3 Sept 2014
Thriving on Challenges
Twenty years ago, ahead of major changes facing the city, the Hong Kong General Chamber of Commerce organised the first of its annual business summits under the banner “Mapping the Future of Hong Kong.” It was a time of uncertainty about what the 1997 handover would bring: one headline in 1995 even predicted “The Death of Hong Kong.” In the lead-up to its November 2014 business summit, the Hong Kong General Chamber of Commerce's CEO, Shirley Yuen, explains why the naysayers “couldn’t have been more wrong.”
Do you draw any parallels between the concerns of the time 20 years ago and business sentiment today?
The first thing that comes to mind is the labour market. Twenty years ago, we faced perhaps the tightest labour market in our history, and today we feel some of the same pressures. At that time, we made the decision to seize the opportunities facing us by opening the door to highly skilled workers, so that critical infrastructure projects would not drain scarce human resources from private-sector projects. Now, we face that same dilemma, but the dynamics are very different and we’re having trouble coming to a consensus as to the way forward.
Society today, as it was 20 years ago, is concerned about the future. I think these concerns are justified, but we shouldn’t let our fears override our common sense. Perhaps the old view that “Hong Kong is finished,” spurred us on to prove our detractors wrong. I’d like to see that same attitude return.
What are some of the key challenges chamber members have expressed in 2014?
Rising costs, labour shortages and worries about our competitive positioning are top on their minds this year. Our members often cite air pollution as a top priority, but we are making some progress now, so that issue is probably not as pressing as it has been in the past. The shortage of places in international schools is another area that has been top-of-mind in the past, but seems to be less of a concern at the moment.
Part of the rapidly rising cost of doing business is the rash of new regulations that have arisen in recent years. There’s also the matter of clarity and transparency, which make it all the more time-consuming – and therefore expensive – to ensure that one is in full compliance with the law. We don’t mind paying taxes, but when the interpretation changes without the benefit of a clear and simple legal definition, it just adds to the challenge.
“No one ever made money betting against Hong Kong.”
And yet, the fears of 20 years ago proved groundless. How have the naysayers got it wrong?
One of those challenges, perhaps the most pressing of this decade and the next, is the impact of our rapidly aging population on our labour force, the tax base and the demands of society for more and better government service. We are entering a time when our fiscal and labour resources are being stretched very thin just as demand for more people and more benefits are beginning to really soar. This is something we can’t ignore.
How can Hong Kong adapt to current conditions?
The two main features of our competitiveness that we have to nurture and protect are our core institutions and the value-for-money proposition. I’m not worried about our institutions; we have robust support from all of society for preserving our freedoms and standards as among the best in the world. But our costs are rising faster than those of our immediate competitors, and we need to invest in that area before we lose our edge.
We need to think about our tax regime in a strategic manner. Having a tax rate of 15 per cent or 16 per cent isn’t the main issue. What matters is what other jurisdictions are doing, what other places are offering, and how we compare in relative terms. Hong Kong has an enormous competitive edge in many areas, including geography, administration, legal and financial considerations. But the advantage we used to have in our tax rates has been eroded in the past decade. We aren’t going to remain hypercompetitive if we don’t recognise this.
Are you confident that Hong Kong has the fundamentals to continue to thrive in the new economic era?
Every economic era is “new,” if you’re part of the old era. Twenty years ago, we were constantly reminded that Singapore was looking over our shoulder, ready to take whatever business we couldn’t manage. Today, Shanghai is often cited as the great threat, but the truth is we only compete head-to-head with those cities in very specific areas.
Singapore is in petrochemicals and high-end electronics manufacturing, which is not our niche. Shanghai has heavy automotive and machinery industries, and we don’t. We do compete with Singapore – and New York and London – in high finance and professional services, and we compete with Shanghai for tourism and some trade sectors. But, there’s plenty of room for all.
What can attendees expect from this November’s “Mapping the Future of Hong Kong” summit?
Each year, the chamber’s business summit brings together the best business minds to evaluate our current situation and examine the challenges and opportunities arising in the near-to-medium-term. This year, three of our former chairmen – Andrew Brandler, Vincent Lo and CC Tung – will look at what they see as the main competitive challenges of the coming decade.
We will also hear from senior members of the business community who form our leadership, on our near-future prospects. Li & Fung Group Chairman Victor Fung has honoured us by agreeing to deliver our keynote luncheon address, again focused on the future and what we need to do to prepare for the opportunities – and challenges – ahead.
Hong Kong General Chamber of Commerce