amcham.org.hk

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2011 March

Co-author of Small Acts of Resistance International Advocacy Director, Amnesty International

Venue: AmCham Office 1904 Bank of America Tower, 12 Harcourt Road, Central