biz.hk Jun 2011

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

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June 2011

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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

June 2011 Vol 43 No 06

Contents

Richard R Vuylsteke

Editor-in-Chief Daniel Kwan

Assistant Editor Kenny Lau

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COVER STORY

CHINA BUSINESS

HOSPITALITY & TOURISM

AMERICAN TOPICS

China currently accounts for nearly 70 percent of garment production worldwide but is also becoming a more expensive place to do manufacturing. Speaking at the Prime Source Forum held earlier in Hong Kong, industry leaders reveals how the global supply chain is caught in a dilemma and searching for other areas to keep cost at a minimal

A case study of Hong Kong-based architects on what market opportunities the Closer Economic Partnership Arrangement has opened up for an individual industry since it was signed in 2003

Theron Skees, Director for Creative Development and Show Quality Standards at Hong Kong Disneyland, explains how creativity and science come together to make Imagineering a success and to create the Disney magic

US Consul General Steve Young speaks on vitality of Hong Kong and Macau in the Context of US-China Relations as well as US diplomacy with China amid annual Strategic & Economic Dialogue

Publisher

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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

16 From Dirt to Shirt:

What Cotton Price Increase Means

04 Chairman’s Memo Rob Chipman previews the agenda of this year’s Washington Doorknock, AmCham’s annual advocacy trip to the nation’s capital

The story behind price fluctuation of cotton as it more than doubled in 2010, reached an all-time high of US$2.47 per pound in early March and dropped drastically in recent weeks

07 New Business Contacts

CHINA BUSINESS

34 executives joined AmCham’s business network last month

20 Is CEPA Useful to Your Business?

45 Mark Your Calendar

A case study of Hong Kong-based architects on expanding business opportunities under the Closer Economic Partnership Arrangement that was signed in 2003 between Hong Kong and Mainland China

COVER STORY

09 Finding “New China” in the Global Apparel Supply Chain The cost of doing business in China’s Pearl River Delta region – a manufacturing base upon which different industries have relied for low-cost labor – has risen sharply and created a particularly acute dilemma for the global garment industry

14 Is Cambodia the Next Option?

ENVIRONMENT 24 Do Something – Before It’s Too Late The once-in-a-lifetime experience of a ‘COOL’ captain on an expedition trip to Antarctica in CLP’s Project COOL program as part of an effort to help achieve reduction of global carbon emission

HOSPITALITY & TOURISM 26 Young at Heart: Unlocking the Secrets of Success of Imagineering Theron Skees, Director for Creative Development and Show Quality Standards at Hong Kong Disneyland, explains how creativity and science come together to deliver the Disney magic

AMERICAN TOPICS 32 Hong Kong and Macau in the Context of US-China Relations US Consul General Steve Young speaks on vitality of the two Special Administrative Regions as well as US diplomacy with China amid annual Strategic & Economic Dialogue

FINANCE 34 Where Should You Put Your Money A report of insights and observations on market trends and how the average investor should structure a portfolio in times of uncertainty in the global market

Scott Huff, CEO of Fair Manufacturing and a delegate of American Cambodian Business Council, talks about what the emerging Southeast Asian country has to offer as a manufacturing center

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

As I pen these lines, I’m finalizing the arrangements for the Washington, DC “Doorknock” trip. Many of you know of our long and stellar history of sending a high-level AmCham delegation to our nation’s capital to advance our members’ interests and reinforce AmCham’s relevance in global trade.

This will be my second consecutive “Doorknock” and from the busy schedule that our president Richard Vuylsteke has planned for us, I expect a blizzard of meetings with key government departments, State, Commerce, and Agriculture. In addition, we’ll meet with the US Trade Representative’s office, think tanks, and – once we’ve worked our courage up – we’ll head over to The Hill and visit members of Congress.

Some of the topics we will be arguing for include an overhaul of the tax system, both corporate and individual, to ensure that American companies and Americans as individuals can compete in the global marketplace. As it stands now, the US’ overly complicated tax structure serves as a considerable handicap to Americans who seek to compete on the international stage.

Intellectual property protection is another subject that will be high on our agenda.

Tom Burns from Intel will join us and few can articulate the importance of IP issues as well as Tom. Andre Leroy will take the lead our meetings with the Consumer Product Safety Commission, where we will continue to air concern of members in the sourcing and logistics business. All members of the delegation expect to be back to Hong Kong in time for the June Board of Governors meeting at which time we will share the results of our trip.

Turning to this month’s biz.hk, I see several articles on a subject near and dear to my heart – logistics and supply chains! I encourage you to read these pieces and familiarize yourself with their content. I’m also very pleased to report that AmCham

Governor Peter Levesque has a new book on the subject – “The Shipping Point” – which is available on Amazon.

I have read the book and it is excellent.

It has distilled down most of what I have learned in the past 15 years in this business into a well structured book that you can read and digest in far less time!

I also highly recommend former AmCham Chairman Steve DeKrey’s chapter on leadership. Well done Peter and Steve; your work reflects very well on AmCham!

US Consul General Stephen Young gave his annual address to AmCham at a luncheon this past month. The CG, as we fondly refer to him, set out the US position and views on a wide range of issues that bring the US, Hong Kong, and the Mainland closer together. If you are interested in learning more, I encourage you to read the article in this month’s magazine.

See you around the Chamber!

Rob Chipman Chairman

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MEMBERS DIRECTORY 2010/2011

New

Business Contacts The following people are new AmCham members: Institute of International Education

Syracuse University Hong Kong

Thomas Jones Managing Director & Co-head of Asia

Maria Luk Acting IIE/HK Director

Joffre Chan Director

American Express

International SOS (HK) Ltd

Table Media LLC

Teri Cheng Regional Head, Strategic Multinational Relationships, JAPA

Cindy Cheng General Manager

Poom Chantha CEO

IP Global Ltd

Thomson Reuters Hong Kong Ltd

Scott Hagerman Telemarketing Associate

Michael Tsang Managing Director, Treasury Asia

Jahnke, Herbert Charles

United Airlines

Herbert Jahnke USA Business Development Expert

Walter Dias Managing Director - Greater China & Southeast Asia

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

Alvarez & Marsal Asia Limited

American Women's Association of Hong Kong, Ltd Susan Madon President

www.amc ham. org.hk

Australia and New Zealand Banking Group Limited Susan Yuen CEO, Hong Kong Gilles Plante CEO, Northeast Asia, Europe and America

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.

Baker & McKenzie

ISBN 978-962-7422-03-7

BALtrans International Moving Ltd

LC 98-645651

Aras Berenjforoush Registered Foreign Lawyer

Joseph Lam Sales Manager

Caesars Entertainment Corp/ Caesars Asia Ltd Venus Wong Office Manager

Citibank NA Carol Chu Head of Marketing

Delta Air Lines, Inc Betty Lo Account Manager, Corporate Sales Alice Wong Account Manager, Corporate Sales

Ernst & Young Fred Chin Executive Director

Hong Kong University of Science & Technology Judy Au Head, Kellogg-HKUST EMBA Program

KBQuest Group, Inc Eric Moy Managing Director

Kimberly-Clark North Asia Robin Moriarty Managing Director Hong Kong - Intl Achal Agarwal President - North Asia Region Chloe Hui General Manager, KCP

UPS William Ng Managing Director, UPS Hong Kong and Macau

WR Grace (Hong Kong) Ltd Adam Grose Vice President & General Manager

Klako Group Sven Koehler Group Managing Director

New Balance Athletic Shoes (HK) Ltd Duncan Scott Vice President, External Products

Norton Rose Hong Kong Christopher Bailey-Gates Of Counsel Ji Liu Partner Andrew Abernethy Partner

PricewaterhouseCoopers Angelica Kwan Partner, US Tax Services

Regus HK Management Ltd Germer Kegge Area Director - HK, Macau and Taiwan

View our other members at:

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

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COVER STORY

Finding “New China” in the Global Apparel Supply Chain The global supply chain of the garment industry is undergoing unprecedented changes. The low-cost labor in China’s Pearl River Delta – upon which the industry has relied on and thrived for decades – is coming to an end. With China accounting for nearly 70 percent of global garment production, the industry is caught in a dilemma of searching for a new “China” or relocating production to other areas in the country that can keep their production costs low, Wilson Lau reports

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or Ranjan Mahtani, Chief Executive Officer and Managing Director of The Epic Group in Hong Kong, the past year was a “sourcing nightmare”. Mahtani’s company is one of Asia’s largest garment manufacturers, employing more than 18,000 people in Bangladesh and Vietnam. With rising production costs because of wages and materials, it is no wonder that Mahtani didn’t find 2010 enjoyable.

Sourcing nightmare In fact, the sentiment expressed by Mahtani succinctly sums up the acute challenges confronting the garment sector. Thomas Nelson, Managing Director and Vice-president of global product procurement of VF Asia, a subsidiary of global fashion company VF Corporation, also says that finding the best sourcing deals nowadays is no easy task given the fluctuations in the commodity markets and surging prices of some raw materials.

“Cotton was in the US$0.50 range in 2010 and is now over US$2,” says Nelson who is also Vice-chair

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of AmCham’s Apparel and Footwear Committee.

“We spend much more time researching and monitoring commodity pricing now to ensure we are getting the best deals.”

Mahtani and Nelson made the above comments at the Prime Source Forum held in Hong Kong in March. Their worries were certainly not coincidental. In March, Guangdong raised the minimum wage required by law by an average of 18.6 percent. This was the second salary increase in 10 months. Moreover, Ranjan Mahtani the gradual appreciation of Renminbi also makes Chinese labor relatively more costly.

For the global supply chain, the “China Price” factor is critical. For more than two decades, China has established itself as an apparel production powerhouse – or the “world’s factory” as some economists

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have called it.

With a labor pool of more than 700 million, China boasts virtually unlimited labor supply. It has also established relatively efficient logistical infrastructure and benefited from the economies of scale of its industry.

Kevin Burke, President and CEO of American Apparel & Footwear Association, says two decades of economic growth allowed many manufacturers in China adopted the “full-package” apparel production so that their operations have become vertically integrated – an advantage not attainable in other emerging economies in Asia.

The issue of soaring labor costs is not limited to China. Asia in general has experienced robust economic growth since 2009. In the same period, production costs covering labor and utility have gone up considerably.

“The cost of manufacturing in China increases at an annual rate of 10 percent and the increase in Vietnam is 12 percent,” says Mahtani of The Epic Group. “Suppliers have to have huge capital outlays to operate.”

Kevin Burke (far right)

China wages There were many factors behind the labor shortages experienced by garment manufacturers in the Pearl River Delta. The transient nature of textile workers in China means that many skilled workers would move on to jobs that offer better pays after spending a few years in the garment-making business.

Another sting came two years ago during the financial crisis. Many factories in Pearl River Delta were closed and sent their workers home in 2009 as demands from western markets shrank suddenly.

When the orders returned about a year later, factory bosses struggled with a smaller pool of workers.

Making the situation worse was the large number of infrastructure projects launched in the provinces under the Central government’s stimulus programme to boost the economy.

Feared that a slowdown in export and investment would trigger unemployment and hence social unrest, the Government spent billions to pay for massive construction across the country. Given the availability of work at home, migrant workers were much less interested to leave their families to toll in faraway

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factories in Guangdong or other coastal provinces.

Regulatory changes also drove up wages too.

David Mitchell, General Manager of Kronos Greater China, says in a recent interview with biz.hk that the Chinese government is determined to raise wages for low-end workers.

“The primary purpose of all Chinese labor regulations is to raise wages of the lower-income groups,” Mitchell says. “The authorities hope that with higher wages, there will be less social unrest and this huge wealth gap between rich and poor can be narrowed,” he adds.

Guangdong has taken the lead to raise minimum wages. As a result, garment manufacturers in Pearl River Delta have had no choices but to pay more for skilled workers to fill their production lines.

Oiling the Chain

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hat can be done to improve efficiency of the global supply chain of the garment industry?

Giving the workers a better deal, improved understanding between buyers and manufacturers, and a more equitable share of values along the supply chain are some of the suggestions made by experts and industry players.

As the era of cheap labor in China comes to an end, garment manufacturers need to rethink their labor strategies. One option is offering their young recruits in rural areas with vocational training and better career paths, suggests Edwin Keh, a former Senior Vice-president and Chief Operating Officer at Wal-Mart Global Procurement.

“These measures enable workers to achieve personal growth while making a living at the same time,” he says. “If the industry could offer career opportunities and training, it is more likely to get the best people.”

Keh was one of the speakers at the Prime Source Forum 2011.

Citing the Nokia’s factory in Dongguan of Guangdong as an example, Keh says that many workers there work four days a week and spend the remaining three days on vocational training. The factory complex was designed more like a campus than a sweatshop so that the workers will feel a stronger sense of belonging and loyalty to the company. Keh is a lecturer at The Wharton Business School of the University of Pennsylvania.

Another key to improving operational efficiency is to provide training for factory managers. Having visited many factories in China, Keh observes a common problem – nepotism. Senior managers often hire their young relatives as junior managers. Many of the middle-ranking managers who have been around for a long time are not keen about implementing changes.

“It is important to provide adequate training to management trainees and mentoring them to build a strong middle-management team,” he says.

An enhanced understanding of the manufacturing process among the buyers and designers helps improve the supply chain, Keh believes. A lack of understanding among US company executives of the cultural differences gives rise to many problems. For example, the buyers and designers sometimes make last-minute changes that put a spanner in the whole production process.

“The primary purpose of all Chinese labor regulations is to raise wages of the lowerincome groups...The authorities hope that with higher wages, there will be less social unrest and this huge wealth gap between rich and poor can be narrowed.”

Multiple squeezes However, manufacturers say they not only have to pay more but also face lower productivity from the newly-hired who require training and extra supervision.

Stanley Szeto, Chief Executive Officer of Lever Style Inc which manufactures items for top international fashion brands at its factories in Shenzhen, says: “Productivity is expected to go down further which will further push up the overall costs because the turnover rate of workers [at garment factories] will continue to increase.”

“According to the new 12th Five-Year Plan announced by the Central government, the average wage of workers in China would double in five years,” he continues. “I personally think wages would quadruple in eight years.”

biz.hk

By Wilson Lau

To build mutual understanding, Keh recommends staff exchange programme for the buying teams and manufacturers. “The buyers can work in the factories to understand the process, and members from the factories can work in the buying offices and be exposed to customer-focused areas.”

“If this can be accomplished systematically, it will bring about positive changes to the know-how and build relationships,” he adds.

Stanley Szeto, Chief Executive Officer of Lever Style Inc, says that buyers and sourcing companies need to change their mindsets. Buyers will continue to chase high initial mark-ups and low prices if they are appraised and rewarded for getting the lowest possible deals.

“They need to explore ways to reduce production lead-times and ensure that goods sell more quickly and fewer goods end up in discount stores,” Szeto says.

“The profit margins will improve as a result.”

“Many buyers do not adapt to this sort of thinking quickly because the old Stanley Szeto thinking is deeply entrenched and it may be the corporate culture of their companies.”

David Mitchell of Kronos Great China says manufacturers can do a couple of things to stay competitive.

First, they may improve efficiency by taking a closer look of how production is implemented. Second, they should seriously consider tapping into the rapidly growing consumer market in Mainland China. With more Chinese consumers willing to pay for high-quality goods, the global supply chain of an increasing number of high-end consumer goods will end-up in Shanghai instead of Tokyo or New York.

He says it will make sense for manufacturers to stay in China “if you are producing higher-value-added piece of clothing or handbags that are focused on that emerging Chinese consumers and appeal to their taste.”

“It is a fundamentally different market and [manufacturers need to consider] where their revenue is going to come from in the next 20 years – it’s going to be 500 kilometers away, not 5,000,” he says.

Photos courtesy of APLF Ltd

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China’s rising labor costs have effectively brought the retail price deflation of the garment trade to an end.

“The deflation has been borne out of the unlimited low-cost labor supply in China,” says Szeto.

“Now the deflation is approaching its end because of the one-child policy implemented 30 years ago and the population of the 30-something has gone down.”

Although it may not be apparent to the average consumers, another pressure point on the garment sector comes from the gradual appreciation of the Chinese currency. Rising commodity prices means that the Chinese government must tackle multiple policy challenges at the same time, according to Liu Ligang, Head of Greater China Economics at ANZ Hong Kong.

“It can choose to subsidize imports or allow the Renminbi to appreciate to offset the increased prices,” Liu says. “For 2011, the annual rate of Renminbi appreciation is expected to accelerate to six percent, which is considered the fastest since 2005.”

“This could represent another risk factor for the apparel industry,” he adds.

Migration from China?

Owing to soaring costs, some manufacturers in the industry are pondering the possibility of migration from China. Some companies in the EU countries might consider moving their operations to Turkey. For US companies, Mexico has always been on the shortlist as an alternative to China, according to David Dodwell, a former journalist of The Financial Times.

How feasible are these moves realistically?

“Mexico’s workforce totals around 47 million.

China had 20 times as much,” says Dodwell who is now Chief Executive Officer of the business consultancy firm Strategic Access. “Mexico has little capacity to accommodate the diversion of production to a scale that will make it viable to move production from China.”

“The workforce in Sri Lanka and Vietnam is also limited,” he adds.

“Over the past two decades, China has established a reputation for high levels of productivity.”

The logic of distributed manufacturing in the apparel sector – in which China plays a dominant role – has remained strong. “In 2009, China accounted for 39 percent of US’s apparel imports, Vietnam was 7.8 percent and Indonesia was six percent,” Dodwell points out.

“Based on these figures, which country has the capacity to accept the transfer of production from China and make a significant change?” he asks.

Szeto of Lever Style shares Dodwell’s view. “Some companies coped with the situation by moving their

Thomas Nelson

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production out of China to countries such as Indonesia, India and Bangladesh,” he says. “Although China is more expensive, the costs in other countries like Indonesia and Bangladesh are also going up.”

“These countries still have a long way to go in terms of taking up more production,” he comments.

“But the writing is on the wall, they need to improve training of their workforce and build capacity further.”

New China is China China enjoys another advantage over other outsourcing hubs – its balanced supply textiles. Countries like Vietnam and Bangladesh – countries often being described as the “next China” – still rely heavily on imported materials.

“China’s importance in the global supply chain does not only lie in its production capacity,” says Mahtani of The Epic Group. “Between 60 and 70 percent of textile [supply worldwide] comes from the country.”

Aside from its textile supply, China has well-developed industry infrastructure, particularly in the supply of fabrics and trims which continues to contribute to the efficiency of production and the supply chain, says Dr Harry Lee, Chief Executive

“China has remained very important in the global apparel supply chain, the shift of production to the alternative countries was just ‘baby steps.’”

Officer of TAL Apparel Ltd, a leading garment manufacturer in Hong Kong.

Mahtani points out that wages of workers in major cities in Vietnam, for instance, have climbed between 20 and 30 percent this year and the working conditions in some factories in the country remained poor.

Wages of Bangladesh workers have risen around 40 percent and unstable utility supply continues to disrupt production and the country’s infrastructure is underdeveloped, he says.

“China has remained very important in the global apparel supply chain,” Mahtani says. “The shift of production to the alternative countries was just ‘baby steps’.”

The garment sector in China will remain a leading

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driving force for years to come, Szeto agrees with other speakers at the forum.

“At least within the next 10 years, it will not be so easy to move production of higher-end apparel to Africa or Bangladesh because these regions lack the know-how and expertise,” he says. “The production of high-quality garments would stay in China.”

Paradigm shift Perhaps the next “China” will still be China – but China of a different vintage. “Some in the industry consider the possibility of relocating production from the PRD on the coast to areas further inland,” Dodwell says.

“According to findings from a survey conducted by the Hong Kong Trade Development Council, the biggest competition for the PRD comes from the Yangtze River Delta or the Bohai region in China, not from other countries,” he says.

Mitchell of Kronos Greater China says it is time for every player of the supply chain to realize that China is no longer the land of cheap labor that they were so used to. He agrees that that the “New China” is still China although some low-end manufacturers will leave the country for places like Sri Lanka, Vietnam and Indonesia.

“There will be a part of manufacturing that will

leave China and will leave for ever – the very low-end textile production. Obviously, it’s time to go to Sri Lanka, Cambodia, and to any place other than China,” he says.

This however means an education process for everybody along the global supply chain.

“It has to be an education for everybody in that supply chain about the ‘New China’,” Mitchell says. “Many people still have the old image of a billion people [in China] and there must be a couple of hundreds of millions [of cheap] labor available and we can find some places to do David Mitchell my work. But the answer is that there isn’t.”

“Then there is this typical American executive sitting back in the US on the top of the supply chain who doesn’t get it. So education is the first thing to do,” he says. “Get that sourcing manager in the US and bring him to Dongguan and make him spend a week in the factory, and then he will see it.”

Huff: The most developed and most common point of entry for business in Cambodia is in the capital Phnom Penh.

An easy drive away from Ho Chi Minh City in Vietnam and located on the Mekong and Tonlesap gives businesses a lot of options for transportation.

The first industry to grow significantly in Cambodia after the war was the garment industry. Industries which are relatively high labor, low capital, low energy processes work best for now in Cambodia. Any manually intense product can be considered. Also agricultural investments do well in Cambodia due to the country’s natural resources.

Photo courtesy of Fair Manufacturing Co

Is Cambodia the Next Option?

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air Manufacturing Company is one of the few western manufacturers in Cambodia. It is the first and only pet treat manufacturer in the country and has been exporting to the US since 2009. Scott Huff, CEO of Fair Manufacturing and a delegate of American Cambodian Business Council who visited Hong Kong in May, talks to biz.hk about why he has chosen Cambodia to set up his business biz.hk: When was Fair Manufacturing established? What’s your company business, and who are your clients?

Huff: My Company started at the beginning of 2009. We had identified Cambodia as a good location for some of our high labor, relatively low capital products we were doing for the pet industry. We make rawhide dog chews there that require chicken jerky to be put inside the chew and the rawhide is tied into a bone shape manually. There is no way to automate this process.

Cambodia was attractive to us for this industry for a variety of reasons. To name few are competitive labor, central location to other services and venders we need, and a strong agricultural industry to supply raw materials locally. We have grown the company through three planned stages now and have 560 workers. Our primary market is in the US but we are working on authorization to ship to Europe, Japan and other

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nations as well. biz.hk: How about your China operation?

Huff: Our China operations have been working now for seven years. We still source most of our products from China but the transition of the highest labor items like the chews is accelerating. Most of the rawhide industry is in Zhejiang province near Wenzhou and the shortage of labor and high price for labor have put a lot of pressure on the industry. This trend on cost and labor will not get better for the pet treat industry.

For hard goods that require extensive tooling and high energy processes like injection molding, China is still very competitive. We still do all of our molded items there and any other process that is capital equipment intensive. biz.hk: Why Cambodia? Why not

Vietnam, or Bangladesh?

Huff: We did look at other locations.

Vietnam was not as competitive on labor and very difficult to get incorporated and started in. The inflation rate in Vietnam worried us as well. We did not think we could be as competitive there for long.

Other locations like Bangladesh were just too far away from resources we needed. We have a supply chain that runs all the way to Qingdao in China to Bangkok in Thailand. Cambodia was in the middle of it. Also we had more options for transportation of our raw materials and finished goods in Cambodia. Lastly we had to have access to some critical high tech processes like Gama irradiation and that was an easy drive away in Thailand. biz.hk: What are the usual locations in Cambodia for foreign investment? What industries are best-suited for foreign investors in Cambodia?

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biz.hk: Can you comment on issues like transportation, electricity supply, and corruption regarding investment in Cambodia?

Huff: On transportation, currently the road infrastructure is in need of further development but gets better every year.

The ports as well are being worked on and by 2013 larger vessels will be able to dock in Sihanoukville which will make transportation costs go down rapidly.

Electricity is very expensive in Cambodia compared to other parts of Asia. Much of it is imported from Vietnam. There are many power plant and hydro power projects being developed and the prices are expected to get more competitive in the next two years. Due to the cost of the electricity, many high energy processes are not suitable for Cambodia at this time.

Corruption does exist. There have been laws passed to stop it and there have been some high level arrests made. I usually tell people that it is not as bad as they probably fear from the reputation. I can say that the total burden on my company from taxes or other expenses is less than what my competitors here in China pay. biz.hk: In your experience, how is Cambodia’s workforce compared with that in China? China has a large pool of skilled labor. Can Cambodia measure up in terms of scale and capability?

Huff: The Cambodian nation is young.

The average age for the country is in the 20’s and the average age of my workers is around 24. We have had a very good experience with the labor in Cambodia.

They are energetic and filled with desire to improve themselves. The quality of the labor has been a pleasant surprise.

We were told so many times by so

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6 • 2011

Scott Huff

“Industries which are relatively high labor, low capital, low energy processes work best for now in Cambodia.”

many people that our labor would not be as efficient as China; we actually back off the production rates on our business plan.

What we learned was the workers were just as efficient as China or any others.

Cambodia is not a large nation so the overall pool of workers cannot compare with China but the availability of workers currently is much better than China. biz.hk: Is it difficult to find Cambodian investors as business partners?

Huff: It is not that difficult since there are not a lot of investment options in Cambodia. Cambodia does not have a stock exchange yet. People who have accumulated money and want to invest typically have been putting it in real estate. There are a lot of banks but few involved in raising capital for business.

Most businesses in Cambodia have overseas banks they work with as well.

biz.hk: If you have a wish list of three, what are the top three items that you may wish to happen in Cambodia that will improve its investment environment?

Huff: Infrastructure improvement for transportation and power. To be competitive the power prices must be addressed first.

My second wish would be to stream line the customs procedures to move products faster across borders. To be competitive in business we need to carry as little inventory as possible and that means we need to reliably ship both raw material and finished goods faster.

My third wish is to make foreign ownership of land 100 percent possible.

This is a changing situation and improving every year but currently some portion of the land your business builds on requires a Cambodian passport holder.

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guard against drought,” Malmstrom says.

“It is highly technical science to create higher yield.”

Why cotton Cotton is used as a fiber, feed and food crop, and more importantly, it is a natural, renewable, biodegradable and sustainable fiber, Malmstrom notes.

Cotton is also known for its versatility, appearance, performance as well as natural comfort.

“Cotton has been with mankind for 7,000 years,” she says. “It is what we say ‘The Fabric of Our Lives,’ meaning it is in many things including the clothes we wear…people sometimes seem to take it for granted because it has been with us for so long.”

About 80 percent of all natural fiber used for human consumption is cotton, Malmstrom points out. And technology and innovation are now making cotton a useful fiber for virtually anything.

The supply side

Photo courtesy of Cotton Incorporated

From Dirt to Shirt:

What Cotton Price Increase Means

By Kenny Lau

T

he price of cotton as a commodity more than doubled in 2010 and reached an all-time high of US$2.47 per pound in early March, outpacing the historic highs during the American Civil War in 1860s. In recent weeks, prices have since fallen dramatically but remained at levels above their norms of the past few years, hovering at around US$1.50 per pound (as of May 2011).

“The price fluctuation is unprecedented,” says Karin Malmstrom, Director for Mainland China & Hong Kong at Cotton Council International, a non-profit marketing group under the National Cotton Council of America (NCC) for promoting export of

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US-grown cotton to buyers around the world.

Price hikes of cotton have had a tremendous impact on the global supply chain. “People, particularly those in the supply chain, were growing increasingly concerned because we did not know what was next, and there was no precursor of this,” Malmstrom points out. “The word of the day is uncertainty and the other is volatility. And that is a problem for the industry worldwide.”

Prices of cotton, yarn, woven fabric, and garment have all gone up; however, increase in consumer prices at the retail level has yet to materialize. The effects of price fluctuation may vary from one manufacturer to another, but margins of profit within the supply chain are

undoubtedly tighter.

“If some manufacturers have more flexibility in the fiber they use or have certain lines of products that are more premium, they may be able offset the extra cost on cotton without affecting their manufacturing,” Malmstrom says.

“If you are in the lower-margin mass market, then you may have more problems in terms of cost ratio.”

Recent trends The price of cotton was on a gradual upward trend between 2004 and 2007 but went down drastically as demand for cotton decreased during the global economic crisis in 2008. As a result of the price drop, many farmers simply

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switched and planted other more profitable crops such as corn and soybean. It led to a decrease in cotton production.

“There was less supply of cotton because less was being grown,” Malmstrom says.

“We had people planting less cotton in 2008 and 2009. India, which is the second largest cotton producing country, tightened control over export of cotton.

And there was flooding in Pakistan,” she notes. “Everything came together to make this perfect storm situation that drove up the price of cotton.”

In 2009 when demand for cotton picked up, supply became very tight and prices started going up. “It was quite a quick turnaround for demand,” Malmstrom says. “The demand increased much quicker than anybody anticipated, especially with a much faster recovery in China.”

“Now everybody wants to grow cotton because of the higher price,” she adds, noting initial forecast for crop year 2011/12 indicates an increase in production in response to higher prices worldwide.

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According to June estimates by the US Department of Agriculture, world production of cotton is forecast to increase by about nine million bales in crop year 2011/12 over the previous year to reach a total of 123.8 million bales.

China, currently the largest cotton producing country, is expected to increase production from 30.5 million bales to 33 million, while India is forecast to increase production from 24 million bales to 27 million. US cotton production, however, is likely to record a slight drop, from 18.1 million bales to 17 million as a result of “adverse” growing conditions and weather challenges, including drought in Texas, floods in the Mid-South, and dry conditions in the Southeast states.

“To plant cotton, you need a certain amount of water at the outset of planting and you have to have that moisture in the ground to get a good start,” Malmstrom explains. “And if you get too much rain near the harvest, you will also have trouble. Too much rain can ruin your entire crop because, once the cotton bolls are on the ground, they are useless.”

Cotton crops, like any other crops, are weather-dependent to varying degrees. The US industry continuously carries out research for new breeds of seeds. “We can now make the seeds more drought resistant or more robust to

Karin Malmstrom According to the National Cotton Council of America, about two-thirds of the harvested crop retain the seed, which can be crushed and turned into three products – oil, meal and hulls. Cottonseed oil is used primarily as a cooking oil, shortening and salad dressing but is also used in the preparation of snack foods such as crackers, cookies and chips. The meal and hulls are used as livestock, poultry and fish feed and as fertilizer.

Interestingly, US dollar notes have a content of 75 percent cotton and 25 percent linen, according to the US Bureau of Engraving and Printing. In other words, there are three-fourths of a pound of cotton in each pound of dollar bills, and there are 454 bills in a pound of US dollar paper currency.

Over six billion bills of US dollar

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notes in all denomination were printed during the fiscal year of 2009 in the US. It took about 21,476 bales of cotton, and the total dollar value of these bills came to US$219 billion dollars (or US$21,290.55 per pound of cotton).

percent of apparel in China containing cotton,” she says. “While China is the world’s largest cotton producer, they need to supplement their own production in order to meet demand for both exports and growing domestic consumption.”

“Cotton has been with mankind for 7,000 years...It is what we say ‘The Fabric of Our Lives,’ meaning it is in many things including the clothes we wear…”

What one bale (about 500 pounds) of cotton can make 215 Jeans 249 Bed Sheets 409 Men’s Sport Shirts 765 Men’s Dress Shirts 1,217 Men’s T-Shirts 1,256 Pillowcases 2,104 Boxer Shorts 2,419 Men’s Briefs 3,085 Diapers 4,321 Mid-Calf Socks 6,436 Women’s Knit Briefs or 313,600 US$100 Bills Source: National Cotton Council of America

Consumer behavior “Cotton will continue to be in demand. There is no question about that,” Malmstrom says. “The population of the earth is increasing, and we have to eat and be clothed. That is a fact of our planet.”

The number of developing countries and their demand for consumption are also increasing, she adds. “In markets like China, we see an upward trend of demand for cotton. Chinese consumers are much more aware of what they wear…it is not only about the color but more about what’s inside the fabric.

“From our survey on retail and consumer behavior, we are finding a trend of more demand among Chinese consumers for natural fiber with over 60

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Indeed, China is the largest consumer of US exported cotton. “Over the past five years, we have seen a gradual shift from China predominately exporting to its traditional markets such as the US, EU and Japan, to more growth of its domestic market as well as other markets in the region,” Malmstrom says. “People are more willing to spend on what they perceive as a healthy lifestyle.”

“The trend for LOHAS (lifestyle of health and sustainability) comes about from more awareness as a result of the food safety problem,” she adds. “People want to safeguard their health more, not only about what they put in their body but what they put on their body.”

The US Department of Agriculture forecasts world consumption of cotton in crop year of 2011/12 to increase by 2.5

percent (3 million bales), from 116.5 million to 119.5 million.

In China alone, consumption is expected to increase by one million bales, from 47 million to 48 million and imports are likely to increase by 2.5 million bales, from 13.5 million to 16 million.

US-grown cotton According to NCC, cotton is produced on about 18,600 farms in the US, and average harvested area in each year between 2006 and 2008 was 10.3 million acres, with an average production of 17.9 million bales. During the same period, textile mills in the US spun on average about 5 million bales of cotton, an amount of cotton enough to make over one billion pairs of jeans.

Cotton is grown in 17 states across the southern half of the United States, Malmstrom notes. And there are different styles of cotton, ranging from short, thick fiber ideal for coarse yarns and heavy cloth to fine extra-long-staple cotton perfectly suited for high-count yarns and fine fabrics. “Depending on the region, different types of cotton are grown to suit different needs.”

Texas and Georgia are the largest cotton growing states in the US, Malmstrom adds. Generally, farmers can start planting as early as February each year in South Texas and as late as June in northern areas of the cotton growing states.

Harvesting begins in July in South Texas and can last until late November in more northern climates.

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CHINA BUSINESS

Is CEPA W Useful to Your Business?

A case study of Hong Kong-based architects

hen the first Closer Economic Partnership Arrangement (CEPA) was signed in June 2003, it was not so much a trade deal. Focused on products and trade then, the deal was crafted with the objectives of getting Hong Kong economy back on track after a long period economic malaise, and to serve as a confidence boost for the city which was struggling to emerge from the shadow of the SARS outbreak.

In an interview with China Central Television in April, Tung Chee-hwa who was then Hong Kong’s Chief Executive, reportedly said: “CEPA was crucial to the restoration of Hong Kong's confidence in 2003. That restoration of confidence bore a direct relationship with the revitalization of the economy.”

Since 2003, seven supplements have been added to CEPA and they have significantly broadened the breadth and depth of the deal. In a description posted on the Trade and Industry Department’s website, it says: “CEPA opens up huge markets for Hong Kong goods and services, greatly enhancing the already close economic cooperation and integration between the Mainland and Hong Kong.”

Market draw

It has been called many names. Most people in Hong Kong call it the “gift” from Beijing. Others say it was China’s first “free-trade agreement”. Since it was signed eight years ago, the Closer Economic Partnership Arrangement (CEPA) has brought enormous benefits to businesses in Hong Kong especially for those in areas like tourism, retail, and logistics. Progress however has lagged behind for individual services and industries. Daniel Kwan talks to representatives from the Hong Kong Institute of Architects and finds out what benefits CEPA has brought to them and what can be done to make it even better

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The “open up” aspect of CEPA has been a key advantage for professional services in Hong Kong. One unique feature of CEPA is that it is nationality neutral. In other words, overseas firms incorporated in Hong Kong, including American companies, can enjoy its full benefits just like any Hong Kong companies. In reaching out to overseas investors, promoting agencies such as InvestHK have always reminded them of the CEPA benefits.

Architectural service was among the few professions identified in the first CEPA documents that may enjoy greater access to the Mainland market. According to Dominic Lam Kwong-ki, President of the Hong Kong Institute of Architects,

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Daniel Chi (left) and Dominic Lam China’s rapidly growing construction and design market is no small draw to Hong Kong-based architects because more than 70 percent of them are small and medium-sized businesses who face stiff competition from big firms locally.

Prospects were good in the first 12 months of the signing of the first CEPA document. In February 2004, an agreement on mutual recognition of professional qualification in architecture was signed between the HKIA and the National Administration Board of Architectural Registration. Just two months later, the first training and test session under the agreement was held. Lam describes that period as a “good start”.

The mutual recognition process made steady progress for about two years when the last batch of Hong Kong-registered architects successfully obtained their Mainland qualifications. The process has been stalled since then. There are now about 420 Hong Kong-registered architects who have obtained the qualifications, but their titles have largely remained a “paper title”.

According to Daniel Chi Wuhcherng, Honorary Secretary of HKIA, Hong Kong-based architects who have attained the Class I qualification in China are still not being treated the same as their Mainland counterparts. “You may say that we are like ‘second class citizens’,” he

Economic benefits of CEPA to Hong Kong • Cumulative business receipts obtained by companies in Hong Kong from Mainland-related business from 2004 to 2009 reached HK$61.6 billion • Business receipts obtained by operations established by Hong Kong service suppliers on the Mainland from 2007 to 2009 amounted to HK$198.5 billion • By March 2010, over 49 million Mainland visitors have come to Hong Kong under the Individual Visit Scheme (IVS) • In cumulative terms, during 2004-2009, IVS visitors brought about additional spending totaling over HK$84.8 billion Source: Trade and Industry Department

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says. He also says that it appears that the Central government is not interested in granting more qualification to Hong Kong-based architects through the mutual recognition channel.

Under CEPA and Supplement VII signed last year, Hong Kong-based Mainland-qualified architects are allowed to act as partners to set up construction and engineering design offices in the Mainland with no restriction on the ratio of the number of the Hong Kong partners to the number of the Mainland partners.

In addition, the supplement also states that there should be no restrictions on the ratio of capital contribution.

Furthermore, Supplement VII relaxes the period Hong Kong-based architects must stay in the Mainland to qualify for registration. Significantly, it stipulates that Hong Kong-based architects who have obtained Mainland qualifications through mutual recognition can register and practice in Guangdong as part of a pilot scheme which allows Guangdong to experiment with reform measures not allowed in other parts of the country.

Guangdong circular

A circular issued by Guangdong Province last December has effectively undone much of all that. Under the circular, Hong Kong-based architects can only be “hired” by firms in Guangdong.

In addition, although the Hong Kongbased architects are already “qualified” under the mutual recognition arrangement, they are now required to sit for tests administered by Guangdong’s registration authorities.

Most important of all is that the circular imposes restriction on the partnership ratio for Hong Kong-based architects who want to set up in China.

Chi says the requirement would make any China venture financially unattractive to the majority of Hong Kong architects who are small and individual operators.

“Few of the Hong Kong architects can afford to hire three Mainland architects

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to set up a partnership,” Chi says. “This is just not feasible.”

A paper issued in April by the Hong Kong General Chamber of Commerce on CEPA, it sums up the dilemma faced

by Hong Kong-based architects: “So far, CEPA has been in place for over 8 years, but for the Hong Kong architects, they only managed to attain PRC Class 1 Registered Architect qualification through mutual recognition arrangement. However this qualification remains a paper qualification only that cannot be put into practice, which means Hong Kong architects are still not allowed to ‘enter the Mainland market’

Open door Both Lam and Chi acknowledge that CEPA represented opportunity for Hong Kong-based architects to expand into the Mainland market but the door to greater participation there has not been fully opened. In March, the institute paid a visit to Beijing and raised the issue of Hong Kong architects to practice in China with Central government officials. “We have raised the issue with officials from different departments,” says Lam. “We will continue our efforts.”

Back in Hong Kong, the institute is

“CEPA opens up huge markets for Hong Kong goods and services, greatly enhancing the already close economic cooperation and integration between the Mainland and Hong Kong.” freely and the co-operation model for Hong Kong architects and Mainland counterparts remains the same as 20 years ago. In fact Beijing has moved backwards and refused to honor their earlier agreement with the architects that the qualification Hong Kong architects received is pari passu with the qualification mainland people received. Now Beijing is saying that Hong Kong Architects despite having the qualification will need to sit for additional examination before registration, apparently demoting Hong Kong architects to unequal and inferior standing as their Mainland counterparts. This is obviously creating more obstacles.”

engaging with the Development Bureau hoping that top Hong Kong government officials would better present their case to the senior leadership in Beijing and break the impasse. So far, little good news has emerged.

About a month ago, Stephen Lam, Secretary for Constitutional and Mainland Affairs, visited Beijing. At the end of his visit, he told reporters that he had discussed expanding the CEPA pilot measures practiced in Guangdong to other Chinese provinces with senior Mainland officials. The dialogue is continuing – let’s hope for progress in the next CEPA supplement.

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ENVIRONMENT embedded in a sledge and intended to serve as a mini-power station for Swan’s 60-day journey form the South Pole to Cape Evans in 2012. Swan’s challenge to himself is to finish the entire journey by using renewable energy only,” Lam says.

Do Something –

Not prepared for…

Before It’s Too Late

“There is nothing I can do about it” or “it makes no difference” are the two most common responses we get when we raise the question of climate change. For Fatima Lam Siu-shan, they are not good enough. Mabel Yung talks to the CLP’s COOL Captain who shares her experiences of traveling to Antarctica and her views about saving the planet

F

Go Antarctica When CLP recruited for volunteers to go to Antarctica, she did not need to think twice before applying. In March this year, she was selected as one of the five COOL Captains. Together with the other colleagues from China, India and Australia, she set off for a 29-day trip to the Antarctic.

The trip was the second in CLP’s Project COOL program which provides colleagues a first-hand experience in implementing renewable energy in drastic environment. It offers an once-in-a-lifetime opportunity

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Before going on the trip, Lam has prepared herself by reading up all necessary information. “I wanted to know what to expect and to be totally prepared for it,” she adds.

Still, there were things she had not prepared for.

First, she was surprised to find that the temperature was not very cold.

“I brought along many clothes but I didn’t need them. I was walking on the ground covered with soil.

Without wasting any time, There was no snow. And I Lam started to tell people about thought to myself: How can it her experience when she came be like this?” back to Hong Kong. She has Then there was a stunning been sharing what she saw and but cruel scene. how she felt with colleagues and “On the beach, I saw a students. She knows that some group of penguins crowded people think it is irrelevant or COOL Captains together and trying so hard to that there is nothing they can do, get a spot on a small piece of but she keeps on doing what she ice,” she says. “We’re told that believes in.

The COOL team at Antarctic they have trouble finding food “When the students I’ve because the temperature has spoken to told me that they become too warm for krills to would go home and share my survive.” story with their parents, I was Antarctic krill provides a very touched. It’s like planting a major main food source for seed in people’s heart,” she says. sea creatures such as “I think women should also penguins, whales and seals. take responsibility to combat The shrimp-like creature climate change. We have better feeds on algae beneath the ice. communication skills [than The loss of krills could cause a men]. We have the ability to domino effect that could influence others with our wreak havoc on the marine passion.” ecosystem. Many scientists believe that as the tempera“The thing is, in the end, it’s not about who you ture continues to rise in Antarctica and the ice supply are, whether you’re a woman or if you’re rich. It’s decreases, the supply of krills will fall. As a result, the about what you believe in and what you want to do penguin population has declined. about this.”

“I’ve seen the world in such a close distance; I know I should protect it. We should all protect our world and do it right now.”

But the one thing that struck Lam the most was experiencing the surreal and heaven-like world of Antarctic.

British explorer Robert Swan was the first “It was a completely different world out there,” she person who has walked to both the North and describes her feeling. “Its tranquility tells me that the the South Poles. He was appointed by the place belongs to penguins and seals.” world leaders at the first and second World “We should leave them alone and let them live in Submit for Sustainable Development with a their unpolluted piece of land. I felt very sad just mission to involve industry, business and thinking of that.” young people in environmental protection The trip has left a deep impression on Lam and and to become sustainable leaders. made her reflect on her life.

“I used to think I was an environmental friendly person. I would separate glass bottles and plastics

Act now

Photos courtesy of CLP

atima Lam Siu-shan has seen what global warming has done to the planet. She comes face to face with it when she goes on diving trips with her husband. The couples love the sport and both are experienced diving coaches.

“You can see the coral bleaching clearly under the water,” says Lam who is a project analyst at China Light and Power (CLP). Temperature change is considered to be the most common cause for coral bleaching. “When I see the corals, I know we need to do something to protect the environment,” she adds.

when I throw my garbage. I always carry a green bag everywhere I go and when I shop. But that’s not enough.”

“Now I would think twice before I do anything. I will not turn on the air condition if I don’t need to. I will not buy things unless I really need them. Just think about the fact that everything in this world needs energy to produce and you’ll know it’s not just about turning off the light.”

“Robert Swan shared with us that it was actually very hard to live only by renewable energy in such a drastic environment in Antarctica. But he wanted to do it to let people know that it’s possible to live by renewable energy. He told us that there was no time to waste. I was very inspired.”

for CLP staff to contribute their professional skills for a real and meaningful cause. The project comes under the company’s Climate Vision 2050, a commitment to reduce carbon intensity of its generation portfolio by 75 percent by the year.

During the first two weeks of the expedition, they joined other corporate members in a leadership training program with 2041, which was founded

by British explorer Robert Swan. (see box) After that, the CLP team went onward to the E-base educational centre on King George Island. The first of its kind in Antarctica and run entirely by renewFatima Lam able energy, E-base was set up by Swan to educate the world about the use of renewable energy.

“We spent nine days on E-base to test our solarpowered energy device which is designed to be

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Another world

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HOSPITALITY & TOURISM

Young at Heart Unlocking the secrets of success at imagineering

By Daniel Kwan Imagineering is at the heart of all Disney theme parks and resorts. But what is it, and what makes it so successful? With three new attractions coming on stream at Hong Kong Disneyland soon, Theron Skees, Director for Creative Development and Show Quality Standards at Hong Kong Disneyland, explains to biz.hk about what makes imagineering so special, and how the creative and science work together to deliver the magic Photo by Victor Fraile / Getty Images

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©Disney

©Disney

“That’s reflective of most of my colleagues in Imagineering and we really are truly kids-at-heart.”

Theron Skees

Photo by Victor Fraile / Getty Images

T

o be able to do what Theron Skees does every day is – to say the least – fun. After all, who gets to be a movie director, storyteller, dreamer, and inspirer all at the same time? And most important of all, Skees can proudly say that to be like a kid is good for his career.

As Director for Creative Development and Show Quality Standards for Walt Disney Imagineering at the Hong Kong Disneyland Resort, Skees is one of the more than 1,500 Disney “imagineers” around the world. In Hong Kong, his team has 12 local imagineers and there are another 50 to 60 members of the Imagineering team currently working on the three expansion projects in Hong Kong.

“Something I tell people all the time is that I am not really sure what I want to be when I grow up,” Skees tells biz.hk in an interview. “That’s reflective of most of my colleagues in Imagineering and we really are truly kids-at-heart.”

“We love the idea of play, we love the concept of adventure, and we love the idea of collaboration,” he adds.

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Magical Kingdom

Story Land. “Guests get to ride in RC Racer now just like Woody and Buzz did in the film … It’s thrilling and it’s fun,” he promises.

Headquartered in Glendale, California, Walt Disney Imagineering designs and builds all Disney theme parks, resorts, attractions, cruise ships, real estate developments, and regional entertainment venues worldwide. “It’s a combination of the creative and the science to deliver what we call ‘the magical,’” Skees says.

Magical it is. In the theme park business, Disney is clearly the market leader. In fact, Walt Disney invented it some 50 years ago. In the old days, there was no such thing as theme parks but carnivals and fairs. As Skees describes it, these amusement parks were kind of “seedy.” Feeling that kids deserved something much better, Walt had a vision to create a 'fantasy place' where parents and children could play together. “It was more about telling-a-story than riding a ride,” Skees says.

The first Disneyland was opened in Anaheim, California in 1955. The Disney Kingdom now has 11 parks worldwide. From

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Guest experiences

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Another example is that imagineers don’t always just rely on signage to control guest behavior in parks. Skees says understanding what guests think and being able to incorporate such understanding in the layout and design of attractions can be far more effective tools instead.

“We take a lot of guest psychology in mind when we think about those types of things especially in a region where Disney theme parks are not well known,” says Skees who joined Hong Kong Disneyland three years ago. “Even more important is to introduce our stories and our characters in a way that’s relevant to this [local] culture so that guests get excited about it and want to come back to experience it again and again.”

The Creative Director who has more than a decade of experience in the entertainment and design industries before joining Disney says that theme parks are not about rides, gadgets and hardware, but experiences, or the emotional connection.

“Our product is not a widget, or a refrigerator, it’s an experience,” Skees points out. “What we are marketing is an experience and it is very important because you have to have an emotional connection with your guests, and that will drive repeat visits.”

New attractions Apparently, Skees has succeeded in delivering exactly such experience. Last year, Hong Kong Disneyland received over 5.2 million visitors. Expecting even higher turnover and growing interest from tourists in the region, Hong Kong Disneyland will open three new areas in the coming two years – Toy Story Land, Grizzly Gulch, and Mystic Point. With these three new themed areas, Hong Kong Disneyland’s total number of rides and attractions will increase by almost 50 percent and top 100.

When completed, the expansion will increase the park’s physical footprint by about 23 percent.

Skees says Disney understands that there is rising competition in the theme park business but points out it means the industry is growing. Benchmarking actually plays an important role in imagineers’ design strategy. In the creative business, Skees says, artists need to learn where to find inspirations.

“We see benchmarking as a necessary part of our job because good ideas take place everywhere.”

“As a designer, especially as an imagineer, one thing that’s key to our success is curiosity and I think that was really handed down by Walt Disney himself,” he continues. “Walt was constantly curious, creating new technology and innovations for the purpose of...and getting his audience more immersed in the story.”

Getting the story right can be tricky business. To do that, authenticity is important. Using Grizzly Gulch as an example, Skees says imagineers check out every detail in designing this western mining town in 1888 – an auspicious year chosen with the Asian visitors in mind – to make sure that they all look as real and accurate as they can get to tell the classic story of the American gold rush. These include the gold mine train, bears, geyser and everything else.

“When we create something like this, it takes a lot of research,” Skees says. “Accuracy is really important to us in our storytelling especially in an area of the world where people can’t just drive two hours and see a Western town like this, where in North America you can. So, it's really important to tell that story accurately.”

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Suspension of disbelief Through authenticity, imagineers make the suspension of disbelief possible, says Skees borrowing the concept from filmmaking. “If I suspend your disbelief, you may believe that you are actually in a jungle in Africa, or in a future space port, or in Andy’s backyard as a toy,” he elaborates. “All of those elements – by maintaining them together and not contradicting them – really do suspend one’s disbelief.”

“As a theme park designer, I have to create an environment that’s 100 percent believable – from the food that you eat, the vehicle that you ride in, the characters that you meet, the music you hear, the landscaping that you see, even the glass in the windows.”

“So, as Imagineers, this is the way we think,” he says. “We don’t create just a single scene that you walk up to and imagine what it would be like to live in that world and time period. We are re-creating that actual world and time period in a very idealic way.”

“A legendry imagineer once told me if guests come to the park and they clean windows for a living, even they don’t realize they are doing it, they are looking how clean our windows are.”

“If we have a seamstress or a tailor that comes to our park, they are going to look at the costumes that our cast members are wearing – how believable are they, how well-tailored are they? If you have a person who is an automobile collector who comes to our park, that person is going to really appreciate authenticity of our vehicles.”

interviews about every technology of how to make a film and every kid knows how to do that now,” he says. “So, it is even more important that we are not only relevant to our guests but that we surprise and delight them with magical experiences that are not easily explainable; these experiences live on in their minds for a long time.”

This is also why imagineers play such important roles in defining what Disney theme parks are all about. They combine imagination and engineering in such a way that the magical experience comes alive. To pay tribute to these men and women who “have laid the bedrock” of Disney Imagineering over the years, Skees says it is a tradition to integrate the names of these legends in the windows of Main Street of a Disney land. “Sometimes, we will use the names of legendary Imagineers as the owners of an fictitious business on Main Street. For example, a music school but then names in the sign are actually the names of those Imagineers who scored the music for the original Disneyland park,” he says.

“Many of the imagineers that you see in the windows of Main Street in Anaheim have long passed away. It’s a way to recognize them and keep their legends alive,” he adds.

Reaching out To reach out to local community and find new talents, Hong Kong Disneyland has launched a design competition inviting entries from local students to design “a unique, diverse, and creative experience concept that maximizes enjoyment for guests.” The design can be an attraction, resort hotel, restaurant, or an entertainment experience. The winners will have the chance to visit Walt Disney Imagineering in Glendale, and be considered for work experience opportunities at the Hong Kong Disneyland.

“Reaching out to our community and really promoting the idea of creativity, arts and culture is something that’s very near and dear to my heart,” Skees says with a big smile on his face.

The legends On a more philosophical level, Skees says through the creative genius and innovative power of imagineers, Disney parks never stop growing or changing. They always learn to adapt to ever changing technology and guests’ likes and dislikes.

“Walt had said that Disneyland is a place that will never stop growing and never stop changing,” Skees recalls. “The reason it has to be that way is because our audience is constantly changing.”

“In 1955 when Disneyland was opened in California, none of the technology that we have today really existed and you didn’t have guests that walked into our parks with such a deep understanding of how film-making techniques were done.”

“Today, every blue-ray and DVD we buy has all these ©Disney/Pixar

Expansion at

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AMERICAN TOPICS

Steve Young

Hong Kong and Macau in the Context

By Kenny Lau of US-China Relations US Consul General for Hong Kong & Macau Stephen Young speaks on vitality of the two Special Administrative Regions as well as US diplomacy with China amid annual Strategic & Economic Dialogue

S

peaking at a recent AmCham luncheon on US-China bilateral relations in light of the Strategic and Economic Dialogue (S&ED), US Consul General Stephen Young discussed some of the economic and political issues between the two countries while highlighting the rapid growth and development of Hong Kong and Macau.

US-Sino relations In reviewing the annual dialogue held this year in Washington, Young says human rights continues to be a key issue of discussion between US and Chinese officials.

“In recent months we’ve seen a negative trend on human rights (in China),” he stresses. “We remain very concerned over recent reports that dozens of people, including public interest lawyers, writers, artists, have been arrested, detained or in some cases simply disappeared with no regard to

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legal measures.”

“We are also deeply troubled by longer term trends in China’s policies toward Tibet and Xinjiang,” he adds.

“We’ve raised these concerns in meetings between the Presidents, in the S&ED, and in the less-seen, but equally vital, workinglevel diplomacy our Mission in China conducts every day.”

In a meeting with Chinese Vice Premier Wang Qishan and State Councilor Dai Bingguo during the S&ED, US President Barack Obama raised concerns about the current human rights situation in China and underscored his support for the universal rights of freedom of expression and worship as well as rights of access to information and political participation.

The US, Young says, believes protecting fundamental rights and freedoms such as those enshrined in China’s international commitments, as well as in China’s own constitution, is the best way to

promote long-term stability and prosperity of any society.

“Critics of our approach to human rights within China often see a sinister impulse at work,” he points out. “They argue that the United States – by this ‘interference’ in China’s internal affairs – seeks to destabilize the Chinese society.

“Quite the contrary: we continue to believe that free societies are stable societies, precisely because there are regular and legal channels for people to express their views peacefully.”

Hong Kong politics The US has undoubtedly been a strategic partner of Hong Kong throughout the years.

The US “eagerly” responded when the United Kingdom and China reached an agreement in 1984 and took the Sino-British Joint Declaration on the Question of Hong Kong to the United

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6 • 2011

Nations for international recognition. To underscore US’ commitment to Hong Kong’s success under a new administrative model, US Congress passed the Hong Kong Policy Act in 1992.

The legislation, Young points out, created the legal framework that allowed the US to acknowledge and support Hong Kong’s autonomy by allowing the US to continue – and expand – the broad and multifaceted relationships the US had enjoyed for decades with the people of Hong Kong and their officials.

“The law allows us to extend special treatment commensurate with Hong Kong’s autonomy only so long as the President can certify that Hong Kong is ‘sufficiently autonomous to justify treatment ... different from that accorded the People’s Republic of China,’” he says.

“In that same spirit, we fully support the ‘ultimate aim’ of electing the Chief Executive and the entire Legislative Council by universal suffrage, which is enshrined in the Basic Law and was reaffirmed by the National People’s Congress Standing Committee in 2007,” Young says.

“In other words, we’re all on exactly the same page about where Hong Kong is going, because we recognize the value Hong Kong, China, and the rest of the world, including the United States, derive from Hong Kong’s continued success,” he adds.

“We also recognize that success rests on Hong Kong’s development as a free and open economy and society, governed by officials who enjoy popular support and an independent judiciary upholding the rule of law without fear or favor.”

Young also believes the means by which universal suffrage is achieved is something only the Hong Kong people and their government can determine, in accordance with the Basic Law and the relevant decisions of the National People’s Congress Standing Committee.

Overall, “I am optimistic of the path Hong Kong has charted since 1997, and am confident that it will continue with the active support of Beijing as well as the entire world,” he adds. “The United States is proud to be a partner in this continuing process.”

Hong Kong economy Despite recent economic growth, there is a perennial concern that Hong Kong might over time become less important economically as other regions on the

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6 • 2011

Mainland develop and open up, Young points out. “This has recurred as China’s economic growth has accelerated in recent years,” he says. “But the longer I work here, the less concerned I am of this danger.”

“Hong Kong has long been a gateway for foreign investment into China – one might say for the past one hundred and seventy years – and that role continues, despite China’s own more recent opening up,” he says.

Hong Kong has long been closely connected to China’s economy, and a symbiotic relationship has developed in recent years, Young also points out. “This is demonstrated by the prominent role the central government has assigned to Hong Kong in its 12th Five-Year Plan on such critical issues as Pearl River Delta development and the Renminbi offshore market.”

In 2010, almost two-thirds of US$105.7 billion in foreign direct investment in China was conducted through Hong Kong, while over half of US$59 billion China invested in overseas markets also used Hong Kong as a springboard.

role in promoting cross-border services, education, and trade.”

In particular, the United States is looking to Hong Kong to support our priority goals of strengthening regional economic integration and expanding trade, promoting green growth and advancing regulatory cooperation and convergence.

“This city is an example of how economic and political freedoms can complement each other to nurture prosperity,” Young says.

Macau The US is second only to Hong Kong as a foreign investor in Macau, with nearly US$10 billion in direct investment. The number of US citizens in Macau has more than doubled and is now estimated at over 4,000.

“We as a Consulate have increased our engagement with Macau to match the growth in our relationship, and hardly a day goes by without someone from my staff making the ferry ride to Macau to

“This city is an example of how economic and political freedoms can complement each other to nurture prosperity.”

An important development, Young says, is the role Hong Kong is now playing in the internationalization of the Renminbi through trade settlement, bank transactions, and investment.

At the end of 2010, RMB deposits in Hong Kong reached RMB314 billion (over US$49 billion – up over 400 percent compared to 2009. At the same time, trade settlement using RMB also climbed to RMB369 billion (US$57 billion) compared to US$300 million in 2009.

Another key role for Hong Kong is in the integration of the Pearl River Delta, the most dynamic region of greater China, Young says. “As Hong Kong and the Mainland continue to build stronger, more extensive ties, US firms in Hong Kong should be well-positioned to play a

work with their government and business counterparts,” Young says.

In the past few years, Macau has not only become a major destination for US investment but also a partner in a number of areas of shared interests, as well as mutual concern.

“We will keep engaging the government to ensure that all foreign investors, including those from the United States, are treated fairly and in a transparent manner, including in recruiting labor and guaranteeing investor rights,” Young says.

Macau, he notes, has made significant progress by passing new and stricter anti-money laundering laws, establishing a Financial Intelligence Unit, and strengthening its guidelines to financial institutions.

33

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two-edged sword for investors. “Many markets, including Hong Kong, face the risk of fast inflows and outflows of capital triggered by changes in market sentiment,” says Kelvin Lau, Senior Economist, Asia, Standard Chartered Bank (Hong Kong) Ltd. “This has caused volatility.”

Volatility (higher risk) notwithstanding, investors seem undeterred. As expected, investors in the region generally favor equities and commodities over bonds and cash; emerging markets over developed ones. According to Catherine Mow, Head of Investment Centre, JP Morgan Asset Management, concern over Catherine Mow China’s inflation may soon

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ease as governments flexed their muscle to tame inflation and restore investors’ confidence.

“We are not over-concerned that inflation and policy changes will have a negative impact on China’s overall economic development over the next three years,” she explains. “Once the new policies take effect, the overall situation will normalize and confidence of investors in the market will be restored.”

Emerging markets

Given the circumstances, how should the average investors structure their portfolios? Emerging markets and diversification seem to be keys.

Analysts suggest that the bull market for equities is not over yet. A fairly accommodative monetary policy by government in general, underallocated positioning and strong corporate profits are all drivers continuing to favor equities and commodities over bonds and cash.

“Clients focused on equity investment can consider some Asian funds,” Mow of JP Morgan says. “For mid to long-term equity investment, we hold overweight position on China and Thailand.”

“Asia’s robust economic growth has been driven by strong domestic consumption,

particularly in China,” she adds.

Calvin Hsu, Market Director for Hong Kong and Private Banking & Investment Group, Merrill Lynch Wealth Management, says their investment picks gear towards multinationals with emerging market exposure.

“We remain structurally bullish of emerging markets which continue to show strong growth, healthy consumer balance sheets, and infant credit cycles,” he says.

At Merrill Lynch Wealth “The only caveat here is that Management, tailor-made solutions emerging markets have already are the key words in meeting custombenefited from enormous ers’ needs. capital inflows in recent years Calvin Hsu, Market Director for and may underperform Hong Kong and Private Banking & developed markets in the short Investment Group, says: “For clients term.” who expect range-bound markets for Hsu believes that central the next few years or downside risks banks’ tightening has cast a from global macro concerns, we offer shadow over equities in emergfunds that have the potential to ing markets in the near term deliver absolute returns over a full but the effects would be tempomarket cycle.” rary. Meanwhile, equities in “In addition, we offer the full these markets are beginning to suite of foreign exchange products as show better valuations now – well as bullion trading capability, roughly at a 15 percent which can provide some diversificadiscount compared to tion away from longer term structural developed market – and weakness in the US dollar,” Hsu positioning with the return of adds. “For clients who wish to take a capital to the region. more hands-on approach, we offer “We look for better entry full trading capabilities in equities, points later in the year as fixed income, and a diverse variety of emerging markets’ central other investment products.” banks get ahead of the inflation problem,” Hsu says. “Meanwhile, a steady US dollar and declining commodity prices

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ow many times has China’s central bank raised bank reserve requirement this year?The answer is six as of mid June.

Do you know that Mainland banks now park as much as 21.5 percent of their deposits with the central bank as part of the Government’s measures to control liquidity and inflation? All these moves have caused jittery among investors that China’s control measures might choke off growth.

In addition to uncertainty on the China front, investors are worried about the pace of recovery in developed economies. Can the momentum be sustained when the US Government’s Quantitative Easing II comes to a close? Moreover, Japan’s earthquake in April jolted the global supply chain and for a brief period sent investors fleeing for cover in US treasury bonds. For the average investors, what’s to do to ensure above-average return of their investment?

Analysts point out that despite the uncertainty, liquidity has returned to Asia. But liquidity can be a

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How do you protect your investment in times of uncertainty? How do you ride the tides when most investors seem to be looking through the glass darkly with little clue of where the market is heading?

Should you choose equities or commodities? Developed economies or emerging markets? Wilson Lau talks to investment professionals in town who share their insights and observations of market trends

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Looking ahead, Hsu of Merrill Lynch believes global growth and liquidity are expected to keep equities attractive for the rest of 2011. This means stock markets will continue to scale a wall of worry in the near term, and these worries include the Euro zone crisis; unrest in the Middle East and North Africa, China’s tightening measures, and US structural concerns. In the longer term, Hsu still prefer equities over bonds and encourages investors to take advantage of market volatility to rebalance towards strategic asset allocations.

In picking stocks, Hsu says there are “highquality, dividend growers and large-cap multinational companies” available.

“Besides leading sectors in technology, industrials and commodities, we are beginning to see opportunities in Calvin Hsu

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China’s CPI reached a 34-month high in May In summary, Mow of JP Morgan says Asia will continue to hold the key position in any investor’s portfolio. Countries like China, Thailand and Indonesia are still on their ascendancy of development and they will continue to sustain robust economic growth.

At the same time, these countries are distinctively different in their development strategies and therefore present diverse investment opportunities.

“While China may slow, countries like Indonesia and Thailand have outstanding performance,” Mow sums it up. “We will see growth rotates among countries in the region.”

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6 • 2011

companies with pricing power like select players in healthcare, media and consumer sectors,” he says.

To hedge against inflation, Hsu advises for real assets and selective commodities including precious metals. “Finally, the weak US dollar has been a positive for unhedged international returns, but as the US dollar may be supported in the coming period, investors might consider hedging their international exposures,” he adds.

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Diversification should be the common feature shared by investors in structuring their portfolios, Mow of JP Morgan says. “Diversification is particularly crucial for clients with mid-term investment plans of between three and five years,” she explains. “There are always unexpected events but diversification allows investors to give the market sufficient time to rebound so that they can recoup their losses and maybe make a profit.”

For investors who have a more aggressive appetite of risk – an investment horizon of about three years and a risk tolerance level of 30 percent of losses at any one time, Mow suggests bigger exposure to equities and relatively smaller proportions of bonds and balanced funds in the investment mix. Investors who fall into this category can also consider single country funds.

In line with its overweight position on China, JP Morgan offers several single country and regional funds based on the China theme, including JF China Pioneer A-Share and JF Greater China Smaller Companies. “For some A-share funds, we have obtained the Qualified Foreign Institution Investor (QFII) quota from the Central Government to invest in A-shares listed in the stock exchanges in Shanghai and Shenzhen,” Mow says.

“For the smaller companies-specific funds, we are keeping our pulse on the market and have the capability in assessing these companies,” she says. “We are confident that they have the potential to become blue chips.”

Another emerging market to watch is Thailand.

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Mow points out that the country has enjoyed strong growth thanks to strong commodities production and robust exports performance. However, Thai stocks were relatively cheap because investors were troubled by social unrest in recent years.

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can alleviate pressures on emerging market equities because of inflation and tough tightening measures.”

Centre-focus JP Morgan Asset Management focuses on new investment opportunities and its clients are often high net worth investors who have already opened fund trading accounts with private banks, says Catherine Mow, Head of Investment Centre, JP Morgan Asset Management.

“We offer priority to some high net worth customers in the purchase of high-valued and exclusive products, including hedge funds and funds that may not be available to the general public.”

Unique among fund houses in Hong Kong, JP Morgan Asset Management is the only one which operates an investment centre providing comprehensive and personalized services to its customers.

Exclusive events are often held at the centre for individual high net worth customers. These include “round-table” exchange sessions in which one fund manager interacts with up to 10 customers.

“We have a comprehensive online trading platform specifically tailored to the needs of professionals, such as expatriates working in Hong Kong, who are on frequent business travel,” Mow explains.

“Customers can carry out buy-and-sell operations, obtain updates on their accounts and valuations through the online platform,” she says.

“Besides, an account manager is assigned to each high net worth customer so that he or she can stay on top of the performance of his or her investment,” Mow says. “The manager also stays in touch with the customer regularly to review if the customer’s current portfolio matches his or her investment objectives.”

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Financial Services Providers and Wealth Management

ACE Insurance Limited

The Bank of East Asia, Limited

25/F, Shui On Centre, No. 6-8 Harbour Road, Wanchai, Hong Kong

10 Des Voeux Road Central, Hong Kong

Key Personnel

Company Activities/ History

Key Personnel

Company Activities/ History

John French Country President Hong Kong, Taiwan and Macau

David LI Kwok-po Chairman & Chief Executive

Tel: (852) 3191 6800 Fax: (852) 2560 3565 Email: Inquiries.HK@acegroup.com

ACE Insurance in Hong Kong is a member of the ACE Group of Companies®, a global leader in insurance and reinsurance, serving a diverse group of clients. Headed by ACE Limited (NYSE:ACE), a component of the S&P 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries and a strong presence in Asia Pacific.

Operating in Hong Kong for more than 90 years, ACE is a niche and specialist general insurer. It has a well known reputation as one of the market leaders in the segments of Property, Casualty and Marine as well as Accident & Health insurance via direct marketing distribution. The ‘A+’ long term insurer financial strength and counterparty credit ratings by Standard & Poor’s are indicative of ACE Hong Kong’s strong capitalization and reflective of its parent’s rating outlook.

(ACE’s core operating insurance companies are rated AA- for financial strength by Standard & Poor’s and A+ by A.M. Best).

Over the years, ACE Hong Kong has built strong client relationships by offering responsive service, developing innovative products and providing market leadership built on financial strength.

www.aceinsurance.com.hk

Additional information can be found at: www.aceinsurance.com.hk

1918

Established in 1918, The Bank of East Asia (“BEA”) is the largest independent local bank in Hong Kong with total consolidated assets of HK$ 34.2 billion (US$68.7 billion) as of 31st December, 2010. The Bank is listed on The Stock Exchange of Hong Kong and is one of the constituent stocks of the Hang Seng Index.

BEA offers a comprehensive range of commercial banking, retail banking, wealth management, and investment services to its customers in Hong Kong, Mainland China, and other major markets around the world. These include syndicated loans, trade finance, deposit-taking, foreign currency savings, remittances, mortgage loans, consumer loans, credit cards, Cyberbanking, retail investment and wealth management services, private banking, foreign exchange margin trading, Mandatory Provident Fund services, and general and life insurance and more.

In addition to the Bank's core offering, other members of the BEA Group broaden the range of products and services available to individual and corporate customers. BEA's wholly-owned subsidiaries BEA Life Limited and Blue Cross (Asia-Pacific) Insurance Limited serve as underwriters of life insurance and general insurance products, respectively while global professional services provider, Tricor Group, offers integrated business, corporate, and investor services.

BEA is the operator of one of the largest banking networks in Hong Kong. In addition, the Bank operates one of the largest networks of any foreign bank in Mainland China, with nearly 100 outlets in major cities nationwide.

Overseas, the Bank maintains an active presence in the United States, the United Kingdom, and Southeast Asia. In the U.S., BEA operates branches in New York and Los Angeles, which mainly provide wholesale banking services. An additional 13 branches are operated by BEA’s subsidiary in the U.S., The Bank of East Asia (U.S.A.) N.A. In the U.K., BEA operates branches in London and Birmingham, while in Southeast Asia, the Bank serves customers through its branches in Singapore and Labuan, Malaysia, as well as through its representative office in Kuala Lumpur.

The Bank currently operates more than 210 outlets and employs over 11,000 people worldwide.

Year Established 1919

Staff size Over 100 employees (Hong Kong) Over 16,000 employees (Worldwide)

Adrian David LI Man-kiu Deputy Chief Executive Brian David LI Man-bun Deputy Chief Executive Samson LI Kai-cheong Deputy Chief Executive & Chief Investment Officer TONG Hon-shing Deputy Chief Executive & Chief Operating Officer

Year Established

Staff size Hong Kong: over , 00 employees Worldwide: over 11,000 employees

ACE Life Insurance Company Ltd. (Incorporated in Bermuda with Limited Liability)

33/F, Windsor House, 311 Gloucester Road, Causeway Bay, Hong Kong

Key Personnel

Company Activities/ History

Anthony Mak Country President

ACE Life is the international life insurance business of the ACE Group, a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited (NYSE:ACE), a component of the S&P 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries and a strong presence in Asia Pacific. ACE’s core operating insurance companies are rated AAby Standard & Poor’s and A+ by A.M. Best. These ratings are indicative of ACE’s strong capital base and financial stability, key attributes in the business of risk.

ACE has been present in Hong Kong for more than 90 years through its general insurance arm – ACE Insurance Limited. ACE Life Hong Kong offers a comprehensive array of quality life and medical insurance products and services which are designed to meet the financial protection and security needs of a broad range of customers.

Year Established 1988

Staff size Over 100 employees (Hong Kong) Over 16,000 employees (Worldwide)

Tel: (852) 2894 9833 Fax: (852) 2577 0866 Email: Enquiries.HKLife@acegroup.com

Additional information can be found at: www.acelife.com.hk

www.acelife.com.hk 38

Tel: (852) 3608 3608 Fax: (852) 3608 6000

www.hkbea.com biz.hk

6 • 2011

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39

Financial Services Providers and Wealth Management Banque Privée Edmond de Rothschild S.A. Hong Kong Representative Office

BNP Paribas in Asia Pacific

50th Floor (Suite 5001), One Exchange Square, 8 Connaught Place, Central, Hong Kong

63/F, Two International Finance Centre, Central, Hong Kong

Key Personnel

Company Activities/ History

Key Personnel

Company Activities

Eric Raynaud Chief Executive Officer, BNP Paribas, Asia Pacific

In 2010, BNP Paribas celebrates the 150 anniversary of its presence in Asia Pacific. The group opened its first branches respectively in Shanghai, China and Calcutta (which has been renamed as Kolkata), India both in 1860. With its strong position in Asia Pacific and about 12,600 staff in the region, the group is represented by its 3 core businesses: Corporate and Investment Banking, Investment Solutions and International Retail Services.

Bruce VonCannon Chief Representative

Banque Privée Edmond de Rothschild S.A. offers comprehensive wealth management and estate planning solutions for wealthy individuals and their businesses. Investment solutions feature expertise in portfolio management, investment advisory and research, structured products, foreign exchange, commodity and trust services. The bank is considered a pioneer in hedge funds dating back to 1969 and received the 2010 InvestHedge Group of the Year Award for alternative range of funds of hedge funds.

Year Established 1958

Staff size 1800

Corporate and Investment Banking (CIB) The Bank’s CIB business is present in all markets in Asia Pacific, providing clients with financing, advisory and capital markets services. Its 6 major business lines include, Global Equities and Commodity Derivatives (GECD), Corporate Finance (CF), Fixed Income (FI), Structured Finance (SF), Asset Liability Management (ALM) & Treasury and Resource & Portfolio Management (RPM). With its well-established and fully operating platforms across most Asian markets, CIB has an extensive client franchise, boasting more than 2,500 corporates and 600 financial-institution relationships.

Investment Solutions (IS) The Bank’s IS platform provides a complete portfolio of integrated investment solutions available from the BNP Paribas Group for both private and institutional investors. This is the asset-gathering arm of the Group and has strong presence across Asia Pacific, which includes private banking, asset management, online saving and trading, insurance, securities services and real estate. IS also develops through organic growth such as Joint Ventures (JVs) and partnerships in various markets, such as Shinhan in South Korea, State Bank and Sundaram in India.

Tel: (852) 2909 8888 Fax: (852) 2865 2523 Email: communication.hk@asia.bnpparibas.com

www.bnpparibas.com.hk 40

International Retail Services (IRS) Today, BNP Paribas generates 54% of its 2010 revenues from retail banking, thus gaining a strong international presence in the sector.

In China, the Group is developing a strategic partnership with Bank of Nanjing, in which it holds a 12.6% stake. The two banks have begun to cooperate closely in retail banking and consumer credit as well as processes, risk management and organisation.

In parallel, BNP Paribas Lease Group in China is currently in the process of merging with Fortis Lease Group, offers a comprehensive range of customized equipment leasing and rental solutions in China with similar services for companies and small businesses.

BancWest Corporation is the holding company for Bank of the West and First Hawaiian Bank. The banks have a representative office in Taipei.

In Vietnam, the Group signed a strategic partnership with the Vietnamese bank Orient Commercial Bank (OCB).

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6 • 2011

Annie Tam Manager

Year Established 1989

Company History

Tel: (852) 3765 0600 Fax: (852) 2877 2185

www.groupedr.ch

The Rothschild name in finance spans over 200 years dating back to the late 1700s to the present day headquarters in Geneva. Edmond de Rothschild merged the bank under Swiss-based La Compagnie Financiére Edmond de Rothschild (LCF) in the 1960s. Listed on the Swiss Stock Exchange since 1987, today the bank has assets under management exceeding USD 100 billion and boasts one of the highest capital adequacy ratios in the wealth management industry. It maintains a global presence with 33 offices across the globe.

Charles Schwab, Hong Kong, Ltd Suites 1607-1611, 16/F, ICBC Tower, 3 Garden Road, Central, Hong Kong

Key Personnel

Company Activities/ History

James Sun Managing Director

Charles Schwab, Hong Kong, Ltd., a subsidiary of the San Francisco-based Charles Schwab Corporation, is registered with the Securities & Futures Commission (“SFC”) in Hong Kong. We offer comprehensive US investing products and services, including US stocks, fixed income, market research, a world-renowned online trading platform and financial consultants here in Hong Kong.

The Charles Schwab Corporation (NYSE:SCHW) has been a leader in financial services in the U.S. for more than three decades.

Through its subsidiaries - including Charles Schwab & Co., Inc., Charles Schwab Bank, and Charles Schwab, Hong Kong, Ltd. Schwab manages client asset exceeding US$1.65 trillion as of March 31, 2011, with 8.1 million client brokerage accounts, 1.4 million corporate retirement plan participants and 719,000 banking accounts Mr. Charles R. Schwab's vision of providing the most ethical financial services continues to lead us to be a reliable source of financial services, a trusted provider of help and advice, and a stable firm committed to delivering great value.

With Schwab Hong Kong, you will have access to your investments and US market insight through our industry leading web site www.schwab.com.hk, 24-hour telephone access (+8522101-0511) and local office.

Year Established 1997

Tel: (852) 3198 4200 Fax: (852) 2506 4756 Email: asia@schwab.com.hk

www.schwab.com.hk biz.hk

6 • 2011

41

Financial Services Providers and Wealth Management

Citigold Private Client 6/F, Wheelock House, 20 Pedder Street, Central, Hong Kong 3/F, Wai Fung Plaza, 664 Nathan Road, Mongkok, Kowloon

Key Personnel Maria Leung Director, Citigold Private Client

Manulife (International) Limited Company Activities/ History

Key Personnel

Company Activities/ History

Citigold Private Client is one of the leading wealth management services that combines core values of a private bank with professional insights and products, and a top premium retail bank with its network and service convenience to provide customized financial solutions to high net worth individuals.

At Citigold Private Client, we offer a superior level of astute wealth management solutions to clients encompassing:

Michael Huddart Executive Vice President and Chief Executive Officer, Hong Kong

Manulife is a major provider of individual insurance, investment linked insurance, employee life and health insurance, provident funds, mutual funds, and wealth management products and services in Hong Kong.

Manulife (International) Limited is a member of the Manulife Financial group of companies.

Manulife Financial is a leading Canadian-based financial services group operating in 22 countries and territories worldwide. For more than 120 years, clients have looked to Manulife for strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. The Company operates as Manulife Financial in Canada and Asia and primarily as John Hancock in the United States.

Dedicated Team of Experts and Professional market research analysis Customized Financial Advice Access to Private Banking Solutions & Full Range of Unsurpassed Retail Banking Products Exclusive Privileges and Experiences

Tel: (852) 2860 8888

www.citigoldprivateclient.com/hk

Our experienced industry-leading bankers will work in partnership with a team of specialists from areas such as investment, treasury, insurance, mortgage, market research and commercial banking to provide tailored financial solutions to clients. With access to our private banking products and services, we are committed to craft personalized portfolios based on their unique needs and to help sustain their wealth success in future.

Tel: (852) 2510 5600 Fax: (852) 2510 0246

www.manulife.com.hk

RCM Asia Pacific Ltd

Control Risks Pacific Limited 1503 - 1504, 15/F Lyndhurst Tower, 1 Lyndhurst Terrace, Central, Hong Kong

27/F, ICBC Tower, 3 Garden Road, Central, Hong Kong

Key Personnel

Company Activities/ History

Key Personnel

Company Activities/ History

Kent Kedl Managing Director, Greater China & North Asia

Control Risks is one of the world’s leading global business risk consultancies. As a trusted adviser to almost three quarters of the Fortune Global 500, we protect our clients’ most valuable assets: their investments, people, brand and reputation. Our support and advice enables clients to manage the political, security, operational and integrity risks that come with doing business internationally.

Mark Konyn Chief Executive Officer, Asia Pacific

RCM is a company of Allianz Global Investors, a pre-eminent global asset management group committed to helping clients achieve sustainable success.

RCM offers a distinctive investment philosophy and culture, while also benefiting from the scale and substantial resources of our parent company. This includes business support, industry best-practices and financial investment. All of which enhances our ability to attract and retain talent, and provide superior insight and investment performance for our clients.

John Macpherson General Manager, Hong Kong

Year Established 1975

For more information on our China practice, please contact: Tel: (852) 2810 9028 Email: hongkong@control-risk.com

Our services include: • Political risk analysis • Fraud and corporate investigations • Crisis management and business continuity planning • Incident Response • Legal technologies • Security risk audits, protection and training • Security design solutions • Travel security analysis and management services

www.rcm.com.hk

www.control-risks.com/ 42

Tel: (852) 2238 8888 Fax: (852) 2877 2533

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6 • 2011

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6 • 2011

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Financial Services Providers and Wealth Management

30

T.Rowe Price Hong Kong Limited Company Activities/ History

Christine To Vice President

Notable Asian Funds & Values (at May 31, 2011)

Anh Lu Vice President

US Listed

US$ millions

T.Rowe Price New Asia Fund

4666

T.Rowe Price Japan Fund

205

Year Established

T.Rowe Price Emerging Markets Stock Fund

5867

1937

T.Rowe Price International Discovery Fund

2892

Staff size 27 in Hong Kong

Jul The Evolution of On The Job Training (OJT) -

07

A Case Study of Morgan Stanley's roll out of OJT across Asia

Claire Goodchild, Executive Director, Learning and Development, Morgan Stanley Brian J Chitester, Chief Personnel Officer, PepsiCo Asia Pacific Moderated by: Peter Rolston, Principal, CZAR Partners

Recently Morgan Stanley won the HK Management Association silver award for their innovative OJT program.

In the upcoming breakfast event, Claire Goodchild, Executive Director at Morgan Stanley, will explain the firm’s methodology, the critical success factors, and the benefits they have seen.

Claire Goodchild is Executive Director in Learning and Development at Morgan Stanley. For the past four years Claire has been leading a project that has transformed Morgan Stanley's on-the-job learning experience. She started out in London as a chartered accountant with Ernst & Young. Claire moved to Asia in 1997 with E&Y in HK in Learning and Development, focused on developing staff’s technical audit skills.

Brian J Chitester is a 20-year PepsiCo veteran. He began his career as the training manager for Pepsi South in Dallas Texas. Thereafter he ran the manufacturing operations for Minneapolis, Minnesota and Orlando, Florida. In 1996, he moved to PepsiCo International and had a variety of roles including Director of Operating Capability, VP of Organization Development and People Capability and VP of Executive and Leadership Development.

www.troweprice.com

Jul Breakfast Workshop: Key Account Management

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Guy Fraser, MDS Associate Director, Miller Heiman

The most valuable clients are often the ones we already work with. However, many companies struggle with ways to actually manage and drive these key relationships to deliver profitable growth. Managing the dynamics of an effective long-term relationship involves: · Dedication · Time · A certain amount of analysis to understand decision-making structures and some of the changes that take place.

Guy Fraser will introduce exercises to address these challenges in a logical and stepwise manner some concepts and engage you in thought-provoking. He has over 25 years international B2B sales and marketing management experience in capital equipment and bespoke solutions encompassing Africa, Europe and Asia Pacific. His achievements include creating new businesses in recessionary conditions.

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

Fax: (852) 2537 8824

Time: 12:00 - 2:00pm (Lunch included) Fee(s): Member Fee: HK$420 Non Member Fee: HK$540 Corporate Table Fee (10-12pax): HK$5,200 MEDIA WELCOME

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

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

Email: sanlee@amcham.org.hk

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2011 July

Tel: (852) 2536 7800 Fax: (852) 2536 7820 Email: hongkong@troweprice.com

Founded in 1937, T.Rowe Price Group is an investment management firm headquartered in Baltimore with offices around the world and more than 4,000 employees. With assets under management of US$510 billion, the company serves as investment advisor for more than eight million institutional and individual accounts in the T.Rowe Price Family and no-load mutual funds and other investment portfolios.

Professor John A. Quelch Vice President and Dean China Europe International Business School (CEIBS) AmCham Hong Kong is pleased to collaborate with the China Europe International Business School (CEIBS), the largest, longest-running, top-ranked business school in mainland China, for an exclusive joint event.

Professor Quelch’s research focus is on global marketing and branding in emerging as well as developed markets. His current research projects address (a) understanding the continuing importance of place, distribution and localization in marketing strategy and (b) formalizing appropriate marketing and customer metrics for periodic review by boards of directors.

Professor Quelch is the author, co-author or editor of twenty-five books, including Greater Good: How Good Marketing Makes for Better Democracy (2008), Business Solutions for the Global Poor: Creating Social and Economic Value (2007), The New Global Brands (2006), Global Marketing Management (5th edition, 2006), The Global Market (2005), Cases in Advertising and Promotion Management (4th Edition, 1996) and The Marketing Challenge of Europe 1992 (2nd edition, 1991).

21/F Jardine House, 1 Connaught Place, Central, Hong Kong

Key Personnel

Venue: JW Marriott Salon 6 (L3) Pacific Place, 88 Queensway Admiralty, Hong Kong

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2011 June

Jun Digital Marketing in China

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