austcham news Issue 173

SMALL BUSINESS EDITION The Australian Chamber of Commerce Hong Kong and Macau 香港及澳門澳洲商會

ISSUE 173, 2015

Cross-border opportunities the key for SMEs to boost profit margins P.8

Hong Kong Focus Hong Kong - Where Business Goes to Grow

P. 16 AustCham Westpac

Australia-China Business Awards Finalists – P.14

Special Feature: Small Business Corner www.austcham.com.hk

Contents

austcham news issue 173 03 Chamber Chatter 05 Events Update 2 June - Selling up, Selling down, but not selling out 5 June - The Future of the Flexible Workplace 12 June - 10th CEO Forum - Dealmakers-Negotiation and

'Winning the Deal' in APAC

06 Cover Story Cross-border opportunities the key for SMEs to boost

profit margins

08 Hong Kong Focus Hong Kong - Where Business Goes to Grow

10 Australia Focus Australian Budget 2015 - with implications to SME sector

and expats 12 Industry Insights Hong Kong and the OnDemand Logistics Economy

Published By: The Australian Chamber of Commerce in Hong Kong and Macau Room 301-302, 3/F, Lucky Building 39 Wellington Street, Central., Hong Kong Tel: +852 2522 5054 Email: austcham@austcham.com.hk Editorial Committee: Drew Waters Karen Wu Advertising: Karen Wu

Follow us on: Facebook Twitter LinkedIn

LinkedIn

14 AustCham Westpac Australia-China Business Awards ACBA 2015 Finalists Cocktail 16 Small Business Corner Tips on how to manage your bookkeeping

and accounting

18 AustCham ANZ Mentor Program

20 Membership eCard Benefit

21 Platinum Patrons Profile Australia and New Zealand Banking Group

22 On The Scene

Online version: Electricity is closely linked to daily lives and economic development in Hong Kong. The Government is holding a public consultation on the Future Development of the Electricity Market. Full consultation document can be found at www.enb.gov.hk AustCham Sustainable Development Committee is now studying the consultation document and will engage in dialogue with different stakeholders. We welcome feedback from all AustCham members. Should AustCham members like to share your views, please contact caness.chan@austcham.com.hk

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Email: karen.wu@austcham.com.hk

CONNEC T • ENGAGE • REPRESENT The Australian Chamber of Commerce in Hong Kong and Macau has more than 1,500 members from some 500 companies doing business here.

It’s the largest Australian business grouping outside the country and the second-largest of 28 International Chambers of Commerce in Hong Kong. The AustCham mission is: To promote & represent Australian business & values while enabling members to connect, engage & grow bilateral relationships.

Disclaimer: The views expressed in this publication are not necessarily those of the Australian Chamber of Commerce in Hong Kong and Macau, its members or officers. The Australian Chamber of Commerce in Hong Kong and Macau takes no responsibility for the contents of any article or advertisement, makes no representation as to its accuracy or completeness, and expressly disclaims and liability for any loss however arising from or in reliance upon the whole or any part of this publication.

Copyright © 2015 The Australian Chamber of Commerce in Hong Kong and Macau

Chamber Chatter

Chairman's Column

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mall and medium-sized enterprises (SMEs) are the focus of this issue of AustCham News. This is fitting because upwards of 60 percent of our members are SMEs. They form the backbone of the Australian economy too, and the recent federal budget provided some much needed support to SMEs in Australia through cuts in the company tax rate and via tax deductions for asset investments. These changes will be welcomed by SMEs back in Australia and may be of some benefit to our SME members who also do business there.

Disappointingly, however, the budget provided nothing of substance in support of deeper engagement with Asia.

In recent years we’ve seen Australian governments trumpet the importance of Asia first through the lens of the (excellent) White Paper on Australia in the Asian Century, then by initiating the well-intentioned New Colombo Plan, and most recently through the progress on a free trade agreement with China. Yet it is hard to identify exactly what all this means in terms of developing new ties and new business between Australia and Asia in the near-term, or indeed in the long-term, because it appears that little is being done to turn policy and rhetoric into progress.

Where is the follow through on the recommendations of the White Paper? Where is the support for developing new industry that will better position Australia in the Asian century? Where are the new ideas (and funding) in support of deeper people-to-people engagement? Why isn’t Australia’s diplomatic footprint in China growing more rapidly? Noting that the Australia-China Council has found that Australia has a significant representation in Europe and the Americas at the expense of Asia, where economic opportunities are manifest; where is the action on this? And why doesn’t Australia better benchmark Asia in its approach to regulation and tax, and in myriad other ways, if it wants to remain competitive? Where is the long-term thinking on Australia-Asia economic and business engagement? It certainly isn’t evident in the recent budget.

The importance of the Asia-Pacific region to Australia’s economic future has been recognised by governments led by both major political parties, by Australia’s business community, and by the population at large. The growth of the Asia-Pacific region holds out the potential for new and larger markets for Australian companies and industries, new sources of supply for Australian businesses and consumers, new investment sources and destinations, and new sources and destinations for travellers and migrants.

But there is a pressing need for: 1. both business and government to better understand the Asia-Pacific region; 2. a more Asia-focused education system in Australia with a focus on developing “Asia literacy”; 3. a greater understanding of, and adjustment for, socio-political differences; 4. (often irrational) opposition to foreign investment in Australia to be more clearly thought through; 5. The development of government policies in support of increasing Australian skills that are relevant to Asia; 6. free trade agreements to be better followed through with trade development programs and funding; and, 7. a proactive Asia-Pacific mindset on the part of the business community in Australia; if Australian businesses are to maximise their potential in the Asia-Pacific region, then they will need to be proactive in addressing customers, partners, and competitors in those markets.

These are just some of the issues and challenges that Australia must deal with if it is to become an even more integral part of the Asia-Pacific region. For Australian companies to realise their full potential in Asia, a compact between business, government, trade unions, and communities will need to be formed. There are various mechanisms and levers that can support such a compact but the most recent federal budget doesn’t help much, so other solutions will need to be found.

I hope that you will connect with the Chamber this month in some way, and that you will continue to share your views on how best the Chamber can serve you.

Richard Petty chairman@austcham.com.hk

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Chamber Chatter

A word from Wellington Congratulations to all of the worthy winners of the 22nd Annual Australia-China Business Awards, 2015.

The Australia-China Business Awards presents us in Hong Kong with the ideal opportunity to showcase excellence across Sino-Australia business. This sparkling event awards winners in nine different categories, of all different sizes of organisations and individual achievements, and honours them in front of their peers and competitors, media, and government officials from Hong Kong and Australia.

It was with pleasure, we are able to welcome The Honourable CY Leung, The Chief Executive of the Hong Kong Special Administrative Region to open the event, Her Excellency Mrs Frances Adamson, The Australian Ambassador to The People’s Republic of China as guest of honour, and The Honourable Richard Alston AO as our guest speaker.

I would like to heartily thank Westpac, for again rising to the challenge as principal supporters of the awards, our category sponsors Australia Trade Commission, Cheung Kong Infrastructure, CLP, China Southern Airlines, CPA Australia, and Waratah Group, and our event partners Australia Plus, MCI, Treasury Wine Estate, and Brandwerk. Without their generous support, a successful evening such as this would not have been possible.

We have formally kicked off the Mentoring Programme for 2015 with the continuing and very welcome support of ANZ. Starting with the now quite famous, “Speed Matching” function earlier in the month, the first information session was held a few days ago with a great turn-out. I’d like to wish all of our Mentor-Protégé pairings the best of luck for the programme, and offer congratulations to all those graduating from the 2014 programme. I am sure they will return in some capacity in the future, perhaps as Mentors or as guest speakers.

Her Excellency Frances Adamson will address our Macau members at the end of the month in a private briefing session followed by our scheduled Macau Mingler. I always look forward to meeting our members in Macau, either there or at events in Hong Kong, and look to strengthen the ties through information sessions such as the Ambassador’s visit.

In closing, I’d like to offer my thanks and encouragement to those nominees and finalists who did not win categories at ACBA this year. I understand decisions by the judging panel were very close, so I encourage them all to consider nominating again for next year’s awards. I’ll see you all in September, in Beijing.

Drew Waters Chief Executive

A bear market to invest in

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nimals Asia is inviting enterprises of all sizes to join a major funding drive for its bear sanctuaries in China and Vietnam by matching donors' donations dollar for dollar.

Five levels of support are on offer with rewards such as naming a rescued bear and/or a bear den at one of the charity’s rescue centres. Other benefits include a plaque at the sanctuary and recognition through Animals Asia’s worldwide promotion channels.

The Hong Kong-headquartered NGO urgently needs to expand its sanctuaries to take in more bears rescued from the brutal bile industry – including the remaining 38 bears still on bile farms in Vietnam’s World Heritage listed Ha Long Bay and surrounds.

Animals Asia is working to end bear bile farming and has rescued over 540 bears to date. But thousands of bears remain trapped in cages on farms throughout Asia. Bile is extracted from the bears’ gall bladder and used in traditional medicine and household products like toothpaste.

For more on the appeal and how to get involved, please contact our new Young Executive member, Bianca Fischer at bfischer@animalsasia.org.

Community Corner AustCham is a non-profit organisation and provides this space free of charge to other, selected non-profits or charities.

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udget week is one of the biggest in the Parliamentary calendar. Peak associations, lobbyists and political tragics descend on Canberra to hear about the Government and Opposition plans for the nation’s future, and try and influence them. Hotels are booked out, taxis and hire cars work overtime and the nation’s capital restaurants, cafes, function rooms and bars are packed for days.

The Abbott Government’s second Budget was dominated by small business incentives, national security, improving female participation in the workforce through childcare and paid parental leave and public service job cuts.

To boost growth, the Government has given small business owners a AUD20,000 upfront tax deduction on asset purchases and a 1.5 percent tax cut.

National security was given a AUD1.2 billion boost to combat the rising terrorist threat and the Australian Security and Intelligence Service, Attorney-General’s Department and Australian Crime Commission were all handed extra funding.

However the rest of the Federal public service was not as fortunate, with eight departments to undergo ‘functional reviews’ and more job cuts in sight. That’s after the Abbott Government has shed 17,300 jobs

since it came to office. The Government is also continuing its campaign to reduce public service pay and conditions.

Another new scheme that will be of particular interest to expatriates relates to changes to HELP debts. From 1 July 2017, Australians with HELP debts who are working overseas will be required to make payments on their loans once they are earning more than AUD53,345.

The Opposition Budget Reply speech outlined not just a plan for the future, but a plan for the decades to come. A plan to build beyond the mining boom to capitalise on the imaginative, caring, productive and adaptive Australian people. The Opposition placed infrastructure, education, small business, science and technology and start-ups at the centre of its vision, to attract the best minds, support our great institutions and encourage home our talented expatriates.

A number of the measures the Opposition considered unfair in last year’s Budget still remain, such as huge cuts to health and education. In 2015, the Opposition will continue to campaign against these cuts, and continue to develop policies to take to the next election for a smart, modern and fair Australia.

Gai Brodtmann MP, Federal Member for Canberra

EVENTS UPDATE MAY AT A GLANCE

Thu, 28 May, 6:30pm – 10:30pm Australia-China Business Awards Gala Dinner Grand Ballroom, Grand Hyatt Hong Kong, 1 Harbour Road, Wanchai, Hong Kong Fri, 29 May, 4:30pm – 5:30pm Macau-Australia Relations Briefing Belon, 31/F, Banyan Tree Macau, Avenida Marginal Flor de Lotus, Cotai, Macau Fri, 29 May, 5:30pm – 8:00pm Macau Mingler Belon, 31/F, Banyan Tree Macau, Avenida Marginal Flor de Lotus, Cotai, Macau

JUNE AT A GLANCE… Tue, 2 Jun, 8:00 – 9:30am Selling up, selling down, but not selling out Thomson Reuters, 42/F Gloucester Tower, The Landmark, Central, Hong Kong

Fri, 5 Jun, 8:00am – 10:00am The Future of the Flexible Workplace CBRE, 3/F, Three Exchange Square, 8 Connaught Place, Central Fri, 12 Jun, 8:00am – 9:30am 10th CEO Forum - Dealmakers-Negotiation and 'Winning the Deal' in APAC Herbert Smith Freehills Office, 23rd Floor, Gloucester Tower, 15 Queen's Road Central, Hong Kong Wed, 17 Jun, 12:30pm – 2:00pm Corporate Travel Management: 7 Ways to Reduce Corporate Travel Spend AustCham Business Centre, 3/F, Lucky Building, 39 Wellington Street, Central Thu, 18 Jun, 8:00am – 9:30am Breakfast with Ivan Colhoun NAB Chief Economist, Markets Tianshan and Lushan Room, 5/F, Island Shangri-la Hong Kong, Pacific Place, Supreme Court Road, Central Thu, 18 Jun, 6:00pm – 9:00pm Mix at Six Alibi, 5/F, Langham Place, Mongkok, Hong Kong, 555 Shanghai Street, Mongkok, Kowloon, Hong Kong issue 173 | austcham news

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Cover Story

Cross-border opportunities the key for SMEs to boost profit margins - By Michael Wray, a former News Ltd journalist now based in Australia.

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ong Kong small and medium enterprises have been urged to embrace new technologies and seek growth in China to overcome their pessimistic outlook for 2015. The call comes as sentiment in the local SME sector remains battered by uncertainty about the global economy and below average domestic growth, according to two leading industry surveys.

The surveys, conducted by Standard Chartered Bank and CPA Australia, highlighted the need for local SMEs to expand their horizons beyond the local market in a bid to boost their dwindling profit margins. There are more than 300,000 SMEs in Hong Kong and they employ about 48 per cent of private sector employment however many have found it difficult to replicate their success outside of the territory.

The CPA Australia Asia Pacific Small Business Survey found that only 39 per cent of participating Hong Kong SMEs expected their business would grow in 2015, making the territory the most pessimistic of the eight countries involved. Just after the report was released in late 2014, CPA Australia Business Policy Advisor Gavan Ord said the results showed Hong Kong SMEs were continuing to suffer from ongoing global volatilities. “With its high level of international exposure, Hong Kong is still experiencing the lingering effects of global economic uncertainty and below average domestic economic growth,� he said.

He said the results in Hong Kong were slightly better than the previous year however SMEs were particularly concerned about increasing domestic costs such as rent and staff as well as domestic competition.

Small business confidence in Hong Kong remains low with only 39 per cent of respondents expecting the economy to grow, especially when compared to attitudes in Mainland China where 71 per cent of respondents are confident about the economy next year Patrick Yeung 6 • austcham news | issue 173

“Small business confidence in Hong Kong remains low with only 39 per cent of respondents expecting the economy to grow, especially when compared to attitudes in Mainland China where 71 per cent of respondents are confident about the economy next year,” he said.

Patrick Yeung, Divisional Past President – Greater China, CPA Australia, said Hong Kong small businesses needed to address their position and look to expand into China for further growth. On the business side, he said operators needed to focus on business management including cost control, cash flow management and customer retention.

“Trading conditions are certainly challenging and when you see the more positive results in Mainland China and Singapore, it is clear businesses in Hong Kong need to step up to meet the competitiveness challenge,” he said.

“The results suggest a widening gap between Hong Kong and Mainland China in not only confidence levels, but digital innovation of business. Mainland China businesses are more likely to expect online sales growth (79 per cent) when compared to Hong Kong (53 per cent). Hong Kong businesses should further embrace e-commerce to expand their businesses into China where domestic consumption is booming and business confidence is high.”

The pessimistic mood was backed up in the Standard Chartered Hong Kong SME Leading Business Index for the first quarter of 2015.

The index rose 2.2 points from the previous quarter to 50.1 however remained three points below the level for the same quarter in 2014.

Any score above 50 represents a positive outlook.

According to the survey of more than 800 SMEs, global uncertainty and profit margins remained the biggest drags on confidence. The retail sales sector also recorded a negative outlook for the first time ever.

“Business optimism among Hong Kong SMEs has been weakening over the past year,” the report said.

“Although the index has improved this quarter, the downward trend is still observed. In 2015, Hong Kong, as well as the global economy will continue to face a lot of uncertainties. Therefore, the neutral business sentiments on the business environment for SMEs in the short term should remain unchanged.”

While Hong Kong SMEs have struggled to connect with their neighbouring markets, Australian Trade Minister Andrew Robb has recently started a two year-long campaign to help SMEs expand into Asia. Mr Robb is hoping that his government’s recent free trade agreements with China, Japan and South Korea will spark a wave of entrepreneurship in the SME sector. He has started a series of information sessions to help exporters understand opportunities in Asia created by the FTAs. The government hopes the sessions will reach at least 10,000 SMEs over the next two years.

“Reaching out to business and helping make our FTAs accessible is something governments over the years, haven’t always done as well as they could have,” Mr Robb said.

“These agreements with our first, second and fourth largest trading partners, offer too much promise to risk low utilisation rates. That’s why the government has created the seminars to ensure businesses understand the agreements and are fully aware of the potential benefits they present.”

Mr Robb said the agreements delivered by the Abbott Government with Japan, Korea and China would provide preferential access to a market of more than 1.5 billion people.

“These agreements put our home-grown businesses in the driver’s seat in these lucrative Asian markets, creating endless opportunity in a variety of sectors, from manufacturing and food production to our world-renowned services sector,” Robb said.

He said SMEs were in a strong position to sell high-end services and products into Asia.

“They have to be at the premium end to make the most of their opportunities,” he said.

He cited the growing trade in premium oysters from Australia.

Already well established in Hong Kong, traders are now expectantly waiting for greater access to China, Japan and South Korea as well as chasing increasing opportunities in countries such as Singapore and Malaysia.

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Hong Kong Focus

Hong Kong Where Business Goes to Grow The city is the ideal platform for Australian companies aiming to extend their reach across Asia Pacific

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ong Kong is an ideal hub for business, given its low and simple tax regime, ease of setting up, strong rule of law, world-class infrastructure, proximity to Mainland China and some of Asia’s fastest growing markets. The city’s international culture, dynamism and bustling vigour are second to none.

What makes Hong Kong stand out is that it can offer different things to different companies. As “the world’s freest economy”, barriers to entry are low and this benefits not only the growing number of Fortune 500 companies that are starting to put global operations in the city but also a new wave of smaller companies and individual entrepreneurs who are starting new business ventures in Hong Kong.

In 2014, InvestHK, the government department responsible for foreign direct investment (FDI), has helped 355 businesses to set up or expand in Hong Kong. Companies from Mainland China make up about one-fifth of the 355 completed projects, and 95 percent of clients rated InvestHK services as “very useful”. These

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355 completed projects have created more than 2,676 jobs in their first year of operation or expansion. The total investment amount was HK$8.9 billion.

“Increasingly, companies choose Hong Kong for its global reach, and there is a trend for more multinationals to use Hong Kong as a global headquarters rather than just a regional headquarters. At the same time, the rise of the startup entrepreneur with global ambitions is changing the face of foreign direct investment into Hong Kong,” Simon Galpin, Director-General of Investment Promotion, said.

In late 2014, InvestHK conducted a survey on Hong Kong’s startup ecosystem. An online questionnaire was completed by 27 target respondents (23 co-work spaces and four incubators). As compared to only three co-work spaces in 2010, the total number has grown to 35 in 2014, providing a total of 2,826 workstations. There are more than 1,065 registered startup companies in these spaces and more than 2,390 staff (including founders) are employed by startups.

The rise of the startup entrepreneur with global ambitions is changing the face of foreign direct investment into Hong Kong.

Simon Galpin, Director-General of Investment Promotion, InvestHK

The startup scene in Hong Kong has grown rapidly through the concerted efforts of the broader startup community. These include initiatives launched by various stakeholders in the ecosystem entrepreneurs, government bodies, corporations, universities and investors, all of whom are passionate about contributing to the future development of innovation-driven entrepreneurship in Hong Kong.

In 2013, InvestHK launched the StartmeupHK Venture Programme which included a one-stop portal for startups (www.startmeup.hk), a global business plan competition, integrated social media-led marketing, and a Venture Forum to promote Hong Kong as a startup destination and encourage entrepreneurs from all over the world to set up in the city and take their business global. In 2014, the global competition attracted 550 entries from entrepreneurs and founders in 47 economies worldwide, an increase of 40 percent compared with the 2013 programme.

Australian Businesses in Hong Kong Hong Kong has long been host to many of Australia’s leading companies looking to secure a foothold in the Asian market.

The city is home to an estimated 80,000 Australians. Over 600 Australian companies do business in Hong Kong, with many of them using the city as a springboard to Mainland China.

These businesses are a diverse and vibrant group and active in insurance, building, road construction, telecommunications, banking and education.

InvestHK has been actively supporting Australian businesses to set up or expand their business in Hong Kong. Examples span across a wide range of businesses in sectors such as consumer products (Aesop), ICT (AccessHQ), food and beverage (Wooloomooloo Group), business and professional services (King & Wood Mallesons), and financial services (ANZ).

Luke Grana, an Australian startup, has recently set up his online fashion retail business in Hong Kong. “InvestHK has been pro-active in introducing us to the right partners, ranging from finance, legal, real estate, logistics and marketing. With its broad network and pro-active approach, it has been really able to help Grana to become what it is now,” he said.

About InvestHK Setting up a company in Hong Kong is easy and inexpensive and is made even easier with the ongoing support of InvestHK. InvestHK supports overseas and Mainland businesses to set up and expand in Hong Kong. It partners with clients on a longterm basis and is available to provide support at any stage of their business development process. The department’s services are free, customised and confidential.

For more information about the StartmeupHK Venture Programme, please visit www.investhk.gov.hk or www.startmeup.hk.

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Australia Focus

Australian Budget 2015

– with implications to SME sector and expats - By Ian Thomson, AustCham Finance, Legal and Tax Committee member.

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oe Hockey, the Australian Treasurer tabled the 2015 budget which appears to have achieved broader acceptance than last year’s budget. In essence this has been achieved by softening the deficit reduction program reflecting softer economic conditions, a focus on taxation integrity, widening back an ‘excessive’ parental leave promise, and certain measures to drive Small and Medium Enterprise activity. Being promoted as the “Tradie’s Budget”, the stimulus given to the SME sector is a direct attempt to boost economic growth which has remained sluggish despite the easing of monetary policy by the RBA over the last 12 months.

Economic Climate This budget is expected to continue delivering on a quarter century of economic growth for the Australian economy despite the vicissitudes in the advanced economy outcomes over the period, and an easing of growth in China as this economy shifts from a construction and export orientation to a service and

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consumer orientation. Basic expectations are for continued soft economic outcomes with real GDP growth at 2.5 to 3.0%, and inflation in the 1.5% to 2.5% driven by external price experiences. However, an absence of a clear view on the interest rates and currency stability should be a concern, particularly if commodity prices recover.

The Government is predicting a budget deficit of $35.1b in 2015/16.

The recognised major economic issue for the economy is the necessary shift in economic mix from the iron ore mining investment boom and LNG development, as these industries shift to production, to a broader-based economic growth and productivity improvement. The Budget initiatives are focussed on this change, supported in part by the fall in the currency exchange due to falls in commodity prices and interest rates, as well as a strengthening of the US economy.

Headline Initiatives

Expats and the Budget

• SME tax rates and capital expenditure immediate write-off

Certain changes or recalibrations exist for expats in the budget; • Reductions in certain pension payments for Australians offshore from 26 week continuance to 6 weeks • Higher Education Loan Program repayment has now been extended to capture recipients offshore based on worldwide incomes

Specifically cutting the income tax rate to 28.5%; immediate write-off on capital expenditure items up to an individual item cost of $20,000 and start-up costs. Plus other initiatives in this line • Farming Drought support enhancement, in face of a new El Nino.

• Parental Leave wind-back & Childcare support Representing a wind-back of the Prime ministers over promise for ‘double dipping’; and increased childcare benefits • Tax Integrity measures • MNC tax avoidance measures targeted at a weakness in current Tax treaty agreements recognised by G20OECD to reduce or eliminate large scales tax avoidance structures.

These rules will target global groups with annual revenues exceeding A$1b.

• Extending GST to foreign supplying digital products and services – although not yet a reduction in the under $1,000 exemption.

It is not clear on how this will be enforced, but it appears that there will be a registration and filing requirement for residents when leaving Australia.

• Unclaimed monies and Superannuation tracking are improved for expats to minimise lost tracking Trade implications and The China-Australia Free Trade Agreement (ChAFTA) Colleagues have pointed out that there is unfortunately little in the budget directed at continuing positioning Australia for ‘the Asia century’. Although, the government sees The ChinaAustralia Free Trade Agreement nearing activation, the FTAs with Korea and Japan now closed, and the FTA negotiation with India as furthering such a position. In addition, the government has funded programs by Austrade for development of business engagement in China, India and Asean and is investing in new consulates for Foreign Affairs into Asia.

Another initiative seen in this context is provision of $5 billion concessional loan facility to drive private funding of infrastructure investment in Northern Australia bringing in part the primary and secondary industries closer to the Asian markets.

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Industry Insights

Hong Kong and the OnDemand Logistics Economy In my opinion Hong Kong has always been an OnDemand economy. Even before the term was coined in its modern context – the people of Hong Kong have always expected to get their food quickly, get home quickly, and move stuff around quickly. But what is an OnDemand Economy and why should we care?

- By Mark Sims, Moderator of AustCham Small Business Network.

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f we look at it from the most simplistic view - an OnDemand Economy allows the fulfilment of demand - as and when it occurs in real or near real-time. That simply means that when somebody wants something - they get it.

However, practicality has always been a barrier to the obtainment of a true OnDemand Economy.

The traditional model of demand fulfilment has involved a value chain that is sequential, similar to the following diagram; Research and Discovery Yellow pages, now Google

Service Provider Connection Phone, now email or WhatsApp

immediate demand satisfaction has contributed to compressing and changing the Hong Kong demand fulfilment value chain to look more like this; Instant Feedback and Rating Research And Discovery Service Provider Connection and Interaction

Waiting

Time

Activity Scheduling

elivery Activity D n ompletio Activity C ent & Paym

Activity Scheduling Usually Manual Waiting Time Waiting for the service provider to turn up at the appointed time Activity Delivery Performance of the activity - usually later than scheduled Payment and Cycle Completion Cash, then credit, now PayPal and alternatives

The Internet started changing and streamlining this, and with the ubiquitous availability of high speed mobile data - this value chain has been completely disrupted.

Research and discovery is now done through crowd sourcing from the convenience of your phone, or tablet (think Yelp and OpenRice).

Being connected with a Service provider is done through a specialist app (Such as Uber) or through an aggregating app (such as GoGo Van). Activity scheduling and tracking is now in real time (think UBER) and payment is a simple swipe of your phone (ApplePay and AliPay).

The combination of high speed mobile data connections, technology enhancements, disruptive startups, and a population that craves

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Where the research, connection and scheduling is all done within a single aggregation application or platform, compressing the time required by the individual consumer to make a purchasing decision from the comfort of their living room couch.

Waiting time has been compressed as technology allows the allocation of orders and requests to be immediately dispatched to available resources already deployed in the field.

Activity delivery, completion and payment has been combined into a single phone swipe or ‘tap’.

User engagement has been intensified, allowing for instantaneous feedback to the supplier and to the wider community – feeding into the ever growing crowd sourced rating and information research pool.

What does this mean for Hong Kong?

Mobile OnDemand has resulted in the democratisation of (i) information, (ii) product offering, and (iii) service provision.

I would suggest that in many ways it has also resulted in the commoditisation of these offerings. So what does this mean? In terms of democratisation, customers get more choice and cast their vote through the engagement of services or product purchase, thereby sending clear signals on what is acceptable and reducing the likelihood of customers accepting an inferior offering – as may have been the case in the past. In terms of commoditisation, the democratisation and sharing of information

has a downward pressure on pricing as the ability of providers to differentiate themselves and therefore command a pricing premium is minimised. This trend has seen massive improvements for the consumer in terms of informed decision making, availability of choice, improvement in service, and the rectification and airing of grievances. If, for instance, we take food ordering site and application FoodPanda - consumers are able to find take away (or self-collect) food availability at the last minute across cuisine types, price points and locations, thus making informed decisions based upon their current needs.

If we look at how this trend has impacted Hong Kong and our life’s, we simply need to look at four logistic startups that are having a profound impact on how we live and interact with the world around us (please refer to the table below).

None of these companies are original in concept. Where they differ from their predecessors is how they have used technology to enhance the logistics side of their offering and thereby bring convenience and a paradigm shift within their field and how their customers view the industry. For example;

• Food Panda has used a technology platform to incorporate the take away menus of a number of different restaurants, allowing customers to order the food style they want and have it delivered at a convenient time, reducing the research and decision making time required.

Whats the Impact Mixed blessings. For the consumer the emergence of these companies has, with a few exceptional circumstances, been a very positive occurrence. For suppliers that are able to use these platforms it has resulted in access to a wider potential customer base and increased revenues, but for others it has meant increased competition, price pressure and transparency. And the pressure will continue. With OnDemand trends in retail, logistics and the transportation industries improving product quality, customer service levels, process efficiency and access to services - there is no doubt that there will be a further flow on affect to these and surrounding / complimentary industries. But in what way?

Customer Experience in the OnDemand World

• GoGo Van has used technology to transcend language barriers allowing their customers to use an app on their phone to find, price and schedule a cargo transport service, making vans and trucks accessible on an ad-hoc basis to the wider population in Hong Kong.

This will be the single most important aspect of disruption caused by these companies as we move deeper into the OnDemand economy. The way in which products and services are discovered and fulfilled will, and is currently changing. While many consumers are now engaging with their providers through Mobile Apps - this is not a silver bullet to embracing and surviving the OnDemand Economy. Those providers that are able to understand, embrace and even innovate within the trends that are surfacing for OnDemand will flourish. Those that merely react or refuse to embrace the OnDemand movement will find that their product is further commoditised as price becomes the only differentiating feature.

• Go N Live has used technology to enable their customers to schedule and track the storage of their individual boxes and items, allowing them to reclaim their living space. Technology allows the customers to create a visual catalogue of what is stored so that the retrieval of individual items can be easily outsourced to the Go N Live moving teams.

The customer will clearly be the winner as the emergence of companies that are embracing technology, adapting to the needs of the customer and embracing a changing environment bring new and more rewarding customer experiences to traditional industries either at the same price point or potentially at a lower point as technology efficiencies are embraced.

• Uber has used technology to access the spare capacity of people’s cars to provide an instantaneous On-Demand driver for their client base. Customers can now use their phone to locate, order and track a personal driver to transport them to where they need to go.

Personal Transportation

Cargo Transportation

Personal Space Management

Meal Fulfilment

Company Name

Uber

GoGo Van

Go 'N' Live

Food Panda

Tag Line

Evolving the way the world moves.

Your exclusive "PocketCarriage".

Giving you back your space 1 box at a time.

foodpanda in your pocket!

Get our app, it's the fastest way to order food on the go.

What they do?

Connects you with personal drivers in realtime.

Connects you with cargo drivers in near real time

Provides an on-demand mini storage solution.

Provides an on-demand food delivery service across restaurants.

Disrupted Industry

Taxi / Limousine

Transportation

Mini Storage

Restaurant

OnDemand Level

Real Time

Near Real-Time

Next Day.

Within the hour

Impact

Allows us to get where we need to be when we need to be there

Allow us to get easy access to cargo transportation services

Allows us to create a bigger living space without getting rid of our stuff.

Allows us to instantly order take away food based upon our specific tastes.

issue 173 | austcham news

• 13

Australia-China Business Awards 2015 The AustCham Westpac Australia-China Business Awards (ACBA) has for 22 years been a means of recognising companies that have worked to deliver Australian products or services to the Greater China region. The Awards recognise excellence in business, but also the ever-growing importance of the business relationship between Australia and China, a relationship that has been boosted by last year's China-Australia Free Trade Agreement.

Congratulations to all the Finalists Business Excellence Award for Agriculture, Food and Beverage

Business Excellence Award for Business Innovation

•

• • •

• • • •

Asian Agribusiness Recruitment, Training & Development Blackmores Limited Bridestowe Estate Yellow Earth Australia

Sponsored by Cheung Kong Infrastructure

Helen Kaminski Pty Ltd Laservision Limited SmartBuyGlasses Optical Group Yellow Earth Australia

Business Excellence Award for Construction, Infrastructure and Natural Resources

Business Excellence Award for Education and Training

• • • • • •

• CPA Australia • University of Wollongong • SMS Management and Technology Asia

Bridestowe Estate Goodman Asia Greater Group Pty Ltd Marshall Day Acoustics Pty Ltd MadePartners Limited Sino Gas and Energy Holdings Limited

Business Excellence Award for Services Sponsored by China Southern Airlines • •

• • • •

Argyle Hotel Group Australia Computershare Hong Kong Investor Services Limited Greater Group Pty Ltd King & Wood Mallesons Royal District Nursing Services Transtar International Freight

Sponsored by Australian Trade Commission

Business Excellence Award for Start-up Enterprises Sponsored by CPA Australia

• Bon App! • MadePartners Limited • Zenda Green Energy Company Limited

THANK YOU TO People’s Choice Award for Advancement of Women in Business OUR SPONSORS Sponsored by CLP Holdings Limited Business Excellence Award for Sustainability and Social Impact •

• • • •

• Michelle Garnaut • Susan Heffernan ANZ Global Services and Operations (Chengdu) NAMING RIGHTS SPONSORS • Fiona Nott Company Limited Blackmores Limited Bridestowe Estate Goodman Asia SmartBuyGlasses Optical Group

THANK YOU TO OUR SPONSORS

THE 2015 ACBA IS PROUDLY SPONSORED BY

AWARD CATEGORY CATEGORY SPONSORS AWARD SPONSORS

NAMING RIGHTS SPONSORS

SEE Y NEXT IN BEIJING

AWARD CATEGORY SPONSORS

14 • austcham news | issue 173 SUPPORTING PARTNERS

Thank y forward Austral hosted

The 2015 AustCham Westpac Australia-China Business Awards Finalists cocktail was held in late April at The Australian Consulate Hong Kong, to congratulate all the finalists who had demonstrated business excellence across different sectors.

AustCham Chairman Professor Richard Petty congratulates the finalists and thanks our sponsors.

Deirdre Lander of OBE Organic and Deborah Biber of Blue Moon Communications.

Andrew Whitford, Westpac’s Head of Greater China commented on the great success stories of Australian companies thriving in China.

Xiaoxu Cheng and Eva Lau of China Southern Airlines.

Jeff Zhang of Argyle Hotel Group Australia and Adele Chui of Computershare HK Investor Services Ltd.

Elizabeth Dorrough of Treasury Wine Estate and Michael Boddington of Asia Agribusiness Recruitment, Training & Development.

Deborah Leung of CPA Australia and AustCham Chief Executive Drew Waters.

Elizabeth Gualtieri, Phil Pearce and Stephen Lee of Goodman Asia.

Ricky Wong, Alice Chan, Michael Li and Roy Mak of Westpac.

Dr. Bill Damachis of University of Wollongong and Ryan Arrowsmith of Greater Group.

Annie Meyer of Transtar International Freight and Austcham Board Director Fiona Nott.

Andrew Steadson of MadePartners Ltd, Australian Consul General Paul Tighe and Martin Goodacre of Westpac.

Matthew Clarke of SMS Management and James Ravens of Bridestowe Estate.

issue 173 | austcham news

• 15

Small Business Corner The Chamber’s Small Business Network (SBN) provides interested members with meetings, speaking events, networking events and cross chamber activities; the opportunity to generate referrals and business within the network; and a platform to provide assistance and professional guidance.

The Network is proudly sponsored by Primasia.

Tips on how to manage your bookkeeping and accounting

M

any start-ups and existing small business entrepreneurs neglect the importance of bookkeeping of their businesses until they receive the Profit Tax Return from the Inland Revenue Department or until the end of the financial year.

Here are five tips to make bookkeeping easier and to manage your business better: 1. Accounting software: It is important to organize your accounting records from the beginning by using user-friendly accounting software that suits your needs. Alternatively, by using cloud accounting software, you can access the software anywhere that has an internet connection, so no need to use a particular computer or be stuck in the office.

However, always ensure you keep backups of your financial data as a security measure.

2. Annual compliance: Business owners have to understand the local tax filing requirements when they set up their new Hong Kong company. In Hong Kong, every limited company is required to file an annual Profits Tax Return together with audited accounts to the Inland Revenue Department.

3. Keep the bookkeeping up to date: Your business records should include bank information, sales record and invoices, records of expenses and cash book. You need to be organized, keep your records up-to-date and then hold on to them for seven years from the transaction date. Trying to find documents later makes the job ten times as hard. It is also an offence not to keep adequate records. You can be penalized for not doing so with fines of up to $100,000.

4. Make bookkeeping part of your regular routine.

Set aside time periodically to prepare and review the accounting data. Regular reviews will let you know how your business is going and allow you to control your cash flow. If you

16 • austcham news | issue 173

don’t have the time to spend away from your business to do the bookkeeping, you may have to consider outsourcing so that you can concentrate on operation and other duties.

5. Keep an eye on your invoices to avoid cash flow crunch Allocate time each week to track your billing. Then put a process in place if a bill goes unpaid. Every late payment is an interest-free loan that hurts your cash flow. Moreover, keep looking for ways to improve the cash flow of the company.

- Teresa Tam, Business Development Manager of Primasia.

InterChamSME: How to Hire, Keep and Grow your SME Employees?

I

was interested to attend this InterSME breakfast because it is particularly relevant to my own business, a company that provides clients Marketing professionals to fill the talent gaps, and keep the clients’ business running until they find a longer term solution.

As discussed in the session, the problem of attracting and retaining good talent, whether it be F&B staff or senior business executives, is a critically important one. To this point, there was a very big watchout from panellists for managers of company’s who are not proactive in how they manage this core business issue as it means they are not operating at full strength which, as outlined, can critically impact a business’s momentum and, ultimately competitiveness. The clear message from all panellists was that managers need to understand what truly motivates their employees to attract and retain them, whilst proactively managing the negative immediate day to day

operational consequences of not always having the right people and skills at hand to get the job done well.

So I do appreciate the opportunity to attend events like these as that helps me directly understand key business issues that directly affect me and my clients. I thought all the panellists spoke relevantly about their personal experiences which very much helped bring the issue to life. A special mention must go to Suzie Quirk from KPMG who I thought brought some really interesting really interesting insights to a couple of tough questions on managing outgoing employees.

Thanks again to AustCham for the invite and to the Spanish Chamber for co-hosting in what were lovely surroundings.

- Chris McMillan, The Three Marketeers

issue 173 | austcham news

• 17

AustCham ANZ Mentor Program

AustCham Chief Executive Drew Waters welcomes the 2015 class.

Amy Benger of Ernst & Young and Rica Bartlett of I Love Ltd.

Christine Lampert of University of South California and Angela Chan of HSBC.

Patrick Dwyer of Asia Gateway Enterprises and Jordan Campbell of Ove Arup & Partners HK Ltd.

18 • austcham news | issue 173

Bianca Fischer of Animals Asia and Ly Gour of Commonwealth Bank of Australia.

Frederick Tai of Aoba Business Consulting and Jason Jia of Eclipse Options.

T

he kick-off event for the AustCham ANZ Mentor Program 2015 was held on Monday 11 May. The evening started with a welcome cocktail followed by a speed-matching session, whereby protégés and mentors have three minutes to get acquainted.

In the coming year, the program will run through a combination of group professional development sessions, panel discussions, one-on-one mentoring meetings as well as social and networking gatherings.

Special thanks for the continued support from ANZ, AustCham’s Mentor Program is now heading into its third year.

Vivian Ng of Brookfield Global Relocation Services and Cherry Chu of Societe Generale.

- Mary Barbara Hanna, AustCham Mentor Program Manager Program sponsor:

AustCham Mentor Program Manager MaryBarbara Hanna introducing the guidlines of the matching session.

Mark Hanna of Dominos International and Gautam Dev of Eastspring Investments.

Vanessa Yen of Commonwealth Bank of Australia, Megan Walker of HBO & EMTB Urban & Landscape Design with Benjamin Wong of Wells Fargo.

issue 173 | austcham news

• 19

Membership eCard Benefit

AustCham ard Membership eC

Member Classifieds Australia Registered Tax Agent in Hong Kong

Thank you!

Holistic Business Consulting Pty Ltd. Chartered Accountant

Home of your favourite Aussie brands! In May, Kedington Wines offers AustCham members a 15% discount off the entire purchase of Australian wines through their website. www.kedingtonwines.com * Terms and conditions apply. * Offer not applicable on limited or allocated items.

We specialise in tax planning for Australian Expatriates, tax returns preparations, private rulings for deductions. www.myoztax.com Call Tommy Ip on +852 69018136 or email: tommy@myoztax.com

out Watch une rJ for ou r! offe

AustCham Platinum Patrons

AustCham on Social!

CONNECT · ENGAGE · REPRESENT

Follow us for latest chamber news, events coverage and more on our social media platform!

Facebook

LinkedIn

Twitter

Flickr

Instagram

Google Plus

The Australian Chamber of Commerce in Hong Kong and Macau Room 301-302, 3/F Lucky Building, 39 Wellington Street, Central, Hong Kong T E

+852 2522 5054 austcham@austcham.com.hk

F +852 2877 0860 W www.austcham.com.hk

© 2015 THE AUSTRALIAN CHAMBER OF COMMERCE IN HONG KONG AND MACAU

20 • austcham news | issue 173

Platinum Patrons Profile

Australia and New Zealand Banking Group 22/F, Three Exchange Square 8 Connaught Place, Central, Hong Kong www.anz.com/hongkong

ANZ is committed to building lasting partnerships with our customers, shareholders and communities across Australia, New Zealand, Asia Pacific, Europe, America and the Middle East. ANZ provides a range of institutional, commercial, retail, wealth management and private banking solutions to around 9 million customers and employs 48,000 people worldwide.

Why did you choose to join AustCham as a Platinum Patron?

Being a super regional bank with a strong presence in Asia, we are proud to take an active role in connecting our clients regionally as well as providing market insights on topics that are relevant to them.

We believe by becoming a Platinum Patron we can strengthen our existing relationships with the Australian and Hong Kong business communities and expand our presence in Hong Kong.

What does your company do really well?

ANZ's global connections and deep local insights provide customers access to Asia Pacific's expanding trade and investment flows, supporting their domestic requirements and connecting them with our global expertise.

What’s something most people don’t know about your company?

ANZ has a proud heritage of 180 years. We operate in 33 markets globally with representation in Australia, New Zealand, Asia, Pacific, Europe, America and the Middle East. ANZ is a top four bank in Australia, as well as the largest banking group in New Zealand and the Pacific, and among the top 50 banks in the world. We’re also ranked number four behind HSBC, Standard Chartered and Citigroup in the Greenwich Asian Corporate Banking survey and have been for three years now.

Farhan Faruqui Chief Executive Officer, Institutional Client Group

What’s your company’s connection to Australia?

ANZ’s global headquarters is located in Melbourne and we’re listed on the ASX. We first opened as the Bank of Australasia in Sydney in 1835 and in Melbourne in 1838. Australia is ANZ’s largest market, with more than 16,000 employees, serving approximately six million retail and commercial customers through a network of around 800 branches, 115 business centres, 2,700 ATMs and leading online and mobile banking applications.

How would you describe your workplace and colleagues?

We consider a vibrant, diverse and inclusive workforce to be a strategic asset for our business and critical to achieving our super regional strategy. We also believe differences in cultural/ethnic backgrounds, gender, disability, age and orientation generate creativity, which is critical to opening up new markets and business opportunities.

What do you do in your spare time?

I spend most of my spare minutes on the golf course or with my wife and three daughters, who are always my number one priority before golf!

issue 173 | austcham news

• 21

On The Scene

Our

company provides, audit and taxation services.

Additionally, our affiliated company provides accounting and company secretary services for Hong Kong companies.

W www.kkchoco.com.hk T (852) 3996 7398 E kkcho@kkchoco.com.hk

Teresa Tam of Primasia, Mark Smith and Boyd Merrett of Leighton.

Amelia Hall of Walkers and Annie Morgan.

Digby Ross of TMF and Richard Teo.

April ANZAC Day Mix at Six was held at Post 97 at Lan Kwai Fong, commemorating 100 years of ANZAC Day.

Big thanks to event sponsor: Anthony Keenan, Sam Fagan and Justin O’Donnell of Commonwealth Bank of Australia.

Joanne Collett of Walkers and Patrick Dwyer of Asia Gateway Enterprises.

Paul Hill of Headland Developments (middle) with Anni Moyal and Brooke Beales of MCI Group.

James Englebrecht of ANZ, Felicia Cheung of BTG Consulting and Dominic Meagher of Fung Global Institute.

Lily Bednikov of Telstra and Brooke Avory of BSR.

David Gilmour of Deloitte and Gayble Tsang of HKEx.

AustCham Chief Executive Drew Waters with lucky draw winner Ian Robinson.

More coverage can be found on our online photo album: www.flickr.com/photos/austchamhongkong

22 • austcham news | issue 173

Lily Wong of BEA and Amy Chan.

On The Scene AustCham and Telstra together hosted a private luncheon on how multinationals can meet their strategic and financial objectives and further expand in the region.

David Thodey, CEO of Telstra, talks about challenges and strategies for success.

Catherine Livingstone, Chairman of Telstra, shares her insights with guests.

The panel shares an overview of Telstra’s strategy and commitment to its growth in Asia as well as insights into Australian businesses operating globally.

Mr Bowen updated AustCham members on the latest economy and political situation in Australia.

AustCham Chief Executive Drew Waters with Mr Bowen and his delegation members.

Australian Shadow Treasurer, The Hon Chris Bowen briefed the Australian business community during his visit to Hong Kong.

issue 173 | austcham news

• 23

50 Years of big adventures And countless life-changing experiences

In fifty years we’ve learned a lot about what makes relocations more successful for everyone.

With experienced and knowledgable people on the ground in more than 60 countries we equip you well for your relocation: • We’ll help you get to know the destination well before you go • Show you how to make it easier and more exciting for children, and less stressful for pets • We’ll look after your belongings with expert packing and transport • And when you arrive, we can help you get settled quicker and enjoy the thrill of a new place or a different culture.

Tel: +852 2636 8388 hongkong@crownrelo.com

Go knowing

www.crownrelo.com/hongkong