Out to impress investment bureaus in Australia and Hong Kong - Special Feature-Investment Bureaus

Business Asia, July, 2002

When it comes to foreign investment, Hong Kong and Australia are at different ends of the spectrum. Hong Kong has been a magnet for investment for many decades, attracting businesses from all over the world into its manufacturing, finance and transport sectors. Australia, on the other hand, is still steadily building its global reputation, although many substantial wins have been scored in recent years.

Both are aware of the importance foreign direct investment plays in the health of the economy. And while both have set up their own investment bureaus to directly handle the promotion and attraction side, Hong Kong and Australia's approaches have more differences than similarities.

Image difference

For one, Australia still has a global image problem to overcome that Hong Kong does not. While most of the world knows Hong Kong as a business centre, the same cannot be said for Australia.

Invest Hong Kong's director general Mike Rowse says the main task the Special Administrative Region had to do was to maintain the positive image it had already earned.

"We have to preserve the quality of the product--it is a terrific product, we've got to keep it as good as it's always been," he said. "Others are improving so maybe our margin over them will start to diminish, but we must do everything we can to stay where we are and in fact improve even further. The gap might narrow, but you let the gap narrow because they're coming up to meet us, not because we're going down to meet them."

Australia, on the other hand, has to work hard to lift its profile and awareness amongst the world's business leaders, Invest Australia's CEO Barry Jones says.

"I think ignorance of Australia is one of our biggest barriers to overcome," he said. "We aren't widely known in some boardrooms, and we need to make ourselves known. We have to ensure that people are aware of the strengths that we have and we are more than just beaches and a great place to visit."

Taken seriously

The very existence of Invest Hong Kong is testament to how seriously the Hong Kong Government has taken the issue of foreign direct investment.

Rowse said the Asian economic crisis of the late '90s, plus increasing competition for the investment dollar, were some of the major motivating factors behind the establishment of Invest Hong Kong.

"Hong Kong certainly has a good reputation as a place to do business, but nothing stands still," he said. "There's always people out there who want to eat your lunch. And I think the Asian economic difficulties that we encountered three or four years ago really accentuated that.

"It's natural then that people will look to how to strengthen their products further. And that means for us not so much give incentives, because we're not in a position to go around and promise people any special goodies, but it does mean going around and beating the drum about Hong Kong."

Challenges

For Rowse, Hong Kong's value proposition lies in four areas--its geographic location; the legal and regulatory regime inherited from the British; its "business friendly" approach, particularly with taxation; and its strong links with China.

These strengths were enough for Hong Kong to have attracted US$22 billion dollars of new investment in 2001, Rowse says, but challenges still remain.

"We have to keep improving the education system and boosting training and retraining. Our economy has gone from 25 per cent manufacturing to five per cent manufacturing in a generation. The number of manufacturing jobs has declined from nearly a million to barely 200,000. All of those displaced workers are now in services--and that's where the future jobs will be," he said.

"(We also) have to open our doors more regularly to the best and brightest of Mainland China. It's our natural economic hinterland. And we can't be the New York of China by just recruiting people born in the equivalent of Manhattan. New York draws on the best and brightest around the world--so do we. New York also draws on the best and brightest from the whole of North America--its natural hinterland. We don't do that yet."

Looking ahead

Rowse, while realistic about the threat a booming China poses to Hong Kong's investment opportunities, is upbeat about the future.

"Are we losing some market share to China operators? Well, of course we are. It would be preposterous for a huge economy like China, for us to still have 80 or 90 per cent of the access," he said.

"We obviously want to stay as competitive as we can. And of course, in some aspects we have unique abilities to do things in China which no other city has.

"If you look at it from the point of view of international financial centre, you need four basic things--a convertible currency, a legal system that respects private property, the total free flow of information, and a banking system that is privately owned. Now I would hope that China would make progress in all of these areas over the next 20-30 years, but even after all of that time it's unlikely that any mainland city will have the whole of this package. And Hong Kong has it right now."