INVESTMENT EDITION The Australian Chamber of Commerce Hong Kong and Macau 香港及澳門澳洲商會
ISSUE 183, 2016
Brexit stage right: what Britain’s decision to leave the EU means for Australia
Australia Focus: Explainer: what is ‘value capture’ and what does it mean for cities?
Hong Kong Focus: Chinese Companies Home in on Hong Kong
Industry Insights : The Central Roles of Data and Real Estate in Smart City Development P.18
austcham news issue 183 03 Chamber Chatter
Published By: The Australian Chamber of Commerce in Hong Kong and Macau Room 301-302, 3/F, Lucky Building 39 Wellington Street, Central, Hong Kong Tel: +852 2522 5054 Email: firstname.lastname@example.org
04 Events Update
06 Membership eCard Benefit
08 Cover Story Brexit stage right: What Britain’s Decision to Leave
Editorial Committee: Drew Waters Karen Wu
the EU Means for Australia
10 Australia Focus
Explainer: What is ‘Value Capture’ and What Does it mean for Cities? The New Turnbull Government
16 Hong Kong Focus Chinese Companies Home in on Hong Kong
CONNEC T • ENGAGE • REPRESENT
18 Industry Insights The Central Roles of Data and Real Estate in Smart City Development
21 Committees in Action
22 Corporate Profile ASX Limited
Advertising: Karen Wu Email: email@example.com
23 On The Scene
The Australian Chamber of Commerce in Hong Kong and Macau has more than 1,500 members from some 500 companies doing business here. It’s the largest Australian business grouping outside the country and the second largest of 28 International Chambers of Commerce in Hong Kong. The AustCham mission is: To promote & represent Australian business & values while enabling members to connect, engage & grow bilateral relationships. Disclaimer:
Follow us on: Facebook Twitter LinkedIn
austcham news Online version
The views expressed in this publication are not necessarily those of the Australian Chamber of Commerce in Hong Kong and Macau, its members or officers. The Australian Chamber of Commerce in Hong Kong and Macau takes no responsibility for the contents of any article or advertisement, makes no representation as to its accuracy or completeness, and expressly disclaims and liability for any loss however arising from or in reliance upon the whole or any part of this publication. Copyright © 2016 The Australian Chamber of Commerce in Hong Kong and Macau
2 • austcham news | issue 183
nvestment is the main focus of this month’s AustCham News. I’ll focus in this space on how Australia can become more competitive through making the right investments at the right time.
One way for Australia to improve its competitiveness is to invest to evolve the economy towards industries in which Australia has advantages and away from industries in which Australia has disadvantages. This tends to happen naturally over time in market-oriented economies as higher returns attract capital and individuals into more competitive industries and lower returns cause capital and individuals to move on. This is more or less the approach that the Australian Treasury and Productivity Commission have been urging, one that allows market forces to push the economy to adjust to maximise its output by causing resources to be allocated to the most productive uses. Of course this can create substantial adjustment costs for individual companies and people employed in industries that become less competitive over time. It can also be politically difficult since the industries of the past often have a political constituency, while the industries of the future often do not. Another way in which Australia’s competitiveness could improve is for industries and the global economy to evolve in ways that make Australia’s strong points more important and its weak points less important. While it might be beyond the capability of the Australian Government or Australian companies to influence the evolution of industries and the global economy in most industries, it might be possible in some, and it is within the capability of the Australian Government and companies to try to anticipate which drivers of competitiveness will be more important in the future and to make investments that build up Australia’s position in these drivers. In a globalised flat world, Australia needs to be a “flattenor.” Australian companies and individuals need to generate ideas and knowledge that are commercially valuable and then leverage them into international markets. This would involve Australian companies understanding the needs of customers in global markets, developing the right products and services to meet these needs, and building the ability market and sell remotely into key countries. This could result in substantial increases in exports of knowledge-intensive products and services as well as increased productivity in the domestic economy. This in turn would involve Australian companies harnessing productive resources in Asia and elsewhere, using modern ICT to overcome the diseconomies of distance, and developing corporate systems and processes to manage complex international systems. It would require that Australia extend its advantages in some basic competitiveness drivers and overcome disadvantages in others, particularly involving infrastructure. It would involve Australia and Australian companies parlaying an advanced education system, a sizable number of knowledge workers, and a favourable institutional environment into a more dynamic innovation system with close links between research organisations and companies, market-driven product and service development, and interaction among clusters of firms and industries. If this were to happen, because Australian entities are developing the knowledge and intellectual property that drives the economy, Australia controls its economic destiny, at least to the extent possible given the interdependence of economies around the world. This would put Australia in an envious position of being able to react to changes in the world economy from a position of strength. Following on from the recent election, the challenge for the (new) Turnbull government will be to craft policies and foster an economic framework that encourages investment into the right sectors at the right time. Not easy. Let’s see … On a lighter note, anyone who attended the recent Melbourne International Comedy Festival Roadshow that played at the Fringe Club over several nights in July surely had a great night out - great comedians and a lot of good Aussie humour. Congratulations to the performers, and to Kylie Mitchell and team on putting on a great show. Come back soon! I hope that you will connect with the Chamber this month in some way, and that you will continue to share your views on how best the Chamber can serve you. Richard Petty firstname.lastname@example.org
issue 183 | austcham news
Across My Desk
s we enter a new financial year, I would like to take the opportunity of thanking our vast membership for the valuable and enthusiastic contribution to the continued success of the Chamber. Our Platinum Patrons ANZ, Australia Plus, Commonwealth Bank of Australia, CPA Australia, Flight Centre, KPMG, Leighton Asia, Macquarie, National Australia Bank, Telstra, and Westpac, provide enormous support without which the Chamber would struggle to provide the high level of engagement that we do. It is a privilege to work closely with such high level professionals across the business spectrum in Hong Kong. We have entered another phase of activity for our much praised and copied Mentor Programme, and our list of Mentors and Protégés has reached record heights. The first event has come and gone, and the mentoring pairs have been selected, introduced, and guided through the first phase of the programme. I wish all of those involved the very best for a productive and enjoyable season, and thank Tanya and Liz from Speak for the dedication and energy brought to the group so far. Our committees have provided some great topics for consideration this year and a couple of those have been transformed into events already. Our Small Business Network has initiated the brand new Business Lifecycle series which will begin in early September, so take a note for your diaries. The Women in Business Network began the Though Leadership series with a terrific event at Minter Ellison’s office last month, with the generous support of Geoff Wilson of KPMG and Ben Way of Macquarie, and will continue with other sessions around the theme. The Business Technology and Sustainability committees have joined forces to bring an event to our members coinciding with the inaugural E-Prix in October, highlighting the transport plan for Hong Kong into 2020 and featuring thought leadership in electric transport solutions, smart cities, and environmental considerations. Of course we are bringing our annual ACCESS China forum to you in early November so, once again, please mark your calendars. Watch this space for more information shortly, but this will continue the great forums we have held in the past few years with highly regarded speakers and panellists, and a great keynote speaker over lunch. It seems we have a new Australian Government, all sworn in and accounted for. After such an entertaining and controversial election, with places in the upper house still to be determined, I’m
4 • austcham news | issue 183
looking forward to a new age of politics with some entertaining, frustrating, and creative processes to follow. We were very lucky to have Kerry-Anne Walsh in Hong Kong to discuss the tumultuous election process and a number of the personalities involved, at a breakfast at the Hong Kong Club and again at a lunch at the St Regis in Macau. Thanks to Kerry-Anne and Mark Wembridge for their insightful and often amusing contribution. Josh Densley has been part of the team at the Secretariat for the past 6 months, helping Iris with events management while Cloudia is on maternity leave. He’s been a great addition to the team, however short lived that seems, and is now actively pursuing other possibilities. Josh has represented the Chamber well and has been member facing at most of our events. He has demonstrated his ability to react to tight deadlines on numerous occasions, and adapted rapidly to the sometimes hectic work environment in here. If anyone is looking for a capable International Business Graduate to complement their team, please drop me a line as I am very keen to help Josh onto his next career step. Summer is well and truly upon us with some great weather to go along with the soaring temperatures. I hope most of you have been able to enjoy the heat and make the most of the conditions, or take a break and travel to less steamy places during the holidays. I will be taking a short break in chilly Sydney shortly, but Chamber activity will bustle on while I’m gone. Have a good summer everyone. Drew Waters, Chief Executive
EVENTS UPDATE AUGUST AT A GLANCE… 30 August, 6:30pm – 9:00pm The 62nd InterCham Young Professional Cocktail Azure Restaurant Slash Bar, Hotel LKF by Rhombus, 33 Wyndham Street
Mark Your Diary!
SS China Forum 2016 4 November – ACCE tmas Mix 8 December – Chris
A Letter from Canberra Post Election I write this letter from Canberra just a few days after the election. I’m still recovering. On election day, I visit every polling booth in the electorate. It’s become a ritual. It drives my staff nuts. They’re not shy about saying so. “It’s not an efficient use of your time,” they say. “You spend half the day in the car.” But efficiency isn’t everything. When you’re by yourself at 6 am on election day, setting up a polling booth at the local primary school, and you can’t feel your fingers from the cold, you know you’re in for a long day, particularly if you’ve volunteered to scrutineer at the end of it. You’re doing it on your weekend. You’re not getting paid for it. And you’re certainly not doing it for the glamour. I know, because I’ve been handing out Labor How To Vote cards since 1983. And I always found that a visit from the candidate over the course of that long day on the booth boosted my morale and reminded me why I was there and why I was Labor.
A political party only needs 76 Members of the House of Representatives to form Government. It’s all about getting 76 warm bodies into 76 seats in Canberra. It doesn’t sound like much. But it takes hundreds and sometimes thousands of people to elect just one. Nearly none of them get their names recorded. But elections wouldn’t work without them. Careers are made and broken by the people who splinter their hands hammering signs into frosted grass on the morning of the election. So visiting them might not be the most efficient use of my time – but it’s important to me. Every politician on every side owes their career to an army of volunteers. We can all find time to say thanks and buy them a coffee and sausage sandwich every few years. Gai Brodtmann MP, Federal Member for Canberra and Co-Convenor of Parliamentary Hong Kong Friendship Group
AustCham Platinum Patrons
issue 183 | austcham news
Membership eCard Benefit AustCham
k Than ! You
In July, Hong Kong Art Tutoring (HKAT) is offering AustCham a 20% discount on their Summer Art Camps this Summer! HKAT also offer courses include life drawing, corporate creative design-thinking events, CSR activities. For more information, please visit www.hkarttutoring.com or email email@example.com
In August, Langton’s East Asia is offering AustCham members a discount on purchasing Crisp Bright Whites at HK$1,380 (per 12-pack) and full-bodied red dozen at HK$980 (per 12-pack). For more information, visit www.langtons.com.hk/austchamexclusive
Hong Kong’s First International Philanthropy forum focusing on Metropolitan Issues The Hong Kong Jockey Club Charities Trust Through its unique combination of horse racing, sporting entertainment, responsible wagering, and philanthropic support, The Hong Kong Jockey Club has been working for the betterment of Hong Kong for over a century.
Ageing and Health, Environment and Sustainability, Innovation and Technology, and Public-Private Partnerships. Members of AustCham enjoy a special discount at $1,800 per delegate until 31 July. (Discount code: 2jCcH@r0). Register now at www.citiesphilanthropy.com.
As the largest charity benefactor in Hong Kong, the Club contributes around 70% of its annual revenue to the community through its Charities Trust. It was also ranked sixth in the World Charity Index 2015. While the Trust continues to fund a wide range of projects, it is placing special emphasis on three areas of strategic focus – Youth, Elderly and Sports, over the next few years.
Healthy, inclusive, and vibrant cities… how can we get there? The Trust will convene the Philanthropy for Better Cities Forum to explore the role of philanthropy in tackling metropolitan social issues. More than 1,000 participants from around the world are expected to attend.
Over 40 international and local speakers will share views on themes including Youth and Education,
AustCham is a non-profit organisation and provides this space free of charge to other, selected non-profits or charities.
6 • austcham news | issue 183
Some Some things things we we haven’t haven’t changed changed in in 50 50 years… years… Like Like making making time time for for everyone everyone
Go Go knowing knowing
InInfifty fiftyyears yearswe’ve we’velearned learnedaalot lotabout aboutwhat whatmakes makesrelocations relocations more moresuccessful successfulfor foreveryone. everyone. With Withexperienced experiencedand andknowledgable knowledgablepeople peopleon onthe theground groundinin more morethan than60 60countries countrieswe weequip equipyou youwell wellfor foryour yourrelocation: relocation: • • We’ll help you get to know the destination well before you go We’ll help you get to know the destination well before you go • • Show you how to make it easier and more exciting for Show you how to make it easier and more exciting for children, children,and andless lessstressful stressfulfor forpets pets • • We’ll look after your belongings with expert packing and We’ll look after your belongings with expert packing and transport transport • • And when you arrive, we can help you get settled quicker And when you arrive, we can help you get settled quicker and andenjoy enjoythe thethrill thrillofofaanew newplace placeor oraadifferent differentculture culture
Tel: Tel:+852 +8522636 26368388 8388 firstname.lastname@example.org email@example.com
Brexit stage right: What Britain’s Decision to Leave the EU Means for Australia - Ben Wellings, Lecturer in Politics and International Relations, Monash University
ritain’s decision to leave the European Union has opened a fundamental crack in the western world. Australia’s relationship with the United Kingdom is grounded in the UK’s relationship with the EU.
8 • austcham news | issue 183
Britain’s decision to leave the European Union has opened a fundamental crack in the western world. Australia’s relationship with the United Kingdom is grounded in the UK’s relationship with the EU.
The UK was Australia’s eighth-largest export market for 2014; it represented 37.4% of Australia’s total exports to the EU. As Austrade noted2: No other EU country featured in Australia’s top 15 export markets.
Given Australia’s strong and enduring ties with the UK and the EU, the shockwaves from this epoch-defining event will be felt in Australia soon enough. Most immediately, the impending Australia-EU Free-Trade Agreement becomes more complicated and at the same time less attractive.
In short, the EU is not as attractive to Australia without Britain in it. Beyond trade numbers
What will happen to trade ties?
But the Australia-EU-UK relationship cannot be reduced to numbers alone. It also rests on values shared between like-minded powers.
The importance of Australia’s relationship with the EU tends to get under-reported in all the excitement about China. We might ascribe such a view to an Australian gold rush mentality. Nevertheless, Australia’s trading ties to the EU are deep and strong.
Brexit represents the further fracturing of the West at a moment when that already weakening political identity is in relative decline compared to other regions of the world, notably Asia (or more specifically China).
Such ties looked set to get stronger. In November 2015 an agreement to begin negotiations in 2017 on a free-trade deal was announced at the G20 summit in Turkey. Trade Minister Steven Ciobo said in April 2016 that an Australia-EU free trade agreement: … would further fuel this important trade and investment relationship.1
EU-Australia relations rest on shared concerns such as the fight against terrorism advanced through police collaboration and the sharing of passenger name records. The EU and Australia also collaborated to mitigate climate change at the Paris climate summit. And they work for further trade liberalisation in the World Trade Organisation – but don’t mention agriculture.
When considered as a bloc, the EU consistently shows up as one of Australia’s main trading partners. Consider the statistics below:
Without the UK, these shared political tasks become harder.
• in 2014 the EU was Australia’s largest source of foreign investment and second-largest trading partner, although the European Commission placed it third after China and Japan in 2015; • in 2014, the EU’s foreign direct investment in Australia was valued at A$169.6 billion and Australian foreign direct investment in the EU was valued at $83.5 billion. Total two-way merchandise and services trade between Australia and the EU was worth $83.9 billion; and • the EU is Australia’s largest services export market, valued at nearly $10 billion in 2014. Services account for 19.7% of Australia’s total trade in goods and services, and will be an important component of any future free trade agreement. This is all well and good. But when not considered as a bloc, 48% of Australia’s exports in services to the EU were via the UK; of the $169 billion in EU foreign direct investment, 51% came from the UK; and of Australia’s foreign direct investment into the EU, 66% went to the UK. You get the picture.
Clearly, Australia-UK relations rest on a special historical relationship. However, it has seen efforts at reinvigoration, as British governments buckled under the pressure of the Eurosceptics among the Conservatives. Beyond everyday trade, historical links have been reinforced through the centenary of the First World War and the UK-Australia commemorative diplomacy that has come with this four-year-long event. Cultural ties are most regularly and publicly affirmed through sporting rivalries such as netball, rugby and most notably cricket. Expect these ties to be reinforced as the UK seeks trade agreements and political support from its “traditional allies”. For those with British passports, there will be a two-year period of grace as the UK negotiates its exit. After that, it will be quicker to get into the UK at Heathrow, but this might be small consolation for the loss of a major point of access to the EU. The vote to leave is a major turning point in Europe’s history. It marks a significant crack in a unified concept of “the West”. It is not in Australia’s interests. It’s time for Australia to make new friends in Europe. Source: This article was originally published on The Conversation.
1 http://trademinister.gov.au/releases/Pages/2016/sc_mr_160426.aspx 2 http://www.austrade.gov.au/local-sites/united-kingdom/news/uk-continues-as-australia-s-top-export-market-in-europe issue 183 | austcham news
Explainer: What is ‘Value Capture’ and What Does it mean for Cities? - Nicole Gurran, Professor – Urban and Regional Planning, University of Sydney - Stewart Lawler, Lecturer in Property and Built Environment, University of Sydney
alue capture secures some of the benefits delivered by public investment to offset the costs of provision. The notion has been around in various forms for a while, but recently gained steam. Prime Minister’s Malcolm Turnbull’s Smart Cities Plan touts value capture as a way to better distribute “the costs and benefits in publicly funded infrastructure to facilitate a project that may not otherwise occur”. But there’s a lot of confusion about what value capture actually means and how it might operate in Australia. What is ‘value capture’? Public investment in a new rail line or motorway can generate huge increases in surrounding land values. In part the increase derives from improved accessibility for existing residents and businesses. High windfalls also arise once land has been rezoned to capitalise on higher development opportunities generated by the new infrastructure. Since public investments and decisions are intended to maximise community benefit, it seems unfair and inefficient that some private landowners profit immensely from the process while others gain little or may even be disadvantaged. Value capture mechanisms seek to rectify this by clawing back at least some of the increased business revenue or land value. These funds are then allocated towards the initial costs of infrastructure provision. In the case of a planning change, land value uplift can also help ensure that affordable housing for low income groups is included in new development.
10 • austcham news | issue 183
How does value capture work? The PM’s Smart Cities Plan doesn’t offer much detail as to how a value capture model would operate in Australia. Several different approaches are used overseas, but their potential transferability is unclear. Transit value capture is used in Hong Kong and Japan to fund railway lines and new town development. This is a project-based approach which packages investment in railway and housing development together. Commercial holdings along the railway line deliver an ongoing revenue stream as does long term investment in residential development. In Hong Kong, a significant program of public rental and subsidised home ownership has also been delivered as part of this model. Project-based transit value depends on access to large swathes of low cost land (in Hong Kong the government retains land ownership, so the land component is essentially free). It also depends on ongoing residential and commercial investment along the new route over time, which in turn assumes buoyant economic growth. When the Japanese economy stagnated, the potential for railway operators to self-finance their projects did too. Tax Increment Financing (TIF) is used widely in the US to finance new transit and urban renewal projects. The model draws on anticipated increases in business revenue or rents in areas where incremental value uplift will occur. A portion of the increase is captured via a special property tax which is then allocated to repay the debt.
Australian local governments can also introduce special purpose levies to fund specific items through property taxes or rates. The Gold Coast light rail project for instance, was partly financed via the council’s annual transport levy (now around $111). However, since the levy applies to all ratepayers, rather than confined to areas where direct value uplift occurred, this doesn’t represent value capture in the strict sense of the term. Value capture through the planning process is another approach. Unlike development contributions, which in Australia are used to internalise the costs of servicing a particular project (like roads, carparks, or footpaths), so they aren’t borne by existing ratepayers, value capture focuses on the benefits (often called “betterment” or “planning gain”) accruing from public investment or planning decisions. One way of capturing value created through public investment or planning is to levy the charge on the first property transaction (ie. land sale) following the change. Another is to add an additional levy to existing contributions paid by developers. The NSW government’s foreshadowed “Special Infrastructure Contribution” for new residential development along the Parramatta Rd light rail corridor ($200 per metre of gross floor area) is a recent example. While this amounts to around $20,000 an apartment (at most about 3% of current sales prices), industry lobby group the Urban Taskforce claim the levy will discourage development and hurt home buyers. That’s cheeky since house prices are set by the market – which in the case of a light rail corridor will rise by much more than 3%. Ultimately the Taskforce worries that value capture places
“an unfair burden on particular sectors of society” by which they presumably mean landowners and developers. What would need to happen to extend value capture models in Australia? Besides the politics, a number of issues must be addressed if value capture is to be extended in Australia. First, calculating value uplift is complex. Often land prices rise well in anticipation of investment or a planning change, so robust framework for value capture should be in place well before such speculation might occur. Second, value capture should not discourage development or make land acquisition more expensive. This means close attention to project viability when setting capture requirements. Third, robust mechanisms for collection through either the planning process, as an ongoing property tax, or when land is sold, are needed. Finally, although the current conversation focuses on transport, over time there will be pressure to fund other socially beneficial infrastructure. Two obvious candidates are schools, which also improve land values, or affordable housing, which is often lost when land values rise. However fuzzy current conversations about value capture may be, the Commonwealth’s new interest in cities and the need to support more affordable homes near public transport, is welcome. So too the recognition that public investment and policy changes in urban and regional areas generate enormous value, which can and should be shared more widely. Source: This article was originally published on The Conversation.
issue 183 | austcham news
Cover Story Australia Focus
The New Turnbull Government After the long election campaign, Malcolm Turnbull was sworn in as Prime Minister of Australia by the Governor General on 19 July 2016. Mr Turnbull was elected to Federal Parliament as the Member for Wentworth in 2004. Since entering public life, he held a number of parliamentary positions including Shadow Treasurer, Parliamentary Secretary to the Prime Minister with responsibility for national water policy, Minister for Environment and Water Resources and served as the Communications Minister from September 2013 to September 2015. He was Leader of the Opposition from September 2008 to December 2009 and was elected the leader of the Liberal Party and the 29th Prime Minister on 14 September 2015. Here are the members of the latest Government Ministry*.
Minister for Foreign Affairs: Julie Bishop
Prime Minister: Malcolm Turnbull
Deputy Prime Minister, Minister for Agriculture and Water Resources: Barnaby Joyce
Treasurer: Scott Morrison
12 • austcham news | issue 183
Attorney-General, Leader of the Government in the Senate: George Brandis QC
Minister for Finance, Deputy Leader of the Government in the Senate: Mathias Cormann
Minister for Education and Training: Simon Birmingham
Minister for Trade, Tourism and Investment: Steven Ciobo
Minister for Women, Minister for Employment, Minister Assisting the Prime Minister for the Public Service: Michaelia Cash
Minister for Revenue and Financial Services: Kelly O’Dwyer
Minister for Immigration and Border Protection: Peter Dutton
Minister for Communications, Minister for the Arts: Mitch Fifield
Minister for the Environment and Energy: Josh Frydenberg
Minister for Health and Aged Care, Minister for Sport: Sussan Ley
Minister for Defence: Marise Payne
Minister for Social Services: Christian Porter
Minister for Defence Industry: Christopher Pyne
Minister for Indigenous Affairs: Nigel Scullion
Minister for Industry, Innovation and Science: Greg Hunt
Minister for Infrastructure and Transport: Darren Chester
Minister for Small Business: Michael McCormack
Assistant Minister for Vocational Education and Skills: Karen Andrews
Minister for International Development and the Pacific: Concetta Fierravanti-Wells
Minister for Major Projects, Territories and Local Government: Paul Fletcher
*For full list please visit www.dpmc.gov.au
Minister for Resources and Northern Australia: Matthew Canavan
Minister for Justice, Minister Assisting the Prime Minister for Counter Terrorism: Michael Keenan
issue 183 | austcham news
Connect with AustCham on social!
AustCham - Hong Kong, Macau and South China ENGAGE
The Australian Chamber of Commerce in Hong Kong & Macau (AustCham)
ÂŠ 2016 The Australian Chamber of Commerce in Hong Kong and Macau
Member Classifieds Australia Registered Tax Agent in Hong Kong
Holistic Business Consulting Pty Ltd. Chartered Accountant We specialise in tax planning for Australian Expatriates, tax returns preparations, private rulings for deductions. www.myoztax.com Call Tommy Ip on +852 69018136 or email: firstname.lastname@example.org
To enquire about advertising, submit an article, comment or respond to austcham news, please contact Karen Wu at email@example.com or call +852 2522 5054.
14 â€˘ austcham news | issue 183
T +852 2522 5054
Hong Kong Focus
Chinese Companies Home in on Hong Kong - Sadhika Nanda, JLL Hong Kong
s China grows its presence on the world stage, an increasing number of companies from the mainland are testing the waters in the free-market economy of Hong Kong.
Over the last five years, the number of mainland Chinese firms seeking office space in Hong Kong has nearly doubled – and high levels of demand are showing no signs of stopping. Mainland corporates accounted for no less than 40 percent of net lettings in the Central office market in terms of floor area. Most of these firms are in the financial services sector, according to Denis Ma, Head of Research at JLL Hong Kong. Whether they’re start-ups or large corporates, all are keen on office space in the city’s core business hub. “We often suggest places beyond Central [the central business district of Hong Kong] – and they are looking, but changing their mindset remains a slow and gradual process”, comments Ma. In fact, JLL forecasts suggest that rents in Central will be boosted by 5 to 10 percent owing to sustained demand from mainland China, coupled with low vacancy rates. And while attention was previously focused more on the leasing market, in the last six months demand has started to shift towards investment. Financial might has enabled many of the bigger incoming companies to pay premiums and record high prices for en-bloc purchases, consequently driving yields lower. China Everbright, for
16 • austcham news | issue 183
example, bought Dah Sing Financial Centre in Wan Chai for HK$ 10 billion in February. Hong Kong: enticing, but why? One key driver of rising interest in Hong Kong is its proximity to mainland China, says Ma. “It’s practical to set-up here, particularly when firms are constantly flying people in and out,” he explains. “There’s a cultural reason too – Hong Kong’s backdrop is ideal in more ways than one, especially in terms of language”. As such, Hong Kong has become a significant first step in China’s strategy of global expansion, as it offers the kind of exposure firms need before going global, but with an element of safety. Another feather in Hong Kong’s cap is the professional services it has to offer in its capacity as a “regional financial and legal hub,” says Ma. Favourable policies have also played a part. Many of China’s new policies aimed at liberalization have given Hong Kong a first mover advantage, subsequently boosting demand from mainland China. The Shanghai-HK Stock Connect and Mutual Funds Recognition Scheme, for example, acted as a catalyst for firms to enter the Hong Kong market while tangibly boosting leasing demand. The changing nature of Hong Kong’s office space With companies from the mainland playing a vital role in the short and long-term growth of Hong Kong’s office markets, their presence could well to incentivise more foreign companies to increase operations in the region.
Rising demand might potentially loosen the strong foothold multinational corporations (MNCs) have in Central, says Ma. “There’s a lot of competition from mainland China tenants in Central and it’s only going to increase. This means that some tenants will just get bumped out.”
“Most banks already have a physical presence in Hong Kong, so we expect to gain interest from more securities trading and asset management companies,” he says. And while Hong Kong remains an expensive market, new supply in areas such as Kowloon East, dubbed ‘CBD-2’ is laying out a range of cheaper options.
For MNCs, this could mean looking elsewhere for office space in districts like Wan Chai, Hong Kong East and Kowloon East, all of which offer contemporary, sought after buildings at rents that are around 50 percent lower than those at Central.
Hong Kong, for now, is very much the market of choice for mainland companies with global plans.
Source: JLL Real Views.
With no sign of mainland demand waning, Hong Kong’s property market faces the risk of growing increasingly dependent on it. While many stakeholders welcome such demand, its critics believe it may be unsustainable. However, given Hong Kong’s competitive advantage over many other cities in the region, Ma believes that demand is likely to remain stable. AustCham AD (204 x148mm) Layout JAN_2016 OP.pdf
Real Views is a news site from JLL that features stories exploring the world of real estate and its impact on the wider business world. For more information please visit: www.jllrealviews.com
H ONG KONG - M E LBOU R N E - SY D N E Y
irect & Enjoy 1 0% off ou r best w
issue 183 | austcham news
The Central Roles of Data and Real Estate in Smart City Development - Adam Bonislawski, CBRE
18 â€˘ austcham news | issue 183
From smart parking to transportation to green and automated office space to the locations of the municipal data centers themselves, real estate is central to the very notion of a smart city.
he phrase “smart city” might conjure up visions of the future, but, in fact, many of the key technologies and capabilities are already here. Remote building environmental controls, traffic mapping apps, automated parking systems—a wide range of smart technologies are up and running in municipalities around the world. The challenge is implementing and integrating them. The complicated road to smart cities Technological hurdles remain, of course, but one of the main challenges of smart city development is not so much the creation of new technology, but the better implementation and integration of those currently in use.
devices produce in meaningful ways that lead to meaningful improvements in quality of life.
It’s a matter of “connecting the individual silos that already exist,” says Nicholas Jeffery, director of CBRE’s data center solutions group, using the example of his morning commute into work to illustrate the challenge.
His team at CBRE sees “data as being the beating heart of a smart city,” Jeffery says. “Because without a data center, you can’t collect and store and archive all of the data you are gathering from a smart city.”
For his drive into London, he might use a smartphone app like Waze, a community-based traffic and navigation system that plots the most efficient route based on real-time traffic data generated by its users. Then, upon entering central London, he pays the city’s congestion charge and makes his way to his office where he searches for a parking space.
He says that he and his colleagues have begun presenting this notion of “data centers as being a big part of a smart city” to leaders of municipalities around the world and have received “an enormous response.” Additionally, Jeffery says, CBRE has gathered into one group resources addressing the full scope of smart city needs, ranging from smart building technologies to labor force analytics. The company is also building strategic alliances with firms that have needed know-how in other areas key to smart city development, like mass transit, for instance.
With better integration, however, his smartphone app might move from picking the best route to helping him find parking once he nears his office, Jeffery notes. “The application could tell me, ‘Nicholas, the best car parking space that has space left is not the one you usually go to, please allow me to direct you to another one,'” he says. “And when I get to that space, it is already reserved for me. And when I drive in, the camera recognizes my car and it tags me as arriving at 9:15 in the morning. When I leave, it tags me on the way out and bills me.” Additionally, the congestion charge system might not only assess the charge, but also gather information on where and when he entered the zone and at what point he left it, allowing city managers to better understand the flows of traffic through the area. Big data, big payoff Central to all this, Jeffery says, is the ability to handle, coordinate and analyze the vast quantities of data a wellintegrated smart city would generate. “People are expecting devices like autonomous vehicles and their refrigerators and home security systems and mobile devices to all be connected,” he says. And that means connecting and processing the vast amounts of data these
And while it might, at first, seem curious that a real estate firm would take such a central role in smart city development— as opposed to, for instance, a Silicon Valley tech stalwart—it makes sense once you consider the fact that, as Jeffery notes, much of the data essential to a smart city’s operations “is generated in real estate.” From smart parking to transportation to green and automated office space to the locations of the municipal data centers themselves, real estate is central to the very notion of a smart city. Or, as Jeffery puts it, “we want to be the glue connecting all these disparate ideas.”
Source: Blueprint, presented by CBRE is an online magazine where the intellectual capital and institutional knowledge that lives within CBRE is shared with the global business community through an array of engaging, thoughtprovoking and illuminating content. For details, please visit: blueprint.cbre.com
issue 183 | austcham news
Australian Ross Williams set up his beverage distributorship firm to tap Hong Kong’s thirst for quality drinks.
he most trying decisions have often led to the greatest rewards for marketer and entrepreneur Ross Williams. The former General Manager of Kraft's Hong Kong and Macau team spent five years with the multinational through the early part of the 2000s before deciding to remain in Hong Kong and start his own company. Mr Williams explains how he built Brandwerk. How did you come up with the idea of Brandwerk? Up the side of a mountain a few years ago, I was on a cycling tour of Austria, enjoying some time on vacation from Hong Kong. We stopped at a bar on the side of the road, high in the Alps. It had been a brilliant day – sunny, blue skies – and the waiter poured me a Stiegl Goldbrau lager beer. It was a moment of sheer magic. I knew I wanted to be involved with the brand then and there. The beer was that good? Yes, it was, and has been for over 520 years! But there was a great story behind the product too. The brewery has been familyowned since 1492, which means they have a great tradition and a strong vision for the future of the brand. It’s a great-tasting natural product and something a little different to what most consumers in Hong Kong might be used to. The brewery has been very supportive in bringing the beer to Hong Kong and we’re very happy to be working with them. How have you expanded the company since? Stiegl is one of the mainstays of our business, but we’re also the official distributors for Portugal’s Super Bock beer; a range of exceptional sparking mineral waters from Europe, including Pedras from Portugal and Gasteiner from Austria, and some boutique New World wineries. I think the international flavour of Hong Kong is one element that has helped us expand. There have always been significant European
20 • austcham news | issue 183
communities here and they’re dedicated to bringing some of the flavours of home to the city. There’s also a level of support here that I think is uncommon anywhere else. That’s due in part to the city’s relatively compact size and its importance on the global stage. In our marketing efforts, we’ve received help from the Austrian Trade Commission, bar owners and restaurateurs, and from the highly developed trade show network here – we’ve exhibited a number of times at events at the Hong Kong Convention and Exhibition Centre. There’s an established system of supports at most levels in the food and beverage trade, but there’s also a relatively affluent community of consumers with an interest in trying new products, and tired of the old beer brands that are everywhere. The rise in popularity of good-quality craft beer has also been a significant trend in the trade. Why did you decide to set up your company in Hong Kong? I’ve always enjoyed living in Hong Kong and decided I would like to stay here longer term. That I could transition from a significant role with a leading multinational company into my own start-up concern with minimum fuss was great for me personally, and has been a cornerstone component of the success of my business. What’s next for Brandwerk? We are currently setting up in Taiwan and at the same time making the move to southern China. I’m in the process of setting up a distributorship for some of our beer brands in Taiwan. So we’re working towards making good on our brand promise of becoming a leading distributor in the Asia-Pacific region. Source: For more information, please visit HKTDC Hong Kong Means Business at http://www.hktdc.com/HongKongMeansBusiness
Committee in Actions
Business Technology Committee: Journey to a Smart City
smart city is a vision to integrate multiple information and communication technology (ICT) solutions to manage a city’s assets.
The Committee recently hosted a session on global trends in smart city development, the Internet of Things (IoT), smart living and smart city services in Hong Kong. Guest speakers Dr. Katherine Kwan from HKT and Craig Price from PCCW Global briefed attendees on the breadth of services required to deliver a smart city and what smart services are being offered in the city today.
AustCham ANZ Mentor Program
Business Technology Committee Cybersecurity risks and how to protect your business
n today’s highly interconnected world, cybersecurity poses a genuine threat to businesses both large and small. Two key cyber risks in ransomware and identity theft are now an everyday corporate threat. Companies are now also facing increasingly sophisticated threats from within their own organisations. The Committee hosted a forum earlier in the month to provide insight and specific advice on what businesses can do to protect their business from these and other forms of cyberattacks. The forum was moderated by Geoff McClelland of CIO Connect, panel speakers include Megan Haas of PwC and Stuart Sanders of Velocity Group. The forum discussed what is trending in cybersecurity both globally and locally, along with the business risks that these upcoming threats pose. Special thanks to venue and F & B sponsor Commonwealth Bank of Australia.
issue 183 | austcham news
ASX Limited Level 19, IFC 2, 8 Finance Street, Central, Hong Kong www.asx.com.au ASX is a multi-asset class, vertically-integrated exchange group whose activities span primary and secondary market services, including the raising, allocation and hedging of capital flows, trading and price discovery; central counterparty risk transfer; and securities settlement for both the equities and fixed income markets. ASX functions as a market operator, clearing house and payments system facilitator. It also oversees compliance with its operating rules, promotes standards of corporate governance among Australia’s listed companies and helps to educate retail investors. The domestic and international customer base of ASX is diverse. It includes issuers (such as corporations and trusts) of a variety of listed securities and financial products; investment and trading banks; fund managers; hedge funds; commodity trading advisers; brokers and proprietary traders; market data vendors; and retail investors. What are the main skills of your job? To strengthen the solid, sustainable and successful relationships with existing clients and to build relationships with new ones. The extension of the ASX Global network together with the new ASX Hong Kong office reflects this determination. What’s the most unusual thing you have had to do as part of your job? Opening and leading the Hong Kong office is a unique and exciting opportunity. What does your company do really well? ASX is a world leader in raising capital, consistently ranking among the top five exchanges globally. With a total market capitalisation of around $1.5 trillion, ASX is home to some of the world’s leading resource, finance and technology companies. Our $47 trillion interest rate derivatives market is the largest in Asia and among the biggest in the world. ASX’s network and data centre are connected to leading financial hubs (including Hong Kong) Speed, reliability, state-of-the-art technology
22 • austcham news | issue 183
James Keeley Business Development Manager, Asia - International Sales and the diversity of the user community, are fundamental to the success of the Sydney-based ASX Australian Liquidity Centre How would you describe your workplace and colleagues? Focused, professional and happy. What’s something most people don’t know about your company? The Australian market has the longest trading hours in the world. ASX Trade24 operates on a 24/6 basis, open 21 hours and 50 minutes every trading day, offering debt, equity index and commodity products and a full suite of trading order management functionalities. What’s your company’s connection to Australia? The ASX Group's origins as a national exchange go back to 1987. The Australian Stock Exchange Limited was formed in 1987 after the Australian Parliament drafted legislation that enabled the amalgamation of six independent state-based stock exchanges. Each of those exchanges brought with it a history of share trading dating back to the 19th century. In 2006, The Australian Stock Exchange merged with the Sydney Futures Exchange and originally operated under the name Australian Securities Exchange. Later, however, ASX launched a new group structure to better position it in the contemporary financial market environment. From 1 August 2010 the Australian Securities Exchange has been known as the ASX Group. What’s your favourite place to go on the week-end? Hiking to Mui Wo What’s your favourite place to eat lunch? Ovo Café in Sheung Wan
On The Scene AustCham hosted a Post-Election Review breakfast session with Kerry-Anne Walsh of KA Communication and Mark Wembridge of Financial Times at Hong Kong Club after the long election campaign in late July.
Guest speakers Mark Wembridge and Kerry-Anne Walsh with Australian Consul-General Paul Tighe, AustCham Treasurer Darren Bowdern and Chief Executive Drew Waters.
AustCham Mentor Program: Introducing the 2016 Class
he 2016 AustCham Mentor Programme successfully launched with the Speed Matching Event in late June at KPMG.
The evening started with introductions from AustCham Chief Executive Drew Waters and AustCham Treasurer Darren Bowdern, followed by an insightful talk from Benjamin Wong – a 2015 protégé – on the impact the programme has had on him both professionally and personally. There were drinks and canapés to get the participants relaxed and ready for their gruelling 2 minute speed matching discussions. Well done to all involved for their patience, endurance, and for their professionalism in having to move on when the bell rang – not an easy task! This year we are very excited to have the 'Speak' team work with AustCham to deliver a unique and tailored programme for the 64 participants. Over the next 10 months, the programme will run through a combination of professional development sessions, panel discussions, social and networking opportunities. With each pair now successfully matched, many have had the opportunity to meet oneon-one and work through their goals and expectations – and the group is buzzing with excitement and positivity. Special thanks again to Darren Bowdern and KPMG for the use of their offices for this event and we look forward to the next event scheduled in August, with our new venue sponsors Cliftons.
issue 183 | austcham news
...buying property in Sydney?
let’s talk +61 411 088 008 | +852 5803 8083
You’re hard-working and good at what you do, but the truth is you also too often feel your life is just a Specialising in select international relentless set of demands you have and local private clients, we provide to meet... let us help. a range of independent tailored solutions with a real estate focus designed to meet the needs of expatriates, family offices, high-net-worth individuals and developers. What type of properties can you assist with? We are Sydney based specialists and can assist clients with any type of property from apartments to houses and commercial buildings. Investment Properties – For an investment property purchase, we are able to take an objective standpoint and methodically recommend properties meeting your strict criteria. Moving Home – We recognise the importance of finding not just a house but a home. Sometimes it’s the non-financial factors that matter most and we work with you and your family to ensure that we look at all requirements to find your perfect fit.
How does a buyer’s agency work? We are engaged by the purchaser to act on their behalf in sourcing and negotiating the best property to suit their needs. Our services are of particular benefit to overseas based clients given the geographical challenges of purchasing property overseas. We save our clients significant time in researching and locating properties. We will only actively work with a handful of clients at any one time to ensure that we can provide a personalised service. Can I still borrow with my income in HKD? We maintain a close working relationship with all major Australian banks with offices based in Hong Kong. We can make referrals to local banking contacts as well as brokers in Australia to assist with your purchase.
Separately, on the commercial side, we also work with developers, hotel operators, managed funds and investors with budgets ranging from AUD $20m through to $100m+. With our extensive network of local contacts, we have access to a range of off-market development opportunities. As a Sydney based firm, how do you service clients in Hong Kong? We make frequent visits between Sydney and Hong Kong – averaging one trip a month. Our clients range from private clients to corporate clients looking for large-scale development sites. We maintain a strong in-person presence throughout the negotiation process back in Sydney giving us an advantage over firms based solely in Hong Kong or in Australia. As a boutique agency, our clients have direct access to me. We also deal directly with the client’s conveyancer, accountants and banking contacts to streamline the purchasing process.
Where do I start? Our first step is an initial in-person consultation to know more about your property requirements and your motivations behind these decisions so that we can best help you. While we appreciate that your time is precious, this ensures we work efficiently to search, identify and shortlist the most suitable properties for you. Send us an email at firstname.lastname@example.org with your requirements or use the contact us form on our website at www.adlerho.com and we’ll work out a mutually convenient time to sit down and discuss your situation.
ADLER HO P R O P E R T Y C O N S U LTA N T S
Investment Strategy | Buyers Agent | Portfolio Management | Lifestyle Management
The Australian Chamber of Commerce Hong Kong and Macau monthly publication.