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Index of Articles
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HONG KONG
About Hong Kong
Hong Kong is on the eastern side of the Pearl River Delta on the southeastern coast of the People's Republic of China, facing the South China Sea in the south, and bordering Guangdong Province in the north. Hong Kong has one of the world's most liberal economies and is a major international centre of finance and trade. Hong Kong is China's richest region in terms of GDP per capita and gross metropolitan product figures.
Hong Kong was a British colony from 1842, until its sovereignty was transferred to the PRC in 1997. It is governed as a special administrative region under the Basic Law of Hong Kong. Under the terms of the Sino-British Joint Declaration, the PRC has promised that Hong Kong will have a relatively high degree of autonomy until at least 2047, fifty years after the transfer of sovereignty. Under the "One Country, Two Systems" policy, it retains its own legal system, currency, customs policy, cultural delegation, international sport teams, and immigration laws, with the PRC representing Hong Kong diplomatically and militarily
Hong Kong has a free market, entrepot economy, highly dependent on international trade. Natural resources are limited, and food and raw materials must be imported. Gross imports and exports (i.e., including reexports to and from third countries) each exceed GDP in dollar value. Even before Hong Kong reverted to Chinese administration on 1 July 1997, it had extensive trade and investment ties with China. Hong Kong has been further integrating its economy with China because China's growing openness to the world economy has made manufacturing in China much more cost effective.
Hong Kong's re-export business to and from China is a major driver of growth. Per capita GDP is comparable to that of the four big economies of Western Europe. GDP growth averaged a strong 5% from 1989 to 2005, but Hong Kong suffered two recessions in the past eight years because of the Asian financial crisis in 1997-1998 and the global downturn in 2001-2002.
Although the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003 also battered Hong Kong's economy, a solid rise in exports, a boom in tourism from the mainland because of China's easing of travel restrictions, and a return of consumer confidence resulted in the resumption of strong growth from late 2003 through 2005
| Hong Kong |
|
| Capital |
None |
| Official languages |
Chinese (Cantonese dialect) & English
|
| Area |
1,104 km² (not ranked)
426.4 sq mi |
| Population
|
7,041,000 (97th) |
| GDP (PPP)
|
$254.2 billion (40th) |
| per capita
|
$37,400 |
| Currency |
Hong Kong dollar (HKD) |
| Time zone |
(UTC+8) |
| Dialling code |
+852 |
BUSINESS IN HONG KONG
Hong Kong's current role as the central intermediary between China and the West may or may not be threatened as the Internet enables China's provinces to participate directly in the global economy, but right now Hong Kong's laissez-faire attitude is giving it an advantage over the mainland, in terms of the Internet as much as in other ways. Beijing's repressive attitude towards the Internet just helps this along, but the CEPA (Closer Economic Partnership Agreement) which came into effect in 2004 is eating away at barriers between the two partners.
At a conference in April 2004, 200 business representatives from both Hong Kong and mainland China attended an e-business seminar in Hong Kong which aimed to explore how efficiency and costs can be improved, and how both regional and international market access can be expanded. Speaking at the opening of the seminar, the Permanent Secretary for Commerce, Industry and Technology (Communications and Technology), Mr Francis Ho, commented:
"The CEPA (closer economic partnership agreement between Hong Kong and China) has provided enormous business opportunities for Hong Kong's goods and service industry. If we are to maintain the competitiveness of our goods and services in the international market, we must not lose sight of the important role of e-business in today's global economy.”
"The Mainland has launched various informatisation, e-Government and e-business programmes in recent years,” he continued, adding: “These programmes will not only help drive the long-term development of the information technology industries and the overall economy of the two places, but will also foster greater co-operation between the local and Mainland enterprises on a mutually beneficial basis, so as to make full use of the cross-border potential of e-business to facilitate trade and investment.”
The city is trying through the "Digital 21" policy initiative, citywide broadband implementation, and the new Cyberport constructed by Pacific Century CyberWorks to lead Hong Kong into the digital future. Hong Kong, with its low taxes and its established position as a trade hub for Asia, is also trying to become a centre of E-Commerce development.
In April, 2005, Hong Kong was found to have the best electronic business environment in Asia according to an annual global survey by the Economist Intelligence Unit.
Judged on a number of criteria, the annual 'e-readiness' rankings placed Hong Kong sixth in the overall global list, behind a top five of Denmark, the United States, Sweden, Switzerland and the United Kingdom.
The result was an improvement on Hong Kong's 2004 ranking, when it was placed ninth. Significantly, it also means that the territory is now considered to be well ahead of its main economic rival in the region, Singapore, with regard to e-commerce infrastructure. The latter has fallen down the 2005 ranking to eleventh place from seventh last year.
The EIU noted that Hong Kong's improvement was attributable to "innovative development of e-business services, a positive legal and policy environment and advances in mobile services".
The economies were ranked based on six criteria, including infrastructure, business environment, consumer and business adoption, social and cultural environment, legal and policy environment, and supporting services.
PCCW is one of the SAR's major players in terms of e-commerce development. In January, 2004, it emerged that PCCW is planning to move into China's on-line gaming market in association with South Korea's NHN Corporation.
On-line gaming is booming on the mainland, with annual growth rates of 30% or more, and represents a natural target for PCCW, which is investing heavily in broadband offerings around the world. The problem for PCCW is content, however, and the alliance with NHN will allow it to offer the latter's Hangame interactive entertainment platform in China. In South Korea Hangame already supports more than 50 internet games. Even though on-line gaming is growing very fast in China, it is a highly competitive sector, and likely to become more so. There is also the piracy problem - recent assurances from the Chinese government that they are cracking down on software piracy have so far done little to dent pirate activities in one of the world's wildest market-places.
The Digital 21 initiative, a collaboration between The Information Technology and Broadcasting Bureau (ITBB) and the Information Infrastructure Advisory Committee (IIAC), is a package of package of initiatives through which Government, business, industry and academia can work together to make Hong Kong 'a leading digital city in a globally connected world.'
The Cyberport, a private-public venture masterminded by Richard Li of the Pacific Century Group, aims to provide the office and residential space for high tech ventures and their employees in a single environment.
The Government is also pursuing proposals (not very laissez-faire!) for a Digital Trade Transport Network (DTTN) to co-ordinate multi-modal trading flows, commissioning a HK$5m study from consultancy firm Accenture, although a coalition of the SAR's trading and logistics firms is offering an alternative it says would be cheaper and quicker to develop. Accenture's study is thought to recommend a 'green-field' solution built from scratch, while the trading consortium says it can build on existing components and systems.
The technical infrastructure for e-commerce development will therefore be in place, but it is less clear that Hong Kong has a business structure that is ideally suited to e-commerce. More than 90 percent of Hong Kong's businesses are small, family-owned firms, most of them forming part of business supply chains, although most manufacturing by now is done elsewhere. Hong Kong businesses are masters at building highly flexible supply networks that allow them to produce goods better, faster, and cheaper than anyone else in the world. Though information technology such as the phone, fax, and e-mail are indispensable to these networks, many Hong Kong businesses have been slow to invest in more advanced technologies.
In addition, Hong Kong's fiscal structure, which taxes local source income, means that e-commerce operations in the SAR would need to avoid entering contracts locally, which in turn might mean that servers would have to be located elsewhere. This is not ideal. 16% tax on profits is not high, but it is a lot higher than nil, which can be achieved quite easily in many other low-tax jurisdictions.
On the other hand, there is no doubt that Hong Kong's legal regime is ideal for e-commerce development, and its professional support services are excellent. Hong Kong is therefore a player in the competition taking place between a number of low-tax jurisdictions, to offer the most advanced e-commerce environment to businesses seeking a tax-efficient base for part or all of their operations. Hong Kong would claim to be one of the preferred jurisdictions in this competition, and it is a fact that the Government has installed good e-commerce legislation alongside its other support measures.
Hong Kong's stated goal of becoming a global e-commerce leader is ambitious. The world, both onshore and offshore, is full of countries which have said they mean to become global e-commerce leaders. The UK may have shot itself in the foot with its misconceived 'RIP' legislation and its general slowness, but Ireland, Bermuda, Malta and the Isle of Man are just four of the more advanced 'low-tax' competitors. In the Far East the authorities in Manila have earmarked the equivalent of US$250 million to create a computer mini-city which they hope to establish as the global 'capital' of E-commerce, while Singapore and Dubai are also forces to be reckoned with.
By November, 2003, Hong Kong Director of IT Services Alan Wong Chi-kong was able to tell the 9th Joint International Computer Conference in Zhuhai that the Government had provided e-options for 86% of public services amenable to electronic delivery and was confident of achieving its aim of 90% by the end of the year. Mr Wong said that the smart identity card launched in June 2003 was a major component of e-government strategy. Offering increased security and various value-added applications, the new ID card supports e-business and e-government transactions.
"The Government plans to join up a number of related cross-departmental services with a view to providing the public with more direct access and better search functions. Projects under study include the Business Entry Portal, the Property Information Hub and the Integrated Criminal Justice System," Mr Wong said.
To foster the growth of the wireless and mobile communications industry in Hong Kong, the Government is setting up a Wireless Solutions Development Centre at the Cyberport where software developers can test their products and obtain industry news.
"The Government has always supported the use of IT in commerce and industry to enhance productivity and operational efficiency," Mr Wong said.
To encourage IT vendors to participate in government IT projects, the Government has adopted a vigorous outsourcing strategy. Information and business-matching services are also offered via supporting organisations to help vendors expand into overseas markets.
With the signing of the Closer Economic Partnership Arrangement, 18 sectors including telecommunications services will enjoy closer trading ties with the Mainland. The Commerce, Industry and Technology Bureau is discussing with the industry a mechanism to strengthen co-operation between the IT and communications industries on both sides of the boundary.
But after spending billions of dollars on IT projects, the Hong Kong government said in September, 2004, that it was planning to adopt stringent new guidelines to try to control the effectiveness of future projects and focus the minds of officials on 'return on investment' and other such market-driven ideas.
The Finance Committee of the Legislative Council is the approving authority for e-government projects that cost more than HK$10 million; for smaller projects, authority is delegated to the GCIO's (Government Chief Information Officer's) Department.
The new policy will be drawn up by an e-government steering committee to be headed by Financial Secretary Henry Tang Ying-yen and supported by the Office of the GCIO. "We would like all the government bureaus and departments to be aware of the government's new expectations of their performance. We don't want to adopt IT for the sake of adopting. We want IT to be a cost-saving device. We want IT to enhance our productivity. There is certainly room for us to do better," said GCIO Alan Wong Chi-kong.
Mr Wong said the next wave of e-government initiatives - as outlined in the 2004 Digital 21 Strategy - must set "utilisation targets". The government has created many electronic services, which it says are used by about 70% of internet users, of whom more than 60% rate the electronic options as "very good" or "quite good". Some of the most popular electronic options are payment of government bills, marriage appointment booking and submission of trade-related documents.
Still, Mr Wong said the ratio of transactions to the number of government services put online - more than 1,200 to date - remained "less than we desired". The government is planning a phased substitution of manned counters in departments with electronic services, such as 24-hour call centres. As part of a business process re-engineering, Mr Wong said the government would like to see more departments working together to streamline processes.
Geographically Hong Kong is well-placed both as a stepping stone into Asia and at a crossroads of the world's communications network - though such advantages are probably more psychological than practical. In theory at least, cyberspace knows no boundaries and the global nature of E-commerce allows it to be conducted anywhere.
~ Books About Hong Kong ~
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