Hong Kong and the Netherlands have a lot in common, geographically - as a gateway to bigger hinterland - but also in terms of people. "The mentality is similar. Dutch people and Hong Kong Chinese are internationally oriented, open-minded and eager to learn, and they have an eye for business deals. Both have entrepreneurship flowing through their veins." Wilfred Mohr, Consul General in Hong Kong, talks about the differences in doing business between Hong Kong and China, and about the opportunities for Dutch entrepreneurs.
Wilfred Mohr, who has been Consul General in Hong Kong for three years, is clearly enthusiastic about his fellow citizens and the business climate in Hong Kong. And with his extensive experience in posts related to business politics and economy in various places in the world, he knows his stuff.
Same country, different system
"Doing business in Hong Kong is essentially different than in 'Mainland' China, in many ways it's easier," Mohr says. "Although it's been one nation since 1997, Hong Kong has retained a large measure of autonomy, at least until 2047. One country, two systems, it's called. While China is a state-governed economy, in Hong Kong the market prevails. It's possible to do business away from the government. In the Dutch press, there was a lot of attention for the demonstrations last year against the draft proposal for a new electoral law (which many didn't think democratic enough). This hasn't affected the economic business climate, however."
Government involvement
That independence from the government doesn't apply to all sectors though, Mohr continues. "In the waste management industry, it is necessary to negotiate with the government." That isn't the case in financial services, the creative industry or agricultural sector. "Unless there are potential dangers to public health. In that case the government is very alert."
Freedom of press and legal certainty
In addition to the market-led economy, he sees two other major differences for doing business in China and Hong Kong: freedom of press and legal certainty. "The press has absolute freedom. The information is correct, and government information is also available in English. In addition, the administration of justice is independent. Business conflicts are ruled based on law, not on political grounds. The Rule of Law of legal certainty is intact."
Service economy with low taxes
Hong Kong is a 95% service economy, with a major role for financial services. Mohr: "That also means there's hardly any agricultural production. That occurs just across the border in [the Chinese province of] Guangdong. This offers opportunities for Dutch companies to export agricultural products to Hong Kong. On an annual basis, 800 million Euro' worth of milk products, particularly powdered milk, is shipped to Hong Kong. Most of that comes from Friesland Campina, another part comes from an American dairy company that also produces in the Netherlands. When it comes to fruit and vegetables, contrary to China, there are no limitations either."
Low taxes and English
The consul also refers to the positive tax climate. "Hong Kong is a free trade zone. There are no import tariffs, nor VAT, and customs are generally very fast in clearing products. In addition, corporate tax is very low, only 16%. In the business community, everyone speaks English, another big difference with China."
Mature market
According to Mohr, Hong Kong doesn't experience the slowdown in growth that the Chinese economy is seeing. "Although the Chinese government's anti-corruption campaign does have an impact. Luxury retail and to a lesser degree hotels are affected. The number of tourists from China is decreasing."
But Hong Kong had always had a slower economic growth than China. "It's currently around 1-2% a year. It's a mature economy, with the growth mainly coming from productivity improvement rather than investments (in infrastructure and real estate)."
Mohr sees various areas with opportunities for Dutch companies.
- Transport and logistics: Hong Kong is an important transshipment port. The ports of Rotterdam and Amsterdam already have interests here, but this sector definitely offers opportunities to companies specializing in transport and logistics.
- Creative industry: Dutch Design is particularly popular. The Consulate supports the establishment of a PIB in this area.
- Waste management. Hong Kong is modernizing its waste management. Since 2014, a PIB with six participants has been active in waste incineration, processing food into biomass, IT equipment for measuring waste flows, and pricing waste and consultants.
- Agrofood and horticulture. Sales of fruit/vegetables, meat and processed products, particularly powdered milk.
Other sectors in which the Consulate wants to become active, are: elderly care (a partnership with a PIB in China is in the making) and innovative start-ups. In 2041, one third of the population in Hong Kong will be 65 years and older, which offers many market opportunities. A lot of research and development (R&D) also takes place in Hong Kong, and the number of start-ups is increasingly rapidly. R&D in Hong Kong now mainly occurs at universities. That means knowledge and know-how are in order, but exploitation remains behind. And the number of start-ups (and the surrounding ecosystem) is increasing fast. Important sectors are finance, internet of things and medical application.
Speed and physical presence
Mohr advises to be fast, to invest in contacts and to have a physical presence in Hong Kong as well. "Hong Kong is a super competitive market. The business turnover rate is very high. If you had a reception yesterday, chances are you have mail from your interlocutor in your inbox today." Being introduced through a mutual contact is less important than in China, but keeping in touch personally remains important. Mohr: "In Hong Kong, people are open to sharing contacts, because they see business everywhere. Still, in Hong Kong they also invest in inter-human relations, just like in China."
About the Hong Kong consulate
The consulate in Hong Kong has two Dutch people and nine local employees working there. Over half of the staff works on improving trade between the Netherlands and Hong Kong, and representing the interests of Dutch companies. More information: hongkong.nlconsulate.org