Hongkong provides an additional edge for businesses to take advantage of the Closer Economic Partnership Arrangement with mainland China thereby getting preferential access to the most populated country with abundant raw materials and human resources without compromising the free market and low tax advantages inherent in the economy.
There was a business exhibition in the sprawling World Trade Centre in Dubai in 2009, where I met Hirofu Hatamato[i], a Japanese American who was busy selling International health equipment. As he was preoccupied with his clients, I waited for my turn to communicate with him. After a couple of minutes, he got a respite, that is when he saw me standing outside his pavilion and grinned at me. Within minutes we became friends and were discussing at length the health business sector and its profitability.
And occasionally he mentioned the name of the country where his business is based. That was the first time I got first-hand information about Hongkong and its ease of doing business. It seems that he had businesses in other countries but according to him Hongkong (HK) is one of the viable countries on earth to scale a business to global standards.
Though HK comes under the jurisdiction of the Chinese economy, it follows a capitalist system coupled with a unique rule of law and independent judiciary distinct from the communist system followed by the Chinese. HK provides an additional edge for businesses to take advantage of the Closer Economic Partnership Arrangement[ii] with mainland China thereby getting preferential access to the most populated country with abundant raw materials and human resources without compromising the free market and low tax advantages inherent in the economy.
Fast forward to 2018, it is no surprise that HK had bagged the fifth rank in the overall ease of doing businessreport[iii] 2018 published by the World Bank. When breaking down the application to start a business in HK, one can observe that the application process is simple, has few procedures, minimum days and required registered capital much smaller than the majority of the developed countries in the world. All you need is a director who can be a HK resident or any nationality and a company secretary to maintain the statutory books and company records.
Another aspect which puts a heavy burden on companies is taxes. Fortunately, companies especially small ones can keep the momentum in the initial stages of the business without being worried about exploitative taxes as there are just three taxes [iv]in HK namely – profit tax for companies (first HK$2 million of profits of companies is 8.25% and on the remainder is 16.5%), Profit tax for Unincorporated business ( first HK$2 million of profits of businesses is 7.5% and on the remainder is 15%), salaries tax (for the first $50,000 at 2%, next $50,000 at 6%, next $50,000 at 10%, next $50,000 at 14%, on the remainder at 17%, and Standard rate at 15%) and property tax at 15%. And all other taxes like sales tax or value added tax, withholding tax, capital gains tax, dividends and estate tax are nil[v]making it ultra smooth for businessmen.
There are a host of companies which have taken advantage of the HK economy –The Swiss company, Zuhlke Engineering Hong Kong Ltd [vi]has set up its base to accelerate its digital transformation.
Dr. Wolfgang Emmerich CEO and Chairman of Zuhlke Engineering Ltd praised the educational system in the HK when he said.
“There is an excellent education in science and technology in Hong Kong where one can find some of the world’s top-ranking universities, creating an abundant supply of talent in the field.”
Hong Kong Science and Technology Parks Corporation (HKSTP) and Siemens Limited [vii](Siemens) have set up a Smart City Digital Hub. The collaborative venture is to nurture cutting-edge research and development in the areas of Data Analytics and Internet of Things thereby offering start-ups and infrastructure providers a platform to create their digital portfolio and develop Made-in-Hong-Kong smart city solutions at the same time developing a network of technology hubs.
Keith Cheng, Head of Hong Kong Digitization Hub, Mind Sphere Application Center, City Siemens Ltd, after setting up the innovative technology ecosystem in HK said.
“I am confident in the next pipeline of the workforce in Hong Kong, especially in software development and AI technology.”
Arrow Open Lab [viii] was set up to close the gap between software and engineering expertise so that the businesses can be scaled to a sustainable one pushing beyond the national frontiers to international markets.
Simon Yu, President Arrow Asia Pac Ltd after starting a support hub for software producers is ambitious of HK growing as a technology hub. “We look forward to partnering more closely with Invest HK and other ecosystem players in transforming Hongkong into an innovation city and thus sustaining its economic development.”
Companies like these which plan for the next 10 or 20 years have mobilised their innovations and inventions to support the ambitious plans of HK, which is a testimonial to the terrific potentials of this country.
Rajesh Trichur Venkiteswaran is a freelance journalist. He can be reached at [email protected]
[i] Name changed for anonymity.