Investment In Hong Kong Hit New Record In 2005

by Mary Swire, Tax-News.com, Hong Kong

12 January 2006

Figures announced by InvestHK, the Hong Kong government's investment promotion department, suggest that the city remains near the top of the list of preferred destinations for foreign investors.

At a press briefing held in the city on Wednesday morning, Invest Hong Kong's Director-General Mike Rowse announced that his department helped 232 foreign companies set up or expand operations here in 2005 - an increase of 13% compared with the 205 companies it assisted in 2004.

According to Mr Rowse, these companies say they have immediately created more than 2,500 jobs and will add more than 5,400 jobs in the next two years.

Together, they invested more than $8.9 billion - 91% growth over the 2004 record total.

“2005 was another year of growth for investment promotion in Hong Kong," Mr Rowse observed.

"We are pleased to see that many of these projects bring along special skills and experience to enrich our existing offerings as an international business hub. Our sector-focused teams will continue to identify, attract and facilitate investors from different sectors from all around the world," he added.

Respected international organisations' recognition of Hong Kong's advantages have reinforced these encouraging results. The Heritage Foundation and Wall Street Journal have just ranked Hong Kong the world's freest economy for the 12th consecutive year. Hong Kong was also selected as the overall winner of "Asian City of the Future 2005/6" by fDi Magazine among over 60 cities and regions in the Asia Pacific.

Mr Rowse attributed these successes to Hong Kong's fundamental advantages - the rule of law, free flow of information and low tax regime - which remain major attractions for foreign companies.

However, he said there is no complacency as there is keen competition in the region, and Hong Kong must strive to maintain and enhance its overall edge.

According to the World Investment Report 2005 released by the United Nations Conference on Trade & Development, Hong Kong remained the second-largest foreign direct investment recipient in Asia, after mainland China.

In 2004, net foreign direct investment in Hong Kong reached US$34 billion, up 150% from US$13.6 billion in 2003, and ranking the territory 7th on a global scale.

In the first three quarters of 2005, Hong Kong attracted more than US$26.7 billion in gross direct foreign investment, $14.6 billion more than in the same period in the previous year.

Moreover, the number of regional headquarters and regional offices in Hong Kong reached all-time highs in 2005. As of June 1, 2005, there were 1,167 companies with regional headquarters and 2,631 companies with regional offices there.

Notable examples include the leading European electronics company Schneider Electric, which uses Hong Kong as a base to manage its operations in the region. In addition to locating its regional headquarters at Cyberport, Schneider has increased its investment in the city by opening a new regional logistics centre in Kwai Chung.

Meanwhile, the Taiwan-based Fubon Group chose to set up a fully licensed banking entity in Hong Kong - Fubon Bank (Hong Kong) Limited - as a springboard for its internationalisation plan.

Hong Kong’s leading position as an international hub of professional services has been further strengthened with the addition of international law firms, including Baker Botts and Hogan & Hartson.

Australian labels manufacturer Z-tag (Asia) Limited has also set up a factory in Hong Kong, taking advantage of the city’s strong intellectual property protection.

In 2005, Invest Hong Kong completed 38 projects related to Mainland investments in Hong Kong. The influx of projects from the Mainland shows that Hong Kong is recognised by these companies as a springboard to expand regionally and internationally. For example, Mainland software company UFIDA set up its Asia-Pacific regional headquarters in Hong Kong to oversee its business in Asia-Pacific.

Other examples include Dynasty Fine Wine, one of the biggest wine manufacturers in the Mainland, which utilised Hong Kong’s strength as an international financial centre and listed on the Main Board of the Hong Kong Stock Exchange, while leading Chinese electronics brand Haier set up a new company in Hong Kong as part of its global strategy.

The Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the Mainland, the third phase of which went into effect in 2006, has also had a beneficial effect on investment. Out of the 232 investment projects completed in 2005, 63 companies (27%) have indicated that CEPA was one of the factors considered in making the investment. Some 32 companies invested because of CEPA, while 31 others have accelerated their investment plans, and/or invested more capital or employed more staff as a result of CEPA. In 2004, 45 companies (22%) indicated that CEPA was one of the factors of their investments.

Mr Rowse says that in 2006, InvestHK will aim to better last year's figures.

"Our target for this year is in the range of 240 to 250 completed projects. To achieve this, we will also work closely with the business community in Hong Kong and around the world,” Mr Rowse concluded.

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