Hong Kong's investment promotion reaches all-time high in 2004

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2004 was a record year for investment promotion in Hong Kong. At a year-end press conference today (January 6) the Director-General of Investment Promotion at Invest Hong Kong, Mike Rowse, announced that the Department assisted 205 foreign companies to set up or expand operations in Hong Kong during 2004 -- representing a substantial increase of 44 per cent over 2003, itself a record year. These projects led to the immediate creation of more than 3,000 jobs and the same companies plan to create an additional 4,600 jobs here in the next two years. Over HK$4.66 billion was invested.

Successful year for investment promotion

Mr Rowse welcomed the results as illustrating Hong Kong's strong attraction to overseas and Mainland companies. He said, "2004 was another record year for investment promotion in Hong Kong. We are glad to see more and more foreign companies in a variety of different sectors choosing Hong Kong to establish or expand operations. These investment projects do not only bring in capital, create job opportunities, but also bring along new ideas and technologies to enrich various industries in Hong Kong.

"These companies have given their vote of confidence in our city and are committed to developing their business with our community."

Hong Kong remains preferred destination for FDI

Hong Kong has maintained its leading position as the preferred destination for foreign direct investment (FDI). According to the "World Investment Report 2004" released by the United Nations Conference on Trade and Development (UNCTAD), Hong Kong remained the second largest FDI recipient in Asia, after the Mainland. Despite SARS and significant economic challenges, the FDI flow to Hong Kong in 2003 reached US$13.6 billion (HK$106.3 billion), up by 40% from an adjusted US$9.7 billion in 2002.

Latest figures show a trend of increased FDI into Hong Kong. The Census and Statistics Department reported FDI inflows of HK$193.1 billion (US$24.8 billion) during the first three quarters of 2004. This amount has already exceeded the total FDI for all of 2003 by HK$86.8 billion.

Moreover, both the number of regional headquarters and regional offices in Hong Kong reached all-time highs in 2004, demonstrating that Hong Kong remains the preferred base in Asia for foreign companies to oversee their regional operations. As at 1 June, 2004, there were 1,098 companies that were regional headquarters (RHQs) and 2,511 companies that were regional offices (ROs) in Hong Kong of companies incorporated outside Hong Kong, according to results of the 2004 Annual Survey of Regional Offices Representing Overseas Companies in Hong Kong conducted by the Census and Statistics Department.

Mr Rowse said, "These encouraging figures show that investors still regard Hong Kong as the ideal location to operate their businesses in the region. Hong Kong's fundamental advantages including the free flow of information and low tax regime remain major attractions for foreign companies. We are confident that we will continue to attract more foreign investment in Hong Kong in 2005."

Highlights of 2004

Hong Kong's unique positioning as the heart of Asia has attracted foreign companies from different industries to set up operations here to access target clients in the region. For example, the world's largest data storage company EMC moved its Asia-Pacific regional headquarters to Hong Kong. The aviation hub has also attracted the Airports Council International to relocate its Pacific regional office here. Legal services provider Heller Ehrman upgraded its Hong Kong office to its regional headquarters; the first Swiss law firm in Hong Kong, SG Fafalen & Co, was set up to tap the rapidly growing opportunities in the region from a base in Hong Kong. Large asset management company OppenheimerFunds established its first overseas office here as its regional base to develop business in Hong Kong and other markets in the Asia Pacific region.

Mr Rowse said, "These examples show that the versatility of Hong Kong as a business location for a spectrum of sectors -- whether be it trade-related, retail, financial services, tourism and entertainment, IT, technology, telecommunications, media and multimedia, professional services or transportation. Our investment promotion teams specialising in priority sectors will continue to introduce the many advantages Hong Kong has to offer to companies of different nature."

Invest Hong Kong continued its efforts to promote the city's unique position as the ideal base for foreign companies to expand into the Pearl River Delta.

The Department published the second edition of a study, "The Pearl River Delta - the Facts and Figures," written by Professor Michael Enright of the University of Hong Kong and author Edith Scott. Since the first edition in 2003, this booklet has become one of the most important sources of credible facts and figures about the Greater Pearl River Delta, which includes Hong Kong and Macau.

In the past 12 months, Invest Hong Kong organised 10 joint investment promotion activities with major Mainland provinces and cities including Guangdong, Foshan, Dongguan, Guangzhou, Shenzhen and Zhuhai. These promotions targeted prospective investors in New York, Singapore, Seoul, Tokyo, Stockholm, London, Marseilles and Mumbai. All of these seminars were extremely well received, with several hundred participants in many of the cities. The Hong Kong-Guangdong joint investment promotion seminar held in London last October in collaboration with the Guangdong Provincial Government received an especially overwhelming response with more than 1,200 attendees.

In 2004, Invest Hong Kong has actively promoted the advantages of using Hong Kong as a springboard to expand overseas to Mainland enterprises. The department arranged 23 seminars in 13 cities in the Mainland, and received 22 incoming delegations from the Mainland.

The influx of projects from the Mainland shows Hong Kong's solid position as the springboard to expand out of China. Beijing Tong Ren Tang made the groundbreaking decision to establish its international production base for Chinese medicine at the Hong Kong Science Park. Leading sports brand enterprise Li Ning Company Limited opened its Hong Kong design and research and development centre. Shenzhen-based Kingdee International Software Group set up its international headquarters in Hong Kong. Large-scale restaurant chains Little Sheep and Tanyutou also set up in the city and are already expanding here.

In response to the new investment facilitation policy for Mainland enterprises to invest in Hong Kong introduced by the Ministry of Commerce (MOC), Invest Hong Kong launched a series of tailored, one-stop services for Mainland investors. These initiatives include establishment of a toll-free "InvestHK 800 Hotline", a new "InvestHK Service Centre" at the head office of Invest Hong Kong, an "InvestHK Kit" of tailored information and an "InvestHK Step-by-Step Guide" jointly produced by Invest Hong Kong and the MOC.

Other investment promotion activities included supporting and participating in major international business events to raise Hong Kong's profile to international business community. In 2004, these included, for example, BusinessWeek's Asia Leadership Forum in Hong Kong and other BusinessWeek conferences around the region; the annual Forbes Global CEO Conference; the Cable and Satellite Broadcasting Association of Asia (CASBAA) annual Convention; the 3G World Congress and Exhibition; and the International Herald Tribune's Luxury 2004: The Lure of Asia, which was held outside of Paris for the first time.

CEPA effect

The Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the Mainland has entered into the second phase in 2005. Invest Hong Kong has been actively organising or participating in seminars in North America, Europe and Asia Pacific to promote the benefits of setting up operations in Hong Kong under CEPA to foreign and Mainland investors.

Out of the 205 investment projects completed in 2004, 45 companies (22%) have indicated that CEPA is one of the factors considered when making the investment. Some 19 companies invested because of CEPA, while others have accelerated their investment plan, and/or invested more capital or employed more staff as a result of CEPA.

Looking Forward

Mr Rowse said the department is optimistic about investment promotion for Hong Kong in the coming year. He said, ¡§We have an aggressive business plan for the next 12 months, and our target for 2005 is 220 completed projects, a 10% increase over the 2004 target, and 7% more than the actual result."

He pointed out that the favourable factors of Hong Kong, including low and simple tax regime, free trade, free flow of information and rule of law, would continue to be the key considerations for companies to set up their businesses here. He noted that earlier this week the Heritage Foundation announced that Hong Kong had retained its position as the world's freest economy for the 11th consecutive year in the 2005 Index of Economic Freedom.

The Department will continue to arrange overseas visits to call on potential investors and to meet with local associations and government bodies so as to encourage and assist expanding enterprises to use Hong Kong as a gateway to China and the rest of Asia. To retain existing investors and to encourage their expansion in Hong Kong, Invest Hong Kong will continue to provide after-care services and work with Consulates and chambers of commerce to organise Community Programmes.

In view of the growing interest from and investment by Mainland enterprises, the Department has reorganised the structure of the head office in Hong Kong from 1 January 2005, mainly to refocus the work of one division to handle principally China issues. Under the new structure, there will be four investment promotion teams dedicated to assist investors from Guangdong, Shanghai/Jiangsu/Zhejiang, Beijing/Tianjin/Hebei/Shandong and Rest of China (including Taiwan). The first team is based in Guangzhou, the remainder in Hong Kong. In addition there is a team to coordinate all China-elated activities, also based in Hong Kong. These teams will organise promotional activities and coordinate with various government departments and bodies from the Mainland. Invest Hong Kong will publish the second edition of the Step-by-step guide to include updated information such as MOC' new on-line application procedures for investing in Hong Kong.

Invest Hong Kong has further expanded its overseas network to reach out to potential investors by appointing new representatives based in Chicago (US), Melbourne (Australia), Tel Aviv (Israel) and Dubai (Arabian Gulf). The Department will actively promote Hong Kong in these markets.

The successes of the past year will only encourage us to do even better in 2005 to attract even more companies to invest and expand their presence in Hong Kong. Our city remains the premier location for both multinational and Mainland companies to establish their operations in Asia. We have the institutions, system, regulatory environment and people that will provide investors with what they need when they need it," Mr Rowse concluded.

Ends/Thursday, January 6, 2005

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