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HONG KONG

BUSINESS

FROM THE EDITOR

Established 1982 Editorial Enquiries: Charlton Media Group Hong Kong Ltd 19/F, Yat Chau Building, 262 Des Voeux Road Central Hong Kong. +852 3972 7166

Many seem to think that Hong Kong has only recently become an expensive place to live.

Publisher & EDITOR-IN-CHIEF Tim Charlton associate publisher Louis Shek production EDITOR Genelie Sta.Ana-De Leon graphic artist Elizabeth Indoy ADVERTISING CONTACTS Louis Shek +852 6099 9768 louis@hongkongbusiness.hk Vanessa Austria vanessa@charltonmediamail.com

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But your editor recalls that when he first moved to the island in 1991, he had to pay $6,000 in monthly rent, a small fortune at the time which accounted for half his salary. Granted, Arbuthnot Road was prime central and more importantly just a flight of stairs away from Lan Kawi Fong and the FCC. Still, at the end of the month and with his SCMP stipend all but spent, economising had to be made. A trip to Quarry bay which started the month in a taxi ended up on the tram just prior to pay day. Fast forward 27 years and it seems things haven’t really changed much, except that the idea of flat sharing has been given a hipster millenial makeover from the tech bros (and gals) in the guise of co-living. Whilst renting a whole appartment can cost from $15,000 a month, some of these new co-living spaces can sort you out with a place to lay your hat from as little as $3,000 a month. There may be a fine line between co-living and dormitory living, but the addition of a fussball table, communal events and some techspirational quotes on the wall can be enough to make people forget they’re space sharing and instead building a community. For more on this phenomenon, we have an article on co-living on page 6. This issue also covers the latest in MBA programmes, reasons why flagship retails stores are being subdivided, and a look at our hottest startups. As always, enjoy the read!

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HONG KONG BUSINESS | MAY 2019

CONTENTS

COVER STORY

18 HK startups cash in on strong VC flows FIRST 12 Expats hunt for co-living spaces 14 Hong Kong flops to 47th spot

in luxury residential property price gains in 2018

EVENT COVERAGE How Asia’s young and crazy rich are pushing banks to re-invent themselves

EVENT COVERAGE Hong Kong companies that pioneered technology excellence recognised at the Technology Excellence Awards

OPINION

ANALYSIS 16 Retailers hit the rent breaks

as fashion brands downsize

22 China firms bag first two

of three virtual bank licenses

32 Virtual cash management tools

take off in Asia regulatory support

44 Hong Kong is catching up

with other APAC markets to embrace sustainability

46 Foam to home in seven years?

A likely story

48 What you could do

with HK$624 billion

RANKING 24 Why HK’s MBA providers

Published Bi-monthly on the Second week of the Month by Charlton Media Group Pte Ltd, 19/F, Yat Chau Building, 8 HONG KONG BUSINESS | MAY 2019 262 Des Voeux Road Central, Hong Kong

are now banking on soft skills

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HOTELS & TOURISM

New players enter scene but an iconic hotel exits Hong Kong Business’ list of 50 largest hotels welcomed new entrants to the hospitality scene in 2018, with The Kerry Hotel, Disney Explorers Lodge, Hotel Vic on the Harbour, and Hotel Cozi Oasis making its way to the list. However, the 45-year-old Excelsior’s looming exit in March deals a blow to the industry, amidst its planned redevelopment into an office block.

COMMERCIAL PROPERTY

HOTELS & TOURISM

Here’s why Chinese developers are on a buying spree of old buildings Hong Kong’s property market scene is experiencing a surge in interest from both Chinese and local developers acquiring older buildings for redevelopment given the challenges they face in the government land sale programme. In 2018, compulsory sale applications from Chinese developers surged 160% YoY to 39 applications received by the Lands Tribunal, based on JLL’s latest Residential Sales Market Monitor report.

Hong Kong takes the world’s 19th most powerful passport Hong Kong ranked 19th in the list of the world’s most powerful passports, placing below Argentina, Brazil and Romania, according to the latest edition of the Henley Passport Index. Hong Kong passport holders have visa-free or visa-on-arrival access to 169 countries, and is joined by Bulgaria and San Marino in 19th place. Singapore, Japan and South Korea jointly took the top spot with visa-free access to 189 destinations.

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FIRST UBER PLEASE

7 in 10 wants to legalise Uber

Uber may not be illegal in Hong Kong but technically it’s not yet legal either, navigating a no man’s land of regulation. So it’s perhaps not surprising that Uber commissioned a survey which found that 74% believe legalising Uber can facilitate service monitoring in the city. That’s perhaps not the same as saying they believe that Uber should be made legal, but at least 60% of respondents believe that the government should take steps to encourage ride-sharing developments in its smart city blueprint. Moreover, 82% of those surveyed believe that promoting innovative technology can raise Hong Kong’s competitive standing. Uber good, taxis bad When asked about their opinion on existing point-to-point services, 64% are of the opinion that taxi services remained stagnant in the past year, and only 11% felt that the services have improved. Hong Kong’s Consumer Council, in a 2017 proposal on regulating e-hailing apps, also recommended that the government needs to reform its approach to e-hailing and taxi services in order to raise the bar in service quality and provide consumers with more choices. That Uber should conduct a poll on Hong Kongers feelings on ride shares and taxis is not surprising, and for understandable reasons the firm does deserve some clear cut regulations so it can better plan its future. Émilie Potvin, Uber’s Head of Public Policy for North Asia said, “Our goal is to provide a meaningful alternative to car ownership but we need a combination of public and private partnerships to make this vision a reality. As the Hong Kong government pursues its smart city ambitions we urge them to consider smart mobility. Urban planners tackling traffic congestion issues, and Hong Kongers travelling around the city could equally benefit from Uber’s technology and data.”

HONG KONG BUSINESS | MAY 2019

Expats hunt for co-living spaces

housands of millennials in the city who aren’t eligible for public rental housing have to grapple with the prospect of living at home or paying up to 80% of monthly salary in rent. Many are now opting for co-living schemes, whilst living in Hong Kong, as a form of shared housing, which typically consists of separate rooms with private bathrooms and communal facilities, such as kitchens, living areas and laundries. The number of such facilities in Hong Kong has almost tripled since 2017, according to JLL data. Recent co-living developments include Synbox in Hung Hom and Weave on Boundary in Prince Edward, where a single room costs $2,800 to $9,500 a month. “Coliving developments are becoming more of a lifestyle choice. They are particularly appealing to expats who seek a community to meet people in a new city without the need to commit to a long-term lease. This means operators and investors will have greater flexibility to increase rents,” says Denis Ma, Head of Research at JLL Hong Kong. Aside from students, co-living schemes can target a broader mix of tenants, including young professionals. Co-living schemes are emerging in the city and are very similar to student housing. Rental affordability is a

Reading room at Weave on Boundary, Prince Edward

They are particularly appealing to expats who seek a community.

significant contributor to this trend. The average rent for a 440-sqft apartment was HK$16,760 per month in June 2016, whilst the median income for a young professional was just HK$21,250. This means that they would have to pay almost 80% of their monthly salary in rent. With this, co-living can provide an affordable alternative with shared rooms starting at just HK$3,000 per month. Hong Kong also has a large proportion of transient non-local professionals who come for both shortterm and long-term work contracts. Co-living is particularly appealing to these expatriates as it provides them with a community to meet people in a new city without the need to commit to a long-term lease. The added demand from students who are unable to secure residence on campus and local young professionals seeking to live independently at a price they can afford provide solid fundamentals for the rise of co-living spaces in Hong Kong.

insurance

Voluntary Health Insurance Scheme goes live in Hong Kong Insurance companies in Hong Kong ranging from top international players to virtual insurers have been approved to join $1.3b (HK$10b) health insurance programme. These include AXA, AIA, Cigna, Manulife, Prudential, Zurich, FWD, Bupa, BOC Life, FTLife and Bowtie. By awarding an annual $1,019 (HK$8,000) tax break for each family member who is put on the plan, the Voluntary Health Insurance System (VHIS) aims to take pressure off the ageing public medical system through tax incentives that help facilitate entry into the private system. The programme also ensures that older residents can avail of private health insurance past 60 years old and unlock lifetime cap for compensation. Under the VHIS, policyholders will be covered up to 100 years old with an annual compensation of $420,000.

Wan Chai Jaffe road AXA Centre

Manulife centre

FIRST

Hong Kong flops to 47th spot in luxury residential property price gains in 2018

he prices of posh residential properties in Hong Kong rose by just 1.8% in 2018, which translates to a weak 47th spot that it shares with Cannes on luxury home price gain rankings and signals a drastic turnaround from what was once one of the most preferred hubs of the ultra-rich, according to real estate consultant Knight Frank. Although Hong Kong’s property market has defied sluggish conditions and has broken new price thresholds every year, 2018 marked a significant turning point for the city. “The stock market slid 13.6%, its worst decline since 2011, and interest rate hikes influenced buyer sentiment,” David Ji, head of research for Greater China at Knight Frank said in a report. A separate report by JLL forecasts that less than 100 new luxury units sized 1,722 sqft or above will be completed in the city’s prime districts, including The Peak, Southern district, Kowloon Tong, Homantin and MidLevels, in 2019. Hong Kong joins the ranks of cities like Auckland, Beijing, Guangzhou, Shanghai and Vancouver where stiffer regulations were put in place in an attempt to rein in soaring property prices. As a result, these cities only saw single-digit growth in luxury

home prices. “As we learn to live without the ultra-low interest rates that have supercharged real estate markets globally since 2008, lower price growth is an inevitable consequence of the shift in monetary policy,” the report’s authors noted. Despite the ongoing property downturn, the luxury segment is proving to be more resilient than the weakening mass segment. In fact, capital values in the mass residential property market have retreated by 4.2% since peaking at the end of August 2018, whilst capital values for the luxury segment stayed largely flat in Q4 2018. This trend can also be observed in the previous market downturn in 2016 when capital values in the mass segment fell by 10.1% whilst the posh market segment saw a more controlled decline of 1.9%. “Whilst the luxury residential segment is being supported by cash-rich investors that stay fixated on acquiring their dream homes, the mass segment is more sensitive to market sentiment and filled with buyers that are more pragmatic when making purchasing decisions,” Henry Mok, Senior Director of Capital Markets at JLL, said in a statement. “Taking into account that there will less than 100 units completed in

Posh home prices rose by just 1.8%

traditional luxury areas in 2019, the top-end of the market is likely to remain more resilient to faltering market sentiment through the current downturn, especially if it is shorter and milder than expected.” Who topped the list? Close regional competitor Singapore managed to snag a spot in the top ten at seventh place as luxury home prices rose 9.1% in the Lion City even as the property market still reels from a harsh round of cooling measures that kicked into effect in July 2018 and saw developers struggling to dispose of their projects. In a surprise development, the Philippine capital Manila nabbed the top spot as posh home prices surged 11.1% followed by Edinburgh where luxury residential prices rose 10.6% after nearly a decade of subdued growth. Berlin comes in at third place with 10.5% whilst Munich and Buenos Aires are tied at fourth spot with 10% price gains. Mexico, Boston, Madrid and San Francisco round out the top ten.

real estate

Commercial real estate investment jumped 40% to $205b in 2018 Massive inflows into the office sector in 2018 single-handedly lifted Hong Kong’s 2018 commercial real estate investment volumes by 40% YoY to a record $204.09b (US$26b), according to a report from UBS. Office transactions doubled to $115.39b (US$14.7b), on the back of several large deals such as the $53.38b (US$6.8b) partial stake sale of Li Kashing’s The Center. Net absorption in the overall Hong Kong office market hit an eight-year high of 3 million sqft in 2018, although leasing activity turned sluggish. This in turn affected occupier demand from Chinese companies, which is likely to remain a factor in corporate real estate decisions in 2019 given that there are no signs of capital controls letting up. “What does work in the office market’s favour is the low vacancy rate, as rents in Central and overall Hong Kong Island hit record highs in 2018 as vacancy rates continued to compress to all-time lows, supporting rents,” Chan and Toh explained, noting that even in the decentralised market of Kowloon, vacancy rates

HONG KONG BUSINESS | MAY 2019

have trended downwards despite high supply volumes. On the other hand, commercial investment volumes into the industrial sector remained flat, whilst the retail property only saw a slight increase in transaction volumes. “There was a discernible tapering off of investment flows in H2 2018, and given already rich pricing and more muted sentiment, investment volumes in 2019 are expected to moderate from the record high levels in 2018,” the report’s authors Adeline Chan and Shaowei Toh said.

Real estate investment volumes

Source: Real capital analytics; UBS Asset Management, Real Estate & Private Markets (REPM), March 2019

Far East Finance Centre in Admiralty

Analysis: Retail leasing from luxury, especially jewellery and watches, to focus more on the mass market, and this will therefore have less of an impact on prime rents.

Suburban retail malls enjoy patronage amidst new Mainland links.

Retailers hit the rent breaks as fashion brands downsize Landlords are expected to subdivide large retail spaces into smaller units amidst diminishing demand for flagship stores in prime locations.

he 2018 numbers are in and it’s been a bad year for both retailers and landlords, with rental growth grinding to a halt by Q4 2018. Retail sales grew only 1.4% YoY in November, the slowest growth rate registered since June 2017, with the performance of core sectors such as jewellery and watches remaining relatively sluggish, with some retailers reporting single-digit declines. Even the new high-speed train terminal failed to lift the sales or spirits of retailers. Despite bringing in 40.3% more same-day visitors YoY in November, overnight visitor numbers rose only 6.1%, showing these new tourists are more day trippers. Mainland same-day visitors tend to spend much less on shopping than overnight visitors and they focus on daily necessities, pharmaceutical products and cosmetics. The only real winners from the new Mainland links are the retail malls attached to them. Suburban retail areas, including Tung Chung, Yuen Long and Tuen Mun, are benefiting from the Hong Kong-MacauZhuhai Bridge; the 55-km bridge has recorded average daily patronage of 16

HONG KONG BUSINESS | MAY 2019

Mainland sameday visitors tend to spend much less on shopping and they focus on daily necessities, pharmaceutical products and cosmetics.

68,500 people from October 24th to December 23rd, noted estate agency Savills. Elements, the premium shopping mall adjacent to the West Kowloon Terminus Station, has already seen a noticeable increase in mainland visitors since the opening of the new cross-border railway link even if actual traveller numbers were below previous forecasts (an average daily passenger patronage of 50,000 vs 80,000 forecast in December 2018). Savills thinks that in view of the changing profile and spending patterns of mainland visitors, Hong Kong’s retail market may shift away Prime street shop rental charges

Source: Savills Research and Consultancy

Retail supply A total of 2.3 million sqft of new supply will come on stream in 2019, the highest level since 2006. Half of the new supply is accounted for by New World Development’s landmark mixed-used project in Tsim Sha Tsui, Victoria Dockside. K11 MUSEA, the 1 million sqft shopping mall component is scheduled for completion in Q3 2019. Other notable new additions to the market include the 345,000-sqft extension of Citygate in Tung Chung and Sun Hung Kai Properties’ V Walk atop Nam Cheong MTR Station. The 298,000-sqft mall in Nam Cheong has already been fully leased and will open its doors in mid-2019. Downsizing and subdividing Meanwhile, property consulting firm CBRE notes that with fast fashion operators focusing on developing their online platforms with a view to fine-tuning their omnichannel offering, leasing demand for large flagship stores in prime locations is diminishing. With this progress, landlords are therefore expected to subdivide their large retail spaces into smaller units in order to quickly fill occupancy. Some of these bigger property leases include local pharmacy chain Watsons, which committed to several new leases including a space along Paterson Street in Causeway. Elsewhere in the SAR, Lung Fung Pharmacy committed to new leases in Tsim Sha Tsui and Mong Kok.

Hong Kong’s hottest startups 2019

The total funds raised by Hong Kong firms hit $26.2b in 2018

HK startups cash in on strong VC flows This year’s crop of hottest startups includes Hong Kong’s first virtual insurer; a firm aiming to revolutionise the renovation industry and a Virtual Reality entertainment startup that offers an immersive gaming experience.

n this edition of Hong Kong Business, we present a list of the 13 hottest startups in Hong Kong based on total amount of financing. This list includes companies engaged in a diverse range of sectors, from e-commerce and pet insurance to digital banking and AI chatbots. Funding was provided by both traditional VC deal flow of companies based in Hong Kong (2009-2019)

big-name financiers and private investors. Although we have tried to create a comprehensive list, we cannot verify all funding amounts declared. Nevertheless, we hope you find this list sufficiently informative. Feel free to send feedback or startup pitches to research@ charltonmediamail.com. 1.

Oriente

Founders: George Prentice Funding: It completed a US$105m initial funding round from a group of family offices, including members of Malaysia’s Berjaya Group, Philippines’ JG Summit Holdings and Indonesia’s Sinar Mas, in November 2018. The deal marks one of the largest initial funding rounds in fintech. Start of operations: 2017

Source: PitchBook

HONG KONG BUSINESS | MAY 2019

Committed to driving financial inclusion, Oriente launched mobile ventures in two Southeast Asian markets includiding Cashalo in the Philippines and Finmas in Indonesia to provide credit access to the emerging middle class and MSMEs via smartphone. Powered by AI, machine learning and data science, the app can provide real-time credit scoring and provide offline and online lending. The startup aims to use the funding proceeds for product developments and regional expansion.

Hong Kong’s hottest startups 2019 2.

5. Ztore.com

Sandbox VR

Founders: Steve Zhao Bermingham Funding: The startup raised US$68m in a series A funding round from US-based VC Andreessen Horowitz in January 2019. Alibaba, Floodgate Ventures, Stanford University, Triplepoint Capital, and CRCM also joined the round. Start of operations: 2016

Start of operations: 2015

Founders: Danny Shum and Clarence Ling Funding: Online retailer Ztore.com‘s cap surpassed US$8m after its series B funding round in October 2018 which provided mainly by Kwai Hung Group and Welight Capital.

Ztore.com feeds the demand for both mass-market and niche brands through over 1,000 products from home-grown firms. Food and With operations in Hong Kong, Singapore, California and drinks, household supplies, and medicines are some of the items Vancouver, location-based VR entertainment startup Sandbox VR for sale. The online store intends to “deliver a better living” to its offers players an immersive gaming experience that ranges from customers whilst letting them enjoy a personalized and convenient fighting zombies to building cities. Users can roam freely in Sandbox shopping inspired by the traditional “shi-duo” (Hong Kong store). VR’s mall locations where they can enjoy top-notch hardware and The funding will allow Ztore.com to upgrade its website, launch a unlock movie-quality content experience. mobile app, and improve its warehouse and logistics operations. 3. Bowtie Life Insurance Company

Start of operations: 2017

Founders: Fred Ngan and Michael Chan Funding: The startup raised US$30m (HK$234m) in series A funding in December 2018 from Sun Life and HKX-Technology.

Bowtie Life Insurance Company is the first startup to receive a virtual insurer licence from the Hong Kong Insurance Authority under the fast-track scheme. As a virtual insurer, the startup can only offer its life and medical insurance products directly to consumers online and not via intermediaries like agents or banks. By banking on an infrastructure-lite approach, Bowtie hopes that consumers can realise cost benefits from its zero commissions business model. 4. OneDegree Founders: Alex Leun and Alvin Kwock Yin-Lun Funding: The online insurance startup has obtained US$25.5m (HK$200m) funding for its pet insurance business. The fresh financing comes from institutional and family investors, which has not been named prior to regulatory approval. Start of operations: 2016 OneDegree plans to offer medical insurance for 510,000 cats and dogs in Hong Kong. Pet owners can easily obtain insurance coverage through the app, which automates policy management and claims processing. It also includes digital accounts maintained by pet owners to keep the animals’ health information The platform also removes the middleman by directly providing the product

6. Goxip Founders: Juliette Gimenez and YC Lau Funding: After raising US$5m worth of funds from photo application company Meitu in January 2018, the Goxip e-commerce platform has attracted an additional US$1.4m investment from financial services firm Convoy. Start of operations: 2016 Known as the “fashion Google” and a “shoppable Instagram,” Goxip serves as the leading destination for searching and purchasing a wide range of fashion and beauty products. Aside from providing a convenient shopping platform, Goxip has a “Shop the Looks” function that allows users to interact by sharing content about their style preferences. The company reportedly has 300,000 users in Hong Kong and Malaysia, and aims to expand into Thailand. 7. Neat Founders: David Rosa Funding: As of October 2018, digital bank Neat has obtained US$3m funding led by China-based Linear Capital. This development brings Neat’s total capitalisation to US$5m, solidifying its position in the financial technology market. Start of operations: 2015 Neat helps businesses by means of a digital option that avoids the long waiting times and paperworks. The fintech firm’s Neat Business provides credit access to SMEs. Other services include setting up bank accounts and managing payrolls and expenses. Neat’s dashboard presents an overview of the customer’s financial status, and facilitates invoicing, payments, and related tasks. With the new cash infusion, Neat expects to increase its workforce and develop new product features such as multicurrency transactions. HONG KONG BUSINESS | MAY 2019

Hong Kong’s hottest startups 2019 8.

11. Rocketbots

Origami Labs

Founders: Kevin Johan Wong, Emile Chan, and Marcus LeungShea Funding: In its funding round in June, Origami Labs raised US$2.5m to support the company’s promotion of its smart ring Orii in the wearable consumer electronics market. Start of operations: 2015 Origami’s Orii ring has a voice assistance mechanism that helps blind people operate their phones. Bluetooth and advanced bone conduction technology are used to communicate with the phone, so that users can make and take phone calls, send text messages, and receive notifications. Orii’s medical-grade hearing device transforms sound into physical vibration that travels through the user’s finger, thus making daily tasks easier.

Founders: Gerardo Salandra Funding: It raised an undisclosed amount of funding in 2018. Start of operations: 2016 Rocketbots is a software company that creates AI-powered chatbots for businesses seeking to engage customers. The Rocketbots platform uses self-learning AI to help agents manage, respond to and automate conversations. The machine-learning capabilities of the platform means that it will start responding automatically once it learns from the chats. Rocketbots unifies messaging apps in one place to create a holistic view of chats that enables companies to communicate at scale. Rocketbots also lets you proactively broadcast updates, surveys, and files to your contacts. Its client base includes names such as Greenpeace, The Chinese University of Hong Kong, LVMH Fashion Group, and The Hong Kong Jockey Club. 12. Clare.AI

9. Gini Founders: Ray Wyand, Calvin Lang and Victor Lang Funding: It raised US$1.6m from Vectr Ventures in January 2019. Start of operations: 2016 Gini is a personal finance management app where users can link bank accounts, credit cards and mobile wallets and enable users to easily view their expenses across all off their bank accounts in one convenient viewing. The app also has a feature that enables users to pick up, sort and categorise expenses as well as generate visual insights like pie charts and graphs on their spending. Since its beta launch in March 2018, gini claims to have amassed 20,000 users and handled over $6b in transactions in line with its goal of being compatible with over 3,000 overseas banks across 60 countries before 2019 ends by starting with over 60 banks across Hong Kong, France, Switzerland and the UK. 10. HKDecoMan Founders: Benny Liu, Andy Lau, and Simon Tang Funding: It raised US$1.4m in December 2018. Start of operations: 2016 HKDecoMan is a home-based renovation service that provides homeowners with engineer-matching and consultancy services. Users only need to upload renovation unit information into the platform, and a consultant will follow up on the user’s requests within 12 hours. The startup also has a physical office called HKDecoBar, which aims to be the city’s largest renovation experience centre that offers a monthly course and a tools trial-use area stocked with renovation materials, parts and tools. These DIY tools and building materials are all paired with a QR code linked to the items for sale in the firm’s online marketplace, HKDecoMall. 20

HONG KONG BUSINESS | MAY 2019

Founders: Bianca Ho and Ken Young Funding: Undisclosed Start of operations: 2016 Aiming to be the Siri for financial institutions, Clare.AI provides its clients with a whitelabel artificial intelligence chatbot to help provide personalised customer experience across platforms. The startup claims that their algorithm is pre-trained with over 500,000 questions in four plug-n-play modules - customer service FAQ, appointment booking, personal financial management and lead generation (i.e. mortgage and loan-related enquiries). The startup also takes proprietary bank data to enhance the capabilities of its machine learning bots. Given the chatbot’s platform-agnostic nature, Clare.ai allows for integration within existing messaging channels like WhatsApp, Facebook, WeChat, and SMS. 13. FinFabrik Founders: Alex Medana Funding: It raised an undisclosed amount in a funding round on February 2019. Start of operations: 2016 FinFabrik is a fintech solutions builder that specialises in capital markets software. The startup makes use of decentralised ledger technology to renew the infrastructure of capital markets through its range of solutions that target the end-to-end lifecycle, including Crosspool for issuance, CryptoFabrik for trading and QuantFabrik for the market-making of digital assets. Through asset digitisation and tokenisation, real-world assets like equities, fixed income, real estate are divvied up into fractional equity ownership and transformed into digital assets that make use of distributed ledger technology.

Analysis: Virtual Banking

SC Digital Solutions is a joint venture between Standard Chartered, HKT, PCCW and Ctrip

China firms bag first two of three virtual bank awardees

The first batch of licencees were granted to two applicants that already have experience in running a deposit-taking and lending business.

hen Hong Kong officially granted the first batch of virtual banking licences to Livi VB, SC Digital Solutions and ZhongAn Virtual Finance, it signalled a long overdue step to bring the city’s traditional financial services industry into the digital age. Two of the approved players are backed by major banking players that forged strategic partnerships with established merchandising and telcos. Livi VB is a co-owned entity by Bank of China (Hong Kong) whilst SC Digital Solutions is the result of a joint venture between Standard Chartered, HKT, PCCW and Ctrip. The collaboration will allow new virtual banks to offer e-commerce related services and customer experiences different from their parent incumbent banks, Sonny Hsu, VP-senior credit officer, financial institutions group at Moody’s Investors Service said in a note. “With the cost efficiency of running a totally branchless business, they should also be able to offer extremely good rates to attract new customers and retain their existing base. They will also have the advantage of knowing first— 22

HONG KONG BUSINESS | MAY 2019

With a population of just over 7 million, time will tell if there is room for more players in the industry.

hand what traditional banking is doing right and what are the existing customer pain-points,” said Anthony Chiam, regional practice leader, global business intelligence - Asia & Australia at J.D. Power. Only ZhongAn Virtual Finance has no backing from a big banking player, although it can count on the formidable support of securities company Sinolink and online P&C insurer ZhongAn Online, which has extensive experience in running a web-only business. “This venture will enhance ZhongAn’s franchise and accelerate its expansion outside of China. However, it will also put

pressure on its capital because of the potential capital needs associated with supporting the virtual bank’s growth and infrastructure investments, said Zhu. “ZhongAn has a limited operating track record in the banking industry, which indicates there could be a higher execution risk compared with the other two virtual banks.” The prize is a market that has expressed growing dissatisfaction with existing retail banks, with 57% of customers in Hong Kong ready to try out virtual banks as they lament growing problems with their existing e-banking platforms, according to a survey from J.D. Power. “There will be a period of test and learn. With a population of just over 7 million, time will tell if there is room for more players in the industry,” said Chiam. Virtual banking storm With no need to set up branches, virtual banks can deliver the full suite of retail banking services like loans, deposits and payment services to individuals and small businesses through an app or a website. The Hong Kong Monetary Authority (HKMA) subjects virtual banks to the same prudential regulatory requirements with minimum capitalisation of HK$300m and deposit insurance capped at HK$500,000 per eligible account. The regulator is processing five other applications in addition to the three licences that have already been issued. The virtual banking initiative is amongst efforts by the HKMA to transition to an era of Smart Banking following the launch of Faster Payment System, enhanced Fintech Supervisory Sandbox and the rollout of a policy framework on open API.

Summary of first batch of Hong Kong virtual bank licencees

Source: Hong Kong Monetary Authority, HKEX and Standard Chartered Bank (Hong Kong) Limited, MOODY’S

MBA PROGRAMMES SURVEY

The City University of Hong Kong (CUHK) is the second largest provider with 128 students in 2018

Why HK’s MBA providers are now banking on soft skills New modules on Artificial Intelligtence and more focus on experiental teaching over academic knowledge are changing HK’s MBA agendas.

ndrew Chan, executive associate dean, Chinese University of Hong Kong (CUHK) said that their focused curriculum on digitalisation and technology through courses includes AI and machine learning, tech disruptions and innovative business models, and design thinking to help students keep up with changing times. China’s increasing presence in the international business scene has also prompted MBA providers to offer electives around the Chinese business scene and China markets. “CUHK MBA programme stays ahead of the game by offering globally competitive programme that provides the best of international curriculum with our deep China market knowledge. Our concentration option in finance and technology is a truly focused specialisation for finance professionals whilst the entrepreneurship and innovation concentration is for aspirants to start up in Asia,” Chan said. This year, The University of Hong Kong also introduced an elective on 24

HONG KONG BUSINESS | MAY 2019

Students are looking for a quality and innovative programme, one that reacts and looks forward to the rapidly changing world.

artificial intelligence, borne out of a growing interest from the student body not only in the technology itself, but also in its current applications, its ethical dimensions, and its solutions for various business challenges. “Finance and Technology courses like FinTech 101 and FinTech Analysis cater to the needs of working professionals who want to expand their expertise knowledge around finance, technology, especially on the FinTech front. In 2019, we continue to put a strong focus on China, and we have plans to introduce courses around business models in Greater Bay area-cum-Belt Road initiatives and the China business macro environment,” Chan said. Practice over theory Another trend that has emerged over the last few years is the application of concepts to real-life situations as MBAs should prepare leaders for action, and as such practice-based learning is now becoming even more critical. Silvia McCallister-Castillo, also from The University of Hong Kong, said that this year, students can look forward to developing not only

the technical hard skills they need to get an interview, but also the soft skills to lead their teams. For CUHK, students are prepared for the real world through field trips to countries like Chile and Zambia, where they are exposed to different elements of entrepreneurial and startup ecosystems, as well as technological innovation from the other side of the world. CUHK also embarks on outreach activities to Israel and the USA, and delegates their students to lead these activities. “In the pipeline will be electives in the China markets, digital transformation, digital leadership & breakthrough strategy as well as FinTech & payments. We have also been in touch with some top-notch CEOs in the commercial world that would help deliver courses and talks that are essential to develop our students’ skills from different perspectives,” Chan said. Who made it to the list? The University of Chicago Booth School of Business remains at the top of the rankings with its Executive MBA Programme headed by Richard Johnson. The programme receives 80 students per part-time intake, with each intake lasting 21 months and costing $1,355,000. The City University of Hong Kong’s MBA stands at a close second, with a slight drop in the number of students from 131 in 2018 to 128 in 2019. CityU’s full-time intake lasts 12 or 18 months, whilst its part-time intake goes for 24 or 36 months. The General Curriculum for CityU’s full-time and part-time intakes cost $338,000 and $283,600, respectively. Meanwhile, CUHK’s Executive MBA is ranked third with 98 parttime students under a 24-month part-time intake costing $635,000. At fourth and fifth places are CUHK’s MBA Programme and MBA Programme in Finance, respectively. The MBA Programme hosts 99 full-time students and 155 part-time students, whilst the MBA Programme in Finance (part-time only) has 280 enrolees at present.

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MBA PROGRAMMES SURVEY Provider/Local Partner

Executive MBA Program (Hong Kong Campus)

The University of Chicago Booth School of Business

80 per intake

160

Richard Johnson

CityU MBA

City University of Hong Kong

128

131

Kevin Chiang

CUHK Executive MBA

The Chinese University of Hong Kong

Andrew C. F. Chan

CUHK MBA

The Chinese University of Hong Kong

254

223

Andrew C. F. Chan

CUHK MBA in Finance

The Chinese University of Hong Kong

280

293

Ming LIU

EMBA-Global Asia

Columbia Business School, London Business School, HKU Business School

50**

Carol Chan

HKU MBA

The University of Hong Kong

319

310

Sachin Tipnis

HKUST MBA for Professionals (Part-time MBA)

Hong Kong UST Business School

109*

110*

Tai Yuan Chen

HKUST MBA for Professionals Bi-weekly Part Time

Hong Kong UST Business School

69*

64*

Tai Yuan Chen

HKUST Full-time MBA

Hong Kong UST Business School

87*

99*

Tai Yuan Chen

Hong Kong UST EMBA for Chinese Executives

Hong Kong UST Business School

61*

60*

Yan Xu

Kellogg-HKUST Executive MBA Program

Kellogg School of Management, Hong Kong University of Science and Technology.

Judy Au

PolyU MBA

The Hong Kong Polytechnic University

188

113

Pamsy Hui

The University of Hull Executive MBA

Kaplan Higher Education

Rebecca Lui

University of Iowa Hong Kong MBA

University of Iowa Tippie College of Business

Victor S K Lee

University of Northern IOWA MBA

Hopkins Training & Education Group

116**

300**

Clara Chan

Manchester Global MBA (Part-time) Programme

Alliance Manchester Business School, The University of Manchester

355**

*figures retained from 2018 as application process is still ongoing **figures retained from 2018

Total Number of Students 2019 2018

MBA Programme

HONG KONG BUSINESS | MAY 2019

Head of Hong Kong Office/Dean

MBA PROGRAMMES SURVEY Total Number of Students Full Time Part Time NA

80 per intake

Minimum Cost (SG$) Part Time

Full Time

Part Time

Number of Intakes Per Year

1,355,000

21 months

12 or 18 months

24 or 36 months

24 months

"General Curriculum (40 credits): $338,000 44

Duration

Full Time

One Concentration (49 credits): $414,050

"General Curriculum (40 credits): HK$283,600 One Concentration (49 credits): HK$347,410

Double Concentration (58 credits): $490,100"

Double Concentration (58 credits): HK$411,220"

635,000

155

550,000

410,000

12 or 16 months

24 months

280

"511428 (RMB438000)"

24 months

"1429937.78 (US$182,160)"

16-20 months

260

552,000

426,000

14 months

2 to 4 years

109*

450,000

24 months

69*

498,000

24 months

87*

585,000

60*

118,450 - 921,203

16 months

1,370,933.09 (US$175,500)

18 months

188

288,600

2 - 4 years

1 intake per academic year

174,800

2 years

258,000

2 years (maximum: 4 years)

116**

151900**

average 18 months**

2 to 3**

336,800

"General- 2 years Global Accelerated- 18 months Finance Accelerated- 18 months"

355**

12 or 16 months

HONG KONG BUSINESS | MAY 2019

Event coverage: wealth management

How Asia’s young and crazy rich are pushing banks to re-invent themselves The 20 to 37-year-old age group received an estimated $30t in wealth from their baby boomer parents.

ore than half of the world’s newest and youngest billionaires are in Asia, making millennials the runners of the world’s biggest finance landscape - one inheritance at a time. In the midst of increasing digitisation and demographic shifts, Asia’s top financial institutions and wealth managers race to offer the trendiest and most novel deals to high-net-worth individuals (HNWI) especially since the region is the world’s largest HNWI factory, holding more than 50% of the world’s new billionaires in 2017 with a combined net worth of US$2.7t, according to UBS and PwC. Digital wealth in the region is also expected to grow to US$300b by 2025, as digital native clients emerge alongside digital migrants who are also learning the ropes of technology. Globally, one in four of the world’s millionaires are millennials, data from the Shullman

Digital wealth in the region is expected to grow to $300b by 2025 as digital natives emerge along with digital migrants who are learning the ropes of technology.

Research Centre show. Kimmis Pun, managing director and head of private banking, VP Bank, said that this age group of 20 to 37-year-olds are receiving their baby boomer parents’ wealth of almost US$30t whilst inheriting positions of influence as well. As banks transform to cater to evolving client needs, they must also be aware that not all their clients will jump on the bandwagon. One in three banking solutions is purchased from the competitor of a client’s primary bank, mostly through digital means that only need a few clicks. Avishek Nandy, principal, Bain & Company said that hidden defection - the silent fade of a loyal customer as they purchase a product outside of their usual bank - is a rampant phenomenon in the region’s banking scene, which is especially unwanted if the defectors are crazy rich clients. “Banks need to sort of think about

Relationship managers remain indispensable in spite of the technological wave in wealth management

HONG KONG BUSINESS | MAY 2019

going back to the basics of anchoring and value and thinking about how they differentiate and hopefully provide value to their customers,” said Nandy, as he called for client over product centricity. Bhaskar Prabhakara, CEO, WeInvest, said that the nextgeneration wealth platform revolves around several key features: cloudhosted infrastructure and data services; execution and custodian connectivity with multiple venues; exception-based operational support; middle and back office; investment strategies from best-inclass-players; and end-user interface and experience. “By using cloud computing, you can achieve a lower variable cost than you can get on your own. Because usage from hundreds of thousands of customers are aggregated in the cloud, you enjoy higher economies of scale which translates into lower pay-as-you-go

Event coverage: wealth management Relationship managers are the second most important consideration to customer satisfaction, trailing behind effectively managed assets.

HNWIs can monetise art collections to achieve significant returns

prices. When you make a capacity decision prior to deploying an application, you often either end up sitting on expensive idle resources or dealing with limited capacity. With cloud computing, you can access as much or as little as you need, and scale up and down as required with only a few minutes notice,” echoed Nilanshuk Haldar, head of financial services partners, APAC, Amazon Web Services. The evolving role of RMs For HSBC, the trend revolves around not only asset accumulation, but also the customisation of banking services. Mark Surgenor, head of wealth, Asia, HSBC, said that wealth management is something that they feel they should control and take over. Whilst Asia’s rich millennials want digitisation and a greater say over their assets, banks should not be too keen in eliminating their relationship managers. A study by HSBC revealed that relationship managers are the second most important element to customer satisfaction in wealth, trailing behind effectively managed assets which remain the topmost consideration. This is followed by the organisation’s reputation, reporting and reviews, and networking and education. Striking the balance is key as customers at HSBC, for instance, prefer a more tailored contact frequency and hybrid contact strategy between relationship manager-led interactions, supported by digital communication. Michele Ferrario, co-founder and

CEO at robo-advisor StashAway, believes that wealth managers can do more by being simple as it aims to resolve a pain point where many companies have made their processes too complex for their clients and relationship managers cannot be fully trusted to have adequate industry knowledge. ‘Going back to the basics’ means leaning the bank, segmenting its customers, transforming its people, and revamping its process and platform, according to Salisa Hanpanich, executive vice president, First Division and Segment Management Division, Siam Commercial Bank. This begins with moving from a one-size-fits-all coverage through a bank network to an agile and hybrid coverage model. Digging to the core To be fully ready for advanced capital markets technologies, wealth managers should look at asset management fundamentals and consider all trade flows between the buy side, the sell side, and markets. Eichiiro Yanagawa, senior analyst, Celent, pointed to the importance of transaction cost analytics across asset classes as the first step toward an effective handle on performance, cost, and counterparty checking. “Innovative buy side firms are already looking more holistically at total cost of execution in a variety of asset classes and reshaping their trading and execution processes for optimal efficiency by channel. We are getting closer to true multi-asset trading, driven by rapid expansion of electronic trading and regulation

that favours automation and transparency,” Yanagawa said. On the client side, those seeking to maximise investments can look at diversifying their portfolios with assets that generate significant investment returns, such as art collections, especially since generational wealth transfers involve not only money but also propertiesproperties, according to Benjamin Szeto, partner and deputy head of private wealth practice, RHTLaw Taylor Wessing. Leveraging data Compared to clients in the United States, clients in Asia Pacific are extremely open to using digital channels. A survey by Oliver Wyman shows that 100% of respondents from the United States would rather talk to an advisor in a face-to-face meeting, compared to only 72% of respondents in Asia Pacific. Consequently, only 18% of respondents in the United States prefer talking to their advisors via social media channels, a stark contrast to 42% of respondents in the Asian region. Anutosh Banerjee, partner, financial services, Oliver Wyman, said that they are seeing four broad themes that characterise ongoing digitisation efforts by wealth managers: operational efficiency, customer experience, platforms, and advisor productivity. For instance, Credit Suisse and J.P. Morgan are both working toward operational efficiency by digitising manual processes, whilst DBS and Citibank focus on customer experience through improved client interaction and service. On the other hand, Goldman Sachs and BNP Paribas are working on their platforms by providing access to technology solutions or their investor base, and Morgan Stanley and UBS are looking at advisor productivity and efficiency. “The future of finance is invisible,” said Ned Phillips, CEO and founder, Bambu. The future calls for a more intangible way of interacting with clients - be that on Messenger, Skype, or through real-time advisory solutions. HONG KONG BUSINESS | MAY 2019

country report: china

Smaller banks face more severe funding pressure

Banks caught in Beijing’s risky balancing act

The People’s Bank of China has launched a Central Bank Bill Swap to help banks lend more by supporting perpetual bond issuance and replenish capital.

wo months after the world’s second-largest economy posted its slowest growth pace since 1990, Beijing has stepped up its support for the banking sector, highlighting its key role in the government’s plan to sustain the pace of expansion. However, smaller banks will likely face a trying 2019 despite the slew of measures meant to expand capital access and bolster profits. Unlike the goliaths of the banking sector, smaller banks will feel the squeeze on all sides, from the aftershock of the government’s deleveraging drive to the current push to boost lending as a way to support the slowing economy. Larger state-owned banks are relatively more insulated from the current industry pressures compared to smaller private banks, which are more exposed in terms of weaker loan quality, funding concerns and diminished access to both internal and external capital, according to Andrew Wong, vice president, credit research at OCBC, as they enjoy better access to higher-quality borrowers and a robust funding stream via deposit franchises and 30

HONG KONG BUSINESS | MAY 2019

Andrew Wong

Alicia GarciaHerrero

capital market access. With the decelerating economy weakening the ability of businesses to repay debt, the NPL ratio of Chinese commercial banks climbed to a 10-year high of 1.89%. In January, the People’s Bank of China launched Central Bank Bill Swap (CBS) to support perpetual bond issuance, which the central bank reckoned will help banks replenish their capital and be in a stronger position to support the broader economy through their

lending operations. The CBS scheme functions as a policy aid for banks to achieve the ambitious administrative target on lending to the private sectors and expand their balance sheets accordingly, said Alicia Garcia Herrero, chief economist at Natixis. By allowing banks to exchange their holdings of perpetual bonds with central bank paper, this will boost the demand for perpetual bonds and aid the replenishment of non-core Tier 1 capital, said Herrero. “We believe the development of central bank bills are strongly linked to the support for China’s cashstrapped private sector,” said Herrero. “Banks will be supported whilst obliged to lend for China to stem off its rapid deceleration.” “Although China is facing more bond defaults than ever, the problem of rising NPLs has been eased as Chinese banks resort to more write offs and continuous asset securitisation, especially for large state-owned commercial banks,” said Herrero. “That said, banks are able to share the risks of stressed assets with the rest of the financial sectors and household.” Banks in China are set for a trying year as Beijing tries to tread a fine line between stimulating growth and containing financial risks. “The government already appears to have loosened its grip on its deleveraging plan and is seeing the importance of shadow banking to economic growth. In all, growth could be more important than deleveraging.”

Funding and liquidity ratios highlight bias towards megabanks

Source: S&P Global Ratings

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Analysis: Banking

Hong Kong launched a real-time fund transfer scheme in 2018

Virtual cash management tools take off in Asia Global transaction banking revenues are estimated at nearly $1t in 2017 or 43% of wholesale banking revenues, signalling the vast potential in the segment.

ith the cash management landscape in Asia set for a complete digital overhaul, banks should be ready to grab the opportunities arising out of this shift, especially since the stakes for winning in the digitisation battleground are high. Management consultancy firm McKinsey estimates that global transaction banking revenues are at nearly $1t, or 43% of wholesale banking revenues, in 2017. Of this, cash management domestic and cross-border payments, including liquidity management accounts for $500b. The burden on corporates is becoming more palpable: finance staff in banks spend about 15% to 20% of their time on reconciliation due to suboptimal processes, estimated Shekhar Bhandari, Sr., EVP and business head for global transaction banking and precious metals at Kotak Mahindra Bank. “A plethora of payment options in the country have created a landscape for corporate and government bodies to offer multitude channels to their customers, whilst the same has also created complexity and challenges in managing their funds flow and the associated informa32

HONG KONG BUSINESS | MAY 2019

There are expectations from the customer to make the domestic transfer process more online and more transparent.

tion flow leading to reconciliation issues,” said Bhandari. “Corporates are seeking solutions that can ease this complexity to be able to present bills, receive collections, and manage the reconciliation across various channels in a seamless manner.” In India, enabling customers’ business efficiency and integrated cash management solutions has become a key differentiator in what has become a highly competitive industry. Kotak is focusing on developing digital solutions that enable Indian corporates to keep up with their increasingly complex cash management needs. “Quicker integrated product designs and less time to market would be the key to cater to the fast-changing product environment, customer expectations, market dynamics as well as regulatory and technological changes,” said Bhandari. The number and diversity of organisations vying for a piece of the transaction banking pie have risen significantly over the past decade. Potential rivals to incumbent banks now include digital consumer-tobusiness payments platforms and ecosystems, IT companies, export credit agencies and even logistics

companies. “Banks can safeguard their client relationships, expand advisory services, and strengthen margins only if they take the lead in developing new strategies to address digital disruption in global transaction banking,” reckoned McKinsey. “There is significant risk that banks will cede important aspects of the business to emerging digital challengers if they do not take advantage of recent advances in technology, regulatory changes and new partnership modes.” The Hong Kong Monetary Authority earlier introduced the Faster Payment System to facilitate instant payments in both the Hong Kong dollar and the renminbi, with the aim of increasing market needs for more efficient retail payment services and make it easier for customers to making cross-bank and stored value facilities payments. “I think a lot of the Asian countries are pushing for [online and faster payments], because there are expectations from the customer that they want the domestic transfer to be more online and more transparent, and the trend is moving in that direction,” said John Wong, head of global liquidity and cash management at Hang Seng Bank Limited. “From a cost perspective, they’re also expecting charges from domestic transfers to be very low, rather than in the past where the monthly transaction costs quite a lot.” Wong sees such regulatory support and customer demand for automated and secure transactions encouraging banks towards API connectivity as non-bank financial institutions, such as security firms, insurers and property management companies, clamour for API usage. “They are looking for stuff [that is] automated with a very secure interface channel with the bank. That triggers all the excitement about API development.” Wong expects virtual cash management tools to become even more vital in the next five years. “Customers really need transparency. If there are virtual cash management tools which help them to have more transparency, which helps them to aggregate all their idle cash or cash balance across different geographies, and which helps to maximise their returns, that will be a very welcome and important decision making factor.”

banking

Donald Lam, Head of Commercial Banking, Hang Seng Bank Limited

Hang Seng Bank enters a new era in commercial banking

Hong Kong’s leading domestic bank is keen on providing a seamless experience for SMEs and other commercial clients.

ith enhanced apps and other digital initiatives, Hong Kong’s leading domestic bank is keen on providing a seamless experience for SMEs and other commercial clients. Hang Seng Bank Limited is proactively introducing financial technologies to its commercial banking services to ensure greater convenience, speed and choice for SMEs and other commercial customers. “Hang Seng is committed to providing SMEs and commercial customers with comprehensive and convenient solutions through continuous development of fintech and service channels to meet the changing business needs of our customers in a dynamic operating environment,” says Donald Lam, Head of Commercial Banking, Hang Seng Bank. “In addition to proactively introducing financial technologies to commercial banking services, Hang Seng Bank optimised its digital services constantly, including the upgrade of our Business e-Banking platform, expansion of the Business Banking Mobile App, aiming to provide customers with greater convenience, speed and choice as to when and how they manage their financial needs,” he adds. In line with its digital strategy, the Bank has completed a pilot trade transaction for two corporate customers through eTradeConnect, a trade finance blockchain platform in Hong Kong. eTradeConnect

facilitates the processing and financing of trade transactions for corporate customers using Distributed Ledger Technology. The platform further enhances trade efficiency, reduces risk and improves financing accessibility through the digitisation of trade documents and the greater automation of the trade finance process. Enhanced payments and forex functionality Hang Seng launched its all-in-one payment collection service called Hang Seng One Collect in 2018. The service enables stores to accept a wide range of contactless and QR code payment methods like Alipay, WeChat Pay, MasterCard and CUP QR code payment as well as the Hang Seng Cash Dollars redemption through one integrated point-of-sale (POS) terminal. It supports five transaction models including QR code, NFC, Chip Card, Mobile Payment and traditional magnetic stripe card and four ways of merchant connectivity via WIFI, Bluetooth, Sim Card and TCPIP. This service, built with wireless capability, makes it possible for, say, diners, to wait no more and pay instantly at the table through a wireless POS terminal. By completely changing the way retailers handle customer payments, Hang Seng One

Collect can help merchants easily streamline and speed up their daily operations. Meanwhile, the other new digital initiatives the Faster Payment Bank Services (FPS), which enables commercial customers collect payments and pay operating expenses at a minimal cost. Using a business account, a customer can pay or receive funds almost instantly, yielding higher efficiency and flexibility in funds allocation. Hang Seng has also upgraded Hang Seng Foreign Exchange Service with new features, which uses real-time rates to allow clients to make the best trading decisions. When customers buy or sell foreign currencies at Hang Seng Business e-Banking or Hang Seng HSBCnet, they can obtain real time exchange rates at the transaction page and lock the quote to capture the best trading opportunities. Online assistance anytime, anywhere The Bank has also rolled out a new virtual assistant known as ‘BERI’ in June 2018. Today, people tend to find it more convenient to go online or use mobile apps to look for answers on their own. That’s why this 24x7 chatbot came on board to give them instant assistance, anytime anywhere. BERI uses AI to handle general enquiries about the Bank’s Business Banking services. It is able to simulate human-like contextual conversations and interact with customers. It can communicate in Chinese and English, and can also understand Cantonese. The customer experience will also be further enhanced as BERI will systematically comb through the conversations with enquirers to build a FAQs library based on AI technologies such as machine learning. Hang Seng has also launched Live Chat, an online messaging service on hangseng.com/ business that enables customers to contact customer service officers at any time. The Bank has also rolled out a commercial banking WeChat official account in July 2018, providing SMEs and commercial customers with a new and convenient channel for receiving updates from the Bank. “This will enable customers to receive mobile notifications from the Bank without relying on SMS, which should prove particularly useful for customers whose business frequently takes them outside Hong Kong,” Lam notes.

“Hang Seng is proactively introducing financial technologies to its commercial banking services to ensure greater convenience, speed and choice for commercial customers.” HONG KONG BUSINESS | MAY 2019

event coverage: Technology excellence awards

Hong Kong companies that pioneered technology excellence recognised at the Technology Excellence Awards

ong Kong Business awarded the most outstanding companies at the inaugural Hong Kong Business Technology Excellence Awards 2019 held at Conrad Hotel Hong Kong last 27 February. The Hong Kong Business Technology Excellence Awards recognise companies in Hong Kong with ground-breaking IT products and solutions that have successfully served to address changing needs of the customers and internal processes. Winners of Technology Excellence Awards are companies from across industries that have remarkably contributed to transform businesses through technology. This yearâ&#x20AC;&#x2122;s nominations were deliberated by an elite panel that includes Bong Chan, Southern Region Leader in China TMT Industry at Deloitte China; Jason Yau, Partner in Technology and Management Consulting at RSM Hong Kong; Douglas Kwan, Partner in Assurance and Advisory Services at SHINEWING (HK) CPA Limited; John Poon, Head of Accounting and Outsourcing Solutions at Mazars Hong Kong and; Jonathan Chu, Partner at Stephenson Harwood.

Hong Kong Business congratulates the following winners:

Cybersecurity - Financial Services Global Payments Asia-Pacific Limited ICT - Business Services GOIP AULA LTD AI - Banking Hang Seng Bank Limited E-Commerce - Banking Hang Seng Bank Limited Mobile - Media & Entertainment Hong Kong Disneyland Resort Enterprise Software - Retail Introv Limited Online Services - Legal LexisNexis E-Commerce - Logistics LF Logistics (HK) Limited AI - Financial Services Magnum Research Limited Enterprise Software - Business Services Nintex Cloud - Business Services Powell Software Cloud - Hospitality & Leisure Sands China Limited Robotics - Financial Services Synergy Strategic Solutions Limited Financial Technology - Retail TFS GLOBAL COMPANY LIMITED IoT - Health Products & Services uHoo Limited Cybersecurity - Hospitality & Leisure Vastcom Technology Limited E-Commerce - Apparel YEECHOO HONG KONG LIMITED

Financial Technology - Business Services Bambu IT - Healthcare BrainNow Medical Technology Limited Digital - Shipping CS Global LTL Services Ltd. Cybersecurity - Training and Development Cyberbit Ltd

Almost 100 tech pioneers gathered to celebrate

AI - Logistics Datatech Global (HK) Limited AI - Education Find Solution Ai Limited E-Commerce - Financial Services Global Payments Asia-Pacific Limited 34

HONG KONG BUSINESS | MAY 2019

Technology Excellence Awards trophies

William Hung receiving the award for Datatech Global

Joe Yun receiving the award for Global Payments Asia Pacific

Ben Lee receiving the award for Global Payments Asia-Pacific

John Wong receiving the award for Hang Seng Bank

Leon Chan receivinig the award for Hong Kong Disneyland Resort

Judges and supporting partners of HKB Technology Excellence Awards

John Parkes receiving the award for LF Logistics (HK) Limited

Andy Gunawan receiving the award for Nintex

Mimi Ooi receiving the award for Sands China Limited

Pradeep Satya receiving the award for Synergy Strategic Solutions HONG KONG BUSINESS | MAY 2019

event coverage: Technology excellence awards

Dustin Onghanseng receiving the award for uHoo Limited

Victor Ieong receiving the award for Vastcom Technology

CS Global LTL Services team

Hong Kong Disneyland Resort team

Sands China team

LexisNexis team with HKB editor-in-chief Tim Charlton

Hang Seng Bank pockets back-to-back win

CS Global LTL Services team

LF Logistics team during networking 36

HONG KONG BUSINESS | MAY 2019

Guests during networking

Robotics - Financial Services

Synergy’s Astra Automation Framework is helping Insurers settle claims efficiently and

The Astra Automation Accelerator Framework comprises of four phases: Strategy Alignment, Capability Identification, Immediate Benefits Realisation and Long-Term Investment Planning.

ave you ever wondered why your medical claim takes a long time to be paid out? Have you ever had the need to undergo a tedious process for a car insurance claim to be settled, waiting for weeks (if not months)? The reasons for delay can be varied, but the common thread is that the claims processes within Insurers are mostly dated and hence the delays. Not to be disheartened, fast changes are being made, with new technology enablers and robotic automation to correct this situation. Synergy has been at the forefront of this transformation, working with Insurers to help them fast track their process inefficiencies and helping them with the latest technologies. By bringing together a mix of best practices and aligning with the technology partners, Synergy helps Insurers undergo rapid transformation with ease. Starting its operations in Hong Kong in 2011, Synergy has been working with Insurers across Asia, and has expanded operations across India, Singapore &

Pradeep Satya, Founder & CEO at Synergy Solutions

Malaysia. Specific to customer experience enhancements, Synergy has developed ASTRA Accelerated Automation Framework, that’s helping Insurers to quickly redefine their old processes, by placing the customer in the middle of a human centered design framework. Astra looked at solving these very issues faced by Insurance companies.

Software Quality Assurance areas where it helps assess the quality of enhancements in real time, when projects are deployed using Agile methodologies. Built on open source .NET platform, the bot has helped in bringing down the verification time by as much as 90%. This is helping clients to significantly reduce costs and effort by bringing down time involved on their projects along with the challenge of training project resources.

The Astra Advantage Synergy’s Astra, a process transformation Pradeep Satya, Founder & CEO model, helps transform processes to provide an improved and seamless customer “CXOs across the Insurance industry face umpteen challenges to keep pace with experience with smart utilisation of growing demand of their Automation and Digital customers. To manage the technologies. “The solution shifting dynamics, they have Astra’s Framework comprises 4 phases of is delivered in to effectively prioritize Strategy Alignment, a span of 12-16 investments to grow the business in a very competitive Capability Identification, weeks.” market place. In this scenario realisation of Immediate we needed an ‘intelligent Benefits and Long-Term weapon’ – hence Astra was born. Astra helps investment planning. The first stage clients by bringing in simple innovation, formulates the overall objectives of that lets them have not just a competitive automation while the second phase advantage but the power to invest wisely identifies the low hanging fruits that are too” critical to business functions which needs to be improved immediately . The third and William Kuan, Board Advisor at Synergy. fourth phases define and deliver the short“I have always considered the Customer term and long-term gains. to be King and core to the success of The significant advantage of Astra is that any businesses. Continuous service it is customized. Deployment modules are improvements, new mobile connect tweaked that adhere to the new processes experiences and the need for innovating in and technologies that are required to be real time, are in higher need than ever before deployed. On an average, the solution is for Insurers.” delivered in a span of 12-16 weeks. This helps Insurers to record real-time benefits CONTACT from the very first day of going live. In the case of a Europe-based insurer with its operation in Hong Kong, the brief was to automate its group claims process. The Company Name: deployment enabled the insurer to achieve Synergy Strategic Solutions Limited 70% straight-through processing which Address: reduced the processing time and errors by Suite 1404, 14/F AXA Centre, 151 Gloucester conducting transactions electronically. The Road, Wanchai, Hong Kong advantage was that it recorded real-time Email: benefits from the very first day of going contact@synergysolutions.asia live and helped re-organize Operations Website: quickly. Given that the bots were reusable, Synergysolutions.asia the automation helped in reducing process times and errors across business lines. Astra has also been effectively utilized for HONG KONG BUSINESS | MAY 2019

Online Services - Legal

LexisNexis elevates the legal research experience with award-winning platform

Their all-in-one platform Lexis Advance® Hong Kong incorporates the latest legislation, case law, commentary and know-how for legal research and drafting purposes.

exisNexis Legal & Professional is leading global provider of legal, regulatory and business information and analytics that help customers increase productivity, improve decision-making and outcomes, and advance the rule of law around the world. We help lawyers win cases, manage their work more efficiently, serve their clients better and grow their practices. We assist corporations in better understanding their markets and preventing bribery and corruption within their supply chains. We partner with leading global associations and customers to help advance the rule of law around the world. What is Lexis Advance® Hong Kong? Lexis Advance® Hong Kong is the latest legal solutions platform we offer to conduct legal research and drafting purposes. Our allin-one platform houses legal research and practical materials. Our Lexis Advance® Hong Kong research platform hosts an extensive content source and incorporates the latest legislation, case law and commentary for legal research purposes. You will be able to find our exclusive encyclopaedic collection such as Halsbury’s Laws of Hong Kong and the Annotated Ordinances of Hong Kong. In contrast, our Lexis Advance® Hong Kong Practical Guidance platform provides legal practitioners with a range of unique practical legal materials written by various legal experts. It comprises with practical resources which guides practitioners through their court applications and lays out contract drafting precedents for them to draft at ease. It extends beyond exclusive written content by trusted legal experts in which the practice notes, precedents, drafting notes, checklists and flowcharts are continually revised by the experts in the legal profession with latest and key developments. We have enhanced our platform by fusing a new algorithm that simplifies your research. We believe it is crucial to access relevant information efficiently to assist you to make better informed legal decisions. Our upgraded platform combines smart content with flexible and advanced technology to

HONG KONG BUSINESS | MAY 2019

Tyson Wienker, Managing Director of LexisNexis Greater China and North Asia. LexisNexis won the Hong Kong Business Technology Excellence Award 2019 for Online Services - Legal.

“We believe that when you put information and technology into the right hands, you give people power to shape the world.” help you dig deeper, spot hidden connections and analyze better for your legal research. Lexis Advance® Hong Kong accelerates the power to connect, communicate and collaborate among teams on the platform, which enhances the synergy within the digital workplace trend. The benefits we provide to our customers are as follows: Intuitive Experience Users would benefit if they can access information at ease and at a quicker pace. We have redesigned our platform with a newly equipped intelligent legal search engine, built together with legal taxonomy and incisive filters to assist users find accurate and relevant legal materials. Our new Red Search Box is a powerful search engine, which is engineered with advanced compatibilities such as phrase suggest technology, Natural Language search, pre-search and post-search filters. It creates a new standard for research, while enhancing its fundamental components. Legal-Tech Expertise The content in our commentary materials, cases and practical workflows are written

with analysis and interpretations by our respected and experienced editors and expert authors, which further enhances your understanding when conducting legal research and drafting legal documents. Content Without Boundaries As LexisNexis is a multinational corporation, our Lexis Advance® Hong Kong allows you to access legal resources across different jurisdictions more efficiently. Besides Hong Kong titles and cases, with Lexis Advance® Hong Kong, users could conduct legal research on our exclusive international contents from other common law jurisdictions. Our practical content on Lexis Advance® Hong Kong provides legal precedents and resources that guide you through your court application in terms of procedures and contract drafting with ease. Lexis Advance® Hong Kong increases your productivity by saving you time in accessing the most critical and accurate information available on our platform without any boundaries.

HONG KONG BUSINESS | MAY 2019

E-commerce - Logistics

LF Logistics drives efficiency and enhances customer value by exploring new technologies The company aspires to create the supply chain of the future to help their customers navigate the digital economy and to improve the lives of a billion people in the supply chain.

eadquartered in Hong Kong, LF Logistics is a high growth pan-Asian logistics service provider offering In-Country logistics services across Asia and Global Freight Management. As a whollyowned subsidiary of Li & Fung, the world’s leading supply chain solutions partner for brands and retailers, its vision is simple but bold – they aspire to create the supply chain of the future to help their customers navigate the digital economy and to improve the lives of a billion people in the supply chain. LF Logistics is the supply chain partner of choice for companies in several verticals including Footwear and Apparel, Fast-moving Consumer Goods, Food and Beverage, Consumer Electronics and Healthcare. Their distribution channels include brick-and-mortar wholesale and retail and e-commerce. The company network spans Hong Kong, China, Taiwan, Japan, Korea, Vietnam, Thailand, Malaysia, Singapore, Indonesia, Philippines, India, UK, and US. LF Logistics manages 26 million square feet of space and delivers 100 million units of consumer products each day. The scalable and customizable business model allows the

company to expand the presence to a new vertical at the right time and with the right opportunity. In today’s digital world, the company stays relevant by continually adapting and pivoting, and selectively applying pertinent technology to improve efficiency and effectiveness. In an era of exponential change, the convergence of technologies has changed the way consumers and businesses interact. Against this backdrop, Li & Fung launched the Three-Year Plan for 2017 – 2019 that focuses on speed, innovation and digitalization of the supply chain and putting purpose at the core of the company strategy. In a new digital technology generation, the solutions from LF Logistics are better by design. The company employs both analytics tools and heuristic models to design optimum solutions, utilizing best-inclass IT systems to provide efficiency and visibility across every aspect of customers’ supply chain. The company invest heavily in technology; for example, the Put-to-Light (PTL) system instructs the operators by showing the number of orders on the light displays. Operators follow the instruction and allocate a specific number of items to each carton under the displays. With the

“LF Logistics manages 26 million square feet of space and delivers 100 million units of consumer products each day. ”

system deployed, the pick accuracy and efficiency have been significantly enhanced. LF Logistics is staying up-to date on emerging technologies that will make the operations process simpler, easier, and quicker, while constantly experimenting with new tools and software in a practical way to assess the benefits that could bring to the businesses. Some of the experiments that have conducted include vision picking, operating drones for cycle counting, and using smartwatches to highlight process bottlenecks, among others. The company run a full suite of IT services that digitize each facet of the customer’s demand and supply chain and the extensive portfolio accommodates various needs in the market, allowing the company to offer innovative, customized and industry specific solutions to support the business growth of their customers. These unique strategies provide a competitive advantage and strengthen the company’s service value proposition, and it is one of the reasons why LF Logistics has been able to excel among the competitors and be the end-to-end solutions provider to a diverse customer base of global brands and retailers. The company acknowledged that collaboration and strong communication are paramount to achieving business goals, so meeting regularly with customers to discuss performance, sharing new initiatives, and resolving all the potential and existing issues is of high priority in business management. By going the extra mile in giving the customers “peace of mind”, the company have achieved a strong track record of service excellence.

CONTACT Company Name: LF Logistics (Hong Kong) Limited Address: 14/F, LiFung Centre 2, On Ping Street, Siu Lek Yuen, Shatin, New Territories, Hong Kong Fax Number: +852 2635 5555 Email: lflinfo@lflogistics.com Website: https://www.lflogistics.com/ One Glance Digital Room, Hong Kong

HONG KONG BUSINESS | MAY 2019

CMY

HONG KONG BUSINESS | MAY 2019

Cloud - Hospitality Leisure

Sands China Limited delivers customer satisfaction with exceptional innovations

It strives to improve continuously in Operational Efficiency, Customer Interactions and Analytics.

CL is the leading developer, owner and operator of multi-use integrated resorts and casinos in Macao. It owns The Venetian® Macao, Sands® Macao, The Plaza™ Macao, Sands® Cotai Central, and The Parisian Macao. The company also owns Cotai Expo, one of the largest convention and exhibition halls in Asia; Macao’s largest entertainment venue, the Cotai Arena; the 1,800-seat luxury Venetian Theatre; the 1,200-seat Parisian Theatre; the upcoming 1,700-seat Sands Cotai Theatre; and Cotai Water Jet, one of two major high-speed ferry companies operating between Hong Kong and Macao. The luxury and midmarket retail malls feature more than 850 shops with well-known retail brands. The combined properties feature close to 13,000 hotel rooms and approximately 150 different restaurants and food outlets. Its business strategy is to develop Cotai and to leverage our integrated resort business model to create Asia’s premier business, leisure, convention and gaming destination for its valuable customers. As a leading innovative company in the sector, SCL has never slowed down it’s pace and is forefront in exploring and leveraging advanced systems and technologies to drive innovations to pursue improvements. It strives to improve continuously in 3 key areas – Operational Efficiency, Customer Interactions and Analytics. Three-pronged approach Operational Efficiency - the company strive to achieve more with less. It channels most valuable resources – human resources to the front line for better services. SCL aims to standardize, simplify and automate the internal processes to make itself becomes more efficient. Customer Interaction – the multi-use integrated resorts giant wishes to engage all individuals from around the world to get interested, and to visit Macao; on the other hand, it helps the visitors to enjoy unforgettable moments whilst their stay, especially in the group’s resorts. Analytics –SCL strives to understand its customers better which could lead to offering the best in class services to the customers. The P2P system development started in 2016 with the objective of providing

HONG KONG BUSINESS | MAY 2019

superior products and services to SCL’s guests. Through this technological upgrade, the company’s payment settlement, e-sourcing and other abilities improved significantly. The P2P system was also deployed in the Zhuhai and Las Vegas offices in 2018. With this system, paperless processes became easy to monitor in real time, inventory management became costeffective, and dynamic analytical reporting was guaranteed. These achievements were due to the adoption of the Ariba and HighJump cloud-based interfaced systems. The Ariba platform offers an auditable sourcing process, e-contract approval workflows, and online tracking of payments and remittances. The HighJump warehouse system allows dock booking via the Internet, auto queuing by scanning of booking forms, tablet-based recording of goods, and automated receipt generation. Social media platforms, such as Facebook and WeChat, have been adopted for better customer interactions resulting in significantly improvements on engaging Sands with interested individuals around the world. SCL developed it’s “Messenger Bot” on Facebook which is not just for enabling conversation with interested

Facebook users but also being able to help the users making reservations. WeChat Mini Program have been developed to bring the WeChat users reaching to Sands Resorts WeChat Page. Both social media functions has significantly improved SCL’s visibility on millions of PC/ mobile uses globally. Partnering with Google to leverage its machine learning capacity with input of Big Data scattered from across multiple channels and platforms leading SCL successfully unifies silo consumer data and connects with high-intent audiences. SCL together with Google have a custom-built prediction model for analyzing 210 million sample cases during Jul-Sep 2017 which finally identified a target group audience that with expected higher room booking rate. The target group was tracked on a sales campaign in Oct 2017, SCL noted a 200% increase in online room booking from this target group. The result is very encouraging with this remarkable result. SCL is no doubt to keep moving forward to further adopt advanced technologies and innovations in various areas. The Sands group will continue to explore, embrace and invest in technologies and continue to make its resorts and facilities one of the most enjoyable attractions around the world.

“It strives to improve continuously in Operational Efficiency, Customer Interactions and Analytics.”

Sands China Limited won the Hong Kong Business Technology Excellence Awards 2019.

OPINION

MICHAEL SMITH

Hong Kong is catching up with other APAC markets to embrace sustainability

overnments around the world are putting policies in place to curb carbon emissions in line with the Paris Agreement on climate change. With a significant proportion of the urban population spending much of their time in commercial buildings, the onus is on the real estate industry to provide sustainable properties that will mitigate negative environment impacts. Many countries in the Asia Pacific region are implementing aggressive measures to address environment challenges such as rising carbon emissions, which is spurring the introduction of incentives to construct green buildings. Hong Kong is no different; it continues to make strides to protect its world class status through its sustainable development as a ‘smart city.’ Hong Kong is making strides In early 2017, the Hong Kong government released its Climate Action Plan 2030+ report, which sets out Hong Kong’s carbon emissions reduction target for 2030. As buildings account for about 90% of electricity consumption in Hong Kong, there is great potential to achieve the government’s ambitions through direct measures in the built environment, such as energy efficiency improvements, fuel switching, and the use of renewable energy. As part of the Climate Action Plan, Hong Kong launched its feed-in tariff (FiT) scheme in late 2018, an incentive program encouraging the use of renewable energy resources. Under the scheme, any non-governmental bodies or individuals who install solar and wind energy systems will not only make a positive impact on the environment, they can also make a profit. This scheme should be celebrated by all residents, businesses, landlords and developers. Through the FiT scheme, buildings with grid-connected renewable energy systems can sell Renewable Energy Certificates (REC), similar to carbon credits, to Hong Kong’s power companies. HK Electric and China Light and Power (CLP) will then buy renewable energy and sell it to individuals and businesses wanting to lower their carbon emissions. Tenants can benefit from the cost-efficient energy source whilst demonstrating their commitment to corporate social responsibility. Whilst it is too early to evaluate the scheme now, there are some initial figures to show the participation has been positive. Two months after implementation, CLP announced that it had received 1,400 applications from launch of the scheme in October to the end of 2018. More is expected as HK Electric has just launched the scheme in January of this year. Where it stands in the regional push towards sustainability With these exercises in place, how does Hong Kong compare with the sustainability initiatives by other Asian Pacific markets? The growth of green office buildings in Asia Pacific, particularly of new developments, is being driven by government regulations and incentives. In Singapore, the government’s third Green Building 44

HONG KONG BUSINESS | MAY 2019

Michael Smith Director, Property Management CBRE Hong Kong

Masterplan, published in 2014, included the target of achieving the local Green Mark standard for 80% of all buildings by 2030. The current adoption rate for office buildings stands at 27%.Australia enforced the Mandatory Commercial Buildings Disclosure Program since 2011 which stipulates that all commercial offices larger than 1,000 sqm must perform energy efficiency evaluations and disclose their National Australian Built Environment Rating System (NABERS) energy rating. Japan implemented the Urban Cap-andtrade Program for Large Facilities for Tokyo policy since 2010. For Hong Kong, implementation is key Hong Kong is a late comer compared with other markets, but the FiT scheme and the enhanced tax incentives are great starting points. These measures show the commitment of Hong Kong in pushing sustainability in the real estate sector and will benefit both the public and private sectors in the long run. Taking the FiT scheme as an example, the biggest winners are the solar and wind energy suppliers. By selling power at higher than market rates, owners of the sustainable energy systems can make a return on investment within 10 years. There are also several suppliers of solar photovoltaic panels offering equipment rental at less than the revenue generated, making it even more profitable. It should be noted that there are various limitations to the new scheme. Whilst the scheme is best suited for industrial buildings, village houses, shopping malls and newer developments, not many properties have an infrastructure capable of dealing with increased voltage. There were challenges in connecting some applicants to the grid due the remoteness of their homes. Installation of the panels also requires a significantly sized rooftop, which is lacking in most highrises in Hong Kong. That said, the pledge to launch FiT to help the city boost renewable energy generation is given in good faith. The key for widespread adoption is implementation. For businesses that report their Environmental, Social and Governance (ESG) performance, taking part in the scheme is extremely attractive. ESG performances express the environmental and social impact of an organisation. Today, most stock exchanges in the world, such as Hong Kong’s stock exchange, make ESG reporting a specific requirement for listed companies. In the real estate sector, ESG performance is assessed by GRESB. A high GRESB score equates to greater access to institutional capital seeking responsible and sustainable investments and stronger demand from tenants seeking sustainable and greener buildings. The FiT scheme has created an attractive economic incentive on a material topic where the built environment needs to change. The shift toward green buildings is now firmly established as a structural trend and will continue to deliver measurable benefits for investors, employees and the broader community via lower costs, better indoor air quality and reduced energy usage.

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OPINION

tim hamlett

Foam to home in seven years? A likely story

tim hamlett Former Editor of Sunday Standard and Associate Professor of Journalism

t is not often that a government press event has me rolling on the floor laughing. So I would like to thank Secretary for Development Michael Wong for his priceless performance on the Lantau Vision thing. Reclamation for the first new island, he said, would begin in 2025. The first residents “may” move in by 2032. That allows seven years for the lot: the whole transition from placid patch of sea to completed public housing estate. I am reminded of the United States Senator who greeted a particularly rosy official forecast by asking if he was expected to believe in the tooth fairy as well. Kai Tak airport Let us look at our government’s record as a user of a large piece of reclaimed land. In 1998 the Kai Tak airport closed, leaving some 300 hectares free for new uses. If Mr. Wong had been in charge, the first tenants “might” have been moving into the resultant new housing in 2005. He wasn’t. In fact, so far, two public housing estates have materialised. In both, according to the government website, the first tenants moved in in 2013. That’s 15 years after the government inherited a piece of land already reclaimed. The rest of the Kai Tak site contains two completed projects: a new office block for the Trade and Industry people and the famous Cruise Ship Terminal. These take up very little of the space, of course. The rest is at various stages in the progression from “temporary” outdoor par park through building site to completed project. The new Kai Tak MTR station looks almost finished from a distance. As it is completely surrounded by construction deserts of various kinds, I suppose the corporation must regard not having to Land utilisation in Hong Kong

Source: Planning Department, Development Bureau, HKSAR Government

HONG KONG BUSINESS | MAY 2019

A barge could be set up from scratch for $60m that could house 2,000 people

operate it yet as the sunny side of the delays to the Shatin to Central link. In the light of the lamentable performance on the Kai Tak site, it appears that even if the Lantau Vision reclamation starts in 2025, the first residents might move in about … oh … 2040? This is a very long-range project. Do we detect a hint of hubris in the assumption that the government has the faintest idea what Hong Kong, or indeed the world, will be like by then? I notice also that roads will be installed by the time the residents move in – so thoughtful! – but the railways “might not run until three or five years later.” Come, Sir, do not be so constipated in your imaginings. If the railways follow recent precedents they might not run until ten years later, if at all. Hefty price tag I fear the government is going to repeat the mistake made in turn in Shatin, Tsing Yi, Cheung Kwan O, and Tin Shui Wai at different times. In each case, residents were moved in when the only public amenity was one of those bus stops KMB makes by sticking a pole in a recycled wheel. Epic tales of misery and tedium ensued. There will be roads. Will there be markets, parks, teahouses, malls, cinemas, a Town Hall, even perhaps the odd dai pai dong? Or will all these things have to wait whilst the new estate is filled with public housing applicants who cannot refuse an offer without losing their place in the queue? Well I still think the whole thing will be ripe for cancellation at some future date “in the light of changing circumstances”. After all, the price has already zoomed from “about $500 billion” (nameless source explaining the budget) to $624 billion (Mr. Wong’s latest estimate). If it eventually reaches $1 trillion (educated guess from Chu Hoi-dick), it will have done no worse than the Express Rail did, though on a larger scale. But we are surely not that stupid. It’s not the Lantau Vision. It’s the Lantau Mirage, shimmering in the distance as we slog through the desert. Don’t drink too much of your water.

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In Print, Online, Mobile, Events, Awards, and Research

OPINION

Hemlock

What you could do with HK$624 billion

he government announced its official estimated cost for the Lantau Tomorrow Mega-Vision Reclamation Concept. The sum is absurdly precise – why HK$624 billion, as opposed to 625, 620 or 630? Or, 600-700? The South China Morning Post calculates that you could buy two-and-a-half Li Ka-shings or 160 hospitals for this money. Better to say, ‘we could build one Hong Kong-class hospital for every half million people in the Greater Bay Area.’ (Of which more in a minute.) The government claims that the extra space will accommodate lots of affordable housing – yet at the same time the reclamation will pay for itself through the traditional overpriced land-sale scam. This is sort of contradictory, though the numbers probably look better when you see the reclamation as an area into which riffraff can be ‘decanted’ (the official term), leaving the old urban neighbourhoods of Kowloon to be flattened and sold off to developers to build luxury apartments. But this all assumes that 20 years down the road, Hong Kong will still be a relatively desirable place to live in, or launder wealth through, so local land values will still be much higher here than across the border. Indeed, the whole reclamation ‘vision’ looks arguably anti-Bay Area. Cunning opponents could point out that, rather than create extra land at vast expense on this side of the border (colonial-era, ‘little Hongkonger’, anti-motherland thinking), we should be patriotic and forward-looking, and be expanding into groovy trendy Zhuhai, Zhongshan, etc. Perhaps it is ultimately an excuse to build an entirely new transport network – a serious boondoggle in its own right, and of course not necessary if you manage population growth and use existing New Territories land properly. Which brings us to ex-lawmaker Edward Yiu, who reminds us that talk of the project sort-of profiting from land sales overlooks the obvious fact that brownfield and other NT sites represent similar value – which sits unlocked.

Shock as HK government listens, makes concession Officials show their caring and understanding side as they drop nine economic crimes from the proposed new extradition arrangements, covering such issues as bankruptcy, securities trading, IP, public health (because, seriously, who cares about that?), import/ 48

HONG KONG BUSINESS | MAY 2019

export, pollution and tax. The lucky beneficiaries of this uncharacteristic sensitivity to external opinion are business-folk, who proved unexpectedly (and curiously) nervous about being sent over the border. However, some economic crimes are still included, namely bribery, fraud and money laundering. This looks calculated to calm Hong Kong and international businessmen. The nine areas of whitecollar offense are the sort that vindictive Mainland local officials or business partners might use maliciously against them. The three remaining areas look more like the ones Beijing would use to get its hands on fallen members of its own elite who are holed up here. The Hong Kong officials announcing this looked a bit sour about having to make this concession (they are muttering about it just being an interim thing anyway). It is unlikely that they will be as accommodating to human-rights and other people pestering them for changes to the proposed arrangements. The government announced this embarrassing retreat at an unprecedented ‘Three Screw-ups in One’ press conference, in which officials also admitted that they had failed (again) to sort out cross-harbour tunnels congestion, and that contractors had indeed ‘cut corners’ (but not meaningfully) in the MTR Shatin-Central link construction scandal. Cynics suspect this bundling of multiple disasters for press conferences is a way to divert public attention from (or at least overload news reporters’ senses with) blunders. Optimists will welcome it as an innovative approach to boosting government efficiency.

by hemlock www.biglychee.com Email: hemlock@hellokitty.com

“You could buy two-anda-half Li Ka-shings or 160 hospitals for this money. Better to say ‘we could build one Hong Kongclass hospital for every half million people in the Greater Bay Area.’

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