HK business in an optimistic mood
(JAMES LEUNG,China Daily staff)
07/02/2003
Although the US Congress has expressed concern about the national security bill, James Thompson, chairman of the American Chamber of Commerce in Hong Kong, merely shrugs and says: "The proposed legislation is not going to change this place." Being an American, "I am a firm believer in democracy," says Thompson, who founded Crown Worldwide, one of the largest moving companies in Hong Kong of which he is the chairman. He says that American business people, like himself, "feel comfortable" in Hong Kong because it is an open and free society. The overseas business community understands that the legislation of Article 23 is "a mandatory obligation" of the Hong Kong government, Thompson says. Amcham, he says, presented its comments on the initial draft of the legislation to the government at a meeting. "I wouldn't say we were upset or anything like that," he recalls. "We just felt that there were some weaknesses in the initial draft and expressed our point of view to the government," he says. "In the second meeting (with the government), we were amazed that every issue we raised was dealt with," Thompson says. "We accepted that although we still think that a more transparent legislation process, such as the publishing of a white bill, would be welcome." The fact that the Hong Kong government has chosen not to do so "doesn't mean it's the end of the world." Thompson says that he doesn't believe the loud protests against the law are an indication of widespread discontent that may have foreign business people worried. He does not agree with the charges of anti-democracy levelled at the government by opponents of the law. "The fact that many people are taking part in the debate openly and freely represents an important step forward in democracy in Hong Kong." "In some ways, we are moving towards a democratic process" which was never seen before the handover in 1997, Thompson says. As an entrepreneur who has thrived for over 20 years in Hong Kong's free-market environment, Thompson cautions against the move towards an overly politicized society. "You can go too far and create a government that is too intrusive and cumbersome," he says. He is convinced that Hong Kong was built by its people. "It is always good to have a small government and let the people of Hong Kong go ahead and develop this place," he says. But that widely accepted maxim seems to have lost its rigour during the economic downturn in the past six years. The result is that more and more Hong Kong people are now turning towards the government for assistance, Thompson says. "And that's a weakness," he adds. The structure of the Hong Kong government administrative system is not equipped to play an active social role, Thompson says. And yet, Hong Kong is caught in a "paradoxical situation in which the government is giving so much to the people in terms of social welfare and subsidized housing but taking little in taxes," he says. Despite the proposal to raise profit tax, the rate is still one of the lowest in the world. The salary tax rate is even lower and the threshold has remained so high that only a relatively small portion of Hong Kong's wage earners need to pay any tax. More important, the simple and straight forward tax regime has been a major attraction to foreign investors, Thompson says. The government had vastly expanded its social welfare programmes during the economic bubble years when the increased expenditure was more than covered by the large income from the sales of government-owned land to private developers. The collapse of the property market in 1997 brought an end to this arrangement. The resulting economic downturn has further depressed government tax revenue. But the enlarged government expenditure has not been trimmed in proportion to the decline in government income for practical as well as political reasons. As a result, the budget deficit has ballooned to worrisome levels. While the government is trying to reduce the budget deficit by cutting expenditure and raising revenue, it understands that the real solution lies in reviving economic growth. To achieve that goal, it has focused on securing the Closer Economic Partnership Arrangement between Hong Kong and the mainland, which provides the framework as well as the incentives for Hong Kong companies to enter the mainland markets. Speaking for his own business, Thompson says that CEPA will allow it to expand rapidly on the mainland. "For at least 15 years, we have been seeing China as our future market," he says. But "our business there has been constrained by the rules and regulations that have limited our presence there," he adds. The major stumbling block is that "we were not allowed to establish wholly-owned subsidiaries," Thompson says. "We simply can't run our business under such a constraint," he adds. At present, Crown has representative offices in various major mainland cities and has to outsource its business to domestic movers. That constraint has been removed by CEPA. "We went to a briefing by Hong Kong's government officials on the arrangement" shortly after it was formalized on June 29, Thompson says. "I was really quite impressed by the concessions given to Hong Kong companies under the arrangement." Thompson says that his company is planning to take advantage of CEPA and open offices in Beijing, Shanghai and Guangzhou next year after the arrangement comes into effect. The immediate benefit from having its own offices on the mainland is cost, he says, and explains that it is more expensive to contract jobs to outside movers than for the company to hire its own staff to do the work. The more important benefit in the longer term is improved customer service. It is easier to control the quality of service provided by the company's own staff than that by outside contractors, Thompson says. "Crown's decision to invest in wholly-owned operations is driven by a desire to deliver consistent quality service to its customers." Crown's principle strategy is to invest in purpose-built facilities located in the markets it serves, Thompson says. Up to now, the company's facilities are valued at around US$130 million. In addition it has also invested in a fleet of vehicles and in cost saving technologies. Founded in 1965, Crown was principally an international mover of household goods. This has continued to be the company's core business. However, it has diversified successfully into document storage services which, according to Thompson, are in strong demand, especially in land-scarce Hong Kong. Thompson says that he doesn't believe business opportunities in Hong Kong are becoming scarce. "All it needs is for people to look harder." To illustrate, he says that a row of abandoned ammunition bunkers built by the British during World War II gave him an idea to convert them into wine cellars. "We have leased those bunkers from the government and are in the process of converting them for the purpose of storing wine for the many wine lovers in Hong Kong," he says. "That is turning out to be good business." (HK Edition 07/02/2003 page7)
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