20 12
In G ter U na ID tio E na TO lS ch oo ls
Journal of The American Chamber of Commerce in Hong Kong
www.amcham.org.hk
April 2012
Shortage of
Primary School Places COVER SPONSOR
April 2012 Vol 44 No 04
Contents
Richard R Vuylsteke
Editor-in-Chief Daniel Kwan
Managing Editor Kenny Lau
30
08
14
COVER STORY
GOVERNMENT POLICY
TRADE & INVESTMENT
SPORTS & ENTERTAINMENT
AmCham’s Education Affairs Group has stepped up its lobbying efforts over a severe shortage of English-medium primary school places on Hong Kong Island as it has become nearly impossible to enroll a child instantly in an English-speaking learning environment
Director of Planning Jimmy Leung Cheuk-fai discusses the vision of making Hong Kong “Asia’s World City” through infrastructure and land development that will enhance the city’s competitiveness
More than two dozens senior US officials meet with over 400 MNCs executives in Tokyo at the annual APCAC meeting to discuss business opportunities as companies are expanding more aggressively into emerging Asian markets
LPGA pro Christina Kim in an exclusive interview talks about her approach to a fulfilling career on the golf course and what it means to be a proud American of Korean heritage in a sport where camaraderie is phenomenal
Publisher
21
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 Unit 1613 16/F, Workingbond Commercial Centre, 162 Prince Edward Road West, Kowloon ©The American Chamber of Commerce in Hong Kong, 2012 Library of Congress: LC 98-645652
AMCHAM NEWS AND VIEWS
GOVERNMENT POLICY
04 Chairman’s Memo
14 Mapping Hong Kong’s Future
James Sun highlights recent advocacy efforts by the Chamber concerning the shortage of international school places in Hong Kong and previews a number of upcoming events including AmCham’s China Conference in mid-May and Washington Doorknock trip in early June
07 New Business Contacts
Jimmy Leung Cheuk-fai, Director of Planning of the Hong Kong government, discusses the vision of making Hong Kong “Asia’s World City” through infrastructure and land development that will enhance the city’s competitiveness on the global stage
17 Are Reclamation and Rock Cavern Development Viable Options?
43 executives joined AmCham’s business network last month
Robin KB Lee, Deputy Head of Civil Engineering Office, Civil Engineering and Development Department, explains the logic behind the government’s initiatives to enhance Hong Kong’s land supply
33 Mark Your Calendar
COVER STORY
08 A Holistic Approach to Alleviate Shortage of Int’l School Places AmCham has stepped up its lobbying efforts in recent months over an increasing shortage of English-medium primary school places on Hong Kong Island as business executives are now having to choose between coming to Hong Kong or relocating elsewhere
12 The Challenge of Finding Land
TRADE & INVESTMENT 21 Tokyo Summit Renews Commitment to American Business Abroad More than two dozens senior US officials meet with over 400 executives of MNCs at the annual APCAC meeting to discuss business opportunities as companies are expanding more aggressively into emerging Asian markets
Director of Planning Jimmy Leung Cheuk-fai in a conversation talks about some of the challenges and issues in the search of suitable sites for expansion of international schools on Hong Kong Island
FINANACIAL SERVICES 24 Taking the Lead – Hong Kong as RMB Offshore Center Winton Ye, Senior Strategic Planner at Bank of China (Hong Kong), explains Hong Kong’s growing role as an offshore center for a currency bound to become more internationalized
HUMAN CAPITAL 27 Asians with Vision A new book entitled Through The Eyes of Tiger Cubs: Views of Asia’s Next Generation offers a glimpse into another side of a young generation raised in a region during the “Golden Age” of economic prosperity and stability
SPORTS & ENTERTAINMENT 30 Always Like to Have Fun LPGA pro Christina Kim talks about her approach to a fulfilling career on the golf course and what it means to be a proud American of Korean heritage in a sport where camaraderie is phenomenal
For comments, please send to biz.hk@amcham.org.hk Single copy price HK$50 Annual subscription HK$600/US$90
2
biz.hk
4 • 2012
biz.hk
4 • 2012
3
COVER SPONSOR
Chairman’s Memo
Board of Governors Chairman James Sun Vice Chairman Richard Weisman Treasurer Peter Levesque Executive Committee Janet De Silva, Frank Lavin, Anita Leung Philip Leung, Belinda Lui, Alan Turley Governors Evan Auyang, Sara Yang Bosco , Brian Brenner, Tom Burns, Nicholas de Boursac, Walter Dias, Rob Glucksman, Toby Marion, Thomas Nelson, Andrea Richey, John Sigalos, Colin Tam, Elizabeth L Thomson, Frank Wong, Shengman Zhang Ex-Officio Governor President
Robert Chipman Richard R Vuylsteke
Chamber Committees AmCham Ball Apparel & Footwear Business Briefing China Business Communications & Marketing Corporate Responsibility Energy Entrepreneurs/SME Environment Financial Services
Kay Kutt Andre Leroy Donald Meyer Frank Wong Susan Reingold Benjamin Grubbs Robert Grieves
Dominic Yin Donald Austin Bradley Punu Catherine Simmons Brock Wilson Food & Beverage Veronica Sze Hospitality & Tourism Damien Lee Human Capital Janet De Silva Peter Liu Information & Communications Technology Rex Engelking Insurance & Healthcare Owen Belman Hanif Kanji Intellectual Property Gabriela Kennedy Amy Lee Law Clara Ingen-Housz Pharmaceutical Stephen Leung Real Estate Alan Seigrist Senior Financial Forum Alvin Miyasato Senior HR Forum Jacqueline Algar Sports & Entertainment Raymond Roessel Taxation Evan Blanco Trade & Investment Patrick Wu Transportation & Logistics Brian Miller Women of Influence Jennifer Van Dale Young Professionals Sherry Lin
4
Dear Fellow Members: Reflection and rejuvenation. The almost weeklong holiday early this month was a welcome break for many of us who have been inundated with meetings and business travel commitments. It was a treat to be able to spend some quality time with family, re-connect with old friends, or just to catch up with muchdelayed reading. As one of the AmCham’s sayings goes – “We work hard, and we play hard.” For the latter, the annual AmCham Ball – to be held on April 21 at the Grand Ballroom of the Four Seasons – is certainly the prefect occasion for fun and partying. We’ll report more on that event next month. Due to conflicts in schedules, we postponed our annual Beijing Doorknock, originally slotted for late
March, to a later date this year. The re-scheduling will better allow meetings with top Chinese officials and business leaders. Active preparations are underway and we’ll report more details on the rescheduled visit in coming months. About 30 speakers and panelists are now confirmed for our China Conference. The one-day conference – also booked at the Four Seasons – promises to be another milestone AmCham event. Last held eight years ago, AmCham’s China Conference has been sorely missed by our members and many China hands. The heavyweight line-up and topics are most relevant and timely, especially as we witness the momentous changes China faces this year. If you haven’t registered, sign up now and don’t miss it. The date is May 18th; block it off on your calendar! Beyond being well tuned in about market-shaping policy changes in China and the region, we are also on top of local developments. Janet De Silva, chair of our Education Affairs Group, spoke on behalf of the Chamber at a panel of the Legislative Council in February concerning the shortage of international school places. Despite her busy schedule at the Richard Ivey School, Janet has taken up our concern and lobbied the government tirelessly together with other members of the group for actions to address the problem. A heartfelt thank you to Janet and her team. As you will read in the cover story in this issue, our demand is for more primary school places in English medium on Hong Kong Island. Results from a variety of surveys and studies all indicate
biz.hk 4• 2012
an acute shortage and urgent actions are needed or executives will relocate elsewhere. Through publicity and direct lobbying, we will continue to push the government on this issue. The summer is upon us now. The next signature event on the Chamber’s agenda will be the Washington Doorknock in June, already being organized by AmCham President Richard Vuylsteke. As in previous years, we will continue to raise issues like the need for US tax reform in our meetings with Congressmen and US officials. We will also address critical issues the global supply chain faces and how they affect businesses in this part of the world (this is the main theme of the APEC conference to be held in Russia this year). In order to build a solid Doorknock agenda, we welcome any suggestions from our members. Please don’t hesitate to contact Richard Vuylsteke on general issues or Vice Chairman Richard Weisman on US tax topics. We look forward to hearing from you.
James Sun Chairman
biz.hk
4 • 2012
5
New
Business Contacts
w w w. a m c h a m . o r g . h k
The following people are new AmCham members: AIMS International/ HCP Executive Ltd
Equinix HK Ltd
KCS Hong Kong Limited
Vanessa Moriel Managing Director, Asia Sharon Rubinstein Head of Strategic Relations
Shaun Bland Director, Product Management, Asia-Pacific Todd Handcock Chief Marketing Officer & VP, Marketing & Strategy Asia-Pacific Andrew Rigoli VP, Corporate Development & Strategy, Asia-Pacific
Bill Fong Director, Fund Administration Services Division
American Express Tara Tubman Director, Large Market Acquisition Hong Kong & Taiwan, Global Corporate Payments
BASF East Asia Regional Headquarters Ltd
Over 500 pages in three major sections, including a complete guide to chamber services, corporate sponsors and AmCham Charitable Foundation. This directory lists nearly 1,900 members from over 700 companies and organizations. ISBN 978-962-7422-03-7
LC 98-645651
Claire Gunning Manager - Sustainability, Environment, Health & Safety Asia Pacific Genevieve Hilton Regional Head of External Communications, Corporate Communications Asia Pacific Karen Wu Senior Manager, External Communications, Corporate Communications Asia Pacific Christian Schubert Vice President, Corporate Communications Asia Pacific
Brown-Forman Hong Kong Limited Trevor Smith Finance Director, Asia Pacific
Charles Schwab HK Ltd Ronald Poon Vice President, Financial Consultant
Damco Hong Kong Ltd Kim Overman Director, Supply Chain Management
Debevoise & Plimpton LLP Sarah Thomas Associate
Delta Air Lines, Inc Judy Lau Sales Manager, Hong Kong
Discovery Bay Resort & Spa Anne Busfield General Manager Marianna Tang Director of Sales & Marketing
Expedia, Inc Johan Svanstrom Vice President & Managing Director, Hotels.com APAC
FedEx Express Philip Cheng Vice President Finance, Asia Pacific CFO
KPMG Maggie Cheung Assistant Manager
Ogilvy Public Relations Worldwide Limited Thomas Crampton Asia Pacific Director, Social Media
Otis Elevator Co (HK) Ltd Kelvin Kwong Senior Manager, Marketing
Promontory Financial Group China Ltd
Nick Gronow Senior Managing Director
Frank Newman Chairman Ronald Gould Managing Director and Head of Office Frederic Lau Managing Director
HOK Int'l (Asia/ Pacific) Ltd
Protiviti Hong Kong Co Ltd
FTI Consulting (Hong Kong) Limited
Steven Ma Marketing Manager
Hong Kong Management Association, The Victor Lee Executive Director
Hongkong International Theme Parks Ltd Damien Lee Director, Staffing and Human Resources Services
InterCall Scott Wilson Business Development Manager
Jones Lang LaSalle Gill Keefe National Director Michelle Chiu Retail Consultant Peter Trollope Director of Business Development
Michael Deeming Associate Director Ricky Lee Manager
Rowbotham & Company LLP Harriet Leung Partner
SGS Hong Kong Ltd Raymond Wong Director of Corporate PR and Marketing
Skadden, Arps, Slate, Meagher & Flom Faith Jones Registered Foreign Lawyer
Tesla Motors HK Limited Sei Liu Relationship Manager
UBS AG Giselle Tropper Trader
JPMorgan Chase Bank
Wharf T&T Ltd
Robert Johnson Managing Director
Esther Chan Vice President of Business Development
View our other members at:
http://www.amcham.org.hk/index.php/AmChamMembers.html
biz.hk
4 • 2012
7
COVER STORY
Legislative Council panel o provision of international school spaces. “The situation is hitting a crisis point right now for the international business community in Hong Kong,” she stresses. “Executives of MNCs are having to choose between coming to Hong Kong or relocating elsewhere simply because they can’t get their kids in school here.” Hong Kong’s role as an international financial center and a hub for regional headquarters of MNCs will be in serious jeopardy if executives bypass Hong Kong altogether to live and work in other locations for their business needs.
From West to East
The number one issue impacting companies' ability to grow is the inability of getting school placement for families of business executives who are trying to transfer into Hong Kong, says Janet De Silva (pictured), chair of AmCham's Education Affairs Group.
A Holistic Approach to Alleviate Shortage of Int'l School Places AmCham has stepped up its lobbying efforts in recent months over a severe shortage of English-medium primary school places on Hong Kong Island as business executives are now having to choose between coming to Hong Kong or relocating elsewhere in large part because of the schooling situation here
By Kenny Lau
H
ong Kong faces a critical shortage of international school places. The shortage is now particularly severe among primary schools on Hong Kong Island, making it nearly impossible to enroll a child instantly in an English-speaking learning environment. The lack of available English-medium primary school places is a serious threat to Hong Kong’s competitiveness because business professionals are
8
simply turning away when they are unable to get their kids in school. “Companies tell us the number one issue impacting their ability to grow is the inability of getting school placement for families of business executives as they are trying to transfer into Hong Kong,” says Janet De Silva, chair of AmCham’s Education Affairs Group. “Put simply, there is a critical shortage of English language primary school places on Hong Kong Island,” she says, citing her testimony on February 13 before a
biz.hk
4 • 2012
The drive behind rising demand for English language school places is a direct result of economic growth in the region where MNCs are increasingly looking to Hong Kong as a hub to set up their regional headquarters while Mainland enterprises are continuing to rely on the city as a platform to take their business global. “We’ve got a high volume of global companies including those of Mainland China doing business here,” De Silva notes. “Since the global financial crisis of 2008, with markets in the US and Europe experiencing low to slow growth, Asia Pacific has become the economic growth engine globally and a region where many Fortune 500 companies are earning 60 percent or more of their global revenue.” According to the annual Brookfield Global Relocation Trends Survey in 2011, Hong Kong ranked eighth among all destinations most frequently selected for executive relocation but, for the first time, the city was named in the “Top 20” of global locations that present the greatest international assignment difficulties – in large part because of the education crisis. (see tables) “Hong Kong has always been one of the most sought-after markets for relocation but never been a market designated as challenging. That changed for the first time last year,” De Silva points out. “In an unbiased third party assessment of Hong Kong, schooling is cited as a critical issue by the international community.” The combination of increasing demand from incoming families as well as desire of local families to enroll their children in an English-medium school has created a perfect storm situation in which demand of school places simply outstrips supply. “It is a good thing that we can have local students in international schools and that parents of local
biz.hk
4 • 2012
students can pick an education stream of their choice, because it creates diversity and a truly international setting,” De Silva believes. “There is a huge opportunity for us to do it well.”
Demographic change Hong Kong is indeed seeing an influx of expatriates. “We are actually working with more expatriates this year than in the past,” notes Gill Keefe, National Director (Relocation), Residential Leasing and Relocation Services of Jones Lang LaSalle, who looks after expatriate families moving to Hong Kong on a corporate or individual basis for their accommodation and schooling needs. “Normally, 70 percent of our clients work in the financial services sector but this year we are seeing an increase in other sectors such as retail, legal and logistics,” she adds. In the old days, senior executives relocating to Hong Kong were usually “older” and above the age of 50, Keefe observes. Nowadays, international assignees tend to be younger and often come here with young children who require primary school access. Gill Keefe “Incoming families today have schooling requirements that didn’t exist in the early days, most notably in the primary sections,” she says, noting a huge disparity in terms of supply and demand of English-medium schools in Hong Kong. “In the primary section where the real bottleneck is, you can actually sit on a waiting list for years at some schools,” she points out. “By the time you are in a position to be offered a place, your child could be old enough to be in secondary school or may even have left secondary and headed for college.” In order for a place to be offered to an incoming child, there needs to be another student leaving a school. But it is an equilibrium in which a large proportion of the student population is not transient and turnover rates are always very low. “A lot of expats are staying longer in Hong Kong and these schools are very popular among local students,” Keefe reasons. “Local students usually go all the way through and do not transfer elsewhere.” Because international schooling in Hong Kong is so renowned to be such a problem, companies are increasingly picking professionals who have no child schooling
9
Locations Presenting the Greatest Challenge Top 3 + New on Top 20
Most Frequently Selected Destination Top 8 of 20
2011
2010
2011
2010
China
1
2
U.S.
1
1
India
2
1
China
2
2
Russia
3
3
U.K.
3
3
Belgium
9
n.a.
Singapore
4
4
Germany
12
n.a.
Germany
5
5
Hong Kong
13
n.a.
Netherlands
6
7
Venezuela
15
n.a.
Australia
7
10
Angola
16
n.a.
Hong Kong
8
11
Japan
20
n.a.
Source: 2011 Global Relocation Trends Survey, Brookfield Global Relocation Services
needs, Keefe notes. Or, business executives poised to relocate here are simply considering other places where it is easier to enroll children in a school. In some extreme cases, executives would choose to live and work in Hong Kong and commute every month or two back to the US or Europe to reunite with their families. Others would send their families to live in nearby Singapore while they work here, despite their desire to live as a family in Hong Kong. “It is a potentially dangerous situation for Hong Kong if people stop relocating here and go to places where it is easier,” Keefe says. “The challenge is that this is not something we can wait on. We are talking about a child’s education that you can never go back on.”
Hong Kong Island The international community is now calling for more international school places and is advocating for allocation of decommissioned school buildings and sites for an expansion plan. More importantly, expansion will need to be in “worthwhile” locations such as those on Hong Kong Island where a vast majority of the residential housing demand exists.
“The reality is that we just don’t have the kind of mature residential infrastructure for the international community elsewhere other than on Hong Kong Island,” De Silva points out. “If you are an international family with primary school kids, you don’t want to be busing them two hours away into the New Territories everyday for school. People are just not willing to make those choices when kids are that young and when they are new in Hong Kong.” However, all of the English-medium schools, particularly in primary grades, on Hong Kong Island are full to their capacity. In some cases, there are more children on their waiting lists than actual students in the schools. “These schools will get over 300 applicants for an intake of 24 students,” De Silva points out. “Statistically speaking, it is harder than getting into a top university in the US. Harvard or Yale may be easier by comparison.” “Most of our incoming families still prefer Hong Kong Island and to a lesser extent Discovery Bay as a first option for schooling and housing,” notes Shaila Gidwani, Team Leader - Destination Services Hong Kong, Crown Relocations, which provides educational
“Put simply, there is a critical shortage of English language primary school places on Hong Kong Island...Executives of MNCs are having to choose between coming to Hong Kong or relocating elsewhere simply because they can’t get their kids in school here.”
10
biz.hk
4 • 2012
support as part of its global mobility services for clients worldwide. “However, as our Availability Report of March 2012 shows, there is clearly a lack of available places in the primary sections,” she adds. “Incoming families stand very little chance of obtaining a school place on the Island as a first choice and often place their children in ‘interim schools’ whilst waiting for a spot in their favored school. “We have seen in some cases of families getting split in a situation where an assignee often comes here first and leaves the spouse and children behind, until a place becomes available in a school in Hong Kong.” The English Schools Foundation (ESF) schools can provide a viable alternative but they are often full in both primary Shaila Gidwani and secondary levels, Gidwani says. “Some schools on the Island are trying very hard to increase their class sizes and some international kindergartens are adding Primary 1 and Primary 2 places as a short term solution. It really isn’t ideal.” Local schools are not an option due to the medium of instruction in use daily, De Silva adds. “To have children go from an English learning environment to a predominantly Chinese-language environment where they don’t have the language support at home just isn’t something that can be contemplated.”
Government policy The Hong Kong government in recent years has made significant accommodations for 5,000 additional international school places, including Greenfield sites in Kowloon Bay, Lai Chi Kok, Sai Kung and Tuen Mun, in an effort to tackle the problem. However, “it does not address the shortage of English-language primary-grade school places on Hong Kong Island,” De Silva notes. “While the government is to be commended for these green field school sites in Kowloon and New Territories, which are a big step forward, these additional places will not be an adequate solution to our primary concern.” The provision of international school places is now such a critical and immediate issue that the topic was included for the first time in the government’s Thematic Household Survey released by the Census and Statistics Department in February.
biz.hk
4 • 2012
According to the survey, there are currently 21,700 students in international primary schools and 20,100 in international secondary schools in Hong Kong. It is also reported that, of these 41,800 students, 71.7 percent waited for less than six months from submission of application to successful admission and 28.3 percent for more than six months. “The fundamental problem with this survey report is that it blends all international schools, all grades, all ages, all locations to create a broad picture instead of addressing a very specific issue,” De Silva says of the survey. “It does nothing to validate the problem of primary school places in English medium on Hong Kong Island, which is a point we have been very precise about.” In the survey, 131,100 households report having children in kindergarten, a number equivalent to 45 percent of the entire primary school student population currently in Hong Kong, she also notes. “This large cohort of children now moving through kindergarten and will require primary schools shortly. This means even greater demand than we already face and quite possibly a huge bulge happening.” “With our current shortage of primary school places at a crisis level, what are we going to do about this large demand curve moving through kindergarten?” she says. “The government’s Thematic Household Survey tells us that we have a bigger problem just around the corner.” From a planning perspective, there has to be a better way of assessing demands for school places and planning sufficiently on a longer-term basis, De Silva suggests. “The demand for school comes not only from local births but also from the international community, driven partly by the movement of people in and out of the city.” One way to tackle the challenge, she proposes, is by forming a centralized steering group comprised of representatives from the international business community, schools, and government departments to look after the schooling situation. “More importantly, we as a city could use a more holistic approach in the development of our infrastructure so that we can create suburbs that are attractive for everyone,” De Silva says. “This way we can distribute demand across the territory.” “Just as not everyone working in New York sends their children to school in Manhattan, Hong Kong’s continued growth as a business center needs to be supported by more alternatives off Hong Kong Island,” she adds. (See more stories on the issue of international schools in the accompanying supplement Guide to Quality Education & International Schools. – Editor’s note.)
11
The Challenge of Finding Land
D
irector of Planning Jimmy Leung Cheuk-fai talks about some of the challenges and issues in the search of suitable sites for expansion of international schools on Hong Kong Island
biz.hk: Hong Kong faces a serious shortage of primary school space of international schools especially on the island. Why can’t the government provide more land for international school on the island? Leung: Hong Kong Island is basically [fully] developed. It’s therefore difficult to find space for anything and not just for international school. We are trying our best to provide space on Hong Kong Island. As you can see, we have more international schools on Hong Kong Island than in other places. We understand the demand is still high. There are at present 50 international schools [in Hong Kong] and together they provide about 35,000 school places. Another 5,000 additional international school places will be available within the next few years. biz.hk: What options are available? Leung: Looking into existing vacant schools to see if they can be converted into international school is one option. In that way, it will speed up the provision of school space. If you are talking about looking for available sites, we – the Planning Department – will help. The Education Bureau has a list of schools that are vacant and they will decide if they can be used. We will do it together with all the concerned departments because there are issues that we will have to look into like transportation and whether the premises are suitable or not. There are always sites being considered because we know that there is a shortage of international school space. We are doing our best to make available sites for such development. We understand there is a problem. There are vacancies in some schools but some are really full and there is no space. The parents may choose [to send their children to] the ones they like so that’s another issue. If there is a school in Tuen Mun but then the family will have to live in the New Territories. We know this is not an ideal situation but we are doing our best. We are always in contact with the Education Bureau and we are trying to solve the problem by finding suitable sites for them. This is a continuous process.
12
Land Use Studies & Reviews to Increase Land Supply North East New Territories New Development Area (NDA) Hung Shui Kiu NDA Tung Chung Remaining Development Ex-quarry sites West Rail Kam Sheung Road Station and Pat Heung Depot and adjacent rural areas Convert degraded rural industrial areas and spoiled agricultural land Rezone industrial land Rezone green belt (GB) Rezone government institution or community (GIC) sites
Site Area (about) 805 ha 790 ha 246 ha 168 ha 137.7 ha
275 ha 60 ha 50 ha 15.5 ha
biz.hk: There are competing demands for land in Hong Kong. How do you balance such demands? Leung: We look at the land issue holistically. This is why I’ve said earlier that we are doing planning study for some 2,500-hectares of land in Hong Kong (see table). This is not a small number – about one-tenth of our current developed areas in Hong Kong. We hope to embark on this study as early as possible. Property prices for housing and office rentals are very high in Hong Kong. We are trying our best to increase land supply and build up a land reserve so that in case when forecast or un-forecast needs arise, we’ll have service land to deal with the problem and to satisfy the needs. At the moment, we look at the individual sites and determine their suitability for what types of uses. biz.hk: Are there some guidelines to follow in making the selection? Leung: There are of course criteria. Under the Hong Kong Planning Standards and Guidelines, whether a piece of land can be used for residential or other uses is subject to a number of factors like transportation and environmental issues. We will look at the constraints and opportunities in determining the use of a site.
biz.hk
4 • 2012
GOVERNMENT POLICY
Mapping Hong Kong’s Future
Guangzhou
Shenzhen Liantang Heung Yuen Wai
Sha Tau Kok
Man Kam To Lok Ma Chau
Shenzhen Bay
Zhongshan
An interview with Jimmy Leung, Director of Planning of the Hong Kong Government, on infrastructure planning and land supply
Hong Kong
By Daniel Kwan HONG KONG ISLAND
Zhuhai
“Study the past if you would define the future.” - Confucius
Jimmy Leung
Macao
Proposed Road Crossing Point Existing Road Crossing Point
H
ong Kong is entering a new era. To better plan for the future, a solid understanding of the past is essential. A good place to start would be “The Hong Kong 2030: Planning Vision and Strategy,” or “HK2030 Study” in short, published by the Hong Kong government in 2007. The strategic blueprint presents a bird’s eye view of the city’s future development, especially in areas such as infrastructure and network building. The report’s mission, as stated in the foreword, is: “The HK2030 Study has looked into our past and present, and set out directions for our spatial development to meet our challenges of the future. It echoes the Chief Executive’s progressive view on development by selecting and focusing on the things that need to be done quickly to anchor our position as a world city of Asia.”
Asia’s world city The study was no simple academic research. Although the consultations began in February 2001, the final report was published six years later in 2007. Bearing in mind that the hottest debate then was China’s growing economic prowess and Hong Kong’s
14
roles. Cities like Beijing and Shanghai were often described as serious contenders to take Hong Kong’s place as the leading international financial center in Asia. The SAR did try to raise its game. The city’s edge lies in its “globalness,” its connectivity with the world. The city’s leaders trumpeted that Hong Kong is not just a Chinese city but Asia’s world city. In 2008, one year after the HK2030 Study was published, Time magazine put on its front cover a new name: “Nylongkong.” Sharing the same pedestal with New York and London, Hong Kong was hailed as a winner even as China took off. Jimmy Leung Cheuk-fai, Director of Planning of the Hong Kong Government, says in an interview with biz.hk: “[Chief Executive] Tung Chee-hwa has said that Hong Kong should not only be a major Chinese city but we could become the most cosmopolitan city in Asia enjoying a status comparable to that of New York and London. That’s the idea [of Asia’s world city].” “Being in the Asian time zone can play a very important role as a financial center in Asia. There will be 24-hour transactions around the world with London in Europe and New York in the US,” Leung says.
biz.hk
4 • 2012
Connectivity
Integration with PRD
A key element in this equation is Hong Kong’s connectivity – in both tangible and intangible ways. Hong Kong’s crown jewel has always been its unparalleled geographical advantage and highly efficient and convenient transportation network. In addition, a “can-do” spirit among its service industries has earned Hong Kong the reputation of the “city that never sleeps.” A jingo often heard about the SAR is that Hong Kong is within reach to any major city in Asia in just about five hours of traveling time. Moreover, making day trips to China – Guangdong Province in particular – is largely hassle free. But the HK2030 Study has foreseen that being convenient in 2007 is not enough if Hong Kong is to compete in 2030. It envisions a big leap forward for Hong Kong – most notable in the report was the section on strengthening Hong Kong’s links with the Mainland and its emphasis on cross boundary traffic. “Hong Kong’s economic success lies in maintaining smooth and unimpeded flows of people, vehicles, goods, information as well as money in and out of the territory,” the study says. “The movements of the first three are particularly relevant to land use and infrastructure planning.”
According to Leung, a fair number of the projects included in the HK2030 Study have already been completed. Together with other ongoing projects, they will take the city’s integration with the Pearl River Delta to an entirely new level. (see map) For example, the Study outlined the construction plan of a new border checkpoint at Liangtang-Heung Yuen Wai on the northeastern side of Hong Kong’s border with Shenzhen. The new crossing – construction will commence next year and the project be operational by 2018 – is expected to help divert traffic from the relatively small Man Kam To and Sha Tau Kok control points. Leung explains the rationale: “If you remember it correctly, before the opening of Lok Ma Chau Spur Line, the railway line; and the Hong Kong-Shenzhen Western Corridor in 2007, going across the boundary was really a hassle – particularly during weekends. With the opening of these new Border Control Points, they really facilitate the flow of people and goods.” On the importance of the Liangtang-Heung Yuen Wai project, Leung says: “This project links Hong Kong with the eastern part of Guangdong Province. At the moment, we have a lot of activities on the
biz.hk
4 • 2012
15
western side. This will help to provide a more balanced and efficient regional road network.” Also moving full steam ahead are the Hong KongZhuhai-Macau Bridge and the Guangzhou-ShenzhenHong Kong Express Rail Link. Both projects are expected to be operational within the next few years and they will greatly cut traveling time between Hong Kong and cities like Guangzhou, Shenzhen, and Zhuhai. For instance, Shenzhen’s Futian would be minutes away from West Kowloon once the express rail line is available. The Director says that in addition to the obvious advantage of reducing traveling time, Hong Kong’s network will become a part of the national transport system. This means the SAR would be on the same track with cities like Beijing and Shanghai. “Once we are linked up with the national rail network, we can go to Beijing and Shanghai and other places in much shorter time,” Leung says. Leung says that the government is currently studying the feasibility of building a rail link between Hong Kong airport and its counterpart in Shenzhen. “The Transport and Housing Bureau is looking at the second railway development strategy – actually the Highways Department under the auspice of THB,” he reveals. “That’s being studied now.”
Grand vision Another issue critical to Hong Kong’s competitiveness is the city’s limited supply of Grade A office space. The lack of supply has made Hong Kong consistently one of the most expensive cities in the world for businesses. Recognizing the shortage, the government has the grand vision of transforming Kowloon East (a vast area comprising Kowloon Bay, Kwun Tong and Kai Tak) into a 21st-century modern business district. (see story on page 17) The scheme – shorthanded CBD2 (so named to highlight its emphasis on connectivity, branding, design and diversity – not as a rival to Central) – was made possible partly with the relocation of the Kai Tak Airport to Chek Lap Kok years ago. According to some estimates, it can provide a potential stock growth of about 14 million square feet net floor area in Kowloon East over the next decade. But Leung admits that redevelopment of the area faces many hurdles and key among which is the diverse ownership of old buildings. “The single biggest problem – as I see it – is the multiple ownership of the old buildings,” he says. “If we can address that or facilitate conversion or redevelopment, then we will see that vision turning into reality a lot quicker.” Although pushes by the government will help accelerate the transformation, market forces will have
16
to play the central role, Leung says. “We’ve come to a time [to deal with] those buildings with multiple ownership,” he says. “If the government succeeds in conveying this vision [of Kowloon East] to the market and if the market reacts to it, then somebody will buy out the rest. Hopefully this will happen.” He is confident that a new office set up under the Development Bureau to spearhead the Kowloon East redevelopment would help enlist investors and developers. The new team is expected to facilitate the participation of private investors and cut through red tape in the redevelopment process. “This special office will talk to landowners and developers and see what roles they can play, or how to help them,” Leung explains. “It’s sort of like a one-stop shop or the first port of call.”
Urban climatic map study A recent consultation completed by Leung’s department is the Urban Climatic Map Study. Launched many years ago and constantly updated, the study aims to apply climatic study in the urban planning process. In particular, city planners are keen to find out how air ventilation can be improved on the pedestrian level especially in crowded districts. Findings of the consultation would be used to update the Planning Standards and Guidelines, which is essentially the government’s planning manual. For example, it spells out how many primary school space and post offices an area needs for a given population size. Some of its current recommendations in enhancing air ventilation include encouraging planting of trees in open space and on hillsides, aligning building blocks to avoid the so-called “Wall Effect,” and the provision of “breezeways” in the form of open ways through high-rises. The planning chief says his department takes public views seriously and is currently in the process of collating views collected from the consultation. On the Planning Department’s role in increasing land supply, Leung says it treads carefully in opening up new unspoiled land due to concern of its impact on environment. “What we at the Planning Department are trying to do is to manage the development of land because it has been proven in international research that if we have more areas of natural state like forests, woodlands, or even semi-natural landscape like farmland or grassland, that will help reduce or mitigate climate change.” “In finding new supply, we will look at those spoiled sites which are no longer green and we’ll start with those sites first,” the chief says. “That’s what we can do as far as land use planning is concerned.”
biz.hk
4 • 2012
Robin KB Lee
Are Reclamation and Rock Cavern Development Viable Options? In recent months, a wide spectrum of local groups has expressed concern over the government initiatives to increase land supply through reclamation outside Victoria Harbour and rock cavern development. Soon after the publication of 25 possible sites for reclamation late last year, groups such as the Pokfulam Residents Alliance have voiced out against the idea and objected reclamation in the Sandy Bay area. In the following interview, Robin KB Lee, Deputy Head of Civil Engineering Office, Civil Engineering and Development Department, explains the logic behind the initiatives
By Kenny Lau
L
and is undoubtedly “one of the most valuable assets” of Hong Kong. That is because Hong Kong by its geographical nature is small and has a very limited supply of habitable land to meet the increasing needs of a population that grows by the day. It is not only an economic issue determining the city’s global status but also an issue which has a direct impact on how people of Hong Kong’s population of more than 7 million live their lives. According to the Census and Statistics Department, Hong Kong’s population is projected to grow by 25 percent to reach 8.9 million by 2039 while the number of households will increase by almost 30 percent to 3.1 million during the same period. The increase of 1.8 million in the population alone will require an additional 2,000 hectares of residential land and another 2,500 hectares of land to accommodate supporting infrastructure, a total of 4,500 hectares just to keep up with current level of population density in Hong Kong.
biz.hk
4 • 2012
“Sufficient land is needed to meet our needs for housing and community facilities and for economic development, which is an important driver of job creation for the population,” says Robin KB Lee, Deputy Head of Civil Engineering Office, Civil Engineering and Development Department of Hong Kong Government. “Adequate land should be provided for business use as well as infrastructure development if we are to maintain the competitive advantage of Hong Kong’s pillar industries and to promote and enhance other upcoming industries,” he says. “We will need more land if we are to improve our living environment by lowering development density and having more public open space or if we strive to protect the natural environment and conserve our cultural and historic buildings.” However, land development in many areas remains a challenge, Lee acknowledges. “There is growing uncertainty and timing mismatch in land supply and demand in Hong Kong.”
17
Land provided for development (hectare)
Graph 1: Land supplied by different options in the past decade 600
2001-2005 2006-2010
500
Hong Kong's surplus public fill are delivered to Taishan, 170 km southwest of Hong Kong, for reclamation, an on-going project since 2007 deploying a total of 65 vessels via 22-hour round trips every day. As of August 2011, about 328 hectares of land, or 17 times the size of Victoria Park in Causeway Bay, have been created in Taishan.
Hong Kong
400 300
Taishan
200 100 0
Reclamation
Rezoning Land
Land Resumption
Redevelopment by URA
Source: Development Bureau, Hong Kong Government
The approach The government currently relies on a land supply portfolio comprising six options: (1) rezoning underutilized sites such as industrial sites and land that no longer perform their original functions such as de-vegetated green belt areas or deserted agricultural land to residential and other uses, (2) redevelopment of older urban areas, (3) resumption of land from the private sector for public needs, (4) creating land through reclamation over seabed, (5) using caverns for non-residential use, and to a lesser extent (6) utilizing ex-quarry sites.(see graph 1) “Each of the six options has its own challenges and limitations, and we should not rely on one single option as the sole solution,” Lee says. “We need all of them in play in order to restore the balance and flexibility in land supply and to meet our short, medium and long-term needs.” However, it is very challenging to make extensive use of land supply options of rezoning, redevelopment or land resumption to create enough land to meet rising public aspirations for a better living environment, he notes. “There are often issues with development density, concerns over nature and heritage conservation, and questions about compensation and resettlement.” At the same time, both cavern and ex-quarry site re-development can only provide a limited supply of land because they may be suitable to only certain types of use or because they may not be readily available.
Why reclamation Reclamation, on the other hand, can be a viable option to create land in a way that could meet Hong Kong’s current and long-term needs. “The practical meaning of turning to reclamation as a last resort is hard to conceive,” Lee says. “Reclamation is not necessarily
18
inferior to other methods of land development from an environmental or social perspective.” “It is most important to choose the sites which will cause the least environmental impact,” he stresses, noting sites of high ecological values such as those inside country parks and marine parks will be excluded. “It is therefore of utmost importance to select suitable sites, either on land or at sea, based on the prudently conducted researches and studies.” To mitigate potential impact on marine ecology, advanced construction technology and attentive planning will be adopted in reclamation projects, Lee stresses. For example, by employing “non-dredged” method, it can avoid removal and disposal of marine sediments during reclamation. The construction of eco-shorelines and artificial reef at suitable locations can rebuild habitats for marine life and enhance the fishery resources. Although reclamation is only legally allowed today in areas outside Victoria Harbour, Lee says that it remains a viable option in the overall land supply strategy. It is because reclamation offers an approach of land creation that is more flexible than others in supporting various type or scale of infrastructure development. “Land development by rezoning, redevelopment and land resumption involves private owners and developers and is, hence, market driven,” he points out. “Reclamation, on the other hand, is implemented by the government and is usually more manageable and predictable. Reclamation, he says, is also the most suitable way to build up land reserve, for which land may be created before a permanent designation of usage is established, as rezoning, redevelopment and resumption involve private properties and are often carried out for a designated purpose. “Reclamation can also provide new land for
biz.hk
4 • 2012
resettlement of those displaced by other land supply options and help handle the public fill generated by land development,” he adds. “It is complementary to other land supply options.”
Public fill Hong Kong each year generates about seven million tonnes of surplus public fill made up of rocks, concrete, asphalt, rubbles, bricks, stones and earth. It is the inert part of construction and demolition materials generated from construction activities and can be reused as materials for backfilling and reclamation works. In other words, reclamation can be an effective way to handle large quantity of public fill while creating more land. Due to a lack of reclamation projects locally, surplus public fill are delivered to Taishan in Guangdong Province (see map), 170 km southwest of Hong Kong, for reclamation because the two existing local fill banks will be full in a few years’ time. A total of 65 vessels are deployed in shipping public fill via 22-hour round trips every day since 2007. In August 2011, about 328 hectares of land, or 17 times the size of Victoria Park in Causeway Bay, have been created in Taishan. “When comparing with local reclamation, this arrangement consumes 19,000 liters more diesel and produces an extra 50 tonnes carbon emission each day,” Lee points out. “If the public fill is used in local reclamation, it will save a handling cost of $27 for each tonne of public fill.” “The disposal at Taishan, in fact, is not a sustainable way of dealing with our construction and demolition materials due to its high delivery cost and substantial carbon footprint,” he says.
biz.hk
4 • 2012
“Reusing in local reclamation can certainly provide a less costly and more environmentally friendly outlet for public fill than shipping to Taishan for disposal,” he adds. “At the same time, it creates valuable land to meet Hong Kong’s need for developable land.”
Timeline The government has recently completed the first stage of public engagement and consultation. The main objective is to find out public views on options of increasing land supply through reclamation outside Victoria Harbour and rock cavern development. “It aims at seeking the public’s views on whether, apart from other current land supply options, reclamation outside Victoria Harbour and rock cavern development are acceptable options for increasing land supply,” Lee says of the consultation. “Based on the views collected at the Stage 1 Public Engagement exercise, we will finalize the site selection criteria with a view to identifying potential reclamation sites.” The list of 25 possible reclamation sites, published in early 2012, is not a confirmed or pre-determined list of selected sites but a part of the consultation process to “better understand how the public consider the initial site selection criteria” through soliciting views about the possible sites, Lee notes. “To underpin the sustainable development of Hong Kong, we will strive for a balance among social, environmental and economic needs by devising a good mix of land supply options,” he adds. “If the community agrees that reclamation can be an option to supply land, the earliest time for commencement of reclamation works is around 2017, with the first piece of land reclaimed in 2020,” he says.
19
TRADE & INVESTMENT
Possible Reclamation Sites
Tai Po Industrial Estate
ShuenWan
Tai Po Kau Wu Kai Sha
Ma Liu Shui
Lung KwuTan Tuen Mun Area 27
Tai Lam Chung
Reclamation Area
Tsing Lung Tau
Tuen Mun Area 40
Sunny Bay
Tseung Kwan O Area 131
SiuHo Wan Silver Mine Bay North Silver Mine Bay South
Hei Ling ChauWest
Small (10-29 ha) Medium (30-99 ha) Large (>100 ha)
Southwest TsingYi
PengChau–Hei Ling Chau Sandy Bay
Category A (Artificial island)
Tseung Kwan O East
Category B (Reclamation to connect islands)
Lamma North
Lamma Quarry
Category C (Reclamation upon artificial or disturbed shoreline)
Shek O Quarry
Category D (Reclamation upon naturalbut not protected shoreline)
South Cheung Chau Beaufort Island
Source: Development Bureau, Hong Kong Government
Reclamation has been an important source of new land in Hong Kong for more than a century. Between 1985 and 2004, Hong Kong reclaimed on average about 500 to 700 hectares of land every five years. As of early 2011, about six percent of land in the entire city came from reclamation, accommodating about 27 percent of the population, 70 percent of all office areas as well as many other infrastructures and facilities. (see graph 2) In the 19th and early 20th centuries, reclamation was carried out on both sides of Victoria Harbour at core districts of Kowloon and Hong Kong Island, creating some of the most vibrant areas known to the world today. The first two industrial areas, namely Kwun Tong and Tsuen Wan, initially set up by the government to promote industrial development, were built on reclaimed land. The government in the early days also improved Hong Kong’s port facilities by expanding Kai Tak Airport and building Kwai Chung Container Terminal through reclamation. Between the 1970s and 1990s, reclamation on a sizable scale began in various parts of the New Territories to form suburban towns in areas now known as Sha Tin, Tai Po and Tseung Kwan O,
20
Graph 2: Reclamation from 1985 to 2009 1000
Photos courtesy: AmCham Japan/Genki Art Photography
Tokyo Summit Renews Commitment to Drive American Business Abroad Two key themes emerged from the spring meeting of the Asia Pacific Council of American Chambers: China topics no longer suck all the air out of the room, and regional business development issues are becoming increasingly critical
By Richard R. Vuylsteke
500
Hectare
More than 100 years
Chiefs of Mission (left to right): Ambassador Jeffrey Bleich, Ambassador Scot Marciel, Ambassador Sung Kim, Ambassador Paul Jones, Ambassador David Adelman, Director William Stanton, Ambassador David Carden, Ambassador John Roos
0
1985-89
1990-94
1995-99
2000-04
2005-09
Source: Development Bureau, Hong Kong Government
all to provide a home for a growing population. But following the enactment of Protection of the Harbour Ordinance (Cap. 531) in 1997 and the Court of Final Appeal’s ruling in 2004, reclamation within Victoria Harbour to create new land is legally constrained. It is a result of “strong public aspirations to protect and preserve Victoria Harbour as a special public asset and natural heritage of Hong Kong.”
biz.hk
4 • 2012
M
ore than two dozen senior US officials, including nine Chiefs of Mission posted to Asia, joined the annual APCAC meeting, this year held in early March in Tokyo, to confirm their commitment to facilitating American business development in the region. The two-day series of panels and presentations, with more than 400 executives attending from the 27 AmChams in the region, revealed that many US and European companies already invested in China are vigorously
biz.hk
4 • 2012
looking to expand or move their operations elsewhere in Asia. For AmCham HK members, for instance, this fact was confirmed earlier this year when more than 40 members of AmCham Hong Kong’s Apparel & Footwear Committee (which also includes companies sourcing textiles and toys) hosted a meeting on the future of sourcing in China. Tom Nelson, managing director of VF Global Sourcing and AmCham governor, kicked off the strategic discussion on when China might reach a “tipping point” that would drive companies elsewhere. Many
committee members said their companies were already looking, if not already engaged, in doing so. As one AmCham HK member put it, “Multinational businesses are expanding more aggressively into emerging Asian markets where cheaper labor is but one attraction. They are looking at the growing number of middle-class consumers as well as other investment opportunities. China isn’t the only game in town.” But alternative destinations often have inadequate infrastructure, insufficient transparency on laws and regulations, and
21
other shortcomings that are severe enough to counterbalance wage differentials. Nevertheless, committee members expressed growing interest in Vietnam, Cambodia, Indonesia, and Bangladesh. The March APCAC conference was timely in this respect. More than two dozen US State and Commerce officials posted to those countries were on hand to promote the opportunities for US business development in the region. In a luncheon address, Francisco Sánchez, Under Secretary of Commerce for International Trade, emphasized this point. "I've spent a lot of time focused on the Asia-Pacific region - and for good reason," he said. "The Asia-Pacific market represents 55 percent of global GDP and 44 percent of world trade. It's also the fastest-growing region in the world and presents incredible opportunities for US businesses." The US officials also encouraged delegations from AmChams to send delegations to assess first-hand the current investment environments. In opening remarks at the conference, Deputy Secretary of State Thomas Nides emphasized that the State Department’s policy of “economic statecraft” has a key role to play in promoting US business success. “Utilizing the resources in our Embassies and Consulates in Asia, we see a joint effort – working together with business – to achieve a rules-based system throughout the region that will help every country prosper together. Our goals are straight
Thomas Nides
forward: We want an overall trading system that is open, free, transparent, and fair.”
How do Ambassadors help? “We have many ways to assist US businesses,” says US Ambassador to Australia Jeffrey Bleich. “We have convening power. We can pull people together – government and business – by using the Embassy as a facility, or
even using our personal residences, to get players face-to-face to meet, communicate, and solve business issues.” “We can do advocacy with the local government at the highest levels, and do this on business sector concerns as well as specific issues,” he says. “We can also work across government, which is always important because resolution of issues often requires more than one ministry or agency. In addition, we can publicize issues through speeches, press releases, and conferences to lend further support to advocacy topics.” For instance, US Ambassador to Indonesia Scot Marciel urges more investment attention to Indonesia. “There are so many opportunities that Americans don’t know enough about – infrastructure projects being one example,” he says. “While Indonesia’s not an easy place to do business, the competition from other countries is growing, and many of them come in with a full package on major deals. It’s time for a ‘team approach,’ with multiple US
“Utilizing the resources in our Embassies and Consulates in Asia, we see a joint effort – working together with business – to achieve a rules-based system throughout the region that will help every country prosper together. Our goals are straightforward: We want an overall trading system that is open, free, transparent, and fair.” - Deputy Secretary of State Thomas Nides
22
biz.hk
4 • 2012
companies coordinating together to pull together package deals. Do that, and we can be even more competitive.” US Ambassador to Malaysia Paul Jones says, “Malaysia is the US’s second largest trading partner in ASEAN and the country is experiencing 5 percent growth, but our Embassy and US businesses need to team up and become even more active in building further trade and investment.” “You can expect to have the Embassy help convene meetings and conferences that bring together local and US business leaders,” he says. “But first we need to see a precise set of priorities and agenda items – and then we can get to work.”
National, Regional Although ASEAN economies are assiduously courting greater inward investment, the overall size of their economies is still dwarfed by China. Thus, as each country develops more attractive investment incentives, at the same time it behooves them to look to broader strategic issues. ASEAN-wide legal and regulatory rules will make it easier for investors to operate and move products in throughout ASEAN member states. This would have tremendous impact on market size and logistics dynamics. Ambassador David Carden, who is based in Jakarta and heads the US mission to ASEAN, helps drive this awareness. “I advocate for system development, not for business directly,” he says. “I am trying to assist the process of consolation of rules-based systems in ASEAN.” “In Asia there are great transactional business people, but if they want the region to integrate efficiently among themselves and with the global system, they have to be engaged strategically,” Carden says. “Connectivity is not just
biz.hk
4 • 2012
concerned APEC. The Tokyo confab revealed that the old view of APEC as organization long on talk and short on action is much less true. “APEC is starting to shape up and is more energetic of late – such as in regulatory convergence and codes of ethics,” says Ambassador Hans Klemm, the US Senior Official to APEC. “The numerous APEC business sector-specific working groups are making genuine progress in promoting harmonization of rules across borders, but we do need more US business people to be supportive and involved in these regional efforts.” Business sectors of particular emphasis of late are health and insurance, responses to the ageing society phenomenon in many Francisco Sanchez countries across the region. “Our job is to listen to American business and respond,” says roads and bridges. There needs to be US Ambassador to Singapore David the ‘software of rules’ – rules that are Adelman. “You have asked us to be enforced – to provide protection for engaged regionally, so we formed trade investors.” missions from Singapore to Hanoi and AmCham member and panelist HCMC (Ho Chi Minh City), for John Rice, Vice Chairman of General instance, where we worked to open Electric, stresses that “investors need doors for food sector development in stable laws and regulations, especially Vietnam.” According to one US for big infrastructure projects that Commercial officer involved, “This was typically have a development timeframe an excellent instance of two US Ambasof 30 to 40 years.” sadors [in Singapore and Vietnam] “If emerging markets want to attract working together to help American big-ticket investment, they need to business development regionally.” ensure that procurement and bidding The messages challenge AmCham processes are faster and more transparHK to take advantage of these regionent,” he says. “Infrastructure developwide opportunities to work with US ment is not just an enabler for these Chiefs of Mission and AmChams to economies to grow and innovate, it’s an promote further business development. economic and moral imperative. The The teams are in the field and it’s time pressure is on and the clock’s ticking.” to play the game more vigorously. Another piece of good news
23
FINANCIAL SERVICES
Taking the Lead – Hong Kong as a RMB Offshore Center
limited investment channels in the first few years after the launch of RMB business by Hong Kong banks in 2004.
Taking off A new era was unfolded when the People’s Bank of China relaxed the international settlement regulations in the summer of 2009. The speed of growth was phenomenal – RMB deposits in Hong Kong soared to RMB66.1 billion at the end of February 2010. The next two years marked the early “childhood” of RMB cross-border trade settlement – particularly in Hong Kong. First, the RMB trade settlement scheme was expanded in August 2011 to cover the entire Mainland. In addition, total RMB trade settlement handled by banks in Hong Kong exceeded RMB1.91 trillion last year. Second, there were 87 RMB bond issuances in Hong Kong last year, with a total value of more than RMB106 billion (US$16.75 billion). That was three times as much as the amount in the previous year. Market response to the “Dim Sum” bonds – RMBdenominated bonds issued in Hong Kong or other offshore locations – was highly positive partly because of the expectation of RMB appreciation by the market. The development received a major boast last August when Vice-premier Li Keqiang visited Hong Kong announcing a raft of measures of further developing Hong Kong as the pivotal offshore Renminbi center. Two months later, two sets of guidelines issued by the People’s Bank of China and the Ministry of Commerce further set the stage that would allow foreign investors to make use of Hong Kong to raise funds for investment in Mainland China.
Winston Ye, Senior Strategic Planner of Bank of China (Hong Kong) Limited (BOCHK), presented the development of cross-border Renminbi business at an AmCham seminar in January. Following his presentation, he talks to biz.hk and explains Hong Kong’s growing role as a RMB Offshore Center in the past few years
By Daniel Kwan
C
hina’s global influence has been on the rise. Over a decade ago, the country was still being considered by most a low-cost manufacturing base supplying western consumers with cheap clothes, toys and appliances. Today, China is the second biggest economy in the world after the United States. Even in the financial area, the pace of change has been breath-taking. Shanghai’s financial markets, excluding forex trading, boosted a total trading volume of RMB386.2 trillion in 2010 and the interbank bond market ranked fifth in the world in terms of outstanding bonds by the end of 2010. Talking of speed, the process of internationalization of Renminbi (“yuan”) has been unprecedented. Although Renminbi is not yet freely convertible, a useful yardstick is the growth of offshore trading of the currency in recent years. According to Ye, not until 2004 were Hong Kong banks officially allowed to conduct limited RMB
24
businesses locally. Today, Hong Kong is the leading offshore trading center for RMB. Statistics released by the Hong Kong Monetary Authority (“HKMA”) show that yuan deposits in Hong Kong already reached RMB588.5 billion at the end of 2011. The total remittance of the Renminbi for cross-border trade settlement amounted to RMB239.04 billion in December 2011, compared with RMB184.99 billion a month ago. To put things in perspective, offshore financial centers typically take years to develop and mature. Major markets like London, Tokyo, New York and Singapore all took different paths to develop their financial markets and trading of their own currencies. For example, when Japan set up the Japan Offshore Market (“JOM”) in 1986, the volume of Yen transactions only accounted for less than 20 percent of the total. Today, it exceeded 80 percent. Ye points out that the introduction of RMB business were warmly received by the market although depositors had very
biz.hk
4 • 2012
biz.hk
4 • 2012
FDI rules Under the new rules, foreign companies can use either the Chinese currency or US dollars to finance their projects in China. By borrowing yuan or issuing yuan bonds in Hong Kong and other markets, the companies can channel the funds back to China if approved by related regulators in the mainland. According to the Ministry of Commerce, a total of RMB16.53 billion (HK$20.11 billion) has flowed into 74 projects since the new rule was implemented on 14 October 2011. Around 70 percent of the funds have come from Hong Kong.
George Osborne
Hong Kong’s leading role as the leading offshore center for offshore RMB business was further bolstered in January when it was announced at the Asian Financial Forum 2012 organized by the Hong Kong Trade Development Council that Hong Kong will help London develop as the next offshore RMB center as part of a broader effort to boost international usage of the currency. George Osborne, Britain’s Chancellor of the Exchequer, told the forum that the plan was to “establish London as a new hub for the RMB market as a complement to Hong Kong.”
25
HUMAN CAPITAL
The Hong Kong-London partnership was later backed by the joint announcement by the HKMA and the UK Treasury of the launch of a privatesector forum to strengthen cooperation between Hong Kong and London on the development of offshore RMB business. The Forum will meet twice a year, with the first meeting to be held in Hong Kong next month. Furthermore, China’s top economic planning agency – National Development and Reform Commission – and the Shanghai government jointly announced plans to establish a huge, onshore market for the Renminbi by 2015 – five years ahead what it was previously announced. Although the announcement strokes fears that Shanghai would pose formidable challenge to Hong Kong in developing offshore RMB business, the joint statement and subsequent explanations given by Mainland officials all emphasized the complementary nature of partnership between Shanghai and Hong Kong.
Natural choice Ye of BOCHK believes that the latest rule change regarding FDI represents great opportunity for Hong Kong to play a bigger role in offshore RMB fund raising. “The rule change represents both a driving force and an opportunity for Hong Kong,” Ye says. “However, Hong Kong needs to do its own share [in attracting business] because we don’t hold the exclusive source of FDI into China.” “Hong Kong is a natural attractive option to investors who are interested in raising funds in RMB and this can help drive Hong Kong’s growth,” he adds. Looking ahead, Ye suggests that it may take some time for the market to mature. There are already rooms for the industry to grow and develop new products before moving up the scale. For example, more new products such as structured notes and equity funds will
26
Asians with Vision
Winston Ye
appear in the market. “Of course, everyone is concerned when the final goals – convertibility of Renminbi and liberalization of the capital account – will happen. Officially, no timetable has been announced. But within the current framework, Hong Kong can accomplish a lot,” he adds.
Useful platform This year will represent another critical year for Hong Kong in building up its credential as the leading offshore trading hub of RMB. In particular, Ye suggests that Hong Kong can become a highly useful learning platform for overseas banks interested in RMB
business. “When we talked to some other banks, we were amazed by their interest in RMB business and they put forward to us a lot of questions on cross-border trade settlement.” “When I visited Italy, France and other European countries, they told us that their clients are increasingly interested but they have a lot of questions about RMB cross-border trade settlement and other related offshore RMB businesses.” I believe there is a learning curve. Given time, people would be able to study it and at the same time the Chinese government is working on simplifying the related rules,” he says.
“Of course, everyone is concerned when the final goals – convertibility of Renminbi and liberalization of the capital account – will happen. Officially, no timetable has been announced. But within the current framework, Hong Kong can accomplish a lot.”
biz.hk
4 • 2012
New book offers a glimpse into a different side of Asia’s new generation and what they think about the region’s future
By Helen Luk
A
sia’s youngsters have often been portrayed in the media as self-centered, over-indulged and unable to deal with adversity – a far cry from their stoic grandparents and parents who survived through wars, hunger and other hardships. Many businesses have been struggling to find ways to successfully manage these twentysomethings, dubbed “little emperors” in China or the “post-80s” generation in Hong Kong. Yet, an essay contest organized by the Asia Business Council, TIME magazine and the Lee Kuan Yew School of Public Policy at the National University of Singapore seems to show a different side of these young Asians. Yes, they are demanding, but at the same time, they are confident, pragmatic and globally minded. The council is a Hong Kong-based independent organization set up by top business leaders across Asia to conduct research and influence
biz.hk
4 • 2012
governments and corporations on key issues affecting the region’s economic growth and competitiveness. More than 400 contestants – all under the age of 32 from around Asia including China, Hong Kong, India, Japan, the Philippines, Singapore and Pakistan – offered their views on what they see is the biggest problem facing Asia over the next decade. They covered a lot of ground, from the growing environmental problems in Asia, the widening poverty gap, food and energy shortages to flaws in the Asian educational system and corruption and governance.
Rising expectations Mark Clifford, the council’s Executive Director, says these educated Asians grew up during the “Golden Age,” an extraordinary time of prosperity, peace and rapid economic growth. They take the rise of Asia as a given, are much less
tolerant of corruption and expect more from their governments than the older generations, he says. “This generation is very special because they really haven’t been through a time of war, hunger and crises. Their generation hasn’t known the kind of existential threats to survival that their grandparents or parents would have known,” Clifford tells biz.hk in an interview. “What they expect in terms of accountability and governance from companies and governments is very different from what we would have seen 20 years ago.” Drawing on excerpts from more than 80 essays and the council’s own research, Clifford and Janet Pau, its Program Director, co-wrote Through the Eyes of Tiger Cubs: Views of Asia's Next Generation. The book covers seven major themes, namely education, inequality, demographics, environment, governance, geopolitics and Asian identity.
27
Many young Asians, for example, are critical of the Chinese and Indian governments over their pursuit of economic developments at the expense of the environment. “There is a real sense that they are inheriting all the environmental problems: the issue of pollution, food and water shortages, the fear of energy shortage in the future,” Pau says. “Like it or not, they are the ones who are going to have to come up with the solutions for it.” Similarly, the tiger cubs also worry that the short-term solutions national governments have adopted for tackling the financial crisis would lead to far-reaching economic problems for future generations. “Largely, there is a sense that with the global financial crisis and what is happening in Europe, the current generation has borrowed from the next one and the next one somehow has to
Mark Clifford
pay back… They feel an extra sense of burden,” Pau says. Despite the rapid expansions of Asian economies over the past two decades, young Asians point out that abject poverty is continuing to plague parts of Asia. Many of them worry that the wealth being generated is only benefitting the urban rich. “One of the things they suggest is to invest more in rural development and infrastructure so that wealth and opportunities can be created there,” she says.
Innovation for the future Clifford and Pau say the young essayists not only demonstrate a deep understanding of the key issues gripping their countries, but some also offer
creative solutions, such as investing in innovations in infrastructure, environmental management and education. According to Clifford, many young Asians believe the traditional education system’s emphasis on rote learning is not equipping them for the jobs of the future and are demanding a more innovative educational approach. “There is real concern about the social impact of this potential mismatch,” he says. “We’ve got a paradox: On the one hand, societies and countries are wealthier than ever and the issue of absolute poverty is much less… yet, the issue of relative income inequality and the perception that it’s harder to climb up either the social or economic ladder is higher than ever. That makes for some big social challenges.” That sentiment is shared among Hong Kong’s youngsters. “We have a more highly educated population than ever, but there is a sense among young people that meritocracy seems to come to a grinding halt after graduation. They feel that compared to the previous generation, it’s harder for them to climb up the economic ladder,” Pau says. Nevertheless, Asia’s new generation is not simply looking to governments to reform the education system. Rather, they think the private sector can play a bigger role in providing training and entrepreneurship programs to help them gain the right skills, she says.
Incremental reforms, not revolution Unlike the radical and anti-establishment sentiments shown by protesters in the Middle East revolution and the Occupy Wall Street movement, Pau says young Asians believe in working with, rather than against, the
28
biz.hk
4 • 2012
institution. They endorse a pragmatic and gradual approach, not a revolution, to engineering change. “A lot of the essayists who wrote independently were talking about how they were confident that businesses can resolve environmental problems, governments can become more representative of people and take incremental measures to weed out corruptive practices,” she says. Compared to previous generations, Clifford says Asia’s youngsters have cast off their colonial pasts and are experiencing a newfound sense of confidence and empowerment. “After the financial crisis, people look at the West and they look at Asia, and they say, ‘Hey, we went through a financial crisis too. We came out of it stronger than ever and look at where we are now.’ Implicitly, there is a real sense of pride and accomplishment that Asia has finally become an equal player on the world stage,” he says. Despite their language and ethnic differences, Pau says many of the essayists think beyond national borders and see Asia as a region. “These young Asians are thinking of what can be done to make Asia more unified and become a bigger player in the global economy,” she says.
Technology and governance With the advent of technology, Clifford says young Asians have embraced social media such as Facebook, Twitter and personal blogs – tools that were unavailable even five to 10 years ago – to fight government abuses of power and corporate misbehaviors. He says governments and companies should brace themselves for dealing with
biz.hk
4 • 2012
Janet Pau
crises in a much more responsive way, as young Asians are no strangers to using technology in their push for greater transparency and better governance. He cites the recent incident involving a protest by Hong Kongers who rallied outside Dolce & Gabbana’s flagship store in Tsim Sha Tsui after a local newspaper reported that the Italian fashion brand’s security guards banned people from taking pictures of its window displays from the street. The rally, organized on Facebook, shows the power of social media in quickly turning a small incident into a crisis for a company, he says. “They are going to be a handful to deal with because their expectations are so high and because of the instant media – things can go viral so quickly,” he says. “Governments and companies need to
really be on their toes to react because it’s a much more equal situation than 10 or 20 years ago, where they have a lot more control over the message through media.” From a corporate perspective, Clifford says Asia’s new generation expects management to treat them with respect. While Asian companies with a more hierarchical structure may find it a challenge to deal with them, he sees an opportunity for western corporations with more advanced governance and management practices to recruit some of the world’s top talent. “The best western companies have an enormous opportunity because they are going to be able to pull some of the best and the brightest and give them opportunities internationally or at home that a local company may not be able to give,” he says.
29
SPORTS & ENTERTAINMENT
She admits it’s an approach that doesn’t always work, so she’s been researching other ways to help her focus including chanting mantras and even seeking the expertise of a hypnotherapist. “I’d like to always have the ability to look at the yardages, see the numbers and the contours of the green and concentrate on that little white ball and how I’m going get it closer to the hole, instead of looking at my opponent’s skirt and thinking how adorable it is!”
Christina Kim
Always Like to Have Fun
Win or lose
LPGA pro Christina Kim talks to Nadine Bateman about what helps her focus, how proud she is to be American …her yo-yoing weight and Tiger Woods’ butt
A
s famous for her effervescent personality, flamboyant fashion sense and playful antics as she is for her sporting abilities, Christina Kim has been accused of putting the fun into golf. She’s guilty as charged. But that’s not to detract from her dedication and dogged determination to excel at the sport. Explaining her natural ebullience, she says: “My parents emigrated 31 years ago from Korea to the US and they were typically respectful and reserved but they noticed it was a little different in America. They were living in Silicon Valley just outside San Francisco and things were kind of crazy and free there back then. So when I was born, they said ‘just be who you are.’”
30
Kim took her parents at their word but acknowledges that they were probably secretly hoping she would be a quiet, well-behaved child. Some hope. Confident and talkative from a young age, Kim says she “always liked to have fun.” Her philosophy is that you only get one shot at life and you should enjoy it.
My way Golf fans who have seen her in competitons have witnessed how that enjoyment is manifest on the course. Kim has been known to jump up and punch the air, shimmy seductively, slap her behind, interact loudly with spectators and laugh – a lot.
biz.hk
4 • 2012
Twice an LPGA Tour winner, she won on the Ladies European Tour last year and was also a member of the US Solheim Cup team. Kim is adamant and she takes her competitive game seriously. And there’s good reason she goofs around a little at times – it’s to let off steam so she can focus when it counts. “I may seem as though I’m having fun and being loud but what I’m doing is purging any negative energy, it’s my way of focusing. If I was quiet, all the things in my brain would still be there and they might interfere with my game,” she explains, adding: “It’s like emptying a water bottle: I’ve got so many thoughts going on in my head I need to tip them out.”
biz.hk
4 • 2012
Kim refers to herself as a work in progress, and when it comes to disappointing performances, she’s sanguine, saying: “I’ve faced that recently and for me it’s still satisfying as long as I’ve learnt something. It’s no good sulking and thinking ‘oh I was rubbish today.’” “I try to take a step back, comprehend what I was doing, figure out how I messed up and work out how I can prevent it from happening again. I like to process things in that way. If you sit there moping and doing nothing about it, the likelihood of it happening again is greater.” “As long as you’re able to assess and overcome the disappointments, you’ll always be a winner.” Of her victories, such as those she had on the LPGA Tour last year, she says: “On the European tour it was such an honour to represent the US. That was so incredible for me. History is being made and you become part of a team. The camaraderie is phenomenal. There are so many tears and so much laughter – it’s like the World Cup for golf.” One of her major goals this year is to win the US Open because she is “so proud of being American.” There has been some controversy surrounding comments Kim made about her US citizenship and Korean heritage which she believes were misunderstood by reporters from a Seoul-based newspaper. She understands that her parents’ decision to leave Korea
31
2012 May
Mark Your Calendar May Inside & Outside Views of China 2012:
08
Cultural Understanding of China's Transformation Beyond Luxury Consumption
Andrew Y. Wu, LVMH Group President, Greater China Andrew Wu will share his first-hand and insightful viewpoints on China’s continuing changes and generation shifts, shedding much light both on what has happened so far and on what has yet to happen, and enlightening even those who may already feel very close to what is going on in China. As LVMH Group President for Greater China, Wu has overseen since 2005 the successful business development of 60-plus world renowned brands under LVMH in the Chinese marketplace. During the 1990s, Wu was General Manager and Managing Director of Parfums Christian Dior in China (under LVMH), establishing its retail network throughout China. In 2000, he joined Sony Music Entertainment Group as Sony Music (Asia)’s Vice President and, in 2001, was also appointed Managing Director of “Shanghai Epic Music Entertainment,” a Sony Music joint-venture with Chinese government to improve on protection of intellectual property and commercial value of entertainment content.
May The Evolving World of News and
09
to settle in America was frowned on by some Koreans, but says: “I’m very proud of my heritage and all that my parents have done for me. I’m proud to be American-born with Korean blood, but I don’t see what my birth certificate has to do with me as a person. I’m just me!”
Size six She’s equally outspoken about her battle with her yo-yoing weight and her decision to employ a team of experts to help her shed 33 lbs. “It’s the human condition; everyone’s a little self-conscious about their appearance. I’m sure even Tiger Woods gets days when he thinks ‘oh, my butt looks big.’ I have guy friends who definitely think that,” she says. “Lee Westwood lost a bit of weight and went through a phase of being mocked when he was slightly heavier, but he’s a lean machine right now. And there’s Tim Herron – or Lumpy as he gets called – that’s his nickname and it needs no further explanation!” she laughs. “I try to be as healthy and fit as possible. I’ve been as small as a size six and that did not do anything for my golf game and I ballooned up and that doesn’t work for me either, so I’m trying to find a happy
medium where I can still feel good and, equally importantly, play well. Of course, ideally I’d like to be six feet tall.” At 28, Kim is the same age as her good friend and former world number one, Lorena Ochoa, was when she retired from competing professionally nearly two years ago. But Kim says retirement is a long way off for her. “I just look at Juli Inkster who is 52 [in June this year] and she’s still going strong, and Laura Davis who won five times in 2010 at the age of 47. They are an inspiration to me. I will play the game until I stop loving it and that will be a very long time in the future. It’s the best job in the world: my co-workers are great and the office is fantastic!” Christina Kim was in Hong Kong in February to take part in the 1O1O Golf Challenge Ladies Day to raise money and awareness for the Hong Kong Breast Cancer Foundation and she’ll be returning to participate in the 1O1O Golf Challenge Grand Final which will take place at Clearwater Bay Golf and Country Club on April 24 – Editor’s note
Christine Brendle, Managing Director, Asia Pacific, Dow Jones & Company and Publisher, The Wall Street Journal Asia
May FATCA, The Cutting Edge of US Tax Policy, and its Impact on Hong Kong
Richard Weisman, Head of Global Tax Practice, Baker & McKenzie and Vice Chairman, AmCham In this talk, Richard Weisman, Vice Chairman of AmCham and Head of Baker & McKenzie's Global Tax Practice, will provide perspective on these developments and trends. He will discuss why FATCA will not simply go away and the prospect that other countries will follow suit. He will describe the political debate between competing proposals regarding taxation ("territorial" vs "worldwide") of US multinationals. He will suggest how US citizens and others in Hong Kong can best communicate their concerns about US tax rules to members of Congress and other decision makers. Weisman advises on international tax planning matters with a focus on transactions and investment involving Asia and the US. He is the first Global Head of Baker & McKenzie’s Tax Practice Group to be based outside the US. Weisman currently serves as Vice Chairman of AmCham and as a member of the Executive Committee of STEP HK. He also has served on the Executive Committee of the Hong Kong branch of the International Fiscal Association, on the Hong Kong Joint Liaison Committee for Taxation, and as Chairman of the Tax Committee of AmCham.
biz.hk
4 • 2012
Fee(s): Member Fee: HK$520 Non Member Fee: HK$620 Corporate Table Fee (10-12pax): HK$6,300
Time: 12:00 - 2:00pm (Lunch included) Fee(s): Member Fee: HK$420 Non Member Fee: HK$520 Corporate Table Fee (10-12pax): HK$5,200
Venue: The Hong Kong Bankers Club Dragon Rms 3 & 5 43/F Gloucester Tower The Landmark, Central Time: 12:00 - 2:00pm (Lunch included) Fee(s): Member Fee: HK$250 Non Member Fee: HK$350 Corporate Table Fee (10-12pax): HK$5,520 MEDIA WELCOME
For information, see website: www.amcham.org.hk
32
Time: 12:00 - 2:00pm (Lunch included)
Venue: Club Lusitano 27/F 16 Ice House Street, Central, Hong Kong
Media in the Digital Age
Asia is home to the world's largest online community with more than 1 billion Internet users as of the end of 2011. Digital and local strategies are essential to reaching this online audience, with leading publishers increasingly expanding in Asia with local language blogs and online editions to reach new readers in dynamic ways. Brendle will share how the Internet, social media, video and mobile apps are changing the way publishers gather and report news, and how readers consume information daily. Brendle leads the development of all Dow Jones brands across the Asia-Pacific region, including The Wall Street Journal Asia and Dow Jones Newswires, among others. Brendle joined Dow Jones in 2006 following a 17-year career with Hachette Filipacchi, the French publisher, spanning various senior management positions across the United States, Europe and Asia. In addition, Brendle spent several years as a media-industry consultant and publishing entrepreneur. In 2004, she co-launched Daily7 and Daily10, two daily English-language newspapers for children.
10
Venue: Conrad Hong Kong Hennessy Room (7/F) Pacific Place 88 Queensway, HK
Tel: (852) 2530 6900
Fax: (852) 2810 1289
Email: kalau@amcham.org.hk
01
Tue
02
Wed
03
Thu
04
Fri
05
Sat
06
Sun
07
Mon
08
Tue
09
Wed
10
Thu
11
Fri
12
Sat
13
Sun
14
Mon
15
Tue
16
Wed
17
Thu
18
Fri
19
Sat
20
Sun
21
Mon
22
Tue
23
Wed
24
Thu
25
Fri
26
Sat
27
Sun
28
Mon
29
Tue
30
Wed
31
Thu