biz.hk May 2011

Co m in Prop mer Ho er cia ng ties l Ko ng

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

Economic

Outlook Steve Forbes

Chairman & Editor-in-Chief of Forbes Media

May 2011

COVER SPONSOR

May 2011 Vol 43 No 05

Contents

Richard R Vuylsteke

Editor-in-Chief Daniel Kwan

Assistant Editor

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08

14

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COVER STORY

GOING GREEN

TAXATION

REAL ESTATE

Steve Forbes, chairman of Forbes Media and two-time runner for the Republican nomination for the US presidency, outlines current challenges in the US economic and political landscape and calls for a more “stable” US dollar in a speech at a recent AmCham luncheon

How more awareness can be raised as to what different business sectors can do to help tackle issues regarding the environment through practical measures designed to deliver results

IRS announces new Offshore Voluntary Disclosure Initiative in a continued effort to bring offshore taxable money back into the US tax system by allowing taxpayers to come forward

Hong Kong’s buoyant economic growth is reflected in the commercial property market amid increased demand for space and sharp rises in rents

Publisher

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 Ease Max Ltd 2A Sum Lung Industrial Building, 11 Sun Yip St, Chai Wan, Hong Kong (Green Production Overseas Group) 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

AMCHAM NEWS AND VIEWS

14 Do Green Buildings Make Dollar Sense?

04 Chairman’s Memo Rob Chipman reports on AmCham’s recent activities on advocacy and recaps the recent annual ball held at the glamorous Four Seasons

The business case of smart architectural designs conforming to environmental standards and how they contribute in reducing energy consumption and greenhouse gas

18 New Benchmark in ‘Going Green’

07 New Business Contacts

A commercial building currently under construction in Causeway Bay has been awarded platinum LEED certification and is a step forward in green development

30 executives joined AmCham’s business network last month

45 Mark Your Calendar

22 Innovation in Style

COVER STORY

The story of a California-based entrepreneur preparing to take a unique line of green products onto a large scale as awareness of sustainability continues to grow

Steve Forbes, chairman of Forbes Media and two-time runner for the Republican nomination for the US presidency, outlines current challenges in the US economic and political landscape

TAXATION

08 US Economic Outlook: Tread Water

GOING GREEN

26 IRS Announces Second Offshore Voluntary Disclosure Initiative The US government continues to deploy measures in an effort to bring offshore taxable money back into the US tax system by allowing taxpayers to come forward

13 The Development of

Environmentally Friendly Initiatives How more awareness can be raised as to what different business sectors can do to help tackle issues regarding the environment

For comments, please send to biz.hk@amcham.org.hk

REAL ESTATE 33 A Look at Hong Kong’s Commercial Property Market The city’s buoyant economic growth is reflected in the increased demand for limited space available in Central and sharp rises in rents

HEALTH & WELLNESS 38 Making Work-Life Balance a Reality Does work-life balance exist in the corporate landscape or is it an illusive dream? It is an issue among employees who feel overworked as a result of long work hours

AMCHAM BALL 40 AmCham Ball 2011: Moonlight Masquerade This year’s annual ball welcomed over 380 distinguished guests to a spectacular gala held at the Four Seasons Hotel in an enchanted evening

30 Hong Kong Strikes DTA with Japan Latest Double Taxation Agreement permits concessionary deductibles on a single income among taxpayers who are subject to tax liability in the two jurisdictions

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

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COVER SPONSOR

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 Ed Ahnert

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

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Rob Chipman Chairman

Dear Members,

Chairman’s Memo

Spring has sprung! The weather is still nice, although the heat and humidity of a Hong Kong summer is just around the corner.

AmCham has been very busy this month wrapping up the Beijing Doorknock and advancing preparations for the Washington DC Doorknock, which will come up in just a few weeks. In addition, several senior congressional delegations have just come through Hong Kong and I’m happy to report that AmCham has had the opportunity to spend time with all of them. We continue to communicate our message of free trade, the need for a level playing field in terms of tax burdens, the need for intellectual property protection and, many other fundamental points that are important to our members.

The AmCham Ball held at the glamorous Four Seasons was a tremendous success.

Ball Committee chair Kay Kutt and her fellow committee members did a magnificent job. Besides the great food, drink, music and dance, AmCham was able to raise significant funds for the AmCham Charitable Foundation. To all those who so generously bought raffle tickets, thank you very much.

Steve Forbes, a good friend of AmCham and someone who shares many of our values, was recently in Hong Kong and was a featured speaker at one of our luncheons.

You can read more about Steve and what he had to say about the current economic outlook in the US in this edition of biz.hk.

One of AmCham’s top priorities in 2011 is improving the environment, specifically air quality. Hong Kong has not had an auspicious start to this year in terms of air quality, but AmCham believes by forming our Environmental Steering Group and by tapping our members expertise, we can bring some business solutions to the table. We are trying to raise more awareness on the issues of environmentally friendly development, particularly in Hong Kong.

In this regard, you can learn some of these on-going developments in a series of articles in this edition. Topics range from Hysan Development’s LEED-certified

Hysan Place due to open next year in Causeway Bay and next-generation features in green building design and engineering to how a California furniture maker has built up a green manufacturing business.

If you have ever had to endure one of my rants about US taxation on citizens abroad, then you definitely want to learn more about what’s going on at the Internal Revenue Service and associated regulations such as FBAR and FATCA affecting US taxpayers. This is absolutely essential information that every US citizen living outside the US must know and comply with.

AmCham is also very fortunate to have Richard Weisman of Baker & McKenzie as a governor, someone with world-class expertise in the field of international taxation. AmCham will continue to carry forth the message that US citizens living in HK need fair personal and corporate tax treatment in order to compete in today’s world.

See you around at the Chamber!

Rob Chipman Chairman

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5 • 2011

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MEMBERS DIRECTORY

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

2010/2011

New

Business Contacts The following people are new AmCham members: Alliance Hip Shing Sportswear Ltd

Hong Kong International School

Swire Properties Ltd

Ronald Tang Chief Financial Officer David Tang Director - Sales Gerald Tang Sales Manager (North America)

Abigail DeLessio Chair, Board of Managers

Don Taylor General Manager - Office

Hongkong and Shanghai Banking Corporation Ltd

VF Asia Ltd

APL Co Pte Ltd Alvin See Vice President & Managing Director, Hong Kong/South China

Asia Business Council www.amc ham. org.hk

Alex Zhang Researcher

CiEvents

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

Carly Lewis Business Director

CLP Power Hong Kong Ltd Rick Truscott Director - Generation

Credit Agricole CIB Clara Wong Head of HK Conglomerates Marlene Lam Head of Hong Kong Corporate Group Eric Maurin Head of Trade Finance, Asia

Daiwa Capital Markets Hong Kong Ltd Hironori Oka President

Dimerco Air Forwarders (HK) Ltd Ricks Wan Sales Manager

Habitat for Humanity Kester Yim Managing Director

Hamilton Advisors Limited Robert Grieves Chairman

Domenic Provenzale Regional Head of Sales & Distribution

Hongkong and Shanghai Hotels, Ltd Sian Griffiths Director of Communications, The Peninsula Hotels

Hongkong Land Limited James Robinson Executive Director, Projects

Alfie Germano Vice President

Y Stage Productions Ltd Eric Pong Director

Yeh Family Philanthropy Adam Nelson Executive Director

Kobre & Kim LLP William McGovern Resident Partner

Lister Lo Lui & Choy Martin Lister Partner

Loyola Marymount University Jeffrey Gale Professor of Management

Mallesons Stephen Jaques Stuart Valentine Partner

Natixis Sylvie Soulere-Guidat Corporate Secretary, Asia Pacific

O Cigarettes Bethany Gordon Chief Financial Officer

Oval Partnership Limited Taryn-Lee Swales Project Director

S C Johnson Ltd Jen Chou Shyung Group Country Manager - Taiwan & Hong Kong

View our other members at:

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

biz.hk

5 • 2011

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ble a l i a v A

Your Best Guidebook to Settling in Hong Kong is Now Available!

Living in Hong Kong is a compendium-style all-you-need-to-know guide for newcomers to Hong Kong. It is a definitive source on all manners of needs ranging from things to know on the first reconnaissance to getting settled and enjoying life in Hong Kong. AmCham members often buy the book for their relatives and friends who are new to Hong Kong. For human resources professionals, it is the most up-to-date and accessible guide you may use to bring your newly arrived expatriate colleagues up-to-speed.

Living in Hong Kong is available at the Chamber office and on its website. To place your order, please contact AmCham’s Finance and Administration Department, or simply go online to AmCham’s e-shop at http://www.amcham.org.hk/index.php/AmCham-Books.html To place your order, contact Hanna Chung AmCham Finance and Administration Department Tel: 2530 6934 Email: hchung@amcham.org.hk *Special prices available for bulk orders

COVER STORY tion and currency turmoil while hurting production investment,” Forbes stresses, adding currencies are not equities but should simply be a stable means of measuring value and, more importantly, a facilitator of doing transaction.

“Just imagine what your life would be like if Washington did to the hour what it does to the US dollar,” he questions.

“What if we floated the hour, so we have 60 minutes in an hour one day, 48 minutes the next day, 96 the next and so on? It should not have to take derivatives, hedges, or futures to figure out how many hours you are working.”

That a weak dollar is good for US exports is also not true, Forbes believes.

“It is simply not true because a weak currency means you have inflation. It is a way of cutting wages of workers. It leads to labor strikes. The inflation also has people focused on preserving what they have instead of expanding what’s left.”

US Economic Outlook: Tread Water

Speaking at a recent AmCham luncheon, Steve Forbes, chairman of Forbes Media and two-time runner for the Republican nomination for the US presidency, outlines current challenges in the US economic and political landscape

By Kenny Lau

Gold standard

Steve Forbes

A

lthough the US economy is growing this year, possibly in the range of 3.5 to 4 percent in real terms, and will likely create 2.5 to 3 million jobs in the domestic market, strong “headwinds” are keeping the world’s largest economy from growing at a faster rate, Steve Forbes, Chairman and Editor-inChief of Forbes Media, said at a recent AmCham luncheon.

“Even though the US economy is growing, it is the slowest recovery from a severe recession in American history,” he says. “In essence, like an automobile, it was stowed for two years, now going about 40 [mph] but it is quite capable of doing 80 or higher. We should be growing at a much faster rate.”

In essence, “the crisis is still with us in the form of a weak US dollar, which is hurting our recovery,” he adds. “The spending is a real drain on the economy.

Regulation puts a lot of extra burden on businesses. And there is uncertainty about taxes.”

Forbes believes the US economy could be on a much faster growing track if those issues were addressed properly,

8

because “the liquidity and entrepreneurship are there…Remove the extra weight on their shoulder, business people would move ahead very quickly.”

US currency One reason for the current depreciation of the US dollar is directly linked to US Federal Reserve’s monetary policy.

The Federal Reserve has been on a money-printing binge since the early part of the last decade, Forbes points out.

“Our government believes that printing money, which creates inflation, is the way to pull an economy out of a recession. It is absolutely not true and does not work.”

What it does do, he says, is lead to commodity bubbles. “That’s why you see food prices going up, oil prices going up. Normally, commodities are all over the place: some move up, some move down, and some tread water. When they are all surging in one direction, it is a sign of a very real monetary imbalance.”

“You can have a magnificent vehicle, but you don’t supply it with enough fuel, you are going to stall, and with too much

fuel you are going to flood the engine.

With the right amount, you have a chance to move ahead,” he explains.

Forbes also argues that natural disasters or political turmoil do not play a role in driving up prices as significantly as most people believe. “Why these commodities are all surging, that is about 20 percent of the explanation,” he says.

“80 percent is excess money creation and the speculation it generates.”

“If you had a stable dollar today, oil would be selling at about US$50 a barrel; there is a lot of it out there, but inflation distorts it,” he adds, saying appreciation of commodities further distorts the market because it leads to a higher tendency to hoard and buy in advance.

“As long as the US is printing a lot of money, you will see artificially high oil and commodities prices,” he further says. “It is not traditional supply and demand that accounts for the doubling of the prices of commodities such as soybeans, corn, wheat or cotton. This happened in the 1970s, the last time we had a big money printing binge.”

“What US Federal Reserve is doing is highly distortive, encouraging specula-

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The US dollar became a reserve currency because the US is the largest economy in the world, and ultimately it became simpler to do transactions denominated in US dollar. “It is convenience in the marketplace,” Forbes says. “Right now, there is no alternative to the dollar. Euro is still not a universal currency. Yen has some problems.”

“You cannot have a global economy unless you have a global currency,” he adds.

In terms of reserves, gold can help but does not deal with the heart of the problem, and the key is to get the dollar stable again, he says. “[Otherwise], it could lead to currency turmoil, which is why we are on the verge of a trade war with China as China’s monetary policy is outsourced to the Federal Reserve.

“If the dollar was stabilized, you’d see the world heave a sign of relieve, because then you could link to the dollar. It makes trading and capital flow easier.”

In his speech at the AmCham luncheon, Forbes made a bold prediction: in the next five years, the US dollar could be re-linked to gold for the first time since the 1970s. He believes there will be a “dollar crisis” in the next couple of years, given the current easy money policy of the US Federal Reserve.

“You are already starting to see it in

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5 • 2011

various ways,” he says. “Even though the Euro is strong against the dollar, it is weak. Greece and Portugal may be starting to have problems again. You cannot print money the way we print money and not have severe repercussions.”

To do that, “you don’t have to bring back the old British style gold standard but have a price range on gold,” he suggests. “Let’s call it US$1,400 an ounce and you can have a 30- or 90-day moving average so you don’t get day-today fluctuation, so everyone knows that the Fed will tighten if it goes much above US$1,400, and ease if it goes much below.

Taxes don’t raise revenue for governments, he says. “Tax on income [shouldn’t be] the price you pay for working. Tax on profit [shouldn’t be] the price you pay for being successful.

Tax on capital gains [shouldn’t be] the price you pay for taking risks that work out.

“The proposition is very simple: you lower the price of good things like productive work, risk-taking success, you will get more of those good things.

You raise the price, you will get less of them.”

The rhetoric of raising taxes is a direct result of “huge” unfunded liabilities and debts. But, it is counter-

“If the dollar was stabilized, you’d see the world heave a sign of relieve, because then you could link to the dollar.

It makes trading and capital flow easier.”

“Is it perfect? No. Is it better than anything else? Yes. It is certainly better than what we have today.”

Taxation There is currently much talk about simplifying the tax code in the US, and it will be a major issue in next year’s presidential election, says Forbes, who attempted to seek the Republican nomination for the US presidency in 1996 and 2000 on a flat-tax platform.

“Even democrats know that they have to be in favor of tax simplification. There will be a mandate coming out of next year’s elections to make big changes,” he believes. “That’s why I like visiting Hong Kong. You’ve done it right on income and corporate taxes.”

productive, Forbes argues. “The only way a country like the US can dig out of the hole that it has put itself into is through getting people to do more productive things like start and expand businesses.”

Besides the effects on its currency, when a government goes on a stimulusspending binge, it in effect takes resources from people, puts it through the political sausage factory, and sprays it out again, Forbes says. “The present stimulus spending has hurt the recovery, not helped it.”

“The thing to ask yourself is: where does the money for stimulus spending come from?” he points out. “It comes from people, either through borrowing, taxing or printing money, which is another form of taxation.”

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“The thing to ask yourself is: where does the money for stimulus spending come from...

It comes from people, either through borrowing, taxing or printing money, which is another form of taxation.”

C

M

Y

Steve Forbes calls for a more “stable” US dollar in his speech at an AmCham luncheon

CM

MY

Regulations Another “headwind” that will have ramification for the US economy is an overflow of regulation, which has put tremendous burden on businesses, Forbes points out. “They are just throwing their hands up in despair.”

On healthcare alone, numerous new regulations are coming in on small businesses as a result of “Obamacare.”

The US, he suggests, should rely on model that has less government involvement, more effective safety nets, and more free enterprises.

“Why do countries have healthcare crisis? The answer is people want more healthcare,” he says. “In every other aspect of economic life, if people want more of something, it is seen a growth opportunity. So, what is the problem with healthcare?

“It is because of the crazy way we finance it and because there is a disconnect between providers and consumers.

Imagine going into a restaurant ordering a bottle of wine and say ‘I don’t care what it costs. That is the government’s problem, not mine.’ The system goes

10

haywire.”

What will emerge in the US is a new healthcare paradigm that becomes one of biggest growth industries in the next decade or two, Forbes predicts. “What it means is you will see entrepreneurs figuring out better ways to provide healthcare at cheaper and more productive cost.

“Why aren’t there more Steve Jobs in the healthcare world figuring out how to do this? The answer is there is no incentive to do it.”

In the US’ healthcare system, there will have to be more openness to free enterprise, and more control of resources by patients, where if a patient saves money, it becomes money in their pocket, he adds.

The outlook In terms of the US economy, there will be a lot of fighting, and battles will be drawn. “People in the US now know our economy is in trouble and recognize change has to come,” Forbes points out.

“Even though the economy is growing this year, people don’t feel it is really on

track, and this is a good environment to get positive reforms.”

Ultimately, it will have a positive impact. “After this dollar crisis that is brewing now and going to be coming, you will see a new monetary system that will provide stability, instead of the chaos we have today,” he believes. “It will also set the stage for getting back on track again something that has been derailed.”

The US tradition of free market will come back after the 2012 election, he adds. “You have already started to see it in our mid-term elections in 2010, when Republicans made enormous gains, and I think you will see that continuing in 2012.”

In the meantime, “expect a lot of turmoil in the US. It is never easy to see politics at work, but, ultimately, good things come from it,” he says. “So don’t despair about the fighting and the noise.

It is the way we start to get change in the US, which will be good for the US and also good for the world.

“If the US is moving in the right way, especially with a stable dollar, it just makes life easier for everyone else who wants to get ahead.”

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CY

CMY

K

GOING GREEN

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4月27日

赴美投資構建和融資（創建投資）

2011年6月中

赴美經營

2011年8月初

赴美經營 － 初步瞭解（II）

2011年9月中

歸國或退出美國市場策略

－

AmCham has been at the forefront in raising awareness and bringing focus to the environmental challenges Hong Kong faces. One of top priorities at the Chamber for 2011 is improving the environment, specifically air quality, by advocating business solutions through forming an Environmental Steering Group and tapping expertise of chamber members.

Through such initiatives, more awareness will be raised as to what different business sectors can do to help tackle issues regarding the environment.

In this edition of biz.hk, we bring into focus the latest environmentally friendly measures that are being employed in the real estate sector and how innovative green development, particularly those towards commercial buildings, is contributing to the improvement of the environment in which we live, including that of Hong Kong

費用：

初步瞭解（I）

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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

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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

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5 • 2011

13

Do Green Buildings

Make Dollar Sense?

A smart architectural design conforming to environmental standards contributes significantly to the reduction of energy consumption and emission of greenhouse gas, but offten at extra cost. Andrea Zavadszky finds out about the business case of undertaking such endeavor

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any of us have had the experience of living or working in buildings that are not so environmentally friendly: thermostats that do not auto-adjust to current room temperature; windows that cannot be opened for natural fresh air; restroom lights that are permanently turned on; or “automatic” taps that do not stop water flow long after we finish washing our hands. In other words, much of our resources are wasted.

The result: buildings account for one-third of our total energy consumption worldwide and produce about 15 percent of global greenhouse emissions.

While it may be true that tall buildings in big cities can save energy by lowering the need for transportation, buildings in cities nevertheless can account for up to 80 percent of CO2 emissions, according to the Clinton Foundation. And this is a significant contributor to the on-going problem of climate-change.

LEED Green buildings designed to conform to certain environmental specification are now slowly but surely catching on. “The job is just beginning,” reckons Richard Fedrizzi, Founding Chairman, President and Chief Executive of the US Green Building Council. “In the US we have done 6 to 7 percent of the market, so we have 93 to 94 percent left to do.”

The council, set up 18 years ago, has established an environmental standard

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business sense," says Dr Richie Lee, Executive Director, Energy and Sustainability-Asia, CB Richard Ellis, who is based in Shanghai.

“There can be as much as 30 percent or more savings on electricity and water, offering immediate cost savings,” he points out. “Proper waste management can cut waste by 50 percent or more, cutting down on usage and disposal costs.

All of these have long-term environmental benefits.” (See Table 1) Lee adds that not only significant energy and water savings are immediately realizable in Asia, but also there are longer-term benefits. In some western countries, sustainable measures (especially in energy savings) coupled with a green certification are already leading to longterm financial benefits, such as increased building value in both sales and rental markets as well as higher occupancy rates.

And it is just a matter of time, probably in three to five years, when these long-term benefits would be realized in Asia too. “Now is a good time to start developing green and energy efficient buildings,” he says.

Cost benefits

Richard Fedrizzi and certification program called Leadership in Energy and Environmental Design (LEED). The program is to encourage and support the adoption of sustainable building practices.

The good news is that in recent years – with more awareness of global warming and the finite nature of our resources – there has been a noticeable effort on the part of designers, architects, owners and developers to achieve sustainability. The process is helped by the fact that owneroperators now recognize the considerable benefits of green buildings to their bottom line.

Business sense "Developing energy efficient and certified green buildings makes perfect

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5 • 2011

The perception that “greener” development of buildings is considerably more expensive than conventional buildings doesn’t hold anymore. “For the first two levels [of rating] we certify in the US, it is almost embarrassing if you can’t do that for the exact same price as a conventional construction, because of the proliferation of products and services,” says Fedrizzi.

He points out that a gold-level certification in building construction could cost up to 2 percent more but would pay back in a year, while platinum-level could cost up to 6 percent more with a payback period of three years. Hysan Development estimates the cost of development for Hysan Place in Hong Kong (pre-certified at platinum LEED level) will be 5 percent higher than building it in a conventional way.

According to a 2008 McGraw Hill Construction study in the US, a green building’s operating cost can decrease by an average of 13.6 percent compared to a conventional building. A green building, together with a green certification, will on average increase in its value by about 11 percent and can lead to a higher return on investment by about 10 percent. (See Table 2)

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Typical Benefits of Green Building Certification (Cost Reductions)

Energy

Carbon

Water

Waste

30%

35%

30% - 50%

50% - 90%

Greater efficiency & immediate cost savings

Lower CO2 with long- term environmental Benefits

Greater efficiency & immediate cost savings

Lower disposal costs and reduced impact on environment

Table 1

Source: CB Richard Ellis

Perceived Business Benefits of a Green Building

13.6% 10.9% 9.9% 6.4%

decrease in operating cost

increase of building value

improved return on investment

occupancy ratio increase

6.1%

rent ratio increase Table 2

Source: McGraw-Hill Construction,2008

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The challenge However, looking at the complexities of developing a high-rise, it is easy to understand why the greening process has not progressed as quickly as some had hoped.

“Picture a table with all the businesses and environmental NGOs around it, starting to break this building issue into issues of site, energy, water, materials, waste, innovation, air quality and day light…” says Fedrizzi, listing the technological side of the equation. “Then [add] the markets, such as the political markets, the governments, financial institutes, developer markets and private equity markets.”

The process involves applying the latest green technology while coordinating the interests of all the stakeholders in different markets. Yet, types of different potential end-users such as those for schools, hospitals, retail, institutions, offices and others are also taken into account.

The beauty of LEED is that it brings all these stakeholders to the same table, making the process smoother. While designing a building used to be a linear process for architects, construction of green buildings is now an intricate process with input from many parties on many sides.

“These programs do one thing. They force [people] to think about the project in a way they never thought of,” says Fedrizzi. “The process now is an integrated approach where people are sitting around the table and are discussing the project. You are actually watching the price go down and the performance go up from all those decisions.”

The US Green Building Council started seeing improvements about 10 years ago, and LEED today is being used in 117 countries with over 40,000 certified projects comprising nearly 8 billion square feet of construction.

“We have 16,000 organizational members, such as General Electric, Siemens, CB Richard Ellis and so forth,” Fedrizzi points out. “In the US we have 78 affiliates and they take our work to a local level.”

Certification Fedrizzi says LEED can be seen as a building’s nutrition label. Just as a nutrition label gives you detailed information about the nutritional value of

16

a food item, LEED’s rating system offers a scorecard showing what kind of thinking went into that building and what environmental goals were achieved. A plaque is awarded as an indication of performance and status of LEED certified buildings are available on US Green Building Council’s Website.

The certification process is complex and goes through major updates every two to three years in order to meet new environmental standards. It was first developed to transform the way people

years. It consists of an annual report card, covering energy and water usage as well as air quality. “It’s absolutely critical for us to recognize quality, going forward, because so much can happen in such a short time,” says Fedrizzi.

Worldwide adoption Another task ahead is to make LEED applicable to different markets with different climates and building material

LEED applies not only to buildings but the standard is being expanded to cover fast food outlets. Starbucks, which now has nine certified stores, was one of the fore runners to adopt US Green Building Council’s standards in a fast food franchise business. McDonald’s also has two certified restaurants using an estimated 25 percent less energy than other conventional outlets, among other green achievements. The best “green” features will be introduced in their roughly 31,000 restaurants worldwide.

performance and tenant satisfaction, which can have a positive impact on employee productivity, health and well-being.

The report says 79 percent of US building owners polled expect green buildings to attract new tenants, and over 90 percent believe operating expenses would improve over time.

Fedrizzi says retrofitting existing buildings with energy efficient products, technologies and systems has started on a grand scale in the US. “In the US, the

LEED Registrations

by Rating Scheme in Hong Kong

“These programs do one thing: They force people to think about the project in a way they never thought of…You are actually watching the price go down and the performance go up in all those decisions.”

-Richard Fedrizzi, Founding Chairman, President and Chief Executive of US Green Building Council

14 12 10 8 6 4

LEED NC LEED CS

2

LEED CI

0

LEED EB

2007

2008

2009

2010

Table 3

thought about buildings, but has constantly grown to align with the continuous development of technology and new materials as well as changing circumstances. In response to the threat of climate change, LEED now requires a minimum of 30 percent reduction of energy consumption from the base line.

Examinations on the performance of existing LEED certified buildings are carried out periodically and US Green Building Council has introduced a building performance initiative to re-qualify certified buildings every two

requirements. “We wished for a system that can transform the market; we just didn’t know the market was so big,” says Fedrizzi.

He also points out that World Green Building Council was set up to help other countries develop their own councils and rating systems. A “round table” of 16 members is now in place to help different locales in the adoption of LEED standards by catering to local needs.

LEED is licensed to Canada, Italy and India, and the countries have used the standards in their own markets.

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Potential & prospect McGraw Hill Construction has recently released three studies on the green building market and they are generally upbeat about the future of green developments.

According to the Business Benefits of Green Buildings SmartMarket Report, green investment in existing commercial buildings is being driven by the need to achieve higher building

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Source: CB Richard Ellis

existing building market is the highest focus right now, because our developers are realizing that they are losing money every day if they don’t enhance the value of their existing portfolios,” he says.

In Asia According to Hong Kong-based Tim Shen, Associate Director for Sustainability, Asia at CB Richard Ellis, the initial momentum driving LEED projects in Asia has been with new construction projects, although fewer new develop

Tim Shen ments were registered under LEED in 2010 than in 2009, reflecting a global trend thought to be linked in part to a slowdown in new commercial supply.

(See Table 3) However, registration rates for LEED commercial interior (LEED CI) projects are closing up fast in the market. “Even during the global financial crisis, when a lot of corporate occupier decisions were put on hold and companies didn’t execute on taking up new space – therefore not having a chance to register new LEED interior projects – we still saw a steady increase in LEED CI registration rates across Asia. Last year, LEED CI registrations really took off, doubling 2009’s numbers,” Shen says.

This trend was initially driven by multinational companies, such as major financial firms, but now a broad range of companies are registering LEED CI projects regionally, including Asian banks, retail and food and beverage brands. And “we expect the LEED CI growth trend to continue,” he adds.

Shen expects that the slew of high-quality tenants who take up large space and fit out their offices with LEED-certified interiors, coupled with a significant number of new LEED registered construction projects now reaching completion and achieving certification, will put increasing pressure on landlords to consider the strategic case for pursuing LEED certification for their existing buildings.

“So this is where the LEED story is in Asia so far, where the excitement is,” he says. “The big LEED trends are occupiers pursuing LEED commercial fit-outs, more landlords choosing to make the transition to LEED for existing buildings, and re-positioning their assets in a rapidly greening market.”

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New Benchmark A commercial building currently under construction in Causeway Bay has been awarded platinum LEED certification and is a step forward in the direction of environmentally friendly development in Hong Kong

By Andrea Zavadszky

I

n busy Causeway Bay high-rise properties stand shoulder to shoulder, with hundreds of air conditioners spitting hot air and making the summer even hotter.

The heavy traffic on its narrow streets often grounds to a halt and its exhaust-fumes filled pavements are packed with tourists and local shoppers.

By the middle of next year, this densely populated neighborhood will be making its first baby-steps towards becoming a more environmentally friendly and enjoyable place, thanks to Hysan Development, the district’s largest commercial landlord owning over 3 million square feet of office and retail space in the area.

“We are not the kind of developer who just builds and sells, we keep our buildings,” says Chan Lai Kiu, Hysan Development’s Director, Design and Project. “Our foundations were built here more than 80 years ago and we have learned through the process. Building in a sustainable way is very important.”

LEED Hysan Place, the new multi-use development replacing the Hennessy Centre, is responsible for these changes, offering some green spaces to sit out, better airflow to keep air pollution down and temperatures cooler as well as a whole range of sustainable design features to provide a better shopping and healthier working environment.

The new development will net the company a Platinum standard certification from the US Green Building Council’s Leadership in Energy and Environmental Design – Core and Shell (LEED – CS) program, but, even more importantly, the company hopes that other developers will follow.

However, the company was not looking to construct a

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in ‘Going Green’ building of iconic status and did not originally target the Platinum-level standard LEED certification during the design process.

“We wanted to seek an international standard and we thought that LEED was the best received in the world. We didn’t target Gold or Platinum. We just approached things seriously and tried to do our best,” Chan recalls. “Then we discovered that we could aim for the Platinum standard. But, it wasn’t the way we started out.”

“When we had the golden opportunity to redevelop this very strategic site, we set out a new agenda for the project. Our duty is to optimise return for our company but, apart from that, our late Chairman, Mr Peter Lee, asked some pertinent questions. One of them was about what we could do for the community and the environment,” Chan says.

The design In designing the new building, initial environmental problems that came to mind were concentration of air pollution and heat, due to a lack of wind movement between the tall blocks of buildings, and the company decided to introduce “urban windows” to help ventilation at lower levels.

As a consequence, they thought of separating Chan Lai Kiu different uses, such as retail and office, into different blocks, and created sky gardens for the enjoyment of the public as well as the staff of their retail and office tenants. The resulting square shape of the building yields a high percentage of efficiency, and with the “urban windows” it looks unique.

“Architects often start off with creating an iconic

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building. We never looked for an iconic building,” Chan says.

“Instead of asking first whether it looked good, we asked what it should be like from an environmental point of view.”

“We based our design on a problem to create something interesting, instead of just creating an interesting design,” she adds. “If you are serious about solving the environmental problem, the design becomes quite complicated but you will end up with something iconic.”

Green features Hysan ended up creating lovely sky gardens, each catering to a different kind of use. The two lower gardens will be open to the public, with the fourth-floor garden to sit out and the seventh-floor garden as a place to enjoy food and beverage. The 16th floor will be available for tenants only, and the company is hoping to create here an artificial wetland, using the plants to filter grey water for watering the gardens.

At a Glance Name: Hysan Place Address: 500 Hennessey Road, Causeway Bay Type: commercial - office and retail Height: 40 storeys Retail: 17 floors Office: 15 floors Typical Floor Plate Size: 16,000sq ft Efficiency: 92 percent Lifts: 13 high-speed, 4 high-speed double-deck, 2 service lifts Management: Hysan

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1100

150

Green Features LIGHT SHELF

3100

4500

SOLAR SHADING

3.1 m ceiling height

LOW-E GLASS

OPERABLE VENT

150

While this is a popular solution in Shenzhen, in Hong Kong it is new, and the company is still experimenting with the execution. The top of the building has also been freed up for a garden as the mechanical floors have been arranged on lower floors.

These open surfaces help in collecting rainwater, which is then channelled to a container and used to water the plants.

Another area under heavy consideration was the introduction of natural ventilation while using curtain walls. There are several problems associated with it. Usually, curtain walls cannot be opened. And even when there is a window that can be open, how do you avoid someone opening it while the air conditioner is on in order to minimize waste of energy?

“It takes a lot of effort, research, experiment and preparing mock-ups to test the idea,” Chan says. “Just for the shading we have been conducting so much research.”

“Environmental solut-ions sometimes cannot be borrowed; they have to be tailored to the particular context and particular climate,” she stresses. “Being a pioneer in certain aspects, we have to take some time to work out the solutions.”

A passive approach In designing the building, they used a “passive approach” and, instead of going for new expensive environmental technologies, they used the positioning of the building, the structure and sustainable materials and fabric to solve some of the environmental problems in a more effective way.

The design called for positioning the building to face the northern side, which also ensured that all offices have sea-views, and putting the core of the building, such as the lifts, at the south side, because on these two sides heat exposure is lower. The short sides of the rectangular-shaped building, facing the sunnier

east and west sides, are equipped with shading.

The environmental design makes the building a healthier and more pleasant workplace by offering natural ventilation, “free” cooling system for winter and heat recovery for pre-cooling of the air in the hotter months.

Light shelves are used to bounce natural light into the depth of the office floors and lower-hanging pendant-lights provide light on the work surfaces. Smart sensors are installed to make sure lights are dimmed around the edge where natural light is stronger, while CO2 fresh air demand control makes sure that

What to keep in mind for green development Do make sure the building can be used for different purposes, that it is physically durable and financially flexible, so that it does not become obsolete too fast.

Buildings are not fashion items, they are meant to last Do make sure you have different strategies to tackle the requirements of different seasons Do build in monitors to periodically review performance during the lifetime of the building and keep fine-tuning and upgrading the system as necessary Do care about the software: make sure that not only the building shell is environmentally friendly, but also the operations and leasing side, including the tenants

Dos 20

Do not start out with an iconic building in mind. Start out with the environment, and you will end up with an iconic design Do not use advanced environmental technology just for the sake of it. A serious approach to the building’s positioning, structure and materials used can already make a big difference and save money Do not simply copy environmental solutions. They have to be researched, tested and tailor made, depending on the specifics of the development, position and climate.

For example, solar panels don’t work in the high-rise, high-density context, because of the buildingvolume/rooftop ratio

Do nots biz.hk

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Light Shelves with profiled reflective ceiling reflect daylight deep into interior of each office.

Curtain Walls allow sufficient visible light entering the building while reducing unwanted solar heat gain and exterior noise at the same time.

Mixed Mode Ventilation uses both natural ventilation and mechanical ventilation / air-conditioning.

Increased Fresh Air of 30% more than the international benchmark is provided to enhance the indoor air quality.

Free Cooling is designed to use outside fresh air for direct space cooling when the right climate conditions allow.

CO2 Fresh Air Demand Controls regulate the quantity of incoming fresh air and saves energy by providing the right

amount of fresh air.

Electric Vehicle Charging Facilities are provided for each car parking space.

Rainwater Harvesting System makes use of rainwater collected at the roof, exterior walls and ground level for irrigation and air-conditioning make-up water purpose.

Composite Steel Structure is adopted for the office tower for their highly recycled content, and structural steel elements are 100% recyclable should the building ever change.

Several Large Openings are designed at lower levels of the building as ‘urban windows’ to enhance natural air ventilation, improve the micro climate in the neighborhood and mitigate the heat island effect.

demand for fresh air, which fluctuates according to the changing number of workers, is closely followed.

Also operated by sensors, escalators are to slow down when no one is using them and speed up again when someone steps into them – a system already widely used in China but is seldom seen in Hong Kong. All these solutions will save energy and, ultimately, cost.

tant aspect in buildings design for a much long lifecycle: that is to make the building flexible.

“We are trying to build a building which can adapt to all kinds of financial realities. Being adaptable is the answer,” Chan points out. “If it can be used for different things, it will not become obsolete. It has to be physically durable and financially flexible.”

Chan explains that some green buildings are more expensive than conventionally built counterparts, because they rely on newer technology, which tends to be more costly. However, that is not necessarily the case all the time. In addition, many A green building is never “finished” as it may require environmental solutions offer immediate cost savings with smart fine-tuning and its performance is to be regularly monitored designs. “from cradle to grave.”

“Green building is, I’d say, “Green building is not only an attitude, treating everything about the hardware, it is also properly and seriously from about the software,” notes that point of view,” Chan Chan. “Apart from the applicabelieves. “If we make careful tions, we are also looking at decisions, some of the features leasing and operations. We even help us to save cost. hope to share some of the “[Hysan Place] is just benefits with our tenants.” marginally more expensive.

Leasing space in a LEEDWe don’t have the exact figures certified building is already a yet, but it may come to be big help for tenants who wish to about 5 to 10 percent more.” become LEED certified.

Nevertheless, there are Hysan is also preparing a many benefits with building comprehensive set of green environmentally friendly fit-out guidelines. development. They include In Hong Kong, most savings on energy, better water commercial developments are and waste management during planned for a 30-year life span the longer lifetime of the and it is not rare they would be building. pulled down after a few years in By solving some environbusiness (The Ritz Carlton in -Chan Lai Kiu, Hysan Development’s Director, Design and Project mental problems, it makes an 2008) or shortly after a improved location and the thorough renovation (Hilton development more popular.

Hong Kong in 1995). In Hong More and more developers Kong’s quick economic cycle, also understand that sustainable buildings are more robust and relatively short lifecycles of commercial buildings make people they do not become obsolete so fast. Development companies care less for the durability and quality of the building. can also benefit from having a caring image and positive corpoWhile an environmental approach with regular monitoring rate branding. and upgrading is a part of the solution, there is another impor

A long, sustainable lifespan

“Environmental solutions sometimes cannot be borrowed; they have to be tailored to the particular context and particular climate. Being a pioneer in certain aspects, we have to take some time to work out the solutions.”

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product has higher tensile strength than steel, but is still pliable enough to be shaped into the curvaceous forms found in her furniture line.

“We make thousands and thousands of bamboo furniture and last year in 2010 we didn’t have a single piece with cracking problem,” Yee points out.

in Style

A hardwood alternative

By Liana Cafolla

As awareness of the need for environmental protection continues to grow, Maria Yee prepares to take her unique line of green products – and philosophical standing on sustainability – onto a larger scale

T

he story of an entrepreneurship started in 1988 when Maria Yee founded her company - Maria Yee Inc - in Scotts Valley, California.

What is exceptional about the Maria Yee products is the highly evolved production process. Nowadays, she says, the green label has become a marketing tool for many.

“Lots of people are talking about green … but for us, it’s now been 23 years that we’ve been practicing that,” Yee notes.

The company designs, manufactures, sells and distributes premium quality, sustainably made furniture. But, none of her products are sourced from tropical rainforests, which as been the traditional - and highly endangered - source of most hardwoods.

Instead, her products are built using her own specially prepared bamboo. Each piece is individually crafted, making each end product a unique work.

The results are exquisite. The range – which comprises more than a thousand products ¬– includes generously proportioned dining chairs in contemporary styles, in natural wood tones with curved backs and black leather seats, club chairs in dark wood with curved arms, and spacious desks with foldaway tops and built-in bookshelves in rich browns, all selling in the mid to high-end price range.

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Sturdy, stylish and sustainable

Yee’s production methods focus on manufacturing in accordance with what she calls the “four Rs.” That is: “reduce, reuse, recycle, and renewable,” she explains.

Yee, who trained as a mechanical engineer, has created and patented BambooTimbre, which is used to create all the products in the EcoLuxury line. The process involves using carefully selected sheets of bamboo to create a solid board of wood that can be up to eight inches thick.

Yee uses Moso bamboo, which grows between 30 and 80 feet high and is six to ten inches in diameter.

Individual stalks are flattened, layered on top of each other and eventually bonded together.

The process, however, is far from simple – Yee describes it as a highly delicate procedure, to ensure that the fibers and nodes of the bamboo culms are precisely and evenly placed. If the alignment is off by just a hundredth of a centimeter, cracking can occur, she explains.

Getting the alignment exactly right means many of the problems such as warping, cracking, splitting and shrinking, which can occur with traditionally cut and dried bamboo culms, are minimized. Yee’s finished

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The innovation of BambooTimbre, which was the result of a three-year research process, has allowed Yee to use fast-growing and easily replenishable bamboo as a viable and sustainable alternative to traditional hardwoods.

“Bamboo is a grass,” she explains. “In the first 30 days, they can grow to the mature height of their life.

The most important thing is that they are renewable.”

Another element that is crucial to her design and production is her patented Handcrafted Breathing Joinery assembly process. Every piece of furniture is put together without the use of nails or screws, a technique that greatly strengthens the furniture against the ravages of humid climates.

Instead, Yee relies on ancient joinery techniques that she learnt from a third-generation highly skilled carpenter whose job was to create and repair furniture inside Beijing’s Forbidden City.

“It’s a three-dimensional locking system putting them together,” Yee points out. “Because the wood is what we call live woods, they need to breathe. And so as the climate changes, they expand or shrink.”

“I was amazed and I learnt a lot from that because of my mechanical engineer background,” she adds.

The finish of each piece of furniture is another area where Yee has made innovative changes.

“The finish has the biggest impact, because the [process to create the] finish is very toxic,” she explains.

To change it from oil-based finish to a water-based finish, we spent three years developing the products.”

The widely used oil-based finishes in furniture making result in a clear, smooth finish that enhances the appearance of the wood grains. However, the product can be toxic. Even after it has dried, when the furniture is put to use in homes or offices, it may still

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release formaldehyde, which is harmful to human health.

On the other hand, typical water-based finishes are non-toxic but result in a cloudy finish, a proposition less attractive to consumers. Yee's variation took three years to develop. The result is a clear finish that looks as good as the oil-based ones, but is non-toxic.

The process however is more costly, adding about 25-30 percent more to her products.

Rather than passing on the costs to the consumer, Yee was able to offset the extra cost by designing proMaria Yee ducts and using processes that together reduced the amount of materials needed and engendered fewer repairs. It resulted in a line of waterbased finished product at no extra cost.

“I don’t believe that being green [means] charging the consumers a premium price, just like organic foods in the past few years,” she says.

Yee has also patented two other construction techniques to solidify her credentials as a green manufacturer. The AirFrame technique allows her to achieve a seamless surface without visible frames, while BEST (Bamboo Enhanced Structure Technology) minimizes the need for raw materials.

These innovations have won her a string of green recognition, including certification from the Forest Stewardship Council (FSC) for several BambooTimbre products. In 2010, her factories were certified to the ISO 14001:2004 Environmental Management System standard.

23

Green manufacturing Yee has built two manufacturing sites in China, one in Guangzhou and one in Hunan, which together total 35 acres and provide one million square feet of production space. At peak production times, she employs up to 1,300 people.

“To have sustainable practices in China, you need to start from the ground up,” she believes. “That’s why firstly we have to have our own factories.”

The factory ceiling is fitted with 14 skylights, each measuring more than 420 feet long, to help eliminate the need for electrical lighting during daylight hours.

The fitting cuts down energy consumption by almost 50 percent.

The costs from heating the plant have also been cut, thanks to a combination of using the latest technology and recycled material. Sawdust is collected and used as fuel in a boiler.

“I do believe that being green is one of the duties of humans, simply to give back to the earth, and that we should not use it as a marketing tool or a sales advantage tool to doing more business.”

“The boiler we are using costs 10 times or more than a regular boiler. This one cost us half a million US dollars,” Yee says. “But this is the cleanest boiler in the world, and we could use sawdust to heat the water.”

“At the time, people thought we were crazy,” she adds. “But we save almost RMB 5 million per year just on [fuel] costs as oil prices skyrocket.”

Intellectual property Yee’s take on intellectual property concerns is highly unusual, so much that, she says, people have doubted her business acumen. Fellow furniture makers across the US are desperately looking for a

24

water-based finish such as the one she has perfected.

In response, she decided to open her factories and her technologies to them, free of charge.

“I do believe that being green is one of the duties of humans, simply to give back to the earth, and that we should not use it as a marketing tool or a sales advantage tool to doing more business,” she says. “I’m willing to share all my experience, the lessons we learnt. I open my factories and finishing lines and we help with the training, and we share all this information – the IP information – for no charge.”

Sharing this information means her competitors will be able to sell similar products to hers at lesser cost. To remain competitive, Yee continues on her path of ever-improving innovation.

“I asked my employees, and they’re all supportive,” she notes. “If we’re brave enough to share, then we think we’re ok to keep up to speed and keep up on the cutting edge, and keep innovating.”

From China to California and back Yee’s return to Hong Kong has taken many years.

She was born in Guangzhou to a school teacher mother and an architect father, who fuelled her interest in design. She later studied mechanical engineering.

After seeing the destruction wrought on China’s ancient monuments during the Cultural Revolution, she was inspired to revive the skills used in traditional furniture making. She started by assembling a group of master craftsmen to create handcrafted, museum quality reproduction of Ming dynasty furniture.

After moving to the US, she set up her company in 1988, a business combining traditional joinery techniques with a modern manufacturing environenviron ment. In her first year, she secured an order from Gump’s of San Francisco, a well-known stockist of Asian arts and artifacts, who continue to stock her products.

Recently, Yee has been researching trends and tastes of residents in Hong Kong and Mainland China and looking to set up in the region. So far, she has found that “green living” has not yet taken a deep hold.

“This is something that people in Asia are just not so aware of yet, about what our mission is all about and giving back to the planet,” she says. “So this is a great education process as well as an opportunity for us to provide that education for the consumer – why we need to be sustainable and how to select the products.”

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TAXATION

IRS Announces Second

Offshore Voluntary Disclosure Initiative

By Kenny Lau

T

he US Internal Revenue Service announced on February 8 a new voluntary disclosure initiative in a continued effort to bring offshore taxable money back into the US tax system by allowing US taxpayers to come forward voluntarily with undisclosed offshore income.

The US Department of Treasury envisions US$9 billion in funds that can be collected from assets of Americans held overseas but not declared to the IRS, according to Laurence Lipsher, past chairman of AmCham South China and a Hong Kong- and California-qualified CPA who has lived in China for more than 20 years.

Back in 2008 it became apparent to US legislators that large sums of money are deposited in overseas bank accounts held by Americans and that some of these accounts are not reported to the US Internal Revenue Service (IRS). A US Senate panel at the time accused UBS of Switzerland of helping wealthy Americans evade taxes through offshore accounts.

In a settlement deal to end litigation with the US, UBS entered into a Deferred Prosecution Agreement in 2009, admitting to helping US individual taxpayers in establishing accounts in a

26

manner designed to conceal assets from US authority, and agreed to a fine of US$780 million (of which US$400 million is said to be the amount of taxes that UBS failed to withhold).

As part of the deal, UBS also agreed to provide the IRS with information and identities of over 4,450 “suspicious” accounts of a total of 55,400 held by its US clients. The process came to a halt as Swiss Supreme Court stepped in questioning the legality of information disclosure on the basis of the right to privacy. The US and Switzerland later came to an agreement in 2010.

“Both countries had to settle this because there was actually a technical defense by UBS and Switzerland to turning over the names, but UBS also had assets in the US, which the US government could have seized if they won the court case in Florida,” says Jay Krause, a partner at Withers LLP in Hong Kong. “It was not so certain which side was going to win.”

In June 2010, Swiss and US officials came to a “compromise,” in which information of the 4,450 accounts would be turned over to the IRS. By September, Switzerland handed over between an estimated 2 – 6 million pages of bank account information to the US. “Privacy and secrecy in banking are a

thing of the past,” says Lipsher. “There have been major tax law changes in each of the past six consecutive years. The likelihood is quite high that this trend will continue.”

US Taxation Every other developed country, except the US, imposes tax based on residence or source of income - not solely on the basis of citizenship, Richard Weisman, head of the Global Tax Practice at Baker & McKenzie, points out. “US tax law differs from tax law of every other developed country in that the US imposes worldwide income and estate tax on US citizens and green card holders, even if they do not reside in the US.” The US also imposes “far-reaching” disclosure requirements on US persons who have bank accounts and other financial accounts outside the US, he adds, noting failure to disclose those accounts can result in onerous penalties up to 50 percent of the account value on an annual basis.

Whether residing in the US or abroad, any US person with a financial interest in or signature authority over any financial account (if aggregate value exceeds US $10,000) in a foreign country

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is required to disclose annually such assets in a Report of Foreign Bank and Financial Accounts (FBAR).

Many US citizens and green card holders in Hong Kong or elsewhere outside the US have not been fully aware of US tax requirements to disclose and report their worldwide income for tax purposes, according to Weisman. "The lack of awareness, combined with the complexity of US international tax rules, the expense of compliance and the onerous penalties for failure to comply, result in very serious tax challenges and potential exposures for US expatriates," he says.

“Years ago many perceived the practical risk to be low, but clearly the practical risk today has become very serious," he adds. “Since the US Justice Department aggressively pursued US persons who had offshore accounts with certain European banks in 2009, there has been a heightened awareness.

“US expatriates in Hong Kong would be well advised to clean up any previous non-compliance. This 2011 program provides an opportunity to do so at capped penalty levels.”

Voluntary disclosure Voluntary disclosure became part of the Internal Revenue Code at the end of WWII. “It offers people who felt they had not complied with US tax law and wanted to get on the right side a chance to come forward,” says Joe Field, senior partner at Withers LLP in Hong Kong.

“The penalty was very benign. In other words, it was a great deal in many cases,” he points out. “Often we would see people who only had to pay three years of back-taxes, plus interest and penalties. They just wanted people on the books.”

“But surprisingly few people took advantage of the prior system, which you could go to the IRS and qualify for until the day before you receive a notice that you are under investigation,” he adds.

Indeed, “prior to 2009, they never enforced anything in a very strict manner,” Lipsher says. “If you looked at some of those forms, you would never find any information revealing penalties for not filing. There was essentially no penalty for non-compliance.”

The whole mood has now shifted from benign to aggressive.

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The IRS formally defined details of the first official Voluntary Disclosure Program in 2009, under which US taxpayers faced up to a 20-percent penalty covering up to a six-year period (2003-09). The first program closed on October 15, 2009 with about 15,000 cases of voluntary disclosure covering bank accounts in more than 60 countries, and more than 3,000 taxpayers came forward since the deadline.

“plethora” of information.

The disclosure of financial information was mandatory to avoid criminal penalty under the voluntary disclosure program. But US taxpayers who participated in the program in 2009 were also asked to reveal contents of meetings with their respective advisors, including accountants, bankers, financial planners, and lawyers.

A New York Times article on

Forms to fill out Form 1040: The Individual US Tax Return. US individuals are required to file each year if total annual income is above US$9,350, regardless of residence

Form 926: US persons are required this form to report transfers of property to foreign corporations and other related information

Form 8865: Form 3520: It is filed to report transactions involving foreign trusts, including creation of a foreign trust by a US person, transfers of property to a foreign trust and receipt of distributions from foreign trusts

Form 5471: Any US person who owns 10 percent or more of a “foreign” corporation is liable for filing this form, which has to be attached to and filed along with a Form 1040

US persons file this form to report interests in and transactions of foreign partnerships, transfers of property to foreign partnerships and the like

Form TD F90.22-1: Report of Foreign Bank and Financial Accounts, or “FBAR” for short. A US person is liable for filing this form if he or she has over US$10,000 in banks or brokerage houses in any other country. It applies even to those who do not have to file Form 1040

Source: US Internal Revenue Service

The result far exceeded what IRS had expected. “It seemed the IRS had expected fewer people applying for the first voluntary disclosure program and had gotten a lot more than what they had expected,” says Krause.

The 2009 offshore disclosure process was said to be “an arduous, expensive and time consuming” exercise, and more importantly, it provided the IRS with a

December 23, 2010 reported that the US Department of Justice has opened a criminal investigation of Swiss regional banks, while it has also been reported that the IRS is looking into banks in Hong Kong where US taxpayers are supposedly hiding assets.

“On the 2011 program, what was said in the release of the detail of the program was that the US was well aware of the flow

27

of funds from Europe to Asia and that this is something they are actively looking into,” says Krause.

“It is a clear implication that some banks in Asia are likely to be under investigation in part from the information that was obtained from the 2009 program,” he says.

“They previously targeted more specifically on certain banks, but this time it is going to be more global,” says Field.

“They now have a lot more lead and they will be looking. The focus in Asia is certainly much greater than what it used to be.”

OVDI II On January 25, 2011, Leslie DeMarco, special agent in charge of the IRS Criminal Investigation’s Los Angeles field office, outlined the second voluntary disclosure program at the 2011 Tax Institute sponsored by the University of Southern California School of Law. The latest program, called the 2011 Offshore Voluntary Disclosure Initiative (OVDI), was subsequently announced on February 8, 2011. Like in the 2009 program, participants generally will avoid

criminal prosecution by opting to enter OVDI. Participants must also come forward and be “accepted” into the program before being identified by the IRS. Unlike the 2009 program, for which US taxpayers could sign up by the deadline and submit paperwork by a later date, all paperwork for the 2011 program must be completed and submitted by August 31, 2011.

The overall penalty structure for 2011 is higher.

Under the 2011 initiative, a new penalty framework requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period.

In other words, participants will have to pay up to eight years of back-taxes and interest as well as paying accuracy-related and/or delinquency penalties, plus a 25 percent penalty.

A US$1,000,000 highest balance means in most cases a US$250,000 penalty.

“The process involves financial records such bank account statements

and tax returns for the past eight years,” Field says. “The problem is that a lot of banks do not keep records after five years. This has become a big question.”

“But you have this date certain,” he adds. “Whatever it may be, by August 31, you have to be done with all the paperwork.”

The IRS in 2011 also created a new penalty category of 12.5 percent for smaller offshore accounts. People whose offshore accounts or assets did not surpass US$75,000 in any calendar year covered by the 2011 initiative could qualify for this lower rate under the new program.

For certain inherited or gifted bank accounts with minimal account activity or for a non-US resident who did not know he was a US citizen or green card holder responsible for reporting, 5 percent of the highest aggregate annual value of assets between 2003-10 will be the penalty.

“Whether you like the law or not, it is the law and I do not recommend violating it,” Lipsher stresses. “What is important to remember is that, once you have filed, you have gotten rid of willful neglect.”

filling orders which would likely create a PE under Japan’s domestic law definition.

Withholding tax

Hong Kong Strikes DTA with Japan Latest Double Taxation Agreement (DTA) permits concessionary deductibles on a single income among taxpayers who are subject to tax liability in the two jurisdictions

By Dean Page and Martin Glynn

H

ong Kong’s tax and regulatory framework has long made it an attractive destination for foreign investors. However, a new era may be beginning with the Territory’s newfound emphasis on implementing double tax agreements (“DTAs”). As a result, opportunities may soon abound for multinational corporations (MNCs) wishing to streamline their regional operations through Hong Kong.

Hong Kong’s pending DTA with Japan (the “HK-Japan DTA”) is typical of the DTAs now being implemented.

Background A DTA is generally entered into between two countries and is designed to clarify important bilateral tax issues.

In situations where there is no DTA, a non-resident investor will be subject to domestic tax laws in the foreign jurisdictions in which the individual is doing business. This may lead to unexpected and undesirable outcomes. DTAs supersede domestic tax laws and provide a means of dispute resolution with domes

30

tic authorities.

A typical DTA would include coverage of the following key issues: - A definition of permanent establishment (PE). The concept of PE is fundamental in international tax. It defines the conditions under which a foreign entity will (intentionally or otherwise) be deemed to have a taxable presence in a jurisdiction in which it is doing business; - Withholding tax rates for dividends, interest, and royalties; and - The conditions upon which an individual who is resident in Country 1 can remain in Country 2 without being liable for tax in Country 2.

The following is a brief discussion of some of the most significant aspects of the HK-Japan DTA.

Permanent Establishment Japan’s domestic PE definition is broader (and many would argue less clear) than that provided in the Organization for Economic Cooperation and Development (OECD) model treaty.

The HK-Japan DTA uses the OECD definition, and it will allow the activities of Hong Kong investors in Japan to be subject to a narrower and more easily understood definition of PE. The HK-Japan DTA sets out three circumstances in which a PE may be created – a fixed place of business, a construction PE and an agent PE. - Fixed place of business PE: This covers situations where the business of an enterprise is wholly or partly carried on through a branch, office, factory, workshop, mine, etc in the other country.

- Construction PE: A building, construction site, or installation project would be deemed a construction PE if it continues for more than 12 months. This is in contrast to the Japanese domestic law definition which provides that a PE would be created by construction lasting more than six months.

- Agent PE: Under the HK-Japan DTA, a PE is created where an agent acting on behalf of the foreign enterprise has, and habitually exercises, the right to conclude contracts in the name of that enterprise.

This narrower agent PE definition excludes activities such as negotiating and

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5 • 2011

One of the most significant benefits contained in the HK-Japan DTA is the reduced WHT rates on payments of dividends, interest, and royalty income.

In the absence of a DTA, Japan’s domestic tax laws generally impose WHT at a rate of 20 percent on such payments. This is obviously a point of significant concern to Hong Kong resident recipients of such income.

The situation under the HK-Japan DTA will be as follows: - Dividends: Under the HK-Japan DTA, owners of at least 10 percent of a dividend paying company will benefit from a WHT rate of 5 percent. In most other cases, the new WHT rate on dividends will be 10 percent.

- Interest payments: In most cases the WHT will be 10 percent. Interest payments to the government of either Hong Kong or Japan, or to a financial institution owned or funded by either government will attract no WHT. - Royalties: Royalty payments (as defined under the HK-Japan DTA) will be subject to WHT at a rate of 5 percent.

Individuals on business trips The tax situation for Hong Kong residents who spend short periods on business in Japan is significantly improved under the new DTA. Currently, a Hong Kong resident who spends a single day doing business in Japan could be subject to Japanese WHT at a rate of 20 percent on any salary earned during the trip. Under the HK-Japan DTA, a Hong Kong resident who spends short periods on business in Japan would not be subject to Japanese tax on his salary provided that: - The individual works fewer than 183 days in Japan in a 12 month period, and - Salary is neither paid from Japan nor borne by a Japan PE of the Hong Kong company.

Foreign Tax Credit In common with most DTAs, the HK-Japan DTA provides for a reciprocal foreign tax credit. This means that a

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Hong Kong resident paying Japanese tax on Japan sourced income would be allowed a credit against any Hong Kong tax payable on that same income.

Dispute Resolution One of the most important features of the HK-Japan DTA is the provision that allows taxpayers to solve disputes via Competent Authority. Under this mechanism, negotiation of important taxpayer disputes would take place directly between the Hong Kong and Japanese tax authorities. As the complexity of cross-border investment increases, the Competent Authority process provides important protection.

Utilizing the HK-Japan DTA According to Jon Karlsson, Managing Director of Accounting Asia, “While operational cost efficiency has been the traditional goal of supply chain optimization, in the case of Hong Kong this has often been at the expense of tax efficiency.”

The HK-Japan DTA opens up significant opportunities to more efficiently structure business between Hong Kong and Japan. In some cases, the HK-Japan DTA may also facilitate investment into China.

The following are possible examples of structuring opportunities opened up by the HK-Japan DTA: 1.

A company may be able to take advantage of the cost efficiency of producing goods in China while taking advantage of the HK-Japan DTA with respect to profits on the sale of goods.

The HK-Japan DTA could allow a Hong Kong company to take advantage of the clearer PE definition by setting up general marketing operations in Japan but recognizing sales in Hong Kong.

2.

It may be possible utilize a Hong Kong holding company to more efficiently pass dividend profits from Japan to China or vice versa. The JapanChina DTA imposes WHT at a rate of 10 percent on dividends paid between Japan and China. However, dividends paid between China and Hong Kong are usually not subject to WHT. Therefore, there may be an opportunity to interpose a Hong Kong holding company between Japan and China. This could effectively reduce the total

dividend WHT paid from 10 percent (under the Japan-China DTA) to 5 percent (ie the WHT rate between Hong Kong and Japan).

It should be noted that there are many issues to be considered before establishing this type of structure. In particular, there may be laws designed to prevent the establishment of mere conduits. For example the recent Jiangsu case confirmed that a Hong Kong holding company should have tangible substance.

Similar to this dividend profit scenario, the DTA creates opportunities for cross border tax planning with respect to interest and royalty payments.

The key to any financial structure is sound planning. As DTAs such as the one with Japan are implemented, foreign corporations will have greater opportunity to optimize their Asian operations through Hong Kong. Again, according to Karlsson, “Hong Kong’s renewed emphasis on international tax agreements provides tremendous opportunities for corporations to optimize supply chains and more fully access Hong Kong’s advantageous corporate tax and business environment.”

About the Authors

Dean Page is CEO of Accounting Asia. He is qualified as both an attorney and as a CPA and was formerly a partner with Ernst & Young. He can be reached at Dean.Page@Accounting.Asia.

Martin Glynn is a Summer Associate at Foreya Partners in Tokyo. He is currently completing his legal studies at Temple University Law School in Philadelphia, Pennsylvania. www.VentureCapital.Asia

31

REAL ESTATE

A Look at Hong Kong’s Commercial Property Market

By Wilson Lau

R

iding on Mainland China’s robust economic growth, the commercial property market in Hong Kong has been doing extremely well.

Judging from the current hustle and bustle in Central – the core business district of Hong Kong – the city seems to have made an impressive recovery from the financial tsunami that hit the region in 2008.

Being the gateway to China, Hong Kong continues to benefit from the country’s fast-paced economic developments. China has consistently achieved at least 8-percent gross domestic product annually, outpacing Asia’s 5-percent growth.

The city’s financial hub status has not only attracted overseas companies to capitalize on China’s developments by establishing a presence or expanding their operations. It has also drawn an increasing number of Mainland Chinese companies to set up bases in the city, aiming to build a platform for their overseas market diversification.

Increased demand The buoyant economic growth in Hong Kong is reflected in the increased demand for the limited office spaces available in Central and the sharp rises in rents.

The current vacancy rate of grade-A commercial buildings in Central is around 3.4 percent.

The rate (excluding ‘secondary’ or ‘shadow’ spaces) is just above 1 percent for Central A1 buildings, which include AIA Central, Cheung Kong Center, York House and One & Two International Finance Centre, according to Charles Kelly, Associate Director, Office Services, CB Richard Ellis.

“We expect the year-on-year growth for grade-A office rents in Central to be around 24 and 25 percent in 2011 and another 19 to 20 percent in 2012,” he says.

The overall office rents in grade-A buildings in Central went up by 7.7 percent in the first quarter of 2011,

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compared with the fourth quarter of 2010.

“Average rent is around HK$120 per square foot for grade-A space in Central, and coupled with extremely low vacancy, now is a great time to be a landlord in Hong Kong,” Kelly says.

Rents of grade-A office buildings in Central in Q1 2011 increased 40 percent from Q1 2010. However, rents of Central A1 buildings only edged up 2.6 percent to around HK$150 per square foot in Q1 2011.

“It reflects that the rents of the Central A1 buildings had been somewhat overvalued towards the end of 2010,” Kelly explains.

make a statement with offices in prime locations in Hong Kong.”

Meanwhile many private equity firms and hedge funds prefer the smaller floor plates available in buildings such as York House, which has helped drive up its rents to a level similar to the other modern Central A1 buildings.

“Private equity firms and hedge funds are very active and they are able to pay top dollar. Many private equity firms and hedge funds from Europe and the US will be setting up operations in the city, because of the growth opportunities in Asia,” Kelly points out.

Various providers of professional services have also expanded their operations in Central over the past year.

“We are seeing a flurry of international law firms expanding their operations and new firm setups in the market looking to capitalize on Hong Kong’s IPO activity and proximity to the mainland,” Kelly adds.

Many law firms are now concentrated in a few grade-A buildings in Central, such as Landmark and Exchange Square. They are located in Central to be close to their clients and as part of their brandbuilding. For accountancy firms that have a sound presence in Central, they are expected to continue the trend of shifting back-office employees to offices in decentralized areas, Kelly notes.

Types of tenant To benefit from Hong Kong’s status as a regional financial hub, many Chinese companies are coming to Hong Kong.

According to CB Richard Ellis’s estimate, there were around 750 Mainland Chinese companies in Hong Kong in 2009, and the number grew to nearly 800 in 2010.

“More companies from the mainland are expected to open offices in the city,” Charles Kelly Kelly notes. “Although some of these companies do not necessarily require large offices, they are well-funded and are looking to

districts as many companies seeking to expand their operations have chosen to locate new offices in these decentralized areas.

Compared with Q4 of 2010, office rents of grade-A office buildings in Hong Kong East rose 10.3 percent in Q1 2011 to an average of HK$32 per square foot per month. It is the highest growth rate among all the sub markets in the city. It is also the highest quarterly growth for Hong Kong East in the past three years, according to Gavin Morgan, Head of Leasing at Jones Lang LaSalle.

In Kowloon East district, rents grew 7.1 percent in Q1 2011 to an average of HK$22 per square foot per month.

Vacancy rate in Hong Kong East now stands at 3.8 percent and that for Kowloon East is 10.8 percent, compared with 15 percent in Q1 2010, according to Morgan. “The declining vacancy of office spaces in Hong Kong East is the main factor driving up the rents.”

“It reflects the fact that until the end of 2010 office rents in the district rebounded relatively more slowly compared with the other sub-markets,” he adds, noting that Hong Kong East only rebounded 24 percent from the bottom of the market in Q1 2010 while Central bounced back by over 50 percent from its trough back in Q3 2009.

“Net effective monthly rents for buildings in Hong Kong East at the end of 2011 will probably be adjusted further upward to an average of HK$38 per square foot, compared with HK$29 towards the end of 2010,” Morgan says.

Office spaces in the decentralized areas have become more attractive because of the surging office

Other locations Significant increases in office rents have been recorded for the Kowloon East and Hong Kong East

Hong Kong East versus Kowloon East

Decentralized areas Regardless of the sizes of spaces being sought, most tenants are becoming increasingly cost-conscious in terms of real estate. Companies in a broad range of industries have established operations in the decentralized areas, including the banking and finance sectors, sourcing, accountancy and insurance, Morgan notes.

“We expect the leasing activities in the decentralized districts to continue for the rest of 2011,” he says. “Feedback from various organizations indicates continuous expansion Gavin Morgan throughout 2012.

The outlook seems to be positive in terms of their office expansion plans going forward.”

In terms of relocation of back-office operations, companies prefer Kowloon East rather than Hong Kong East because of its more competitive rents.

Kowloon East continues to develop a critical mass to attract potential tenants. New buildings include the 18 Kowloon East, which has been completed in Q1 and has a total of 300,000 square

HK Office Rents

Grade A office rentals

HKD per sq ft per mth, NFA

rents in Central, which has around 23 million square feet of office spaces and its current vacancy rate is around 3.4 percent.

Rental Index (2000 Q1 = 100)

70

400

60

350 300

50

250

40

200

30

150 20

100 10

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Hong Kong East

Kowloon East

Jul -10

Jan -11

Jul -09

Jan -10

Jul -08

Jan -09

Jul -07

Jan -08

Jul -06

Jan -07

Jul -05

Jan -06

Jul -04

Jan -05

Jul -03

Jan -04

Jul -02

Jan -03

Jul -01

Jan -02

Jul -00

Jan -01

Jul -99

Jan -00

Jul -98

Jan -99

Jul -97

Jan -98

Jul -96

Overall

Jan -97

Jul -95

Jan -96

Jan -95

50 0

0 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

Source: Jones Lang LaSalle

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Central

Central A1

Source: CBRE Research

35

feet of office space.

Later in 2011 the redevelopment of WKK Building will begin to offer around 120,000 square feet of office space, while the building under construction at the ex-Piazza Building site will offer 350,000 square feet.

“The vacancy rate of Kowloon East might fluctuate throughout 2011,” Morgan says. “From now till Q3 the vacancy may reduce further. When the redeveloped spaces at the WKK Building and Piazza Building sites become available, vacancy may go up again.”

“Broadly speaking, we will continue to see accommodations being taken up,” he adds, noting net effective monthly rents in Kowloon East at the end of 2011 will probably be adjusted upward to HK$28 per square foot, compared with HK$20 at the end of 2010.

“The 3.8 percent vacancy in Hong Kong East will be stable,” he further says. “This vacancy rate is structural and only small spaces are available.

It is likely that rents in Hong Kong East and Kowloon East will grow at a faster rate compared with the other districts.”

Relocating to save cost

COMMERCIAL PROPERTIES IN HONG KONG

to relocate their front offices to Wanchai or Causeway Bay and Hong Kong East.

“Typically rents in grade-A buildings in Wanchai and Causeway Bay are around 50 percent of those in grade-A buildings in Central,” Morgan notes.

“Moving offices eastward is a more natural market progression than moving to the western part.”

He also points out that many existing buildings in Wanchai and Causeway Bay feature bigger floor plates and that the districts also have redevelopment sites, which have more scope for large floor-plate office buildings.

“There are already well-established clusters in Hong Kong East and Causeway Bay. Buildings in the western part of the island tend to be smaller,” he says. “Meanwhile many are strata-title buildings, where offices are sold to individuals within a building rather than being held by one landlord. It makes it more difficult to build a critical mass and generally do not suit the requirements of larger multinational corporation occupiers.”

In Causeway Bay construction of Hysan Place has been scheduled for completion in early 2012. The new building will offer a total of 240,000 square feet of office space.

It is expected that this building will continue to generate a leasing activity through the later part of 2011, Morgan points out.

Because of the surge in office rents, companies try to make their real estate work a little bit harder by getting more people into the same amount of space.

“Square foot per person in many organizations is coming down,” Morgan notes. Companies compensate for that with higher quality, more aesthetically pleasant furniture to create an enjoyable working environment.

“Many new offices adopt open-plan layout and feature more break-out rooms for individual staff who need to make private phone calls and bigger and better-equipped pantry rooms for employees.”

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“We expect the leasing activities in the decentralized districts to continue for the rest of 2011.

Feedback from various organizations indicates continuous expansion throughout 2012. The outlook seems to be positive in terms of their office expansion plans going forward.”

Apart from setting up their back-office operations and offices for supporting divisions in decentralized areas, some companies are also considering relocating their front offices to Wanchai, Causeway Bay and Hong Kong East.

“This time in 2010 occupiers of small to large spaces still focused on the more traditionally expensive locations in Central. Now the rents have escalated to the extent that many organizations are looking at more creative solutions to mitigate costs,” Morgan points out.

A trend, he says, is that companies that traditionally have had their front offices in Central are looking

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• Causeway Bay is a major office district as well as a prime shopping and entertainment area in Hong Kong. The district is home to many well-known office buildings, hotels, restaurants and retail shops, and boasts Hong Kong’s largest concentration of department stores.

• Regus is the world’s largest provider of workplace solutions, with products and services ranging from fully-equipped offices, virtual offices, to professional meeting rooms, business lounges and the world’s largest network of video communication studios.

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www.regus.hk 36

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5 • 2011

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5 • 2011

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37

HEALTH & WELLNESS

Proper nutrition

Making Work-Life

a Reality

Sleeping to restore

By Chan Cudennec

D

oes work-life balance exist in the corporate landscape or is it an illusive dream?

According to a survey conducted by Community Business, employees in Hong Kong perceive that the issue of work life-balance has deteriorated over the past five years, in spite of many of the corporate initiatives in place offering flexible working hours and things like sabbaticals.

Employees in Hong Kong often feel overworked as a result of long working hours, at an average of 48.5 hours per week. It is above the “40-hour week” recommended by the International Labour Organization (ILO).

Furthermore, an alarming 78 percent of the workforce felt that their health and relationships with family are negatively affected, also as a result of long hours at work. About 40 percent in the survey admitted to considering a job change in order to have a better work-life balance and live a more fulfilling life.

For human resources professionals as well as employers themselves, it is a real business case. One only has to imagine the potential costs to companies with high staff turnover rates, in terms of increased recruitment, loss of human capital, and decreased efficiency and effectiveness.

The case for companies to invest in staff wellness should be a no brainer as performance of employees is directly linked to the bottom line. However, many companies are still reluctant to invest in sustainable corporate wellness programs that are proven to lead to higher productivity of employees.

From an employee’s perspective, what does work-life imbalance actually feel like? When their work life is out of balance, many say they experience one or more of the following symptoms: - Fatigue - Stretched - Lost time with friends and loved ones

38

and repair - Need a holiday soon Studies have indicated that work overload can cause stress and have a negative impact on morale, cognition, behavior, sleep, and job performance of a person.

Many think that a job change will improve the situation. But will it truly improve? Or will it be more or less of the same stress and pressure? Wouldn’t it be better if we took charge and proactively tried to avoid getting “burned-out.”

For many of us, the lack of work-life balance is a state of mind; for others, it is a real physical issue of the body.

Nevertheless, here are some easy-toimplement tips to help “balance” your life: • Schedule brief breaks: The capacity of a human being to concentrate on a task efficiently is reported to be 20-30 minutes. Thus, having brief breaks throughout the day would improve one’s efficiency.

• Plan ahead: Setting priorities for the following day at the end of each day can often ease the pressure. Worrying about unfinished tasks could be minimized if one could make it a habit to establish a discipline of pre-planning priorities.

• Practice strategic email management: Don’t let an overload of emails invade your life. There are courses and guidelines available online on how to be clever in managing emails.

• Be frank: When addressing concerns about deadlines and deliverables, the earlier the better. If one has an issue about unrealistic deadlines or any other emergencies, it is best to surface them early with relevant parties before they become a catastrophe.

• Enjoy your vacation time whenever possible: “No time for vacation” is a lame excuse for being badly organized and a strategy for poor work-life balance.

• Make a distinction between work and

rest of life: It is absolutely essential to maintain harmony and healthy relationships at home and during vacations. We wonder how many Blackberries have landed at the bottom of the swimming pools of exotic resorts.

• Don’t sweat the small stuff: Focus on the big and important few and try the “20 percent to get 80 percent impact.”

• Share your load at work and at home: Ask for help and you will be surprised how willingly your colleagues and family members say yes.

• Exercise: It is very important to move, whether it is at the gym, brisk walking or strolling by the beach or in the park. Try practicing yoga or other forms of moving meditation .

• Eat well: Healthy food choices are always better.

From our experience working with corporate clients, we have found that three specific areas are particularly useful in helping employees experience better work-life balance. They are: - Stress management - Sleep and relaxation techniques - Proper nutrition

Stress management The long-term effects of stress on health are detrimental and are the underlying cause of many serious illnesses such as cancer, cardio-vascular diseases, and clinical depression. That is because the immune system is constantly under attack and the person’s natural defense mechanism cannot work as efficiently.

Stress is with us every day as it is part of

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5 • 2011

living. But what we need to do is to shift our attitude in order to reclaim our power and develop a sense of personal resilience.

Today, resilience is recognized as a key management competency in leadership roles. Resilience is defined as the ability to bounce back in face of adversity, to embrace change instead of resisting it, to develop healthy self-esteem and to lean towards optimism.

Dr Martin Seligman, founder of positive psychology and an authority on “learned helplessness,” suggests we can all learn to be optimistic. His research shows that optimists perform better in the workplace and lead a fuller and richer life.

Optimistic people are also physically healthier as their immune systems are enhanced. Even when they become sick, they believe in better outcomes and are more active in seeking out ways to heal and recover faster.

There are also many “de-stress techniques.” One can reduce the harmful effects of stress by breathing more deeply through practicing Yoga and yogic breathing called Pranayam. Other forms of meditation such as Qi-Gong or Tai-qi can also be quite useful.

Recharging oneself by walking on the beach or on the earth barefoot is very invigorating. Recent findings by Clinton Ober and Stephen Sinatra in their book Earthing demonstrate how connecting with the earth is critical to our health and well-being as the earth offers boundless amounts of free electrons. Their sciencebased work shows that conditions of chronic inflammation or poor sleep can be reduced by being “connected” to the earth.

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5 • 2011

Sleep is a definite pre-requisite in achieving recovery and clarity of mind and, ultimately, work-life balance. Poor or lack of sleep is a major cause of many health disorders such weight gain, diminished immune responses, lack of concentration, irritability and depression.

Insomnia is on the rise as our society does not value sleep and tends to view it as a sign of laziness.

The following ten strategies are effective to help you sleep better: • Free your mind of anxiety and worry: meditation, visualization, therapeutic music, warm bath with oils, and socks for cold feet; • Get physically tired: the body must exert energy to get physically tired; • Increase darkness: make the bedroom as dark as possible, if not blackout shades; • Reduce electro-magnetic pollution and “yang-ness” in bedroom: remove clutter; • Cut back on caffeine: drink half a cup less coffee each day until you quit entirely or at least refrain from caffeine consumption after 3pm; • Limit alcohol: alcohol consumed just before sleep wears out after 4-5 hours and afterwards the brain becomes hyper-aroused; • Journaling: writing a journal before bedtime clears the mind while a gratitude journal creates positive frame of mind; • Reset your body clock: body clock may be out of sync with day and night. 20 minutes of bright sunlight exposure within 15 minutes of awakening can help; • Take a supplement: melatonin or 5HTP in evening or an hour before sleep; and • Stop worrying: thinking about not being able to sleep could simply keep you awake.

Eating properly is crucial to leading a work-life balance, especially under a stressful lifestyle. If we eat badly we can develop digestive disorders such as heartburn, bloating, constipation, colitis are precursors to many chronic health conditions.

One’s health can improve with foods that are alkaline through a variety of fruits and vegetables and other nutrient-rich food. Supplements such a CoQ10, Omega 3 oil, and Vitamins C and B complex are all necessary to support a hectic and stressful life. Raw and living food in meals can dramatically improve one’s vitality and well-being.

Cleansing the gastro-intestinal tract periodically is an excellent way to maintain wellbeing. Fasting and reduction in food intake for 5-7 days effectively detoxifies the body of waste products from metabolism, food additives and environmental toxins.

The most negative effects of poor work-life balance can be successfully mitigated with the above strategies. But, more importantly, a change in attitude and learning to be optimistic can make a difference in finding solutions to a better work life balance.

About the Author

Chan Cudennec, a former banker turned holistic healer, is founding CEO of SOL Wellness. The group offers corporate wellness consulting and seminars on topics including work life balance strategies, stress and sleep management, and healthy living. It also offers holistic health solutions for individuals through optimum nutrition and body cleansing/detoxification. She can be contacted at chan@sol-wellness.com

39

AMCHAM BALL

AmCham Chairman Rob Chipman gives his welcoming address at the 2011 AmCham Ball

hemed Moonlight Masquerade, this year’s annual ball organized by the American Chamber of Commerce in Hong Kong welcomed over 380 distinguished guests to a spectacular gala event held at the Four Seasons Hotel ballroom in an enchanted evening that embraced candlelight, mystery, and beguiling music that lit up the dance floor.

Guests were delighted by the exquisite and opulent decor and treated with an unforgettable fine dining and entertainment experience. The Tony Carpio Band charmed the guests by filling the elegant ballroom with timeless romantic classics.

By the end of the evening, AmCham raised HK$119,000

40

for the AmCham Charitable Foundation through raffle ticket sales.

“AmCham’s mission is to foster commerce among the United States, Hong Kong and Mainland China, and to enhance Hong Kong’s stature as an international business center,” says AmCham Chairman Rob Chipman. “However, we also want to show that AmCham members and Hong Kong know how to have a good time.”

“In addition, we focus on contributing back into the community as 100% of our raffle ticket sales proceeds go directly towards benefiting local organizations through the AmCham Charitable Foundation programs,” he adds.

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41

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Asian Tigers Mobility

Overlook Investments Limited

AmCham Team Stephanie Chu Events Director

Mimi Shih Events Manager

Committee Rex Engelking Telstra Asia

Ian Stirling UBS AG

Jerry McLean

Therese Necio-Ortega

Andrea Richey

Raymond Roessel

CZAR Partners

Legal Marketing China

Jon Zinke

Keesal, Young & Logan LLP

Jin-ah Lee Senior Manager Membership and Chamber Services

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May Getting a Grip on Mobile Marketing:

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Mark Liversidge, Chief Marketing Officer, CSL Limited Wai Yee Lam, Managing Director, Monitise Hong Kong Bernie Tay, Head of Mobile Sales, Greater China, Google Mobile Moderator: Scott Frain, Mobile Market Entrepreneur and Investor

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To get a clear view of the mobile marketing's potential, come hear a panel of experts address questions including: Where does mobile marketing sit in relation to other non-digital and digital marketing channels?

What industries and companies are using mobile marketing successfully?

What companies should be investing in mobile marketing -- and should they be starting now?

What’s the best way to begin and what are some of the barriers of entry people need to be aware of?

What are the key trends in mobile marketing in Hong Kong and Asia in general? And how do these stack up in comparison with other countries?

May Talent Management through Global Mobility

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Cathy Loose

Benefits Business Development Leader, Asia Pacific Towers Watson

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Venue: AmCham Office 1904 Bank of America Tower, 12 Harcourt Road, Central Time: 8:00am - 9:30am (light breakfast included) Fee(s): Member Fee: HK$150 Non Member Fee: HK$250 MEDIA WELCOME

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

Asia's Role in Reshaping Capitalism Chandran Nair Founder & CEO Global Institute For Tomorrow The Western model of consumption-led economic growth cannot be replicated in Asia, according to Chandran Nair. Instead, Nair offers an alternative paradigm for governments, business leaders, and academics to consider. He argues that economic policy needs to be realigned; to avoid the catastrophic outcomes that could result from the relentless promotion of a consumption-led growth model in Asia, at a time when resource constraints are only too apparent. His book Consumptionomics calls for bans on some forms of consumption, re-pricing of resources, and for the state to play a bigger role.

Chandran Nair is the Founder and CEO of the Global Institute For Tomorrow (GIFT), an independent social venture think tank based in Asia, its key goal is to guide corporations, and their leaders, on how to meet the challenges of doing business in Asia, with particular emphasis on the role of social investment, geo-politics, leadership development, business ethics, government and civil society.

For information, see website: www.amcham.org.hk Tel: (852) 2530 6900

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Time: 8:00 - 9:30am (light breakfast included) Fee(s): Member Fee: HK$150 Non Member Fee: HK$250 MEDIA WELCOME

Email: sanlee@amcham.org.hk

2011 May

According to Towers Watson's 2010 Workforce Study, the majority of surveyed companies cited the three factors below as the most challenging areas: - Loss of talent in key skills areas; - Lack of succession planning management; and - Inability to attract necessary talent.

Asia Pacific being the growth region, talent shortage is even more critical. More than 80% of companies in Asia Pacific are planning to hire in 2011. Yet faced with the demographic shifts (ageing societies), fast changing labor markets along with inadequate education systems and migration policies, human capital challenges in the region will soon rival financial capital as the key impediments to economic growth.

Cathy Loose will share with the members overall market trends regarding talent management issues looking from an APAC region and HK perspectives. She will also provide insights and approaches that companies should consider when linking talent management process with global mobility policy as well as the evolving landscape of global mobility practice among multinational companies.

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The Inside View from Three Industry Leaders

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