AmCham biz.hk Jan/Feb 2017

Jan/Feb 2017

A VISION TOWARDS 2020 WALTER DIAS

2017 AMCHAM CHAIRMAN SUBMISSION ON CE POLICY & HK BUDGET CONSULTATION COVER SPONSOR

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January/February 2017

Contents

Vol 49 No 1-2

Publisher

Richard R Vuylsteke

Editor-in-Chief Kenny Lau

Managing Editor

08

COVER STORY

AmCham Chairman Walter Dias reflects on chamber activities of the past year amid surprising global development and highlights the continuation of AmCham 2020, a five-year strategic plan designed to better meet the needs of members, with a focus on formulating improved communications, local and international media content and awareness for the business community of Hong Kong

Jennifer Khoo

Advertising Sales Manager Tom Chan

AMCHAM NEWS AND VIEWS 04 AmCham Leadership 2017 Board of Governors and Chairs of Chamber Committees

07 New Business Contacts 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) 3753 1206 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 Tel: (852) 3596 8466 Email: ray.chau@overa.com.hk Website: www.overacreative.com ©The American Chamber of Commerce in Hong Kong, 2017 Library of Congress: LC 98-645652 Single copy price HK$50 Annual subscription HK$600/US$90

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65 executives join AmCham’s business network this month

68 Mark Your Calendar

COVER STORY 08 A Vision Towards 2020 AmCham Chairman Walter Dias reflects on chamber activities of the past year amid surprising global development and highlights the continuation of AmCham 2020, a five-year strategic plan designed to better meet the needs of members, with a focus on formulating improved communications, local and international media content and awareness for the business community of Hong Kong

BUSINESS OUTLOOK

14 2016/2017 Annual Business Survey Compared to the business environment of Hong Kong throughout 2015, that of 2016 did not fare any better in most cases, according to findings from AmCham’s year-end business outlook survey. Unsurprisingly, the outlook for 2017 reflects a market far less bullish

GOV’T RELATIONS/ADVOCACY

22 Submission on CE Policy & Budget Consultation A comprehensive list of recommendations on government policy regarding Hong Kong’s role and position as a leading international financial and commercial center amid the rise of China’s economic power and global footprint

biz.hk 1-2 • 2017

14 BUSINESS OUTLOOK Compared to the business environment of Hong Kong throughout 2015, that of 2016 did not fare any better in most cases, according to findings from AmCham’s year-end business outlook survey. The outlook for 2017 reflects a market far less bullish

62

38 HUMAN RESOURCES Business leaders and HR professionals gather at AmCham’s annual Conference to share insights on how to better integrate the business and HR, with a focus on optimizing people resources to deliver transformational results

HUMAN RESOURCES

38 The Untapped Asset for Business Disruption

CORPORATE RESPONSIBILITY The American Humane Association (AHA) believes that as long as animal welfare standards are upheld, zoos and aquariums aid us in our moral duty to preserve endangered wildlife – a cause not only valuable for the earth but also the economy

47 Ownership culture in Asia The cultivation of an ownership culture in an organization is particularly tough in Hong Kong, a city notorious for its high labor turnover

40 The culture of co-ownership NiQ Lai, Head of Talent Engagement and Chief Financial Officer at Hong Kong Broadband Network, shares how the culture of co-ownership transformed his company from a humble startup into a market leader

41 Preventing a leadership crisis in Asia Rosemary Goater, Partner at Heidrick & Struggles, discusses the pressures and opportunities facing leaders in Asia and shares ideas on how to “futureproof” local talent against inevitable change

42 HR in the age of disruption From the origins of HR in China to its role in reinforcing company culture, a well-represented panel of leaders discuss how businesses can leverage people resources to manage disruption in China

43 Team-building & innovation Organizations must embrace innovation to stay competitive. Five experienced panelists evaluate different appetites for risk, and the role of leadership and teams in driving change

44 Flexible work hours Flexible working arrangements are becoming increasingly popular among a growing number of millennials and university graduates who value a better work-life balance

45 The “Gig” economy A panel of experts discuss how a shift in workforce trends has given rise to what is known as the ‘Gig Economy’ - a growing phenomenon with transformative implications for stakeholders globally

46 A diverse workforce Championing diversity in the workplace isn’t just the right thing to do; it often makes good business sense and is viewed as a crucial part of company strategies

biz.hk 1-2 • 2017

FINANCE & ECONOMICS

48 Investing in a Greener Future

China has found itself leading the charge in green finance initiatives across the region. Meanwhile, perched on its doorstep, open, free-trading Hong Kong is well placed to facilitate China’s goals while reinventing its own image as a green finance hub

EDUCATION

54 Harvesting the Ingredients for Success Stephanie Villemagne, Associate Dean of Graduate Programs and Director of MBA Programs, The Chinese University of Hong Kong Business School, reflects on the trends shaping executive education and shares her plans for the school going forward

REAL ESTATE

58 The “Multifamily” Real Estate Market With local property prices reaching record highs, it may be a good time to set our sights further afield. Brett Cameron, CEO of SkyPoint Realty Partners Limited, explains why a new wave of Asian investors are entering the North American market

CORPORATE RESPONSIBILITY

62 The Economics of Wildlife Conservation The American Humane Association (AHA) believess that as long as animal welfare standards are upheld, zoos and aquariums aid us in our moral duty to preserve endangered wildlife – a cause not only valuable for the earth but also the economy

3

Chamber Officers BOARD OF GOVERNORS Chairman

Diana David Financial Times (HK) Ltd

Anna-Marie Slot Ashurst

Sean Ferguson Hong Kong University of Science & Technology

Eric Szweda Troutman Sanders Solicitors

Mark Green PVH Far East Ltd

Rick Truscott CLP Power Hong Kong Ltd

Owen Belman Aon Hong Kong Ltd

Robert Grieves Hamilton Advisors Limited

Jennifer Van Dale Eversheds LLP

Governors

Matthew Hosford Banco Santander, SA – HK Branch

Jenny Wong Time Warner Inc

Clara Ingen-Housz Linklaters

Patrick Wu Duff & Phelps

Michael Klibaner BlackRock

Lennard Yong FTLife Insurance Company Ltd

Simon Ogus DSG Asia Limited

EX-OFFICIO GOVERNOR

Walter Dias United Airlines Inc

Vice Chairman

John (Jack) E Lange Paul, Weiss, Rifkind, Wharton & Garrison

Treasurer

Donald Austin ONE Pacific Ltd Evan Auyang Gerson Lehrman Group (Asia) Ltd Sanjeev Chatrath Thomson Reuters Elaine Cheung Regal Springs AG Sean Chiao AECOM

Seth Peterson Heidrick & Struggles Hong Kong Ltd Catherine Simmons Citi

Peter Levesque Modern Terminals Limited

PRESIDENT

Tara Joseph The American Chamber of Commerce in HK

CHAMBER COMMITTEES Apparel & Footwear Gareth Brooks VF Asia Pacific Sourcing S.a.r.l.

Ball Elaine Cheung Regal Springs AG Rick Truscott CLP Power Hong Kong Ltd

China Business Devin Ehrig Barron Asia Limited Lili Zheng Deloitte Touche Tohmatsu

Environment

Caroline Johnson AbbVie Limited

Financial Services

Real Estate

Steven Chan State Street Asia Ltd

Food & Beverage Veronica Sze Wyeth (Hong Kong) Holding Co Ltd

Hospitality & Tourism Mark Kemper KPMG

Human Resources

Communications & Marketing

Peter Liu AsiaNet Consultants (HK) Ltd

Oliver Rust ORC International

Information & Communication Technology

Corporate Social Responsibility

Benny Lee CenturyLink

Pat-Nie Woo KPMG

Insurance & Healthcare

Education Virginia Wilson The Child Development Centre

Energy Rick Truscott CLP Power Hong Kong Ltd

Entrepreneurs/SME Cynthia Chow KPMG Laurie Goldberg AmeriCraft Imports Limited

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Pharmaceutical

Jim C Taylor CLP Power Hong Kong Ltd

Rebecca Harrison AIG Insurance Hong Kong Limited Hanif Kanji Sinophi Healthcare Limited

Intellectual Property Gabriela Kennedy Mayer Brown JSM

Law Chiann Bao Skadden, Arps, Slate, Meagher & Flom Jessica Bartlett Freshfields Bruckhaus Deringer

Edward Farrelly CBRE Limited Robert Johnston CBRE Limited

SelectUSA

Terrance Philips Citi Lili Zheng Deloitte Touche Tohmatsu

Senior HR Forum

MaryAnn Vale PVH Far East Limited

Taxation

Ivan Strunin Deloitte Touche Tohmatsu

Trade & Investment Barrett Bingley The Economist Group

Transportation & Logistics Gavin Dow Modern Terminals Limited

Women of Influence Jennifer Parks White & Case

Jennifer Wilson Collingwood Advisors

Young Professionals Michael Harrington Mintz Group

biz.hk 1-2 • 2017

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www.amcham.org.hk

AMCHAM Means Business

Members Directory

Over 500 pages in three major sections, including a complete guide to chamber services, corporate sponsors and AmCham Charitable Foundation. This directory lists about 1,400 members from about 700 companies and organizations.

ISBN 978-962-7422-68-6

LC 98-645651 NON-MEMBER PRICE Local Delivery HK$1500 Overseas Delivery US$195 Shipping costs: Local HK$45 (per copy) US/International US$50 (per copy)

MEMBER PRICE HK$800 US$104

AmCham Member

Name: Title:

Company:

Address:

Tel: Fax:

Email: Website:

copy(ies) of Members Directory

Total: HK$/US$ (postage inclusive)

payable to The American Chamber of Commerce in Hong Kong check#

Bank:

Charge to AMEX (US$) Diners (HK$) Visa (HK$) Master Card (HK$)

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The American Chamber of Commerce in Hong Kong 1904 Bank of America Tower, 12 Harcourt Road, Hong Kong.

Tel: (852) 2530 6900 Fax: (852) 3753 1208 Email: hchung@amcham.org.hk

New

Business Contacts The following people are new AmCham members: Adidas Sourcing Limited Hoa Ly Senior Vice President, Product Operations Apparel Aetna Global Benefits (Asia Pacific) Ltd. Brian Lam Business Development Manager Maurice Tsang Sales Director Kevin Jones Country Manager

Eli Lilly Asia, Inc Andrew Lechleiter General Manager Equinix HK Ltd Mary McHale Director of Business Development EY Brian Foley Partner, Global Compliance & Reporting, Asia-Pacific

APCO Worldwide Christina Lai Senior Director, Hong Kong Leader

FedEx Express Doreen Tan Vice President, Legal, Asia Pacific Division

APL Logistics Waldo Basilla Head, APAC Retail Vertical Paul Man Head, North Asia Phil Tran Lead, Business Development, APAC

Florentia Village Hong Kong (Tribeca Retail Management Ltd) Joe Tong Centre Director Victor Chan Marketing Manager Ian Stazicker Consultant - Commercial Director

Baker Botts Russell Wilkinson Partner Joanne Du Partner Michael Arruda Partner-in-Charge Banco Santander, SA - HK Branch Antony Hung CEO, Asia Pacific BASF East Asia Regional Headquarters Ltd Rachel Fleishman Head, Advocacy & Sustainability Communications, Corporate Affairs Asia Pacific

Fossil (East) Ltd John O'Brien SVP, CFO, Asia Pacific GoAnimate Hong Kong Limited Billy Chung Director of Business Development Grand Hyatt Hong Kong Richard Greaves Area Vice President and General Manager Hamilton Advisors Limited Joyce Lee Account Manager

Bird & Bird Padraig Walsh Partner

Hang Seng Bank Ltd Liz Chow Head of Global Markets

BNY Mellon J David Cruikshank Chairman, Asia Pacific

Hasbro Far East Ltd Greg Morley Vice President, Human Resources, Asia Pacific

Carter's Global Sourcing Ltd Howard Chiu Brand Protection Manager

InterContinental Hong Kong Jeremy Brook Director of Sales and Marketing

Chinese Education & Cultural Investment Ltd Naomi Zhao CEO Clifford Chance Nicholas Turner Registered Foreign Lawyer (New York, USA)

J.P. Morgan Anthony Ngai Head of Credit Trading, Asia Pacific

CMMB Vision Holdings Ltd Charles Wong CEO Albert Klein COO Janice Chan Finance Director & Company Secretary

Jones Lang LaSalle Ltd (JLL) Annie Wang Regional Director, Integrated Facilities Management Linklaters Alexander Lee Associate Marcus Pollard Managing Associate

Modern Terminals Limited Vikram Bangera General Manager - Strategy Management Keith Saunders Managing Director - Hong Kong O'Melveny & Myers Ronald Cheng Partner PVH Asia Limited Jonathan Koch Senior Director, Strategy & Business Development, PVH Asia Pacific Eric Reed SVP, Brand Development, Tommy Hilfiger Asia Pacific SAP Ariba Gareth Bowen Head of SAP Ariba, Greater China Andras Varadi Head of Ariba Hong Kong Skadden, Arps, Slate, Meagher & Flom Jonathan Stone Partner Chi Tsun Steve Kwok Partner Bradley Klein Partner SRG Global Hong Kong Limited Jose Sanchez-Pedregal Managing Director, Asia Pacific Andrew Zhao Human Resources Director, Asia Pacific Nick Wang Finance Director, Asia Pacific Standard Chartered Bank (Hong Kong) Ltd Lilian Lim Head, Global Subsidiaries, International Corporates Global Banking, Corporates & Institutional Banking, Hong Kong State Street Bank & Trust Co Steven Chang Senior Managing Director , Head of Trading Asia, Foreign Exchange Pauline Wong Senior Vice President, Head of Global Services, Hong Kong Fangfang Chen Senior Vice President, Chief Administrative Officer and Head of Strategy, APAC Colin Zhong Senior Managing Director, Head of Global Markets, Asia Pacific Swire Travel Ltd Gloria Slethaug Managing Director Top Schools Ltd Ruth Benny Head Girl & Founder

Columbia Sportswear Company (HK) Ltd Mai Loc Viet Liaison Office Director - Taipei

M. Moser Associates Ltd AurĂŠlie Pillot Business Development Manager

United Technologies Corporation Wee Chin Oon President, UTC Climate, Controls & Security, Hong Kong, Macau, Taiwan & Guam

DHL Global Forwarding (HK) Ltd Mark Slade Managing Director, Hong Kong and Macau

Mandarin Oriental, Hong Kong Louise Wu Director of Commerce

VF Asia Pacific Sourcing S. a. r. l.

Sonia Cheng Vice President, Human Resources Asia

View our other members at: www.amcham.org.hk/memberlist

biz.hk 1-2 â&#x20AC;˘ 2017

7

COVER STORY

Walter Dias

8

biz.hk 1-2 â&#x20AC;¢ 2017

A Vision Towards 2020 Re-elected for a second term in 2017, AmCham Chairman Walter Dias reflects on chamber activities of the past year amid surprising global development and highlights the continuation of AmCham 2020, a five-year strategic plan designed to better meet the needs of members, with a focus on formulating improved communications, local and international media content and awareness as a stronger, consistent voice on key issues affecting the business community of Hong Kong

By Kenny Lau

biz.hk 1-2 â&#x20AC;˘ 2017

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A

mCham Hong Kong will focus on enhancing its brand in 2017 by improving the communication process to highlight the chamber’s advocacy work for members, Walter Dias said in his inaugural speech as AmCham Chairman for a second term, noting the continuation of AmCham 2020, a five-year strategic plan designed to better meet members’ future needs, with strengthened leadership and staffing, enhanced coordination between committees and the board, and expanded events, delegations and briefings.

“This year, we’ll focus on formulating improved communications, local and international media content and awareness,” he says. “We’ll increase the coordination of our advocacy work and activities between the committees to assure a stronger, consistent voice on key issues impacting our members and the community.

We’ll also introduce a stronger, interactive and more mobile friendly website and increase our use of social media in the market to convey our positions.”

A year in review It was an extremely busy year in 2016 for AmCham, with more than 300 events including several signature large-scale conferences – all designed to share knowledge and create value for members of the chamber, Dias reflects. “These are all important forums where extremely valuable ideas from experts from all over the world are shared. We were also privileged to host US Consul General Kurt Tong in a discussion on the importance of a strong US-Hong Kong relationship.”

“In fact, we continued to focus on building government relations by hosting many roundtables with senior Hong Kong government officials including Chief Executive CY Leung, Chief Secretary Carrie Lam and Financial Secretary John Tsang,” he says.

“Our China Affairs Department maintained a robust schedule of China-related programs during the year. In addition to the China Conference, we hosted over 33 events during the year.”

The China-related programs in 2016 included the annual Beijing Doorknock and other meetings with various government officials to further strengthen connections with the central and regional governments, numerous business delegation trips to China for meetings with top executives at benchmark Chinese companies such as Gree, DJI, Huawei and Harvest Fund Management, and many closed-door CEO roundtable meetings to address peer CEOs and share information.

More importantly, AmCham committees continue to play a critical role in advocacy on a variety of issues regarding Hong Kong’s business community, Dias stresses. “Our most recent is a comprehensive list of recommendations based on extensive input from our committees for the Chief Executive’s Policy Address.

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We appreciate the government’s vision and efforts in maintaining Hong Kong as one of the world’s leading cities and their openness to seeking input from the business community.”

“2016 was certainly a year of change and surprising developments all over the globe, including the Brexit vote and US elections,” he notes. “China also struggled to achieve an economic soft landing as it rebalanced from an export- and infrastructure investment-driven economy to a consumption-led economy. It was a volatile year in China with a rocky stock market and weakening RMB. 2017 begins with major changes, bringing heightened uncertainty and risk.”

The US perspective With a new class of US political leadership in Washington DC, much of the change will soon begin, bringing new challenges and opportunities on trade in the Asia Pacific region as well as Sino-US relations, Dias believes. “Although there has been much concern that the new administration will have a negative impact on trade and business around the world, it remains to be seen, and there are even signs of positive developments.”

“The International Monetary Fund, for example, just increased the US economic growth forecast to 2.3 percent this year and 2.5 percent in 2018, as a result of likely US tax cuts, regulatory reform and an increase in infrastructure investment by the new administration.

This is a significant improvement from the 2016 growth rate of 1.6 percent, and it could have a positive impact on trade and business activity in Hong Kong, China and Asia.”

“Despite the loss of the Trans-Pacific Partnership (TPP), AmCham will continue to push and promote the goals of free and fair trade, as well as continued US leadership and commitment in the region,” he emphasizes. “We will also establish closer ties and more regular dialogue with Washington think tanks and key stakeholders to become an informative platform for our members on the latest developments and related challenges and opportunities for business.”

In Hong Kong “One Country, Two Systems” remains a core component of Hong Kong’s ability to achieve a free, open and competitive economy with a high standard of living, Dias stresses. “The rule of law, independent judiciary and fundamental freedoms have allowed Hong Kong to achieve its global success and will continue to play an important role in the future. This year, Hong Kong Special Administrative Region (SAR) celebrates its 20th anniversary, and we congratulate the people of Hong Kong on their success.”

biz.hk 1-2 • 2017

“This year, Hong Kong will also face a change in administration with the upcoming Chief Executive election,” he adds. “We expect a new administration will continue with policies to strengthen Hong Kong’s role and strategic position as a leading global financial and trading center. “We will strive to build new relationships and engage with the new administration to promote policies to strengthen Hong Kong’s status as a world class city and hub for international businesses in the region.”

The China market Because of Hong Kong’s unique environment, it is a perfect platform for Chinese companies with global ambitions, and Hong Kong remains a perfect gateway for foreign direct investment (FDI) into China, Dias notes. “China’s 13th Five-Year Plan presents specific opportunities for Hong Kong in China’s continued economic development, and the ‘One Country, Two Systems’ principle allows Hong Kong to have a unique role in helping mainland enterprises go global.”

“The signing of the Agreement on Trade in Services between Mainland China and Hong Kong within the CEPA framework is very positive and will create new and

biz.hk 1-2 • 2017

valuable opportunities for Hong Kong’s professional services industries,” he says. “We believe Hong Kong’s business community will create great value for the entire Pearl River Delta (PRD) region by providing foreign direct expertise (FDE) with professional services on the mainland, especially with the Belt & Road initiative.”

Given the increasing transportation connectivity between Hong Kong and cities of the PRD, AmCham is well positioned to build relationships across the border and maximize business opportunities for members of the chamber, Dias adds. “Through our delegations, visits and roundtable events, we’ll continue to be the platform for regional and international businesses to access the latest policy directions and plans for Hong Kong and PRD while forging pragmatic relations.”

Advocacy priorities To be a part of Hong Kong’s efforts to remain competitive on the stage of global business, AmCham will seek to build upon an agenda of specific priorities targeting areas deemed critical to the continuing success of the city in an era of dramatic disruptions.

They are indeed timely advocacy priorities for Hong Kong if it is to be a conduit and a super connector

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linking the region with the rest of the world in the 21st century.

(1) Pearl River Delta - One Megalopolis, Two Systems The Pearl River Delta region (of which Hong Kong is a part) is poised to be a global powerhouse, Dias notes, given the significant transportation infrastructure projects including the Hong Kong-Shenzhen-Guangzhou high speed link and the Hong Kong-Zhuhai-Macau Bridge currently under construction, in addition to the increasing financial connectivity provided by the Shenzhen-Hong Kong Stock Connect.

“The strengths of Shenzhen’s R&D and tech manufacturing sectors, combined with Hong Kong’s expertise in finance and professional services, strong university system and international connectivity, would create a formidable competitor,” he points out. “Hong Kong should pursue the idea of ‘One Megalopolis, Two Systems’ to create a proactive cooperation with PRD cities.”

(2) Smart City Development and Innovation The utilization of the rapidly evolving information and communication technology to develop Hong Kong into a smart city will create tremendous opportunities for growth in the city, Dias believes. In fact, several related initiatives have been launched recently by the Hong Kong government, including an allocation of HK$500 million for the Innovation and Technology Bureau to enhance government services and a HK$500 million Innovation and Technology Fund for Better Living.

“In our Policy Address submission, we recommended Hong Kong create a Smart City Development Council to better coordinate efforts among the various departments and agencies to help expedite development,” he says. “And we will establish a Smart City Group and be a leading voice and active participant in shaping Hong Kong Smart City vision and initiatives.

We believe US companies and multi-national firms will have a strong role to play in this area.”

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(3) Education and a Multi-Talented Workforce Education remains a key priority for AmCham.

That’s because Hong Kong needs to educate, develop and retain top talent in order to remain competitive, especially as an international financial center and smart city, Dias reiterates. “Hong Kong should assure the education system can meet the needs of new industries with improved IT literacy, English proficiency, vocational training and global awareness.”

In addition, Hong Kong’s labor policies need to be revised to assure the city can attract and retain high quality talent including those from overseas as necessary, he also says. “AmCham will continue to advocate for workplace diversity and inclusion to ensure Hong Kong remains competitive in attracting top talents required for building an innovative and smart city.”

(4) Hong Kong’s Belt & Road Opportunities With a stable legal system and position as a hub for the movement of capital, information and people, Hong Kong is exceptionally well placed to commercialize opportunities from the Belt & Road initiative, Dias suggests. “We applaud the Hong Kong Monetary Authority’s decision to establish the Infrastructure Financing Facilitation Office to help Hong Kong take full advantage of Belt & Road business opportunities.”

“We encourage the government to continue working with Mainland China to establish Hong Kong as a premier choice for financial, legal, engineering, design and consulting services related to this initiative,” he adds. “AmCham will continue to provide vision and leadership and work with our partners here in Hong Kong, the United States and China to create a better Hong Kong for the entire community.”

“Despite the sweeping changes and challenges around the world, I remain optimistic of our future,” Dias asserts. “We may encounter some bumps along the way, but Hong Kong has a bright role to play in this dynamic region.”

biz.hk 1-2 • 2017

BUSINESS OUTLOOK

2016/2017 Annual Business Survey:

Market Volatility Exacerbated

By Kenny Lau

I

n comparison to the business environment of Hong Kong throughout 2015, that of 2016 did not fare any better in most cases, according to findings of AmCham’s year-end business outlook survey. Conducted in the last quarter of the year among 700 member companies (with more than 1250 invitations and a response rate of roughly 10 percent), the survey revealed that while Hong Kong’s current real GDP growth remains in positive territory – expected at 1.5 percent for 2016 – it is also lower than that of the past five years. The cost of doing business, meanwhile, far outpaces the level of profits today.

In 2016, Hong Kong, like many other Asian economies, had to endure a number of external shocks, including the US presidential election in November and the UK’s historic vote to leave the European Union in June, which continues to have an impact on financial markets and the dynamics of international relations globally. It is therefore no surprise that a larger percentage of businesses operating in Hong Kong said the market in 2016 was “unstable or worse,” and only a few said it was a “good” year. It is also no surprise that the business outlook of 2017 reflects a market far less bullish.

The number of companies expecting the business environment in the coming 12 months to be “unstable” or “worsening” has risen sharply, from 24 percent in late 2015 to more than 37 percent in late 2016. Companies are also expecting to see far greater change in the business environment of 2017 than they did a year ago. On the positive side, some remain cautiously optimistic about the local economy and anticipate a “good” or a “very good” year of business.

The overall business climate, in short, is anticipated to be extremely challenging for all sectors and industries.

The good news is: Hong Kong is still deemed a commercially viable and competitive city on the global stage despite a slight drop in optimism. Nearly 30 percent in the survey believe Hong Kong is very competitive, and roughly two-thirds say Hong Kong is no less competitive than any other international city. In highlighting Hong Kong’s attributes, business leaders and senior executives of multinational corporations always point out a simple and efficient tax system, a sound legal and regulatory system, world-class infrastructure and well-established transportation links.

The high cost of real estate, limited availability of international school places, air pollution, and uncertainty in the political system, on the other hand, threaten Hong Kong’s competitiveness.

Survey respondents find the impact of Hong Kong’s political development and government leadership on the business environment particularly pertinent, suggesting an erosion of confidence in Hong Kong as an international business center.

As a gateway to China, the city has an important role to play in connecting Chinese companies and international firms. The “One Belt, One Road” initiative – China’s plan of commercial engagement which covers more than 60 countries and 62 percent of the world’s population – is an example of the vast opportunities for professional services firms beyond the legal, tax, accounting and finance fields. With world-class infrastructure and talent, Hong Kong is a conduit linking the region to the rest of the world.

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BUSINESS SENTIMENT Market sentiment drops further downward in a gradual slide over the past five years In comparison with Hong Kong’s business environment of 2015, 2016 was no better. More than a quarter of survey respondents (28 percent) called the local market “unstable or worse” – it was only 20 percent last year. Those who felt little change dropped from 40 percent in 2015 to 36 percent in 2016; about 30 percent of respondents said it was a “good” year, a decline of roughly 8 percent from 2015 (and more than 18 percent from 2014). Surprisingly, more than 5 percent – a jump from 2 percent in 2015 – categorized 2016 a year of “very good” business environment.

The outlook of the local business environment for 2017 reflects a market far less bullish. More than 37 percent said they expect it to be “unstable” or “worsening,” a sharp rise from 24 percent a year ago. A little more than 30 percent said it will likely remain “unchanged” in the coming 12 months – a drop by 20 percent from 2016 and an indication of a fast-evolving market for local businesses. Despite a greater sense of cautiousness about the economy, 31 percent and one percent of respondents said they anticipate a “good” and a “very good” year, respectively, in 2017.

Please indicate your/your company's overall assessment of Hong Kong's business environment in the past 12 months

How do you/your company consider the outlook of the business environment in Hong Kong in the coming 12 months?

Unstable/ Getting worse 28.42%

Very good 5.26%

Unstable/ Getting worse 37.23%

Good 30.53% Unchanged 35.79%

Very good 1.06%

Good 30.85% Unchanged 30.85%

Hong Kong remains a hub of regional headquarters doing global businesses Hong Kong remains a strategic center of international business as indicated by the vast majority of companies seeking to either continue or expand their business in the city over the next three years. According to the survey, 31 percent will “expand” their operation; 62 percent will continue as usual; and 7 percent will gradually reduce their business. It is also indicated that Mainland China as a growth market is simply too important to ignore, hence a strong desire to “deeply connect with PRD at a business level while maintaining Hong Kong’s best traditions.”

Hong Kong is a major city of regional headquarters for multinational companies – a status not expected to change drastically over the next few years. Some 70 percent of survey respondents revealed an intention to keep their regional headquarters here; 22 percent weren’t so sure; and 9 percent simply answered “no” to the question. Nevertheless, more companies are seeking alternatives outside of Hong Kong today. In fact, Hong Kong has scored slightly lower in various global economic indices, and other cities – such as Singapore – are catching up very quickly.

What are your company's plans in Hong Kong over the next three years?

If your HK office is the regional headquarters, will it remain so over the next three years?

Gradually Reducing 7.45% Expand Business 30.85%

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Business as Usual 61.70%

No 9.09% Not Sure 22.08%

Yes 68.83%

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BUSINESS INFRASTRUCTURE Hong Kong is deemed a competitive international city despite slight drop in optimism While survey respondents generally see Hong Kong as a commercially competitive city in which to do business, they also believe it has fallen slightly behind others on the global stage.

More than 3 percent in the survey believed Hong Kong is the “most competitive” global city, while another 27 percent said it is “very competitive.” Interestingly, those who felt the same way last year comprised over 36 percent as opposed to only 30 percent this year. Meanwhile, 62 percent (51 percent in 2015) said Hong Kong is on par with other international cities; those who saw a “least competitive” city were 9 percent (12 percent in 2015).

In assessing Hong Kong’s competitiveness against other major cities around the globe, a large majority of respondents said the city ranks above the average in terms of being a platform for business operation – largely because of a simple and efficient tax system, a sound legal and regulatory system in addition to well-established transportation links and infrastructure. The high cost of office and housing rent, limited availability of international school places, and uncertainty in the political system are reasons for a decline in competitiveness.

What is your assessment of Hong Kong's competitiveness vs. other international cities in the region & globally?

Least Competitive 8.51%

Most Competitive 3.19%

Very Competitive 26.60%

On par with other international cities 61.70%

A strong foundation of core values is Hong Kong’s key pillar Rule of law, a sound legal and regulatory system, a simple and efficient tax system, a well-established transportation system, and a fair and open market uniquely positioned as a gateway to China are all key to Hong Kong’s commercial success. The high cost of real estate, limited international school places, and growing concerns about the local political system are issues making Hong Kong a less attractive place in which to live and do business.

Satisfied (%)

Fair (%)

Transportation links

52%

38%

9%

Not satisfied (%) 1%

Taxation

32%

49%

16%

2%

Infrastructure

28%

46%

22%

3%

Competitiveness of executive remuneration

14%

56%

28%

1%

Legal and regulatory system

18%

44%

28%

10%

Intellectual property rights protection

13%

48%

32%

5%

Gateway from China to the rest of the world

11%

50%

33%

4%

Gateway from the rest of the world to China

11%

48%

33%

6%

Fair competition/market access

13%

44%

31%

10%

Anti-corruption

12%

45%

29%

13%

Cost of doing business (i.e. wages, government levies)

5%

51%

35%

9%

Civil service efficiency

10%

40%

32%

13%

Availability of high quality personnel - White Collar

3%

50%

36%

11%

Insurance & Healthcare

6%

38%

44%

9%

Mandarin language proficiency

4%

43%

43%

10%

Availability of high quality personnel - Vocational

1%

51%

33%

13%

English language proficiency

2%

36%

43%

19%

Consultative process for government policies

7%

23%

43%

23%

Availability of international school spaces

1%

31%

29%

35%

Political system (Chief Executive and Secretaries)

2%

19%

37%

40%

Office rent

0%

14%

32%

51%

Political system (Legco and District Councils)

2%

15%

26%

56%

Housing cost

0%

6%

23%

70%

Very satisfied (%)

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BUSINESS VIABILITY Assessment of Hong Kong’s overall competitiveness vs. other international cities The unique aspects of Hong Kong in the form of strengths and weaknesses have remained strikingly unchanged over the past five years. What has notably changed in the past year is a growing concern about the impact of Hong Kong’s political development and government leadership on the business environment – which is directly linked to the city’s overall competitiveness.

Strengths: • Rule of law • Tax system • Ease of doing business • Employment opportunities • Gateway to China • Infrastructure • Transportation links • International exposure

Weaknesses: • Cost of doing business • Cost of office rentals • Affordability of housing • Air quality/pollution • International school places • Political system/stability • Quality of life/environment • Education/talent development

Top areas of concern regarding Hong Kong’s business environment in 2017 •Government leadership & bureaucracy • Economic & financial development •Political stability • Overall cost of doing business

• Legal & regulatory system • Freedom and the rule of law • Hong Kong-China relations • Talent pool

What are your/your company's top three concerns regarding doing business in Hong Kong in the coming 12 months?

18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

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ADVOCACY & GOVERNMENT RELATIONS The principal voice of the international business community in Hong Kong In terms of the Hong Kong advocacy agenda, survey respondents (66 percent) are most interested in a focus on the impact of Hong Kong’s political development on the business climate – a concern closely tied to the issues of: “One Country, Two Systems,” political governance, and the rule of law (54 percent). Education and human resources, including talent availability, recruitment and professional training, are emphasized by well over half of all respondents. Hong Kong’s regional role in Asia Pacific – a topic on the very top of the list in 2015 – fell to fourth place, followed by an environmental agenda.

On the HK Advocacy agenda, please indicate the areas that concern you or your industry the most (choose one or more)

One Country, Two Systems, political governance and rule of law Impact of the Hong Kong’s political development on the business climate

54.43% 65.82%

HK-China trade and economic relations

32.91%

HK’s regional role in �Asia Pacific

44.30% 27.85%

HK’s development as a �Smart City Environment

44.30%

Education & Human Resources (talent availability, recruitment, training) Financial Services & Insurance (IFC, asset & tax management) Information & Communications Technology Intellectual Property �Rights Tourism Transportation and� Logistics

51.90% 31.65% 16.46% 13.92% 11.39% 16.46%

In terms of the US advocacy agenda, US-China bilateral relations are by far the most pressing issue, according to 70 percent of survey respondents. 63 percent believed more advocacy work is necessary as a result of the US presidential election in 2016, whereas cybersecurity (39 percent), US trade and investment initiatives (36 percent), and regional security (28 percent) continue to be some of the most critical issues on which AmCham can be a voice for the business community.

On the US Advocacy agenda, please indicate the areas that concern you or your industry the most (choose one or more)

69.33%

US-China bilateral relations Regional security

28.00%

Cybersecurity

38.67%

Trade & Investment including, SelectUSA, Trans-Pacific Partnership (TPP) US Presidential Election’s impact on Asia Pacific region Taxation

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36.00% 62.67% 20.00%

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CHINA AFFAIRS Hong Kong businesses expand in the growing marketplace in cities across China Shanghai (69 percent), Beijing (60 percent), Guangzhou (40 percent), Shenzhen (34 percent) and Chengdu (23 percent) are major cities of Mainland China where companies of survey respondents have one or more branch offices; only a quarter of surveyed companies do not have a presence in any of the Chinese cities. The fact that over 75 percent of companies associated with AmCham Hong Kong have established a corporate office in China signifies the importance of the existing Hong Kong-China economic relations.

In which city (or cities) of Mainland China does your company have branch office(s)? (Choose one or more) 60.00%

Beijing 22.86%

Chengdu

40.00%

Guangzhou

68.57%

Shanghai Shenzhen

34.29%

None

24.29%

For the China advocacy agenda, market access (46 percent) is a key area of interest for a dialogue with various government officials in different regions. Fair competition (38 percent), US-China relations (38 percent), and Chinese companies going global (38 percent) are also seen as significant prospects to the growth of many companies here in Hong Kong.

To facilitate market access to the growing China market, many are interested in joining a delegation to Shanghai (59 percent), Beijing (53 percent) and Shenzhen (34 percent).

The levels of interest in Beijing has subsided while the levels of interest in Shanghai, Chengdu and Chongqing have increased significantly. This is in sharp contrast to the findings in 2015 and indicates a shift of focus to high potential and untapped markets.

For the China advocacy agenda (Annual Beijing Doorknock and various meetings with government officials from different regions of China), please indicate your areas of interest (Choose one or more)

To which city (or cities) in China would your company have interest in joining an AmCham delegation in 2016? (Choose one or more)

53.13%

Beijing 45.90%

Market Access

37.70%

Fair Competition Intellectual Property Rights Environmental Protection

Jinan & Qingdao

16.39%

US-China Relations

37.70%

Chinese Companies Going Global China's national security review

37.70%

Rising Cost

16.39%

Nanjing

28.13% 12.50% 15.63%

Shanghai

59.38%

Shenzhen

34.38%

Wuhan

12.50%

Xiâ&#x20AC;&#x2122;an

12.50%

Zhongshan

biz.hk 1-2 â&#x20AC;˘ 2017

25.00%

Chongqing Guangzhou

24.59%

11.48%

31.25%

Chengdu

15.63%

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CHINA AFFAIRS (Cont’d) “One Belt, One Road” Initiative The “One Belt, One Road” initiative – also known as the Belt and Road initiative comprising the “Silk Road Economic Belt” and “21st Century Maritime Silk Road” – is China’s plan of commercial engagement covering more than 60 countries and 62 percent of the world’s population in the Middle East, Southeastern, Central and Western Asia, as well as parts of Europe. About 22 percent of survey respondents said it has had a positive impact on their business; over 76 percent believed it hasn’t had any impact; and less than 2 percent spoke negatively about the strategy.

How will/ has the Belt and Road Initiative been impacting your business?

22.06%

Positively Negatively

1.47% 76.47%

Neutrally

The Belt and Road initiative is noted for real business implication beyond international boundaries. In terms of being a part of the development of China’s ambitious commercial undertaking, nearly half of survey respondents said their current line of business can serve as a super connector in the form of professional services. Services which companies can provide include market intelligence (29 percent), talent services (16 percent) and due diligence (16 percent).

In which area does your company have particular strength to serve as a super connector for the Belt and Road Initiative? (Choose one or more) 48.39%

Current business 29.03%

Market intelligence Legal service

12.90%

Tax planning

12.90%

Project financing

12.90%

Incorporation service

6.45%

Talent service

16.13%

Due diligence

16.13%

Public relations

3.23%

If your company is to take advantage of the Belt and Road markets development, which format will your company prefer?

Expand existing business on your own Welcome Chinese or other equity investments to expand your existing business

36.17% 17.02%

Provide professional services to new investors

40.43%

Establish new subsidiary companies/joint ventures Be an equity investor

14.89% 2.13%

The initiative can provide a tremendous window of opportunity for companies from a diverse range of sectors in Hong Kong.

Among firms seeking to play a part in the Belt and Road initiative, many will do so by offering professional services to new investors (40 percent), some will expand existing business on their own (36 percent), and others will welcome Chinese equity investments (17 percent) or establish new subsidiaries/joint ventures (15 percent). Large professional services firms are particularly well positioned to access the potential markets.

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GOVERNMENT RELATIONS/ADVOCACY

THE AMERICAN CHAMBER OF COMMERCE IN HONG KONG SUBMISSION ON THE CHIEF EXECUTIVE’S POLICY ADDRESS 2017 AND 2017 – 2018 BUDGET CONSULTATION

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HKSAR 20th Anniversary – Celebrates the Sustained “Specialness” of Hong Kong & Marks a Next Chapter of Success in “Smart” Growth for the Region FULL SUBMISSION

I. Introduction II. Strengthen the “Specialness” of Hong Kong III. “Smart” Growth & Proactive Synergy with the Pearl River Delta IV. People Competitiveness: Talent & Education V. Economic & Industry Competitiveness VI. City Competitiveness – Culture & Livability VII. Conclusion

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I. Introduction 1. The American Chamber of Commerce in Hong Kong (AmCham) congratulates the success of the HKSAR in its 20th anniversary year and appreciates the opportunity again to provide our recommendations for the Chief Executive’s Policy Address and Budget Consultation for 2017 2. Hong Kong as an outward looking city has a unique and significant geographical footprint in the Asia Pacific region and globally. It is a choice conduit, linking up the region and globally due to its world class infrastructure and the deep bench of international and competitive talent that choose Hong Kong for a deep sense of its “specialness,” which offers highly competitive advantages for this city to become global and regional headquarters of multinational corporations and start-ups.

3. In the rise of China’s economic power and global footprint, Hong Kong’s role and position has remained unique and irreplaceable as one of the most important Chinese cities with global significance, economically and culturally. Unlike its sizeable Chinese counterparts, the value of Hong Kong for foreign businesses is as a large market in itself, but as a super-connector of influence, diversity, vibrancy and stability safeguarded by some core values so cherished by the people of this city and businesses that also have a strong stake here.

4. In the past 20 years, Hong Kong has learned and grown from a series of social and economic challenges faced by the reunion with China, and has become clearer than ever in understanding its strategic role in the development of Chinese and global economies. The “Fourth Industrial Revolution” availed by smart technologies is going to change lifestyles - the way people produce, consume, communicate, live and interact with one another. It will create an array of opportunities for young people and businesses across all sectors. However, Hong Kong’s “innovation capacity” has been ranked 35th by the World Economic Forum (2016)1, lagging behind its Asian counterparts such as Singapore, Japan and South Korea.

5. As a leading financial center in Asia with top infrastructure, transportation, efficiency, and talent, Hong Kong has all the conditions to provide a conducive policy environment and create an ecosystem for innovation and “smart” growth. Hong Kong should proactively capture these opportunities in synergy with cities in South China and the Asia Pacific region in the directions mapped out by China’s 13th Five Year Plan and Belt & Road initiatives.

II. Sustain the “Specialness” of Hong Kong Core Values for Success 6. “One Country, Two Systems” has been successful in maintaining Hong Kong as a free, open and competitive economy with high quality of living. However, while Hong Kong takes pride in such a success, it should never take it for granted. The implementation of the rule of law, independence of judiciary, and the fundamental freedoms (freedom of press, academic freedom, freedom of expression, etc.) enshrined in the Basic Law require care and attention to ensure these core values are intact for Hong Kong to continue to earn its well-deserved reputation as a global financial and cultural hub.

7. Hong Kong’s clean and efficient government with a high degree of transparency is not only a pride of the Hong Kong people, but an assurance to global and regional businesses that depend on visionary and proactively responsive policies to make investment decisions. For decades, AmCham has enjoyed amicable relations with the HKSAR Government at various levels and looks forward to carrying on such a professional partnership for greater mutual benefits.

8. It is important that the HKSAR leadership adopts a collaborative mindset in policy making and public engagement to ensure important policies that are crucial for Hong Kong’s economic development receive deserved support from the people and the Legislative Council.

9. AmCham continues to monitor closely the two main drivers of Hong Kong’s attractiveness as an international business center – the “laissez-faire” approach and the rule of law. Despite some recent incidents that triggered social attention, AmCham has confidence that the HKSAR Government will continue to safeguard the core values that determine Hong Kong’s success.

1

The Global Competitiveness Report 2016-2017, World Economic Forum. http://reports.weforum.org/global-competitiveness-index/competitiveness-rankings/#series=EOSQ119

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Hong Kong’s strategic positions 10. Hong Kong has hyperactive, multi-faceted relations with China, the US and the Asia Pacific region. These trade and cultural relations are highly interconnected, giving great leverage to businesses based in Hong Kong.

a. Hong Kong – Mainland China 11. AmCham congratulates the HKSAR on the signing of the Agreement on Trade in Services between the Mainland and Hong Kong in November 2015 under the framework of the Mainland and Hong Kong Closer Economic Partnership Agreement (CEPA). The reduction of restrictive measures in the negative list, and the addition of 28 liberalization measures in the positive lists for cross border services (including cultural and telecommunications services), are positive and encouraging progress for both the Mainland and Hong Kong Administration in promoting “free trade,” which will significantly accelerate the economic integration of the Guangdong-Hong Kong-Macau Greater Bay Area with the global network.

12. In the midst of China’s path towards higher quality growth, Hong Kong is well-positioned to capture tremendous growth opportunities being a gateway of foreign direct investment (FDI) going into China and a test market for China’s businesses going overseas. China’s expansion of footprint via the Belt & Road initiatives, development in green finance, commercialization of eco-products, and economic transformation driven by innovative technologies, are all opportunities for Hong Kong in exporting its professional services along the Belt & Road countries.

13. AmCham looks forward to the success of the ongoing negotiation of the US-China Bilateral Investment Treaty (BIT) and views that Hong Kong will, and should, continue to be a test market for Mainland products and services going to the US and overseas. The “test” is not in size of customer base but more in aspects of regulatory framework, intellectual property rights, global financing, and user preferences.

14. In view of the 13th Five Year Plan which specifically outlined Hong Kong’s unique role and substantial offerings in China’s overall economic development, the HKSAR Government should strive to uphold and leverage the principle of “One Country, Two Systems,” its core values and strengths that attest to its success today. Being the global city of China and the region, Hong Kong should be the economic model in bringing international best practices and global standards, regulatory efficiency, service industry expertise, and intellectual property rights to the PRC.

b. Hong Kong – United States 15. Despite its small size, Hong Kong has unique trade and cultural relations with the United States. The US is the second largest trading partner of Hong Kong after Mainland China; while Hong Kong is also the US’s 10th largest export market, in particular high-quality US products. Due to many shared values between Hong Kong and the US, Hong Kong is ranked 20th in the number of undergraduates studying in the United States. Such natural and strong cultural ties have laid an excellent foundation to support talent development in Hong Kong as well as to deepen industry-academic collaborations in the innovative and creative fields which are instrumental for “smart” growth.

c. Hong Kong – Global and Regional 16. With a long history of international trade, a stable legal system, and position as a hub for the movement of capital, information and people, Hong Kong is exceptionally well-placed to commercialize opportunities from the Belt & Road Initiative.

AmCham applauds the Hong Kong Monetary Authority’s decision to establish the Infrastructure Financing Facilitation Office (IFFO) to help Hong Kong fully take advantage of its role as a springboard for Belt & Road business opportunities.

AmCham encourages the government to continue to work with Mainland China to establish Hong Kong as the premier choice for financial, legal, engineering & design and consulting services related to this initiative.

17. Hong Kong companies’ extensive experience in investing in China and ASEAN member countries signifies Hong Kong’s key role as a major facilitator for increased levels of FDI flowing into emerging markets like Vietnam, Cambodia, Myanmar and the Philippines. The government must maintain Hong Kong’s simple tax framework, competitive banking industry and currency stability to preserve its pivotal role in FDI regional flows. AmCham welcomes the announcement that Hong Kong is working to conclude the Hong Kong-ASEAN Free Trade Agreement (FTA) by the end of 2016. The government should implement it as soon as possible in 2017.

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18. Given Hong Kong’s status as an international financial center, AmCham supports a greater role for Hong Kong in financing projects for China’s Asian Infrastructure Investment Bank (AIIB) and the Belt & Road initiatives. AmCham encourages Hong Kong to join the AIIB as a sub-sovereign member and to pursue the opening of an AIIB office in the city. This will allow Hong Kong to most effectively leverage its investment expertise to facilitate investment from this new institution throughout the region.

19. Currency stability is essential to decision making in business and the USD peg has been fundamental to the stability of Hong Kong’s currency. The government should clearly restate its intention to maintain the USD peg in an effort to dispel any rumors to the contrary.

III. “Smart” Growth & Proactive Synergy with the Pearl River Delta Smart Economy – Economic Synergy with the Pearl River Delta and the Region 20. Almost all sectors will have to embark on some sort of “smart” growth in the arrival of the “Fourth Industrial Revolution.”

Hong Kong is in a greatly advantageous position being adjacent to IT manufacturing drivers such as Shenzhen and other cities in the Pearl River Delta. As an open trading economy, Hong Kong has the natural incentives to invest and innovate because businesses here have sophisticated exposure to constant competition and new ideas that favor technology transfer from its imports and foreign investment.

21. Given Hong Kong’s enhanced transportation infrastructure and connectivity with the PRD, a geographical complexity of economic and social activities will inevitably take place. AmCham submits that the HKSAR Government should explore the idea of “One Megalopolis, Two Systems.” Currently, PRD cities have their own plans, however they are not intricately coordinated in unity by leveraging their respective strengths. Specifically, Shenzhen’s strengths in high-level manufacturing and R&D, and Hong Kong’s expertise in professional services industries, strong university system and international connectivity could be integrated in a more concerted manner. As such, Hong Kong should have a “co-opetititve” mindset – competing with PRD cities in coordination instead of in isolation – and adopt a proactive approach in setting itself a role model for the region. A protectionist mindset will not only contract growth but compromise Hong Kong’s leading position in the long run.

22. AmCham submits that Hong Kong should define its own success by evaluating how synergy with Southern Chinese cities will best strengthen its position for the next decade, expanding from a financial hub to an innovative powerhouse. In doing so, the HKSAR Government should promote proactive pragmatism for economic growth to its people in a rhetoric that suits the current political climate. By doing so, the Government must present this as a strong business case – develop Hong Kong into a true global city as reflected by the neologism “Nylonkong” – to gain public support. Hong Kong should continue the role of market catalyst for the enhancement of Mainland Chinese products and its associated international export.

23. While Hong Kong’s strategic advantage is connectivity, the city should expand its influence and footprint and see itself chartering a new era of “smart” growth similar to that of Switzerland by leveraging connectivity, top infrastructure, world class institutions, efficiency and reliability, as well as high professional standards and high-skilled labor. Currently, the lack of an overarching policy construct to facilitate cross-sectoral collaboration among the HKSAR administration, business and academia is hardly conducive to an ecosystem that effectively cultivates “smart” growth.

Enhancing connectivity with Mainland and the Region by strengthening the Financial Hub status 24. AmCham is eager to continue to support Hong Kong’s success and development as an international financial center. In this regard, we note the importance of building a pipeline of local talent in financial services and Hong Kong’s linkages with the Mainland.

a. RMB Internationalization 25. As China’s premier offshore RMB business center, foreign firms domiciled and managed in Hong Kong have insufficient access to RMB QFII and collective funds. AmCham recommends the lifting of RMB QFII quotas to allow the free flow of financial services between Hong Kong and the Mainland. AmCham fully supports and looks forward to working with the Financial Services Development Council (FSDC) on these and related issues with an ultimate goal to operate without the constraint of quotas.

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26. AmCham fully supports the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect initiatives and the China-Hong Kong Mutual Recognition of Funds (MRF) and proposes the consideration of Bond Connect initiatives.

(i) Stock Connect 27. AmCham appreciates the launch of the Shanghai-Hong Kong Stock Connect and the impending launch of the Shenzhen-Hong Kong Stock Connect. Increasing connectivity between the Shanghai, Shenzhen and Hong Kong is essential to fostering market development in these destinations. As the stock connect programs continue to develop, AmCham recommends expanding the investment scope in these two programs to include Exchange Traded Funds (ETFs) and more financial products (including A-share derivatives) and removing daily trading quotas altogether.

(ii) Bond Connect 28. Bond Connect would be a logical follow-on from the stock connect initiatives. As bonds are loans to companies, rather than ownership stakes as is the case of equity, there will likely be less concern from a political perspective to introducing the scheme. Bond Connect aims to provide a significant new access channel for investors.

(iii) China-Hong Kong Mutual Recognition of Funds (MRF) 29. AmCham enthusiastically supports this important MRF initiative to further open China’s capital markets. MRF allows eligible China-domiciled and Hong Kong-domiciled funds to apply for approval for their qualified retail funds to be offered to retail investors in each other’s market. For the first time, non-Chinese fund providers will be able to offer their funds to the US$18 trillion private wealth market in China directly, instead of via a local provider under the Qualified Domestic Institutional Investor (QDII) scheme. AmCham encourages the HKSAR Government to engage industry on remaining key issues covering distribution arrangements, account opening, and account issues on foreign exchange.

b. Regional Asset and Wealth Management Hub 30. The Asia Regional Funds Passport (ARFP) initiative was launched in September 2013. In April 2016, five jurisdictions (Australia, Korea, Japan, New Zealand and Thailand) have joined this initiative by signing the ARFP MOU. Member countries signing the MOU will have 12 months to adopt ARFP rules with the expected launch date of late 2017/early 2018. According to a recent APEC cost-benefit analysis study, the ARFP could potentially create 170,000 jobs in the region and save Asian investors US$20 billion per annum in fund management costs.

31. AmCham encourages Hong Kong to join the ARFP in order to enable Hong Kong serve as a regional hub for the asset and wealth management industry. Hong Kong’s membership will be critical for the development of a large-scale market for collective investment schemes in the region and will promote sustainable economic development by facilitating the region’s savings toward productive investment.

c. Green Finance 32. The success of COP 21 has set clear rules and objectives for business to follow in green economy, green financing and the development and commercialization of green technology. However, the implementation of the COP21 deal depends on support from the business sector.

33. Green finance presents a significant opportunity for Hong Kong to build its bond and project finance markets and provides numerous benefits from increased employment to growth in the investment management, derivatives, insurance and private equity industries. AmCham strongly supports the government’s initiative to develop Hong Kong into a regional leader in green finance, and endorses the short and long term recommendations made by the Financial Services Development Council in May 2016, including strategic green bond issuance, building a green investor base and other measures to transform investment priorities and environment.

d. Financial Technology (Fintech) 34. Hong Kong’s important regional and international role in finance and banking with its entrepreneurial spirit have set a solid foundation for Fintech development. AmCham fully supports Hong Kong to (1) transform its financial industry towards the

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next innovative form in order to stay competitive, (2) position itself as a hub to connect the Mainland with global markets, and (3) brand itself a platform for Fintech startups and financial institutions to develop and apply Fintech for the Mainland.

35. AmCham also appreciates the recommendations by the Steering Group on Fintech released earlier this year to formulate a clear vision to underline Hong Kong’s commitment in developing Fintech and positioning the city as a launch pad for Fintech companies with regional and global ambitions. The Chamber also lauds the recommendation to raise Hong Kong’s position as a hub for applying and setting standards for cutting-edge Fintech technologies, such as cybersecurity and Blockchain.

36. In late 2016, AmCham organized a Fintech forum focused on creating a viable local Fintech ecosystem and a workshop on Blockchain to support the development of Hong Kong as the Fintech hub in Asia. AmCham welcomes the recent announcements

by Hong Kong Monetary Authority of the launch of a Fintech Supervisory Sandbox and Fintech Innovation Hub. AmCham believes the “sandbox” should be designed to create a safe space not only for the Authorized Institutions but for firms of all sizes to operate. The framework needs to enable firms to test innovative products, services, business models and delivery mechanisms in a live environment without incurring all the burdens of the current regulatory framework. AmCham recommends using a principles-based approach through targeted experimentation.

37. AmCham urges the government to further promote innovation by sharing best practices on a timely and regular basis. This can be accomplished through the development of an online and regularly updated catalogue of selected innovative approaches.

38. AmCham encourages closer cooperation and collaboration between local government agencies and other economies (e.g.

China, Singapore, Australia, etc.) to develop a vibrant marketplace for new technology developments and innovation in Hong Kong. AmCham welcomes initiatives between regulators in some other markets to establish a recognition regime (such as those between the UK and Singapore, and Australia and Singapore). We encourage Hong Kong to explore similar mechanisms to promote links with other regional and global Fintech centers to further the development of Fintech in Hong Kong.

e. Insurance 39. AmCham recognizes Hong Kong’s efforts to take a leadership position regionally in insurance, including the recent passage of the Insurance Companies (Amendment) Ordnance 2015, upcoming establishment of the Independent Insurance Authority, and impending implementation of Risk Based Capital framework. However, Hong Kong will need to accelerate the development of its insurance industry, particularly Non-Life, to keep pace with other Asian markets. Non-Life insurance plays an important role in enhancing risk management practices across industries in Hong Kong.

40. Hong Kong should continue to invest in becoming a reinsurance and captive hub. Singapore’s sustained focus has positioned it as a regional reinsurance hub, and China’s implementation of the China Risk Oriented Solvency System (C-ROSS) this year will increase Mainland competitiveness. However, Hong Kong is well positioned to support Chinese outbound business, including the Belt & Road initiatives. Hong Kong should build on recent efforts to attract captives, which can be an important tool in assisting Chinese corporations. Captives can be particularly useful in managing infrastructure project risk and protecting overseas assets through insurance and other risk management solutions.

Smart City Development Smart Government, Smart Mobility & Smart Environment 41. AmCham appreciates the initiatives announced in the 2015 and 2016 Policy Addresses and acknowledges that the HKSAR Government has taken an encouraging first step towards realizing the huge potential of growth to be generated by Smart City development.

42. Referring to the six components of urban strategist Boyd Cohen’s popular framework of smart city (smart economy, smart government, smart people, smart living, smart mobility and smart environment), AmCham submits that the HKSAR Government should take a “fostering an eco-system” approach with cross-bureau and cross-department collaboration and a practical business case.

43. In the domain of Smart Government, the HKSAR has launched various initiatives, such as Digital 21 Strategy, data.gov.hk and various e-government services and infrastructure. On Smart Mobility, there are Road Cargo System, electrical vehicles, Autotoll, ezTrack, computerized Area Traffic Control Systems, Walkable Kowloon East, etc. On Smart Environment, Green

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Building Council has pioneered a number of initiatives under the legal framework set by the Building Energy Efficiency Ordinance and the Energy Efficiency (Labelling of Products) Ordinance, coupled by the showcase of Zero Carbon Building as well as other government campaigns to promote the sustainable use of resources and energy.

44. AmCham appreciates that all of these are great initiatives taking the city forward. However, Smart City emphasizes connectedness, and innovative industries require interdisciplinary thinking. The HKSAR Government needs to adopt a holistic, instead of fragmented, approach with a top-down, overarching policy framework to facilitate integration at the implementation level across different bureaus and departments. AmCham applauds the introduction of a single transportation card (i.e. Octopus) for all or most of the transportation and encourages the Government to expand such approach to other digitized services leveraging the data made available by Smart Government, such has health records of patients.

45. Similar to the function of the Financial Services Development Council, AmCham submits that the Chief Executive should establish a cross-bureau, cross-department Smart City Development Council (SCDC) to spearhead and accelerate the development. The proposed body should be tasked with authority and responsibilities to map out the strategic direction of Hong Kong as a smart city, lead and expedite cooperation among relevant bureaus, departments and government agencies, and facilitate discussion and collaboration among relevant public and private stakeholders.

46. Delays and cost over-runs in large scale public works projects reduce public support for these initiatives and make it difficult for businesses relying on that infrastructure to plan. By rationalizing project numbers, increasing private sector involvement in projects and privatizing some infrastructure, the government could help restore Hong Kong’s “can do” reputation and improve the climate for business even further.

IV. People Competitiveness: Talent & Education 47. Talent and education should top the HKSAR’s agenda if Hong Kong is to maintain and build upon its position as an international financial center and smart city with a diverse and competitive talent base.

48. Key considerations for a holistic view on smart growth are: 1) immigration and labor policies to attract and retain the high quality, global talent the city needs for future growth and 2) education reform to ensure economic growth and prosperity in a changing professional landscape.

49. If Hong Kong is to compete with major cities in talent, a review must be conducted to consider the mismatch of knowledge and skills between academic disciplines and industry needs. Inclusive workplace fosters creativity, which takes place in an inclusive society.

Talent – Inclusive Workplace and Immigration Policies 50. The number of expatriates from the U.S., Britain and Australia has dropped by 8-10% in the last year according to Immigration figures.2 The survey by ECA International in 20153 noted that housing in Hong Kong is 69 percent more expensive than the home countries of interviewed expatriates. For many expatriates, impact upon family, especially schooling of children, is one of their foremost considerations. Tuition fees for the most sought-after international schools have risen from $20,000 to $40,000 in the past five years. Factors leading to expatriates’ shift from Hong Kong to other cities include the absence of an updated labor legislation, inclusive workplace and supportive immigration policies.

a. Is Hong Kong’s labor law fine-tuned for the future?

51. Hong Kong’s labor and employment landscape is generally considered “employer friendly” although there are considerable protections for employees in relation to sick leave, maternity rights and other basic entitlements. However, the law is paternalistic and rigid. It does not, for example, permit employees to agree to arrangements outside the legislation even when the employee would benefit. There are numerous requirements that carry criminal penalties for minor technical offenses. Hong Kong’s main employment law (the Employment Ordinance) was drafted in the 1960s and was appropriate for Hong Kong’s economy at that time. As Hong Kong’s economy and workforce have become more sophisticated, it is critical for Hong Kong to remain competitive both globally and in relation to other cities in the region by updating our legal framework to incorporate international standards and common practices.

2 Is the expat community changing in Hong Kong? (August 12, 2016, SCMP): http://www.scmp.com/news/hong-kong/education-community/article/2002932/expat-community-changing-hong-kong 3 Competitive Expat Packages in the Spotlight (AmCham HK, 2015): https://amchamhkpublications.wordpress.com/2015/05/28/biz-hk-2015-may-editorial-competitive-expat-packages-in-the-spotlight/

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52. AmCham respectfully submits that the Government review the relevant legislation to incorporate international standards, best practices, and to recognize the impact of technological changes to the way people live and work. For example, legislation to regulate working hours should take into account work-from-home and other remote working arrangements. The prohibition on deductions from wages should be loosened to (a) allow employees to agree to deductions where the employee would benefit (for example to make contributions to a stock purchase plan or similar benefit); as well as (b) to allow employers to make tax deductions mandated outside Hong Kong (for example where employees are assigned to work in mainland China or where both employer and employee are required to file US taxes). Record-keeping requirements should recognize that many multi-nationals maintain central files. Finally, employees should be permitted to take annual leave by mutual agreement (rather than as dictated by the employer) and should be permitted to take leave in the year it accrues. The current requirements impose significant administrative burdens on employers and are substantially out of step with international practice.

b. A Global City with Global Standards 53. Talent is the prerequisite for the success of pioneering industries that require new thinking and business approaches.

Smart industries demand talent with creativity and innovative thinking as reflected in the increasing importance placed by large, multinational corporations to put in place inclusive workplace policies that embrace diversity in order to drive creative business products and services. The lack of appropriate talent continues to be one of the key challenges to developing a leading the Fintech sector and cultivating start-ups in Hong Kong.

54. Attracting, retaining and engaging a competitive talent pool is a key priority for companies operating in Hong Kong, and the current immigration policy has the potential to be a significant obstacle in achieving this. The policy of not recognizing foreign, legally registered same-sex marriages and partnership, means that the spouses of those coming to Hong Kong to add to our economic strength and vitality are not being granted dependent visas – and consequently are denied resident status, cannot attain permanent resident status, and cannot themselves work visa-free – unlike heterosexual dependent spouses.

55. AmCham urges the HKSAR government to recognize foreign, legally registered same-sex and domestic partnerships and marriages in order to maintain Hong Kong’s status as an international financial center and compete on the global stage. Hong Kong must have a level playing field to enable our world class industries to nurture, recruit and retain the best talent who are free from differential treatment.

56. In addition, AmCham encourages the government to consider expanding the work visa program to support greater diversity by allowing companies to recruit and retain top global talents in the early years of work. AmCham applauds the government’s efforts to develop a new student visa scheme for non-local universities. This pilot program will help expand Hong Kong’s role as a premier education destination for students from throughout the region and will enhance cross border understanding and interaction. AmCham further recommends that Hong Kong and Shenzhen education institutions collaborate more to build synergy among students in colleges and high schools.

57. Apart from the university-affiliated student visa with work permit conditions, working holiday visa, and employer-sponsored intern visa, AmCham submits that the government should expand the working holiday scheme to other jurisdictions and/or provide a more flexible scheme to allow overseas students to intern in Hong Kong.

Education towards a Global, Forward-looking, Multi-talented Workforce 58. Apart from maintaining Hong Kong’s reputable academic freedom and active exchanges with overseas counterparts in the academic arena, Hong Kong has the opportunity to transform its education system to meet the needs of latest industries for “smart” growth. Students in Hong Kong need to improve their English proficiency, IT literacy and global awareness to become a forward-looking and multi-talented workforce.

a. Non-degree / Vocational Education 59. AmCham submits that showcasing success is of paramount importance to drive a change in perception from parents and society, and reduce the pressure towards academic achievement as the sole path for success. However, such a change must go hand-in-hand with structural reform of the education system to introduce new elements that support talent development for “smart” growth.

60. The forecast4 of the World Economic Forum (WEF)’s for jobs of the future to 2025 includes several points crucial to Hong Kong’s future competitiveness: (1) a need to increase skills in technology, (2) complex problem solving, (3) computational thinking, and 4 World Economic Forum (2016): https://www.weforum.org/reports/the-human-capital-report-2016/

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(4) social and emotional intelligence to keep up with global demand. Much of the growth in jobs will be in non-degree sectors including medical technicians, physical therapists and front-line sales people. Building a diversified, high quality work force with better image, pay and work environment in the vocational sector will be an important asset for Hong Kong. Moreover, WEF predicts that 43% of the skills currently needed to perform well in the financial services and investors industry will soon become redundant.

61. AmCham supports the government’s direction to raise the profile of vocational training to address the job demands and skill shortage in Hong Kong. A recent AmCham survey of local HR leaders suggests that there is still a significant gap between the demand for skilled labor and the current supply provided through vocational training. In addition, the workforce readiness of university graduates is not being addressed effectively. Education officials should identify strengths of talents early and match them with the right opportunities and exposure to learn and sharpen their skills.

62. AmCham will host a series of events this year to explore such gaps and identify ways to assess the “workforce readiness” of Hong Kong students and graduates. AmCham supports efforts by the Vocational Training Council (VTC) to promote non-university tertiary education and to highlight a wide variety of careers beyond those of the typical university graduate.

AmCham would urge the VTC and universities to look at providing co-op programs which have proven effectiveness in many countries across the world. These programs have demonstrated a better culture of understanding in the workforce and allow a graduate a speedier entry into the workforce, hence fast forwarding their careers.

b. University Education 63. Unlike cities such as Singapore that proactively drive academic development alongside industry development, Hong Kong seems to remain relatively static. Hong Kong is dominated by traditional financial and service sectors; the industry chain for IT research and manufacturing has developed more slowly.

64. Hong Kong has favorable conditions to nurture research and development talent in local tertiary institutions and offer smart city-related curricula. According the WEF’s latest report on competitiveness (2016), Hong Kong ranks very high in “business sophistication,” which is a reflection of the resilience, creativity, efficiency and flexibility of its people.

65. It is essential for the HKSAR Government to promote closer collaboration between academia and the business sector to create a favorable environment for IT talent. Talent exchanges and partnerships should be promoted to instigate the sharing of talents and ideas between local and overseas enterprises, research institutes and tertiary institutions.

66. AmCham has worked closely with universities to develop higher education and corporate programs to ensure graduates and professionals have the skills they need to succeed in financial services in Hong Kong, regionally and globally. AmCham supports a more robust university curriculum and increased collaboration between universities and the private sector on Fintech and innovation.

c. High and Junior School Education 67. In order for Hong Kong to maintain its competitiveness, it must continually upgrade and focus the skills of its young people.

Students in Hong Kong must be capable of functioning in both Chinese and English and having an awareness of global affairs and Hong Kong’s role in the international economy. In our work with local schools we have noted that the cultural gap continues to widen in Hong Kong, and we would like to work together with the Education Bureau to help the students close this gap. Hong Kong is on the verge of losing the very edge that has made it prosperous over the last century, and it must start by embracing the cultural diversity that is Hong Kong with the future generations of Hong Kong youth.

68. On general IT education, the HKSAR should build on existing initiatives to provide students with more comprehensive and intensive training to foster their IT knowledge and practical skills such as programming and robotics through the Fourth Strategy on IT in Education. Such efforts should even be extended to primary schools. The HKSAR Government should consider collaborating with organizations that have global perspectives and global reach, such as the Cisco Networking Academy to upgrade the IT skills of students – the future workforce in smart growth.

d. Special Needs Education (SEN) for Inclusive Society 69. Hong Kong has made commendable efforts to facilitate efforts to meet the educational needs of expatriate families contributing to the Hong Kong economy. However, the area that still needs improvement is for families, especially non-Cantonese

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speakers, who have children with mild to severe Special Educational Needs (SEN). Programming offered in local schooling is typically inaccessible for non-Cantonese speaking children with special educational needs, and most international schools do not offer the scope and scale of services required to meet the needs of this segment of our community.

70. The lack of appropriate access and support is further evidenced in the long wait lists, which exist at international schools that do offer programming for SEN students. The lack of legislation in this area has proven to be a distinct barrier and the fact that children with SEN do not have equal access to education is rather antiquated and damaging to Hong Kong’s reputation as a world class city.

AmCham urges the government to review its dated SEN policy to allow all children in Hong Kong to have equal access and support.

V. Economic & Industry Competitiveness A Shift of Regulatory Mindset towards Embracing Innovative Technologies 71. Rapid technological improvements have seen a rise in innovation and related products. AmCham submits that the HKSAR Government should take an open-minded approach to ensure that policies are smart, evidence-based and provide sufficient lifestyle choices in an open and free market. As a global metropolis, Hong Kong should consider overseas experiences and refer to international standards in designing any regulatory framework business, avoiding over-regulation that is detrimental to business innovation. Some examples: 72. Tobacco: Advances in innovation have resulted in the development of non-combustible alternatives to cigarettes, which is understood to have significantly reduced the risk of smoking-related disease compared with cigarette smoking. These products have the potential to reduce health risks and further review by the HKSAR of this emerging global trend is necessary to ensure Hong Kong residents who choose to smoke can have access to reduced risk products.

73. Infant Formula: The latest “Proposed Regulatory Framework on Nutrition and Health Claims on Infant Formula, Follow-up Formula, and Prepackaged Foods for Infants and Young Children under the Age of 36 months in Hong Kong” proposed a total ban of related nutrition and health claims, in disregard of its scientific substantiation. Scientifically-sustained nutrition and health claims on the relevant products should be allowed to communicate, so as to protect consumers’ rights to access evidencebased product information for informed choices and in the meanwhile to respect the trade’s freedom of communication of science-supported product information. The current proposed regulation restricts the public’s right to know, and is in direct contradiction to the SAR’s commitment to freedom of information and transparency.

Intellectual Property a. Copyright Protection 74. Hong Kong’s copyright legislation lags behind many jurisdictions in respect of its ability to address the challenges and realize the opportunities arising from the digital environment. Online piracy and unauthorized digital distribution continues to present a serious and immediate threat to all copyright-based industries (originating both locally and internationally).

75. AmCham urges the government to continue working with the creative and innovation industries in Hong Kong to develop opportunities for improving the online media environment.

b. Use of Trademarks 76. Another example is the proposal to require graphic health warnings to occupy 85% of tobacco packaging, thus leaving only 15% of pack space available for the use of trademark. This proposal would set a dangerous precedent of over-regulation of legitimate products by substantially depriving the rights of trademark owners and exposing Hong Kong to violations of treaty obligations which set international standards on the protection of intellectual property rights.

c. Patent Reform 77. To support Hong Kong’s continuing transformation into a regional innovation and technology hub, the Government needs to move forward without delay on the patent reform recommendations contained in the 2013 Report of the Advisory Committee on Review of the Patent System in Hong Kong.

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Transportation & Logistics a. Air Transport 78. As host to one of the world’s busiest airports and the world’s largest air cargo hub, Hong Kong enjoys its status as a strategic destination connecting 190 cities worldwide. Hong Kong’s favorable geographical location enables passengers and goods to reach most of the Asian markets within 4 hours and half of the world’s population within 5 hours, facilitating 24-hour financial transaction for businesses between Europe and America. Based on the above, the government should treasure the opportunity to further consolidate Hong Kong as the center of Southeast Asia and the window of Mainland China.

79. The current two-runway system will soon reach its maximum practical capacity, and it is necessary to boost the third-runway project to handle future traffic demand, i.e.102 million passengers, 8.9 million tonnes of cargo and 607,000 aircraft movements per year by 2030. As a home to 3,500 regional headquarters and offices of multinational companies, the air transport infrastructure is a significant factor for international talent, and high-value products and services to be based in Hong Kong, for increasing business efficiency, and creating a virtuous cycle of connectivity and economic growth. Undoubtedly, this can only be made possible by effective communication with the PRD governments to reach a consensus on airspace control measures to ensure safe operations of aircrafts.

80. For Hong Kong to maintain the status of regional aviation hub, it must cooperate with Guangzhou, which would be the regional aerometropolis in China. Within the region, Guangzhou Baiyun Airport is expanding its runways from three to five, while Shenzhen Baoan Airport follows the blueprint and is adding one more runway from two to three. Singapore is doubling its capacity with two additional terminals by mid-2020s and will be the most ambitious competitor in taking over the role of Southeast Asian and global aviation hub. AmCham submits that a ‘co-opetitve’ mindset should be adopted and a Hong Kong-PRD cooperation policy agreement be formulated to open the possible capacity of local air traffic and to promote liberalization of passenger and cargo services. The development of a third runway system in Hong Kong is inevitable if Hong Kong is to avoid being overtaken by its neighboring cities.

81. In the era of globalization and fierce competition, it must be emphasized that developments are necessary to sustain Hong Kong’s economic prosperity and its status as a global city. Acknowledging the administration’s struggle between economic growth and environmental protection, AmCham urges the HKSAR Government to embrace visionary and comprehensive planning as well as transparent consultation exercises for public interests and long term success.

b. Ground Transport 82. The Chamber acknowledges the HKSAR Government’s effort in strengthening its transportation connectivity with its neighboring cities. In the foreseeable future, Hong Kong’s inevitable integration with the Pearl River Delta and Mainland cities means that connectivity between Hong Kong and the PRD cities is necessary through the construction of highways and road-based mass transportation.

83. For Hong Kong to retain its competitive edge and develop into a “Smart City”, the HKSAR Government must invest in not only hard transport infrastructure but also soft infrastructure such as a digital system utilizing analytics and data for urban planning, transport efficiency and traffic control. The Chamber supports the Electronic Road Pricing pilot scheme in Central and its adjacent areas for combating road traffic congestion on Hong Kong Island.

84. Based on the AmCham’s overall strategy on “Pedestrian First, Mass Transport Second, Private Cars Last”, AmCham calls upon the government to continue its approach to green and integrated transportation policies to address long journey times, rising transport costs, and roadside pollution.

85. With an ultimate goal of creating a pleasant and livable city, Hong Kong should support the planning and development of green mobility including the use of greener / zero-emission vehicles such as diesel-electric hybrid, electric bus as road-based mass transport, and electric vehicles by providing more charging stations across the city. Public-private partnership is feasible and is highly encouraged.

c. Maritime Transport 86. For decades, the Hong Kong maritime and port industry has made huge economic and social contributions to the community. The industry directly contributes 1.4% to Hong Kong’s GDP and 93,000 jobs, accounting for 2.5% of the total employment in the city.

It is vital to one of the four major economic pillars of Hong Kong – trading and logistics – which accounted for 23.4% of Hong

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Kong’s GDP and 20.4% of total employment. The port offers stable and secure employment opportunities for a mix of professional, technical and non-skilled positions. There are good prospects for employees to develop their careers which help support their families and Hong Kong’s social mobility.

87. The government has demonstrated its commitment to strengthening the competitiveness of Hong Kong Port. The Hong Kong Maritime and Port Board was established in April 2016 to support and enhance the position of Hong Kong as an international maritime transportation hub. The business case study stated that the setup of a statutory body in the long-term should not be ruled out. AmCham urges the government to consider setting up a new statutory body to drive the long-term development of the maritime and port industry in Hong Kong.

88. The government’s “Proposals for enhancing the use of port back-up land in Kwai Tsing” was released in June 2015 to respond to requests and recommendations laid out in an industry White Paper (March 2014). Under the proposals, a series of measures are being carried out to enhance the use of land around the container terminals to provide additional yard space and barge berths and drive up the port’s overall integration and efficiency. These initial proposals addressed the short-term needs of the industry, representing just under a quarter of the land enhancements suggested in the White Paper. In order to secure the healthy growth and development of the port in the medium to long-term, AmCham urges the government to commence planning for the next phase of development now to ensure the ongoing recovery of the competitiveness of Hong Kong Port.

89. The HKSAR Government has shown strong support for maintaining the current cabotage arrangements in Mainland China, despite some relaxation in the pilot free trade zones. This segment of international trade is key to Hong Kong Port. AmCham supports the Hong Kong government’s ongoing close liaison with the Central Government to ensure the stability of the cabotage arrangements in Mainland China.

VI. City Competitiveness – Culture & Livability 90. Hong Kong is a city of strong preservation of Chinese culture and westernized lifestyles to an extent that a strong and genuine love of its unique East-meet-West characteristics is felt by people who live here. These include and do not limit to the use of Cantonese language and traditional Chinese characters, festive traditions, as well as the pop culture that is followed by and exported to Chinese communities in the rest of the world including Mainland China. For a small city, Hong Kong has major influence on the cultural trends of Chinese globally thanks also to its vibrant entertainment and movie industries.

91. Hong Kong also has very exceptional natural scenery and biodiversity, such as 40% of the total land preserved as Country Parks, internationally important wetlands in the Mai Po Inner Deep Bay Ramsar Site, gorgeous coastlines, and an internationally well-known waterfront along Victoria Harbour. The convenient access between city life and these natural escapes has made Hong Kong truly special in offering a great variety of activities for people who choose to live and work here.

92. The HKSAR Government should translate its pride in these assets into holistic strategies to preserve these cultural and natural assets not only for great local attractions, but also to develop value-added industries that thrive on these assets – such as eco-tourism, enhancement of the harbourfront, movie industries and other art and cultural industries.

Hospitality & Tourism 93. The year 2015 saw an overall 2.5% decline of tourists to Hong Kong, however the number of international tourist arrivals grew by 4.4%, marking a 6th consecutive year of above-average growth, according to the United Nations World Tourism Organization (UNWTO). As a world-class tourism destination with rich culture and biodiversity as well as gateway to China and the rest of the region, Hong Kong should see positive growth in tourism. In view of this, the HKSAR Government should (1) diversify the Hong Kong Brand; (2) enrich the tourist experience by showcasing the city’s yet-to-be-known cultural and natural assets through eco-tourism; and (3) upgrade its current infrastructure.

a. Diversifying the Hong Kong Brand 94. Hong Kong should move away from a limited Luxury Supermarket image and expand into a Smart, Cultural Eco-city by injecting new components to enhance the tourist experience. The weakening of the Luxury Supermarket image means that Hong Kong needs to strategize its tourism policies, and consider leveraging its incredible natural resources and cultural heritage, both of which AmCham sees the

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potential to showcase to not only travelers from Asia and rest of the world, but also local citizens. Developing Hong Kong into a cultural hub would demonstrate Hong Kong’s culinary and art traditions to reveal its originality, all of which will bring tremendous opportunities.

b. Eco-Tourism and Management 95. AmCham sees the potential of Hong Kong bringing in best eco-tourism practices from the United States or Australia, for example, creating value for its own trade to Mainland China. Such a new trade will create new jobs and economic activities for enhanced tourist experience and better preservation of cultural and ecological assets in both Hong Kong and Mainland China.

96. Named as “Hometown of Dinosaur in China,” Heyuan City of Guangdong Province’s rich natural heritage of dinosaur eggs and footprints sees great potential being turned into an eco-tourist destination with huge archeological and educational value. As such, Hong Kong should play its connector role to bring best international practices of eco-tourism management to Mainland China and help Southern Chinese cities enhance its preservation of natural resources for greater, win-win economic benefits.

c. Investment into Tourism Infrastructure 97. In the past two decades, Hong Kong has not developed a coordinated strategy of major tourism infrastructure planning and development, relying mostly on thematic or location-specific constructs. AmCham submits that the HKSAR Government should make infrastructure investment a priority, with a constant review of necessary enhancement under an architecture of specific “Hong Kong themes” to build attractiveness. Children and family-friendly infrastructure, such as Kidzania, Children’s Discovery Museums, animal parks and aquariums, could be introduced for educational purposes, and an itinerary and exploration routes for families should also be created.

Harborside Living 98. As one of the most beautiful natural harbours in the world, the Victoria Harbour has full potential in providing an outdoor harbourside living and recreation for the public. The Chamber has hosted overseas experts to learn their insights in harbor planning and there is a general consensus, together with the government’s Public Engagement Exercises since 2013, that Hong Kong’s harbourside should be utilized in a visionary manner for long-term cultural and economic benefits. AmCham strongly urges the Government to establish the Harbourfront Authority to spearhead the management, planning, and development of the open space at Victoria Harbor, including the harbourfronts in New Central, Wan Chai-North Point, Quarry Bay, Kwun Tong and Hung Hom.

Enhancing Hong Kong’s Medical Innovation and Healthcare Policy to Meet Dire Demand 99. Hong Kong has long enjoyed a high reputation in healthcare services through collaboration between the health sector and universities. Hong Kong also has top dental health services, top obstetrics and gynecology services and top organ transplant services.

Further enhancement in infrastructure and research, as well as talent development and recruitment, will help transform the city towards a leading medical hub in the region and the world.

100. Acknowledging that Hong Kong faces the challenge of ageing population, with elderly persons aged 65 or above increasing from 15% in 2014 to 36% in 2064, it is essential for the Government to provide high quality and affordable medical options for its citizens. A coordinated healthcare policy and relevant measures, as suggested below, would be welcomed in tackling the challenges ahead.

a. Attract Medical Talents for Long-Term Healthcare Needs 101. The current shortage of healthcare professionals means that these qualified personnel have overt long working hours which will increase risks of medical accidents. Ageing demographics, projected population growth and surging demand for quality public and private healthcare from the region are just a few of the many reasons Hong Kong must expand its medical services capacity. Opening Hong Kong to international healthcare professionals (including but not limited to doctors, nurses, and physiotherapists) is consistent with the traditions of Hong Kong as a free and open port and is a vital support for the wider healthcare plans that are proposed for the future. AmCham urges the government to reduce the restrictions on international healthcare practitioners who want to work in Hong Kong.

b. Enhance Medical Research and Development in Hong Kong 102. On clinical research, Hong Kong is well-equipped with advanced medical infrastructure and clinical trial sites that are self-contained

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with modern medical equipment and laboratories. Investigators are highly experienced, globally recognized, and motivated to participate in clinical trials. In view of recent establishments of the Biotechnology Center, Science Park and Hong Kong Baptist University Traditional Chinese Medicine Center, AmCham believes that Hong Kong should leverage these advantages and further enhance its capacity as a regional research and clinical trial center for both Western Medicine and Traditional Chinese Medicine to attract more scientific and clinical research to Hong Kong. AmCham recommends: • An increase in manpower to expedite the approval of clinical trial certificates - particularly for phase 1 clinical trials.

• An increase in investment on clinical research, on both Western Medicine and Traditional Chinese Medicine.

• Hospital Authority to set up a dedicated research team on clinical trials to standardize procedures to speed up the protocol approval time, contract review and patient recruitment.

• Hong Kong to leverage its proximity to China and position itself as the principal clinical trials site for clinical studies from China.

• To further enhance industry collaboration with research institutions in China, the government should facilitate the accreditation of additional clinical trial sites / hospitals in Hong Kong and ensure clinical data transferability for trials conducted in Hong Kong.

c. Development of Traditional Chinese Medicine Hospitals 103. The use of traditional Chinese Medicine (TCM) is increasingly popular in Hong Kong, even in the expatriate community. This goes along the global trend of increasing belief and use of natural healing methods and natural medicine. While TCM has become increasingly popular in Europe and the U.S., high-end travelers from America and Europe would be attracted by the excellent standards and regulations in acupuncture, Chinese herbal medicine and reflexology. With a potential to develop medical tourism in the future, the HKSAR Government should consider establishing TCM hospitals as what Taiwan, Mainland China and Singapore has already been doing.

d. A Comprehensive Cancer Control Plan 104. To improve the accessibility and affordability of cancer medicines, the Hospital Authority should consider introducing a dedicated evaluation process and an alternative enlistment route for cancer medicines. A dedicated evaluation process would speed up time to market for new treatments and would encourage pharmaceutical companies to continue to innovate in this area.

105. The reimbursement list of cancer medicine in Hong Kong only covers half of the drug list compared to the UK or Australia and the level of reimbursement in Hong Kong is lower compared to these countries where full reimbursement is often provided. To ensure the affordability of cancer therapy, a ring-fenced fund could be developed by the government with collaboration with community partners such as NGOs and/or charities to run pilot programs on performance-based risk sharing agreements in order to address the financial sustainability concern.

e. Develop People-Centered Care Health Services 106. Hong Kong has a traditional physician-centered system with a system that is supply-driven and resources which focus on increasing the capacity on the supply-side. However, Hong Kong should develop a people-centered framework with a system designed to allocate the right resources which fit with people’s needs. AmCham recommends a) adopting scientific evaluation systems, such as quality matrices, to measure healthcare investment versus patient healthcare outcome, and b) enhance Public Private Partnership to provide integrated healthcare solutions.

f. Enrich Support for Patients with Rare Diseases 107. The development of health policy on rare diseases in Hong Kong is seriously lagging behind. There is no official or local definition of rare diseases in Hong Kong, and therefore the needs of rare disease patients are often neglected. At present, only six rare disease areas, out of the thousands of rare disease cases, are considered for support by the Expert Panel on Rare Metabolic Diseases. Again, this stifles innovation from pharmaceutical companies, as they believe it is unlikely that patients on their treatments will receive funding in Hong Kong. To create a more equal, inclusive and supportive society, there is a genuine and imminent need for a clear definition of rare diseases and a new, high-level policy formulation to manage and support rare disease patients: • Set up a fast-track service for drug registration, budget review and approval process for rare disease treatments and establish guidelines for treatment priorities as is the case in many other countries; • Funding for rare diseases should include different and more types of rare diseases; and

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• An allocation of funds to build patient registry and to support the operating budget for clinical specialist training programs and for raising awareness among frontline healthcare practitioners about rare disorders.

g. A New Broader Safety Net to Cover Hong Kong’s Middle Class Patients 108. AmCham welcomes the HKSAR Government's continuing effort to expand the number and range of treatments covered by both the Samaritan Fund and the Community Care Fund, as a safety net to the underprivileged.

109. AmCham recommends that the current method of determining patients’ annual disposable financial resources be revised.

Currently, an applicant is assessed based on the total income and assets held by all family members living under one roof. Many individuals cannot move out of their family home because of the high cost of living. A patient's family members may not be able to share the medical expenses because of other commitments. The current financial assessment criteria prohibit the access of many patients to higher priced but effective treatments.

110. We also urge the government to relax the clinical criteria to benchmark with international treatment guidelines when assessing a patient's eligibility for subsidy. For some treatments, the current schemes require patients to exhaust all available treatment options before they become eligible. These stringent guidelines often delay a patient’s access to effective treatments and thus they may miss the window of opportunity for treating the disease.

111. Lastly, AmCham asks that the government consider expanding the number of times for Samaritan Fund drug list enlistment application to once per quarter, instead of once a year. This will shorten the waiting time to effective treatment.

Smart Living 112. Smart Living is to improve the physical and spiritual wellbeing of everyday life through the application of smart ideas and technology, covering also culture, safety and health aspects. In the domain of Smart Living, Hong Kong has seen facets of sporadic developments without apparent integration with other Smart City components.

113. Following the recommendation of a holistic Smarty City development strategy, AmCham submits that the HKSAR Government should unravel the spirit and creativity of smart living in Hong Kong by organizing large competitions to promote the people’s participation and inventions in “Smart Ideas to Live”, in a bid to nurture start-ups and generate new business opportunities.

114. AmCham views that the HKSAR Government should create definitions for smart living in the Hong Kong context and provide incentives for smart homes and smart business towards sustainable living and business models. These new lifestyle ideas will not only increase convenience but also promote the effective use of resources in reducing ecological footprint on Planet Earth.

a. Smart Living towards Green Economy and Sustainable Lifestyles 115. AmCham submits that the government should provide a conducive policy environment for a growing consumption-driven green economy. Clear definitions, guidelines and promotion by the government, coupled with appropriate incentives to motivate behavioral change, will create more demand for, and supply of, green products and services.

116. The HKSAR Government should apply international standards (e.g. certification systems) and best practices to legislate a regulatory framework of sustainable consumption, including labelling and certifications, as in the case of the Green Building Ordinance.

VII. Conclusion 117. AmCham will continue to work closely with all government bureaus and departments in Hong Kong and the PRD as a connecting platform for international businesses and other related stakeholders. AmCham sees the business community as game changer in chartering a new chapter of smart growth for Hong Kong. The HKSAR Government is our closest partner in providing a conducive policy environment for such growth to take place in synergy with the PRD and in concerted efforts with other community stakeholders in Hong Kong. We appreciate the HKSAR Government’s ambition and effort to make Hong Kong a unique city in China and the world. AmCham will continue to be its close partner in providing thought leadership to inform, connect and advocate.

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NiQ Lai

The culture of co-ownership

By Jennifer Khoo

E

ach company has its own unique culture, driven by a corresponding belief of what drives performance.

NiQ Lai, Head of Talent Engagement and Chief Financial Officer at Hong Kong Broadband Network Limited (HKBN), the city’s largest provider of residential fiber broadband services, passionately believes that “if you get the people right, the company will do great.”

During his luncheon keynote address, Lai elaborates on how the concept of co-ownership transformed HKBN from a struggling startup into the most profitable carrier in the city today.

Humble beginnings The founders of HKBN started out selling plastic calling cards in 1992, in Canada’s Chinatown, before coming to try their luck in Hong Kong. Once here, the newly formed company held its own against some of the city’s largest conglomerates, backed by just HK$1 million from family and friends.

Over the next 20 years, HKBN grew from a humble startup to a market leader. “If you had invested HK$1 with us when we started, today it would be worth about HK$9,000,” says Lai. How did they do that? “For every idea or business plan we have, we need to ask

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what is our ‘LUCA’ (Legal, Unfair, Competitive, Advantage)? Everything we do needs to be done better than our competition, and faster,” he explains.

Culture of co-ownership One key “LUCA” at HKBN is co-ownership, says Lai, a concept that applies both in practice and mindset.

Formerly an investment banker, Lai took an 80 percent pay-cut to join HKBN, then some years later sold his home to buy into the company as a co-owner, following a management buyout in 2012. The reason underpinning his decision was simple. “You will never get rich working for an entrepreneur, but you might get rich working with one,” he explains.

During the buyout, the management team expanded the co-ownership pool from 10 to 100, to allow 90 more of the company’s top performing managers to buy in. This decision resulted in an “alignment of interests, an instant change in attitude and improvement in performance,” the effects of which he describes as “like turning on the lights in a dark room.”

This new “alignment of interests” became the impetus behind HKBN’s journey from private listing to IPO in just two and a half years. Well acquainted by now with the benefits of co-ownership,

the company expanded the scheme to allow even more employees to co-invest.

Today, 500 top performers from the company’s 3000 staff are invited to co-invest, and around 65 percent say yes. Lai places emphasis on the word “invited,” as co-ownership is a state of mind as well as a financial commitment, neither of which can be enforced.

Collectively, the co-ownership mindset at HKBN has given birth to a vibrant work culture, showcased briefly in short video clips during Lai’s address.

From a sales meeting that could have easily been mistaken for a pop concert, to a military-style team building excursion in South Korea, it is obvious that the company genuinely invests in and rewards its people, in exchange for loyalty and good performance.

Lai believes the co-ownership structure ensures both these things: people stay because they made a family-based decision to co-invest, and a personal stake in the company motivates them to perform.

Doing the right thing HKBN goes to great lengths to implement its vision of “Making our Hong Kong a better place to live,” starting with addressing some of the city’s biggest issues.

In efforts to combat education inequality for example, the company hires many non-university degree holders, and has a partially-subsidized program in place to support employees who want to pursue a degree whilst working full time.

Meanwhile, the company’s co-ownership structure has made some of its younger employees enough money for a down payment on a home, says Lai. These initiatives, along with other benefits such as a “no work emails on weekends” policy; extended paternity and maternity leave; a HR culture based on trust and “the assumption you are a good person;” are not motivated by profit but simply “a desire to do the right thing.”

“Though we may be too small to change Hong Kong by ourselves, we hope that by sharing and learning and working together, we can influence change,” he concludes.

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Rosemary Goater

Preventing a leadership crisis in Asia

By Jennifer Khoo

T

he 2016 AmCham Human Resources Conference featured a keynote speech

by Rosemary Goater, Partner at Heidrick & Struggles (H&S), a global executive search firm.

Goater, a Canadian with 20 years of executive search experience in Asia, talks about the pressures and opportunities facing leaders in the region, and shares ideas for “futureproofing” local talent against inevitable change.

Drivers of change All companies aim to hire the best leaders, but good people aren’t always easy to find, develop or retain. Goater sees three “themes” driving major change and placing pressure on the talent pool in Asia.

First, the region is rapidly evolving and diverse, not only from a cultural and language perspective but also from a legal and regulatory one. “There is no such thing as ‘One Asia,’” she says.

The second theme relates to the internationalization of local companies, especially Chinese firms. Over the last seven years, there has been a three-fold increase in the number of Chinese firms

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on the Fortune 500 list, she notes.

Third, technology is disrupting the way we work, the way we interact with clients, and the makeup of the workforce through the rise of the ‘Gig Economy.’

In light of these themes, the quest to hire, nurture and retain good leaders is even more pertinent, as “everyone is looking for the same thing: tech- savvy, future-relevant and internationally trained leaders,” she continues.

Personal development Goater shares six qualities for leadership success in Asia’s diverse and rapidly evolving business landscape: 1) communication – the ability to communicate “the local story to global” 2) ability to influence and manage stakeholders – many leaders fail to utilize social capital to get things done 3) strategy – many good plans fail at the execution stage due to poor strategic management 4) agility – adaptability, learning mindset, forward thinking, and resilience 5) empowerment – leaders who can energize their people are “magnets for talent”

6) innovation – leaders who can “enable” technology for relevant business needs Naturally, all six attributes are difficult to find in one person, and unrealistic expectations can put further pressure on the local talent pipeline. By way of a solution, she suggests that more companies support internal leadership development, given the insufficient amount of internal development opportunities currently available.

“From one report, more than half of respondents say their top executives spend only one to 10 percent of their time on leadership development; only 49 percent of companies say they have a clear development plan for emerging market leaders; and 59 percent say their leaders have little or no accountability for developing their next layer of leaders,” she explains.

She recommends “a customized leadership development or advancement plan for local leaders, and giving people in the region ‘profile to global’ without mobility by allowing them to drive global initiatives and projects.”

Shadow of a leader Being a good leader is about more than just developing yourself. It is also about having the ability to coach, mentor and develop others, says Goater. Unfortunately for some, a restrictive company culture can suffocate even the best of intentions.

Research by H&S suggests that many MNCs don’t provide enough local candidates with a clear path up the career ladder – an issue that is often to do with company culture (which is usually driven from the top, especially in Asia).

Such is the importance of good leadership in Asia that 67 percent of respondents from H&S’ APAC survey cited senior leadership as their primary reason for staying with a company. In China, this was the biggest reason, followed by an attractive company culture.

As the saying goes, ‘People don’t quit companies, they quit leaders.’ Sometimes all it takes is one person joining or departing from a company for its culture to change completely, says Goater. “Individuals have more power than they think.”

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HR in the age of disruption

By Jennifer Khoo

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he role of HR in China has changed little since it first appeared in Ancient China more than two thousand years ago, says Kaiser Chen, Chief HR Officer at SenseTime Group, a specialist in artificial intelligence.

Back then, the HR function was created to select government officials for the emperor, who were evaluated based on four rigid factors: integrity, competency, seniority, and potential. This approach is still widely adopted in China today, and in the rest of North East Asia i.e. Japan and Korea.

“The problem with this approach to HR is that it is more or less a cookie

East Asian approaches: between slow, thoughtful planning, and the typical Chinese ‘knee-jerk’ reaction to problems.”

This balance is well captured by the decision-making process of the Chinese Communist Party, Chen says. Democratic and studied at the beginning, but centralized and swiftly executed at the end. Collaborative, but not consensusdriven.

Adam Najberg, Head of Digital Communications for the Alibaba Group, says that company culture can influence levels of disruption.

At his previous Chinese company, he says the internal culture was character-

From left: Kaiser Chen, Yan Xu, Adam Najberg and Jennifer Van Dale

cutter solution; an uncompromising way of viewing people,” he says. A Western approach to HR, by contrast, aims to cultivate potential leaders through a customized, rather than a one-size-fits-all, evaluation process. But this way, too, has its faults, and Chen says companies can learn from both approaches.

Similarly, where managing disruption in China is concerned, he explains that HR professionals should “strike a balance between Western and North

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ized by “a distrust of employees, as though someone was going to steal a secret,” adding that HR struggled with staff retention. This environment of distrust resulted in many people “building walls to protect themselves,” with little chance to develop skills outside those for which they were hired.

Although company culture is usually dictated by those at the top, HR plays a key role in its reinforcement, says Najberg. For example, at the recruitment stage, HR is responsible for

filtering in candidates who are likely to contribute positively, rather than negatively, to the existing culture, i.e. selecting people who might improve it over those who might make it worse, so to speak.

From a cultural standpoint, Chen says the attitude towards trust in North East Asia could have its foundations in Confucianism, i.e. the belief that everyone is born equal, and only time will tell what each person decides to make of themselves. This translates to the workplace, where employees are initially viewed with caution until they have proved themselves worthy of trust over time.

Alternatively, attitudes towards trust may not have anything to do with culture at all, but with the natural progression of society from an economic perspective, he explains.

As developing countries like China eventually move from away from a manufacturing-based economy towards a knowledge-based service economy, and the focus becomes “less about what you are doing and more about what you are contributing,” company culture will evolve to favor collaboration, rather than direct competition with each other, he adds.

Professor Xu Yan, Associate Dean of HKUST Business School, believes that companies in China can leverage business professionals with an executive education to manage workplace disruption. But up until around ten years ago, few would have agreed with him.

Historically, schools in China have always placed the greatest focus on science, engineering and mathematics subjects. Thus, business education wasn’t conventionally popular. In fact, during the cultural revolution nearly all business schools were suspended, and it was only after it ended that a creeping interest in business and management subjects began, he explains.

Despite the upward trend, there are many in China who remain skeptical.

“There are still those who point to prominent leaders, like Bill Gates for instance, who have achieved huge success without a basic college degree, let alone an executive one,” he says.

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Team-building & innovation

By Wilson Lau

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n today’s fast-changing business environment, many corporations recognize the need to innovate in order to remain competitive in a world full of disruptive changes. The implementation of an effective human resources strategy is a key focus among senior managers of major corporations globally. The drive for increased capability in a disruptive environment requires a significant shift of mindset that is more willing to take risks and embrace change.

The issue of human resources has become such an important part of driving corporate success that many companies have considered hiring HR specialists to run individual business units, notes Bhavya Sehgal, Senior Vice President, Strategy Research (Asia) at ORC International. “They will let the HR guys operate some units of their business for three to four years before eventually taking over the operations.”

An increasing number of corporations also purposefully tap the knowledge and experience of HR professionals coming from other industrial sectors to initiate swift change, he adds. “Chief HR officers are hired from other industries to change the status quo.” That’s because innovation requires a change in mentality and somewhat of a different skillset among employees, many of whom in Asia are quite risk-adverse.

Noting a case in which a medical device producer was confronted with the challenge of a slide in sales of devices through the established channels, Sehgal recalls having to build a new key performance index (KPI) to find out the causes. “In the process, we found out over 85 percent of the company’s workforce were not innovation-minded.

[To turn things around], we needed them to have the appetite for risks and be ready for disruptive changes and innovations.”

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The appetite for risk-taking, however, depends on the nature of the business, says Bin Wolfe, Managing Partner, Talent (Asia Pacific) at EY. “If you are successful in a highly regulated industry, you’ll tend to be more risk-averse.

When you have a clear idea about what you’re able to do and have clear communication with all stakeholders, you can then look at the possibility. You need to be very thoughtful about innovation.”

In terms of leadership, “we want people with resilience and agility,” she says. “They should understand the business well and see the emerging trends in different sectors … We look at diversity and inclusion so that people

customer satisfaction, and other measures.”

“Our performance appraisal matrix was changed three years ago, and we re-introduced a grading system and provided skill-enhancement training,” she recalls.

Senior leaders have a significant role to play in driving effective change, notes Leonie Valentine, Managing Director, Sales & Operations Hong Kong, Google, citing the case of Whirlpool’s success in adopting changes initiated by top management. “It was the leader who suggested getting ideas from everyone on improvement; they made their suggestions while several teams processed the information before ideas were implemented. This required strong committed leadership.”

“Sustainable change management can span over several business cycles before results become apparent,” he adds. “In a disruptive environment, it is important for companies to focus on

From left: Amy Benger, Bin Wolfe, Leonie Valentine, Bhavya Sehgal and Jenny Pong

bring in diverse perspectives. We develop high-performing teams with methodology to accelerate the process.”

To obtain sustainable business growth, Jenny Pong, Group Director of Human Resources at JTH Group, believes it is essential to recognize and reward the achievement of employees. “[To gauge their performance], we set clear objectives and goals for individual employees at the start of the year and introduce comprehensive balance score cards covering specific targets,

customer feedback and suggestion.

This can help create value and save costs in the long run.”

The bottom-up approach is a viable way to deliver change and innovation, Pong agrees, noting her company once held some 30 focus groups across different countries. “We had town hall meetings with our staff and generated many ideas concerning work process, customer experience, and improvement ideas. This is an annual exercise because we believe innovation comes from the employees.”

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Flexible work hours

By Wilson Lau

From left: Liza Allen, Kimberly Arth, Lynne Barry, Sylvain Trocmee and Helen Colquhoun

M

any companies in Asia remain behind their counterparts in other developed economies when it comes to flexible arrangement of working hours.

A flexible work schedule is becoming increasingly popular among a growing number of millennials and university graduates and is considered helpful towards optimizing employees’ work-life balance, particularly for women who are in transition.

A supportive corporate mindset, advanced telecommunication technologies effectively connecting people in different geographical locations, and office configurations such as well-equipped meeting rooms are essential for flexible working arrangements to take off. “IT equipment and devices are vital for our employees,” says Sylvain Trocmee, Head of Human Resources Asia Pacific, Robeco.

To support work on laptops, smart phones and other mobile devices, Robeco, an asset management company headquartered in Rotterdam of the Netherlands with its six branches in Asia, has integrated the latest security technologies that enable users to access

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the main drives in its global systems.

Technology is what gets people connected anywhere, notes Trocmee.

“Communication is important.

People need to have a strong sharing mindset,” he says, adding the mentality that physical presence at the office equals productivity is not always true.

But companies in some Asian countries, particularly Japan and South Korea, typically do not think flexible arrangements will work.

The implementation of flexible working arrangements requires a high level of trust on all levels of a company, says Lynne Barry, Global Head of Learning and Development at Telstra. “Given this trust, employees are expected to deliver results. We do not find people taking advantage of the flexibility.”

“We have a score card system. All business unit leaders describe their goals for the next three to five years, she explains. “In the quarterly breakdown, they state exactly what needs to be done to achieve the goals. This supports flexibility,” she continues. “When team members know what they have to deliver towards achieving the goals each quarter, they can work flexi-hours.”

“In the case of our company, people

working flexible time are more productive and loyal,” she adds. “It’s about cultural change. It requires the leaders to take the lead and introduce the circuit breakers.”

Flexibility is particularly applicable to professional women at a transitional point of their lives. The idea, however, appears to be less developed in Hong Kong, notes Kimberly Arth, Co-founder and Co-CEO of PIVOT, a company which finds project-based and flexible work opportunities for professional women.

“Our talent base consists of women with over 10 years of experience, and 45 percent of them speak multiple languages.

Some have master’s degrees,” Arth notes. “They want options, but options in Hong Kong are limited. It is about educating the companies that the best talent is available and they want flexible working arrangements.”

Professional services specialist Accenture operates in over 20 countries and has implemented flexibility initiatives, says Liza Allen, Managing Director for Communications, Media and Technology. “We try to ensure that flexibility is built into the projects, taking into account the objectives and timeframe. Millennials like the idea of flexible working. It’s about collaboration and connections.”

In fact, flexible working arrangement bodes well in talent recruitment and retention. When you can provide your clients with the best talent for their projects, they will not say no to such talent, says Telstra’s Barry, highlighting the company’s social media platform where employees could share their experience of flexible work arrangement.

Given that many companies in Hong Kong face the challenge of high turnover, flexible work hours can be a solution to the shortage of talent by retaining staff. It is not beneficial employee retention but can also attract more highly experienced women professionals to return to the workforce, Arth of PIVOT believes.

Staff retention is a challenge particularly in the middle layer of companies, Allen points out. “Many employees simply choose to leave. People need to get the points across to senior management and convince them to introduce changes.”

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The “Gig” economy

By Nan-Hie In

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he wave of independent workers joining the “gig economy,” a workforce that eschews the 9-to-5 employment of being anchored to a single organization, is a growing phenomenon worldwide.

In 2014, Staffing Industry Research reported 44 million of gig workers in the US. In Asia, this flexible workforce is also in demand. In the 2016 Hays Asia Salary Guide, which surveyed over 3,000 employers in various locations across the region, 54 percent of employers in Hong Kong said they have hired contingent staff in the past year.

Freelancers, temp workers, and independent contractors are nothing new and have been in place since the second world war, notes Trevor Sunderland, Country Manager Hong Kong & Asia Operations at Agile-1, adding that these groups have been “re-bundled” into today’s gig economy.

“What’s different today is that technology really supports the overall combination of these verticals,” he says.

“That includes on-demand tech companies such as Uber and online platforms which make it easier to connect independent talent with clients. It’s creating a new dynamic of employment that will undoubtedly be carried forward.”

What are the implications? The accelerating pace of change today has shortened the life cycles of companies as well as tenures of their employees, says Susie Quirk, Partner and Head of People and Change Advisory, KPMG. “In the future to 2025, it’s predicted that a company would stay on the S&P 500 for five years; employees are already adopting a portfolio approach to their career by accruing various jobs over their life span.”

The technological forces, notably artificial intelligence and robotics, will only drive the gig economy further in a

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shift where low-skilled jobs will be replaced, she adds, predicting a trend of re-training among workers in the next five to ten years. “We are already seeing it through the rise of corporate universities, learning and development centers and more, and more people are being re-skilled.”

Quirk also foresees an increasingly connected worker that will further fuel the gig economy, thanks to “working- atthe-speed-of-thought”technologies.

Today, many gig workers operate their

tech companies where frontline staff – not managers – will be the most skilled workers in an organization, with multiple degrees under their belt.

The shift towards a highly flexible workforce, from the perspective of an employer, is not without challenges.

From a talent management standpoint, it is advisable to budget for a high turnover rate, Sunderland suggests. “[The gig economy] is more difficult for employers than employees, but hopefully technology will evolve and make it significantly easier for employers.”

Meanwhile, governments are starting to restructure their employment laws and examine how to categorize this particular sector of the workforce, Sunderland notes.

Countries in Asia, he adds, will have

From left: Susie Quirk, Christopher Schrader, Trevor Sunderland and Tim Carey

knowledge management entirely on smartphone apps, for example, and innovations such as Amazon’s voice-based assistant Echo will increase the capability of workers and intensify the rate of participation in a growing gig economy.

Christopher Schrader, CEO of Pathship, an educational tech provider with 2,000 “gigsters,” concurs that artificial intelligence and robotics will play a larger role in an increasingly automated world. He also believes it will lead to a shift away from a low-skilled gig economy to a high-skilled gig economy comprising expert freelancers, consultants and specialists.

“We are moving towards people becoming increasingly specialized,” he says, envisioning a future full of modern

to play an active part in the legal development of labor policy to remain competitive, although no such initiative in Hong Kong has been noted. Meanwhile, China – where the gig economy has taken off – is poised to adapt to the phenomenon with an amendment to the current regulations. Once it happens, others will follow suit.

The discussion on the issue of employee benefits in the gig economy has been ongoing in the US whereas Finland’s implementation of a national universal basic income law to provide a certain level of quality of life has propelled its participation in the gig economy. That’s because the obligation of providing benefits is not on individual companies but is coupled with an entire country at large.

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A diverse workforce

By Jennifer Khoo

From left: Mac Ling, Wijnand van Hoeven, Ada Lee, Julian Groves and Paul Choi

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hampioning diversity in the workplace isn’t just the right thing to do; it often makes good business sense.

Wijnand van Hoeven, Head of Talent Development at Prudential Corp Asia, believes diversity should be viewed as a crucial part of company strategy.

While more women are hired to meet operational needs, they are still severely underrepresented at the board level. At Prudential, for example, nearly 70 percent of the company’s workforce and product salesforce is female, yet there is only 28 percent female representation on the board,” says van Hoeven.

“This is where it goes wrong.

Decisions around marketing and branding, strategy, product development, operations etc are made by men, while our customers, our salesforce, and the majority of our staff are female,” he adds.

Furthermore, in an industry like insurance sales where the decision to purchase is primarily made by female family members, including more women at board level is clearly in the best interests of companies like Prudential.

Ada Lee, HR Business Partner at Google Hong Kong, says that unless a

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company has a diverse workforce, it will be unable to truly meet the needs of a diverse client base. Hence, her organization strives “to create the happiest and healthiest workforce where everyone can be themselves at work every day.”

This includes being aware of unconscious biases that exist in every workplace, and the resulting expectations of employees regarding success.

Lee highlights personality differences and suggests a problem-solving approach which incorporates perspectives from a diverse group of people.

This ensures that the values of diversity and openness are instilled throughout the firm, at all levels of the organization, and don’t remain trapped among a small number of people who care.

Paul Choi, Executive Director, Human Capital Management at Goldman Sachs, says the issue of workplace diversity in North East Asia, especially in China, will only be taken seriously once it is viewed as a necessity.

From his experiences dealing with small local companies in China, he believes they have not yet reached that stage, mainly because they don’t yet see how diversity can contribute to the happiness or productivity of their workforces.

“If a hundred percent of a company’s workforce consists of locals, they probably won’t realize the importance of diversity until their client base becomes more international, or at least until part of their workforce becomes more international,” he says.

While it can be difficult to quantify the results of investing in diversity, Choi advises us to think about the long-term benefits, such as better employee retention and a stronger brand, which can also help the company’s recruitment drive, particularly with millennials.

Beyond the workplace, ethnic and cultural diversity also remains a challenge, especially in Hong Kong. Julian Groves, Associate Professor of Social Science Education at HKUST Division of Social Sciences, says that local South Asian children and those from poorer families are starkly underrepresented in local universities.

These children experience considerable difficulties in the local education system compared to their native Chinese-speaking classmates from wealthier backgrounds, and are less likely to finish high school as a result – the basic requirement for admission into university.

Alongside the ethnic and cultural considerations, Groves feels that Hong Kong’s education system should be diverse in many more ways, starting with the acknowledgment that academia isn’t for everyone.

“Academics undertaking study are much more privileged in Hong Kong. In the UK by contrast, vocational courses are given more funding, and privileges are given to kids who don’t make it onto the academic tracks of the national school system,” he explains.

However, van Hoeven advises a degree of caution where discussions about ethnic and cultural diversity are concerned, and to only push for it “where it matters.”

In a corporation with a global presence, people who benefit most from cross cultural opportunities such as international training or temporary overseas postings, are those working in global or regional head offices, where they are required to interact with people from diverse backgrounds on a daily basis.

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Ownership culture in Asia

By Nan-Hie In

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frequent conundrum amongst talent managers in organizations is how to encourage employees to be more pro-active in meeting business goals and go beyond their job description to generate desired outcomes. In the past, the responsibility was upon senior managers to instruct staff to get things done; today, it seems to be a very different environment of work culture.

Such top-down approach is no longer effective in today’s perpetually evolving organizations of the 21st century,

the workplace that many simply believe they are easily replaceable, a pervasive mindset that impedes ownership culture in organizations.

Often, companies may have dozens of in-house human resources professionals but very little resources dedicated to examining staff retention strategies, Wainwright points out. “If you spend time on finding out triggers behind why people are leaving [your firm], you can develop better ways to retain your staff. That is how you can create a culture of ownership in a company.”

From left: Sarah Hassan, Wendy Zhang, Sharmini Wainwright and Francis Tam

according to Wendy Zhang, Vice President of Human Resources at VF Asia Pacific. “Every individual has to have the drive [to get things done] and that passion comes from within,” she says in a discussion on cultivating an ownership culture.

The cultivation of an ownership culture in an organization is particularly tough in Hong Kong, a city notorious for its high-turnover labor force. According to Sharmini Wainwright, Managing Director of recruitment firm PageGroup, companies have grown too accustomed to a high turnover rate of employees in

biz.hk 1-2 • 2017

Despite such a challenging environment, there are various ways an organization can cultivate a can-do spirit in organizations, according to the panel of experts. One strategy is to stimulate performance amongst employees by facilitating a meaningful dialogue, with a series of thought-provoking questions, including “What do we need to change in this organization for it become more appealing to you?” and “If you were the CEO, what changes would you implement in the next 12 months?”

When the approach was tried as part of an “Innovation” series, initial

response was tepid, but some participants took it seriously and aired their suggestions. Once employees observed that their views had led to some changes, they were energized to do the same in the following year, Wainwright recalls. “I thought I could do it in a year but it has taken three years to get the results that I wanted.”

At Philip Morris International, instead of a top-down directive, managers often share their reasons behind decisions with their employees, notes Sarah Hassan, Regional Director of HR. “It is a thought process...it gives our employees an opportunity to question us.” By opening up their decision-making process in a conversation, it fostered an authentic and genuine dialogue at the workplace.

However, from an employee’s perspective, it is often an insurmountable challenge to share their views in a dialogue without fear of repercussions.

To create a sense of security for employees, Zhang suggests a “Dare to Try” strategy, an initiative launched by VF Asia Pacific, highlighting cases in which the status quo was challenged. “It didn’t have to be a successful case; the learning [was what] we celebrated.”

One of the key questions is about fostering an ownership culture for different generations of staff within an organization, notes Francis Tam, Regional Sales Director at Panopto Asia Pacific, who moderated the panel discussion.

Hassan recommends that companies give the issue more visibility by emphasizing the journey of employees. This is particularly pertinent among younger staff as they tend to respond more swiftly to their career development.

Today, it is much more common that employees are informed about their career path in an open environment – a practice which young employees, especially among millennials, find particularly attractive.

“Our managers are much more open and transparent about sharing insight to incumbents or existing employees about where they are today and where they will be in five years, provided he or she will do all the right things to get there,” Hassan says.

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FINANCE & ECONOMICS

Investing in a Greener Future In response to its escalating environmental crisis, China has found itself leading the charge in green finance initiatives across the region. Meanwhile, perched on its doorstep, open, free-trading Hong Kong is well placed to facilitate Chinaâ&#x20AC;&#x2122;s goals while reinventing its own image as a green finance hub

By Jennifer Khoo

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biz.hk 1-2 â&#x20AC;˘ 2017

A

t the annual G20 summit in September 2016, China announced plans to make “green finance” a pillar issue of its presidency, and with good reason. The nation’s environmental crisis is intensifying with unprecedented speed each year, with levels of pollution that can no longer be tolerated or ignored.

According to the Green Finance report released in May 2016 by the Hong Kong Financial Services Development Council (HKFSDC), China’s air quality is satisfactory in only 8 out of 74 major cities, and just 25 percent of the country’s drinking water reaches national quality standards.

The solution isn’t simple or cheap. In March 2015, the People’s Bank of China (PBOC) estimated that China would need to invest over US$1.5 trillion (US$305 billion each year over five years) in order to meet its environmental goals outlined in the pledge it made to the 21st Conference of Parties (COP21) at the Paris Climate Conference in 2015.

These goals, which China hopes to achieve by 2030, include the peaking of carbon dioxide emissions, and to increase the share of non-fossil fuels in its primary energy consumption by 20 percent. Of the US$1.5 trillion investment amount, China’s government has said it can only contribute 15 percent, leaving an annual deficit of US$260 billion to be met by the private sector, locally and abroad.

The global green bond market Fortunately for China, investor demand for green investment opportunities is growing throughout the region and globally. Still, the challenge lies in developing the necessary financial infrastructure to efficiently match investor capital (demand) with new and existing green investment opportunities.

In its report, the HKFSDC recommends the issuance of green bonds to kick-start green financing activity in Hong Kong’s private sector. Under this scheme, issuers can issue “green bonds” (labelled as such) to fund their green projects, and in return, investors are given opportunities to support low-carbon or sustainable projects with low-risk financial returns.

Hong Kong would certainly not be the first; many countries have entered the green marketplace over the last few years. In 2015, the value of the global green bond market was worth approximately US$42 billion, nearly doubling in 2016 as anticipated, under the impetus of China’s green financing requirements [see Chart 1].

China leading the way Photo: pixabay

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As evidence of its commitment to a greener economy, China’s government has taken several steps towards

49

Photo: pixabay

Photo: G20 China official website

Green bond issuance by year In US$ billion 80

80

60

42

40

36.6

20 11.1 0.8

0.4

0.9

3.9

1.2

3.1

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

*Estimate

50

Source: Climate Bond Initiative, Moody’s

improving the facilitation of green financing within the country, starting with an announcement in 2015 of its intention to merge seven carbon trading pilot programs into a national market by 2017. If successful, this will create the world’s largest carbon exchange.

With RMB75 billion (US$11 billion) worth of green bonds issued in the first half of 2016 alone, China is already the world’s largest green bond market and growing, fueled by demand that is estimated to be worth twenty times as much as the current financing, according to research published by the PBOC. In spite of its progress, China still struggles with international concerns regarding the integrity and transparency of its financial reporting processes, and frequently fields doubt about whether investor finances are genuinely flowing into green projects.

Hong Kong’s role Due to Hong Kong’s status as the world’s second

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Photo: Thinkstock

largest recipient of foreign direct investment, its role as China’s principal offshore RMB center, and its special relationship with the mainland; along with its wellregulated financial markets, its free flow of information and rule of law; the Special Administrative Region (SAR) is uniquely placed to help China raise the funding it needs to meet its environmental goals, while establishing itself as a leading green finance hub at the same time.

But for the special territory, honing a reputation in green finance is about survival over face. For a city in which the Financial Services sector makes the highest contribution per capita to GDP, and provides business for other important service sectors such as law and accountancy, maintaining a leading position and steady rate of growth in the industry is crucial to its future.

This involves being at the forefront of the shift from a “brown,” fossil-fuel reliant economy to a sustainable “green” one, in acknowledgment of the increasing awareness and interest in environmental protection

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across the region.

Investor behavior in recent years reinforces this trend, with a growing number choosing to avoid carbon-intensive investments.

In June 2015, Hong Kong saw its first green bond issued by Chinese wind energy firm Xinjiang Goldwind Science & Technology. Receiving orders of US$1.4 billion, the US$300 million green bond was nearly five times over-subscribed, indicating the extent of new demand for green investment opportunities.

Playing catch up For a city of its economic influence and potential, Hong Kong still lags disappointingly behind on the green finance front; the issue of sustainability remains a mere afterthought for many businesses in the territory.

With the exception of Xinjiang Goldwind’s US$300 million issue, the city hasn’t had much action in the green bond market compared to rival financial centers

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From tall trees to green shoots: green bonds are spreading across the world Norway $0.9bn Estonia $0.06bn UK $0.7bn Netherlands $4.1bn United States $10.5bn

Latvia $0.08bn Denmark $0.6bn Germany $5.6bn China $1.0bn India $1.1bn

Mexico $0.5bn

¼ of total issued amount came from the US – $10.5bn mainly driven by municipal green bonds.

US surpassed supranational institutions and is the largest green bond issuing country in 2015.

7 new countries joined the green bond market this year: Brazil, Denmark, Estonia, Hong Kong, India, Latvia, & Mexico. They jointly added $3.2bn green bonds to the market.

Japan $0.5bn Hong Kong $0.3bn

Brazil $0.6bn

Europe remains the region hosting the most green bonds, with $18.4bn issued in 2015.

Markets keep on growing; seven countries (U.K., China, Germany, Japan, Netherlands, Norway, and U.S.) have shown significant growth in green bond market size this year.

Source: Year 2015 Green Bonds Final Report, Climate Bond Initiative

What is Green Finance?

According to the HKFSDC, green finance is “a broad term that refers to capital raising and financial investments flowing into projects, products and companies that support the development of a more sustainable, low-carbon and climate resilient economy.”

Examples of green projects include: Clean energy; pollution control; green buildings, transportation and infrastructure; energy efficiency; sustainable resource management; and environmental services such as waste management and sustainable forestry.

What is Carbon Trading?

Carbon or emissions trading, also called “Cap and Trade,” refers to a regulatory, market-based system designed to control global pollution levels by providing companies with economic incentives to lower their carbon emissions.

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like New York and Singapore. Even the locally-listed Industrial and Commercial Bank of China (ICBC) chose to issue its RMB-denominated green bond out of London at the end of 2015.

According to the FSDC report, any progress made has been driven mainly by market opportunities rather than as a result of deliberate government policy or regulations.

This is how Hong Kong’s financial services sector has traditionally evolved, with the government merely responding to market developments throughout the years.

But in order for the territory to remain competitive, the government must play an active role in stimulating green growth within the private sector, starting with a commitment of its own funds towards green projects currently in need of capital investment.

A flourishing green finance sector would bring a multitude of benefits to Hong Kong, including – but not limited to – the creation of more employment opportunities, a locally-based source of finance for the city’s own projects, and attracting entrepreneurs in green industries to raise capital and seek listings here.

If the economic reasons alone aren’t enough to convince Hong Kong people to “go green,” perhaps the prospect of better air quality will change their minds.

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EDUCATION

Harvesting the Ingredients for Success In 2016, the Chinese University of Hong Kong Business School celebrated the 50th anniversary of its MBA programs. Stephanie Villemagne, Associate Dean of Graduate Programs and Director of MBA Programs, reflects on the trends shaping executive education and shares her plans for the school going forward

By Jennifer Khoo

L

ast year, the Chinese University of Hong Kong (CUHK) Business School celebrated the golden jubilee of its MBA programs. It must be doing something right, if longevity is anything to go by.

Stephanie Villemagne, Associate Dean of Graduate Programs and Director of MBA programs, was appointed last year to continue its success, and judging by her experience, there isn’t any question of whether she is up to the task.

Following a decade of employment at INSEAD, including time at its campus in Singapore where she served as Global Director of its MBA, Villemagne (an executive MBA holder herself) is a veteran in the field of business education.

As Director of the School’s MBA programs, she oversees all program-related matters, from marketing to career support. As Associate Dean, she is responsible for the portfolio advancement of its graduate programs, including international recruitment, diversity, new program development and operational excellence.

54

Ingredients for success Known for more than just its MBA programs, CUHK was named the “Most innovative university in Hong Kong” by Thomson Reuters in 2016, having pioneered an impressive number of ‘firsts’ in the fields of entrepreneurship, learning, and business.

As the first business school to launch a Centre for Entrepreneurship, CUHK is committed to developing comprehensive entrepreneurship curriculum for its MBA, which it continuously questions and builds upon to keep it current and relevant, says Villemagne.

“We are also the first business school to launch a blended mode of learning for our Part-Time MBA, i.e.

50 percent taught online and 50 percent taught face-to-face, which provides a much more flexible and advanced learning process for our students,” she adds.

CUHK also has a long history of contribution to Hong Kong’s business sector. Since the late 1990s, professors

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Stephanie Villemagne

and students from the Business School’s marketing department have actively engaged with the local business community to help companies translate their “big data” ideas into practical and strategic solutions.

For example in 2013, the School and multinational technology company IBM jointly established the Marketing Engineering Lab, the first-of-its-kind in the world, aimed at developing a new generation of marketing professionals.

And last year, initiated by the School’s Department of Marketing, CUHK Business School, IBM and two other business schools in Mainland China jointly rolled out the ‘A100 Project,’ aimed at helping 100 companies in China set up the software infrastructure and business models necessary to support intelligent, data-based marketing decisions.

These achievements reflect CUHK’s innovative spirit and its willingness to embrace change – both key “ingredients” in its success thus far, and for the future, says Villemagne.

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Skills for the ‘New economy’ Industries everywhere are being disrupted by advances in technology: MOOCs (Massive Open Online Courses) have disrupted the world of education; Artificial Intelligence (AI) and the Internet of Things (IoT) are disrupting the way we learn, live and work; social media has disrupted the way we communicate.

“Traditionally, people went to business school to learn the skills necessary for excelling in and leading large corporations in the ‘Old economy.’ But our world is changing so much that what worked five years ago may not work anymore today,” says Villemagne.

She believes that business education, like all others, must adapt to stay relevant to their stakeholders (students, faculty, companies, etc.) Likewise, the definition of a good business leader is also evolving.

“In the ‘New economy,’ our society needs people who can innovate, create, and disrupt,” she explains.

“That means schools are responsible for promoting

55

isn’t traditionally popular with companies in the city other than MNCs. However in recent years, she has noted growing interest from Hong Kong companies that have begun to see the point of sending their staff to executive programs for training purposes.

Despite the positive trend among local companies, Hong Kong’s market for business education is still heavily subject to demand from its unpredictable next-door neighbor. Hence, business schools like CUHK should seize the opportunity to promote themselves in Mainland China whenever possible.

Especially now, amid the nation’s economic transformation – driven by the so-called Fourth Industrial Revolution – which has produced wave after wave of entrepreneurs, innovation and new technology.

In the pipeline Under her stewardship, Villemagne intends to bring several plans to fruition, starting with a curriculum review in early 2017 to ensure the MBA program’s continuing relevance to students and recruiters.

The School will also work towards the official launch of its blended learning MBA in 2018. “This is already an option that our current students can take, but we hope to have it as a full-fledged standalone program by then,” she says.

Finally, the School plans to launch a new Master in Management program targeted at pre-experience students wanting to enter a management position rapidly. “It will be very innovative in its approach and content, and will allow students to understand the uncertainty of the world we live in and apply their learning to solve complex business problems,” she explains. innovation and technology, as well as critical thinking and creativity, to help the next generation adapt to this new context.”

CUHK takes this responsibility seriously and has been proactive in its commitment to working with change. “We are currently the only university in Hong Kong with a campus in Shenzhen (widely regarded as the Silicon Valley of China), and we have a close partnership with the Hong Kong Science and Technology Parks (HKSTP),” she says.

Diversity – another word synonymous with success in today’s world – is about more than just nationality.

“It’s also about gender, profession, and beliefs. We can draw from each other’s fortes and cultural richness to help society progress. This is what the next generation needs to understand in order to be good citizens and great leaders,” she adds.

Market observations Villemagne says that executive education per se

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Words of advice To those considering an international business education, Villemagne suggests that location is nearly as important as the quality of the course itself, a consideration which may surprise some people.

“Location, location, location – people should look for a location with vibrancy, cultural dynamism, action and energy. Hong Kong has all these and much more,” she says.

She recommends doing thorough research, like talking to alumni, looking at the network of recruiters, and looking at the ranking, but warns against total reliance on these steps to make what is an important and expensive decision.

“This is a good place to start but it will not tell you which program is the right one for you. Ask questions, more questions, and again, so that once the due diligence is done, you can be 100 percent sure you have found the right program and school for you, your career and your personality,” she adds.

biz.hk 1-2 • 2017

Š 2016 United Airlines, Inc. All rights reserved. United Polaris travel features, including aircraft configuration, may not be available in all markets and/or flights.

The business class experience redesigned from Ahh to Zzz.

Arriving December 2016

united.com/polaris

REAL ESTATE

An Introduction to North America’s “Multifamily” Real Estate Market With local property prices reaching record highs at the end of 2016, this year may be a good time to set our sights further afield. Brett Cameron, CEO of SkyPoint Realty Partners Limited, explains why a new wave of Asian investors are entering the North American market for multifamily real estate

By Jennifer Khoo

biz.hk: What exactly is multifamily real estate? What are the benefits to investors over “regular” real estate?

What role does SkyPoint play?

Cameron: Multifamily real estate, which is more common in North America than in Asia, means rental housing in apartment buildings.

Rental housing is a non-discretionary expense: people require a place to live in both good times and bad. Those who invest in multifamily real estate receive returns based on the percentage of a building that they own, not on individual apartments.

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The benefits to investors in multifamily assets include superior risk-adjusted returns compared to the real estate market as a whole over the past 20 years; steady and superior appreciation over time compared to other real estate asset classes; and predictable and stable cash flows due to low vacancy rates.

SkyPoint prides itself on providing the Asian market with outstanding intelligence on the North American real estate market. Our research combines macroeconomic fundamentals with local market intelligence that gives a clear picture of the North American real estate landscape.

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Toronto Population by Age 14%

13%

25-34

15-24

15% 35-44

Prime Renter Age

16%

6%

75+

7%

65-74

45-54

12% 55-64

Source: SkyPoint

Photo: Thinkstock

biz.hk: Why the focus on North America?

Cameron: Multifamily real estate is more common in North American than in Asia, particularly in Canada.

We focus on Canada and its major cities, in particular, on Toronto, the country’s largest city.

Why Canada? It led all G7 countries in economic growth over the last decade, according to the World Bank, and its population is forecast to grow by 45 percent over the next 50 years (StatsCan).

The country’s population is the most educated among members of the OECD (Organisation for

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Economic Cooperation and Development), with half of its working-age population having a tertiary-level education (OECD).

It has a democratic and transparent government, and it is the most tax competitive country in the G7 (KPMG). Finally, it ranked number one for the Brett Cameron soundest banking system in the world eight years in a row, according to the World Economic Forum.

Why Toronto? For a start, the city ranks number one in the world as the “most desirable” by The Economist and has the highest forecast net inbound migration of any Canadian city, according to the Conference Board of Canada [see chart].

Toronto housing prices continue to rise, leading to historic low rental vacancy rates of 1.7 percent (CMHC). The Toronto region accounts for 19 percent of the nation’s GDP and ranks among the top 10 financial centres globally (City of Toronto).

Some 40 percent of Ontario’s jobs are located in Toronto (Invest Toronto), and in recent years, Toronto outperformed all major US cities including Los Angeles, New York, San Francisco and Chicago in employment growth and household formation (SkyPoint) [see chart].

For someone investing in residential property, these are critical factors to consider.

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Net Migration 2015-2019 Toronto is expected to attract over 100,000 new international immigrants per year over the next 5 years.

Intercity

Calary

International

Edmoton

Interprovincial

Vancouver Winnipeg Halifax Ottawa/Gatineau Toronto Montreal Saskatoon -100,000

0

100,000

200,000

300,000

400,000

500,000 Source: SkyPoint

biz.hk: What are the main differences between North America’s real estate market and Hong Kong’s?

Cameron: In Hong Kong, demand for housing continually outstrips the stock of housing available. In North America, this may be the case in some cities, like Toronto, but certainly not in all cities.

As we have mentioned, multifamily housing as an investable asset class is more common in North America than in Hong Kong. In fact, it is almost unheard of in Hong Kong.

Hong Kong investors who buy into real estate like the idea of ownership – owning an apartment, or a building, or a free-standing house. The notion of property as a purely financial asset class is new to them. biz.hk: What are the most common mistakes that investors make when investing in real estate?

Cameron: They fail to take into account local market trends, such as demographics, immigration, job creation, diversity of local industry, and the key housing demand/supply ratios.

Investors also make the mistake of comparing nominal returns without properly factoring in risk.

Would you rather invest in an individual carpark space or in a rental building with stable cashflows and capital appreciation? biz.hk: What are some up- and-coming real estate trends that investors can anticipate within the next few years?

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Cameron: In Toronto, we foresee continued strong job growth, particularly in higher paying jobs, and strong immigration, which will continue to create demand for homes, especially well located, luxury apartment rentals.

The demographics tell the story, and the demand is not going away any time soon. The average rental listing in Toronto stays up 12 days only. It’s a landlord’s market.

According to recent reports, listings are down and competition to find a good home in a good location remains high [see charts]. biz.hk: What factors have the biggest impact on SkyPoint’s business? How does it respond?

Cameron: With the current uncertainties in the Hong Kong property market, due to the added 15 percent tax and new stamp duties; a decline in demand from China; and volatile global markets, the sentiment is that buyers are looking to countries that are considered safe havens and Canada is one of those markets.

This higher demand is of course good for our business. Our strategy provides a solid choice of diversification in good times and bad. biz.hk: What does the future hold in store for SkyPoint? Anything in the pipeline?

Cameron: As a partner of the developer, Storey Living Corp (Toronto), SkyPoint is an access point to three key development projects in the GTA (Greater Toronto Area) starting with OpArt Lofts located in the affluent

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Population Growth 2010-2015

Multifamily Vacancy Rate 2015

9%

8% 7.8%

8% 7%

6%

6%

5% 4.6%

5%

3.5%

Los Angeles

New York

3%

3%

1.9%

2%

2%

0%

3.4%

4%

3.6%

4%

1%

6.9%

7%

0.9%

Chicago

1% Los Angeles

New York

Toronto

0.9%

Chicago

140,000

125,301

120,000

0.8%

0.8%

Toronto

Annual Employment Growth 2015

Market Supply Growth 2015 1%

0%

100,000 0.6%

0.6%

80,000 60,000

0.4%

0.2%

0%

68,147

0.2%

20,000 Toronto

40,675

40,000

Chicago

New York

Los Angeles

0

18,650

Chicago Los Angeles New York

Toronto

Source: SkyPoint

and highly sought after area of Oakville.

OpArt is the first project available to Asian investors, with two more projects located in downtown Toronto coming online soon. This is an opportunity to co-own class A multifamily residential real estate. biz.hk: Any advice for first-time investors in multifamily real estate?

Cameron: Do your homework, talk to people on the ground, be mindful of the trends and forces underpinning the local market, be mindful of the risk-adjusted returns.

biz.hk 1-2 â&#x20AC;˘ 2017

biz.hk: Could you share some of your background, and what is your role as CEO of SkyPoint?

Cameron: I joined SkyPoint at the end of 2015, attracted by the investment proposition behind multifamily assets. Multifamily properties fit with my work over the past 13 years in creating solid co-ownership stakes for individual investors.

Previous companies I have worked for include the Walton Group and ReDev Properties. My responsibilities with SkyPoint include business development and educating the market about the benefits of investing in multifamily properties in North America.

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CORPORATE RESPONSIBILITY

The Economics of Wildlife Conservation People have long held conflicting viewpoints about the ethics of keeping animals in captivity.

The American Humane Association (AHA) argues that as long as animal welfare standards are upheld, zoos and aquariums aid us in our moral duty to preserve endangered wildlife a cause not only valuable for the earth but also the economy

By Jennifer Khoo

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biz.hk 1-2 â&#x20AC;˘ 2017

O

n 23rd September 2016, Ocean Park Hong Kong was awarded certification under American Humane Association’s global Humane Conservation program for animal welfare. Hong Kong’s homegrown marine life-themed park with a focus on education and conservation joins an elite group of only six institutions worldwide to earn the prestigious Humane Conservation seal of approval, and is the first to be certified in Asia.

American Humane Association (AHA), the first national humane organization in the United States and the world’s largest certifier of animal welfare, launched the program in June as the world’s first-ever certification devoted solely to verifying the humane treatment of animals living in zoos, aquariums, and conservation centers across the globe.

In its latest white paper Arks of Hope: Ambassadors for Animals, AHA advocates for the humane treatment of animals within these institutions, and for the value that these institutions bring - not only to animals and the planet, but to jobs and economies around the world.

Inherent value of conservation Researchers believe the world is amid a “sixth mass extinction,” this time driven by humankind and the unprecedented rate at which our ever-expanding population is consuming the planet’s finite resources.

Our dominant presence on earth has been steadily encroaching upon the natural habitats and homes of animals in the wild, placing more pressure than ever on conservation efforts to sustain those animal populations being slowly edged out of existence.

Dr. Robin Ganzert, President and CEO of AHA, believes that humanity has a moral obligation to preserve wild and endangered animals for the benefit of all life on earth. But to make sure conservation efforts are sustained far into the future, educating people – especially younger generations – on the issue is key.

“People won’t protect what they don’t love and they can’t love what they don’t know,” she says.

To this end, zoos and aquariums provide spaces for people to learn about and appreciate animals which we might otherwise never see in person, says Dr. Ganzert.

In addition to safely housing and sustaining critically endangered species, many reputable institutions have breeding programs which support the conservation and preservation of certain species.

Alongside these commendable efforts, she says zoos and aquariums must also uphold high standards of animal welfare, and ideally be endorsed by credible third-party certification like AHA’s Humane Conservation program.

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Sea mammal trainers at Ocean Park

Troubling ethics of wildlife tourism In many poorer parts of the world, the concept of animal welfare is still very much abstract. In places like India and Cambodia for example, animals are still used extensively within the tourism and entertainment industries, providing a desperately-needed source of income for many.

But within recent years, countless cases of animal cruelty and neglect have been brought to light, prompting renewed concern from the international community and denting tourist numbers to zoos and aquariums in developing countries.

Thailand’s infamous Tiger Temple made headlines in June 2016, when investigators discovered forty dead

64

tiger cubs in the Temple’s freezer during a raid, amid long-standing allegations of animal abuse at the institution.

Prior to the raid, the “animal sanctuary” was long considered a top tourist attraction in Thailand, drawing millions of visitors from around the world to sit and play with the oddly tame wild beasts, for a fee.

The scandal forced wildlife tourists everywhere to reevaluate their knowledge of what truly happens in these institutions behind closed doors.

The troubling ethics of wildlife tourism isn’t just applicable to developing countries. The US is littered with “roadside zoos,” many of which have suffered their fair share of bad press concerning cases of animal abuse and neglect at the hands of improperly trained and unqualified “zoo” staff.

Several undercover investigations at such attractions

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Park conservationists in action

Onlookers watch a feeding session at Ocean Park

have revealed ghastly treatment of animals exploited for lucrative photographic opportunities, including overhandling and food deprivation.

The solution: Raising awareness From AHA’s standpoint, the solution isn’t necessarily to shut down these poorly-managed attractions but to help them improve, by transforming them into humanely-run, safe havens for animals, for the purposes of conservation and public education.

No doubt proper resources are required to make this aspiration a reality, starting with sufficient funding, which by far remains the biggest challenge (particularly in developing countries.) Under these circumstances, simply raising awareness of the issues can be effective

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on two levels.

First, it can place pressure on local governments to introduce proper legislation concerning animal welfare, and perhaps even secure funding. The goal is to convince governments that investing in wildlife conservation will bring economic benefits, among others, to countries.

Second, it can demonstrate to local communities that from a livelihood perspective, properly managed wildlife attractions can be just as profitable, if not more so, than many of the morally-questionable attractions in operation today.

Just as many modern consumers are willing to pay a premium for humanely farmed meat, many tourists – if given a choice - would happily pay more to visit animals in humanely-run institutions.

In a survey conducted by the Association of Zoos and Aquariums (AZA), the results revealed that for most visitors, learning was one of the top reasons for visiting these institutions, and animal welfare – knowing that these animals were kept in enriched environments- as well as experiential factors, contributed most greatly to their satisfaction with a visit.

This is evidence of a growing trend that visitors to zoos and aquariums value these institutions increasingly for the education and conservation benefits, rather than solely as a place for entertainment.

Economic value of conservation The success of Ocean Park in Hong Kong is evidence of the economic benefits a wildlife attraction can bring to a city when combined with a focus on

65

Dr. Robin Ganzert (fourth from right) with representatives from Ocean Park Hong Kong and AHA

learning and proper conservation. local students ranging from kindergarten to senior During FY2014/15, the Park recorded its secondary. third-highest ever annual attendance Since the inception of the Park’s and second-highest ever overall “People won’t protect education programs in 1992, close to revenue of nearly HK$2 billion 800,000 students have taken part in (US$258 million). During that period, what they don’t love different courses to learn about the Park also started construction on and they can’t love conservation. two new major affiliated projects: its Hopefully, AHA’s certification of on-site Hong Kong Ocean Park Marri- what they don’t know.”

Ocean Park Hong Kong will set the ott Hotel and the long-awaited seafront benchmark for other zoos and aquariwater park, Water World, anticipated to open in the ums in the region, serving as proof that investing in second half of 2018. conservation isn’t just the right thing to do; it can also These new initiatives will not only enhance Park be profitable, in every sense of the word. visitors’ experiences and strengthen Hong Kong’s appeal as a tourist destination overall, but will also contribute significantly to the local economy.

Ocean Park’s Chairman, Leo Kung, told local press Animal Welfare - Animal Welfare is a human last year, “The hotel project is expected to create responsibility that encompasses all aspects of animal approximately 3,500 employment positions during the well-being, including proper housing, management, construction phase and, upon completion, approxidisease prevention and treatment, responsible care, mately 500 hospitality positions; whilst the Water World humane handling, and, when necessary, humane project is projected to create 2,900 jobs and add euthanasia. AHA are advocates of this stance.

HK$842 million to the GDP by 2018.”

Animal Rights - Animal Rights is a philosophiUltimately, the Park remains committed to cal view that animals have rights similar or the same supporting conservation and education within the local as humans. True animal rights proponents believe community. that humans do not have the right to use animals at In 2015, the Park donated HK$13.3 million to the all, and wish to ban all use of animals by humans.

Ocean Park Conservation Foundation Hong Kong Definition provided by the Animal Welfare Council (OPCFHK), during FY2014/15, and offered around 1,600 conservation education courses to over 53,000

Welfare vs. Rights

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biz.hk 1-2 • 2017

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Creating effective solutions To know more about our services, please visit www.colliers.com/hongkong.

MARK YOUR CALENDAR Feb China's Power Revolutions:

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Clean Energy Boom, Pricing Reform

Joseph Jacobelli Senior Asia Utilities Analyst & Asia Content Coordination; Bloomberg Intelligence, Bloomberg L.P Two key policies were announced with China's 13th Five-Year Power Development Plan (2016-2020). One is the continued focus on shifting the generation mix away from thermal coal in favor of non-fossil fuel energy consumption. The other is the move towards market-based electricity pricing. The two areas face significant execution challenges while proposing dramatic changes to China's energy complex as well as have a deep, transformational impact on existing industry participants and new entrants.

Joseph Jacobelli has been involved in Asia’s energy sector since 1990. He joined Bloomberg Intelligence (BI), Bloomberg's research arm, in 2013. At BI he leads Asia's utilities industry and company-level research. He is also responsible for research content coordination for the Asia region. Prior to joining BI, he was Global Head of Cleantech and AsiaPacific Head of Utilities research at HSBC Global Research.

He altogether spent 21 years in sell-side equity research with leading global investment banks, including Merrill Lynch, and was ranked at various times in Institutional Investor, Greenwich and Asiamoney.

Feb The Impact of Travel

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Evelyn Chan, Head of Environmental Affairs, Cathay Pacific Airways Carmen Ng, Director of Sustainability, Langham Hospitality Group Natalie Chan, Principal Sustainability Consultant, PIE Strategy Limited Hong Kong residents are among the most frequent travelers in the world, and total outbound trips are expected to grow 7 times faster than total household growth over the next few years. How can business travelers and individual tourists minimize their negative impact, while bringing benefits to local communities? Whether driven by cost savings or by business principles, the hospitality, travel and tourism industries are recognizing that the environment, local communities and human capital are valuable resources to be protected – and that the long-term business sustainability of these sectors will depend on both industry transformation and individual traveler behavior.

Evelyn Chan joined Cathay Pacific Airways, Hong Kong in 2010. As Head of Environmental Affairs, she is responsible for formulating and developing the company’s Sustainable Development Strategy and driving sustainability into the mainstream of the business, so as to ensure the company is well-positioned to face the challenges of a carbon and resource -constrained future.

In Carmen Ng’s role, she leads and drives the sustainability strategy within the Group.

She is responsible for a diverse range of sustainability programmes including strategy and policies development, management system, capacity building, stakeholder engagement, communication and reporting.

Natalie Chan has close to 15 years of experience in corporate responsibility and sustainability management, and is now the Principal Sustainability Consultant at pie strategy.

Feb Trump's Impact on US Corporate Taxation

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Ivan Strunin, Managing Director, U.S. Tax Services, Deloitte Asia Pacific International Core of Excellence Peter Guang Chen, Partner, Zhong Lun Law Firm There is much speculation about how President Donald Trump will revamp the US tax system. We will have a panel of US tax practitioners discussing some of the prevailing views of what those changes will be, and how they will impact businesses selling to the US. In addition to the taxation of businesses in the US, we will look at the impact on the global supply chain and discuss what steps you may wish to consider.

Ivan Strunin is a member of the Asia Pacific International Core of Excellence (AP ICE) which is a core group of senior tax professionals that provides international tax services to Asia Pacific based companies investing abroad as well as multinational companies investing in the region. He also leads Deloitte's International Strategic Tax Review practice in Asia.

Peter Guang Chen is both a certified public accountant and an attorney with more than 20 years of experience, and who is practicing in Hong Kong. His has advised multinational companies on their investment structuring, regulatory, and business issues; mergers, acquisitions, reorganizations in the U.S., China and the Asia Pacific region; He has represented both companies and individuals to resolve tax disputes with tax authorities in the US and China.

He is a partner at Zhong Lun Law Firm’s HK office, leading the U.S. tax practice.

For information, see website: www.amcham.org.hk

Tel: (852) 2530 6900

Venue: The American Chamber of Commerce in Hong Kong 1904 Bank of America Tower 12 Harcourt Road Central, Hong Kong

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Venue: The American Chamber of Commerce in Hong Kong 1904 Bank of America Tower 12 Harcourt Road Central, Hong Kong Time: 12:00pm - 01:45pm Fee(s): Member: HK$280 Non-member: HK$400

Fax: (852) 2810 1289

Email: byau@amcham.org.hk

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