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Display to 31 July 2018 HK$40

2018 SALARY SURVEY Are you getting paid enough?

LUXURy BRANDS TURN TO POP-UPS RISE Of THE VIRTUAL BANKS IS A 5% PAy RISE ENOUGH? VC INVESTMENTS HIT RECORD HIGHS

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HONG KONG BUSINESS | JULY 2018


HONG KONG

BUSINESS

FROM THE EDITOR

Established 1982 Editorial Enquiries: Charlton Media Group Hong Kong Ltd 19/F, Yat Chau Building, 262 Des Voeux Road Central Hong Kong. +852 3972 7166

Welcome to Hong Kong Business’ annual salary survey. Channel checks with industry experts revealed that salaries of Hong Kong employees rose to an average of 5.7% in 2018 from the previous year’s 3.9%. Average bonuses also clocked in at 1.6 times the basic monthly wage which represents a better showing than the past two years. The banking and finance sector continues to enjoy the highest average salary increment of 8%, with salaries for those in the risk analyst and risk management positions boosted by as much as 19.1% and 11.1% respectively.

Publisher & EDITOR-IN-CHIEF Tim Charlton associate publisher Louis Shek production EDITOR Genelie Sta.Ana-De Leon graphic artist Elizabeth Indoy ADVERTISING CONTACTS Louis Shek +852 6099 9768 louis@hongkongbusiness.hk Rochelle Romero rochelle@charltonmediamail.com

ADMINISTRATION ACCOUNTS DEPARTMENT accounts@charltonmediamail.com Advertising advertising@charltonmediamail.com Editorial editorial@hongkongbusiness.hk

Meanwhile, our regular Financial Insight column covers the booming venture capital scene in the city. Venture capital investment in Hong Kong reached a record US$1.14b in 2017, continuing a rapid growth trend over the past three years, data from the Hong Kong Venture Capital and Private Equity Association, or HKVCA showed. This amount was more than double from US$547.4m in 2016 and up sevenfold from US$159.1m in 2014. Average deal size in 2017 climbed to US$42.4m, also more than doubling from US$19.6m and up more than tenfold from US$3.9m in 2014. Some analysts also predict that Hong Kong will see the rise of 10 unicorns by end 2018. As the trade war heats up between US and China, economists also weighed in on how Hong Kong’s economy will fare. This even prompted Hong Kong Finance Secretary Paul Chan Mo-po to warn that a trade war between the U.S. and China would affect one in five Hong Kong jobs. This issue also bears the coverage of our most recent event. The Designed In Hong Kong Awards and the Made in Hong Kong Awards. Flip the pages to find out about Hong Kong’s most exceptional products. Enjoy the issue!

PriNting Gear Printing Limited Flat B, 3/F, Derrick Ind. Bldg., 49-51 Wong Chuk Hang Rd., Hong Kong.

Tim Charlton

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Editorial Enquiries: If you have a story idea or just a press release, please email: editorial@hongkongbusiness.Hong Kong and our news editor will read it. For Media Partnerships, please email: editorial@hongkongbusiness. Hong Kong and put “partnership” in the subject line and it will forward to the right person. Subscriptions email: subscriptions@charltonmedia.com Hong Kong Business is published by Charlton Media Group. All editorial is copyright and may not be reproduced without consent. Contributions are invited but copies of all work should be kept as Hong Kong Business can accept no responsibility for loss. We will however take the gains. Sold on newstands in Hong Kong, Macau, Singapore, London, and New York *If you’re reading the small print you may be missing the big picture    

HONG KONG BUSINESS | JULY 2018

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CONTENTS

24

COVER STORY Workers enjoy 5.7% higher salaries in 2018, but also suffer longer work hours

FIRST 06 Rise of the pop-ups 07 HK embraces virtual banking 08 Facing the payment giants 10 Firms move out of Central

in Hong Kong doubled in past three years

Published Bi-monthly on the Second week of the Month by Charlton Media Group Pte Ltd, 19/F, Yat Chau Building, 2 HONG KONG BUSINESS | JULY 2018 262 Des Voeux Road Central, Hong Kong

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Event Coverage Hong Kong Business hails 2018’s most exceptional products

event coverage

REGULAR 20 Economy Watch 38 Marketing Briefing 40 Legal Briefing

as Kowloon and Hong Kong East offers alternative

12 Flexible working spaces

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fINANCIAL INSIGHT Hong Kong’s venture capital investment hit record highs at US1.14b in 2017

SECTOR REPORT 22 Hong Kong insurers play

the digital game by forging fintech and insurtech allies

42 Is IoT the ultimate driver

of digital transformation?

44 Cybersecurity risks pose threats

to transport industry

OPINION 46 Keeping track of the MTR 48 Land cretins on rampage as usual

For the latest business news from Hong Kong visit the website

www.hongkongbusiness.hk


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News from hongkongbusiness.hk Daily news from Hong Kong most read

HR & Education

FINANCIAL SERVICES

Weakening dollar is making Hong Kong cheaper for expats

Hong Kong can expect at least 15 more blockbuster IPOs

Xiaomi hit by $8.58b loss in Q1 ahead of blockbuster IPO

Hong Kong has plunged from second to 11th place in the global cost of living rankings for overseas workers in a mere span of 12 months, according to a report by ECA International, representing the city’s lowest position in three years.

Hong Kong can expect at least five more mega-value IPOs from the new economy sector which is expected to raise $10b each in addition to the listing of 10 unicorns, according to accounting firm Deloitte, fueling the city’s ambitions to battle New York.

Reuters reports that Chinese smartphone maker Xiaomi was hit by a whopping $8.58b (7b yuan) loss in Q1 ahead of its public debut that widely expected to be the world’s largest listing in almost four years.

FINANCIAL SERVICES

Banks wage war over fixed deposits as interbank lending rates surge Hong Kong banks are continuing their battle for HKD fixed deposits as interbank lending rates surge anew with the one-month Hong Kong Interbank Offered Rate (HIBOR) climbing for the ninth consecutive day to 1.457%, according to OCBC Treasury Research.

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FINANCIAL SERVICES

HONG KONG BUSINESS | JULY 2018

FINANCIAL SERVICES

IPOs surge 33% to US$725m in first half of 2018 With a greater number of issuers embracing domestic exchanges as their listing destinations, total funds raised via IPOs in Hong Kong hit US$725m in the first half of the year, according to law firm Baker McKenzie. For one, medical provider C-Mer Eye Care raised over US$80m in early January.

ECONOMY

Hong Kong is the second largest offshore wealth center Hong Kong trails behind Switzerland to score the second spot in the global offshore wealth management rankings, according to an annual study from Boston Consulting Group. The Asian Financial Center manages US$1.1t in offshore wealth, which is half of the Alpine country’s US$2.3t.


FIRST offline stores is usually the root cause,” property services firm JLL said in a report on evolving retail trends in Hong Kong. “Where this gap cannot be closed, the best way for bricks and mortar retailers to fight back is to provide value added services in addition to selling products. These services could include personalised products, enhanced warranties, bespoke post-purchase services, loyalty programmes, or even special events.”

HONG KONG’s unhappy workers

Workers in Hong Kong are the unhappiest in Asia Pacific, according to a survey by human capital management firm Workday. 2 in 5 workers said that they are unhappy due to compensation, lack of worklife balance and lack of career prospects in the face of digitalisation, according to the IDC survey by Workday. Meanwhile, 8 in 10 employees are willing to change jobs given the right opportunity whilst 25% are thinking of leaving their jobs within a year. These employees are willing to find a new job that will give them better pay and reward (26%), better career prospect (19%), and better work/life balance (14%), the study revealed. About three in ten respondents (30%) believe that their employers are not doing enough to upskill them for digitalisation. More than half (55%) felt that their managers and employers are not proactively engaging employees. “The digital economy is driving a dichotomy in the talent market: retention challenges and reskilling needs,” the study found. According to the findings, the war for talent has created more career opportunities for employees with the relevant digital skills. The digitalisation also poses a call for the government and employers to help workers to stay on track through investment in reskilling around the region. “The more confident workers are about having the necessary digital skill sets to meet the challenges of the future workplace, the more likely they are planning to leave their current company within a year,” Workday Asia Pacific president David Hope commented. “Employers should make the effort to share their digitalisation plans with staff they hope to develop, provide them with relevant skills and compensate them accordingly for their new roles or risk losing them to competitors,” he said, adding that many research studies have revealed that the cost of hiring new employees is higher reskilling existing staff. 6

HONG KONG BUSINESS | JULY 2018

Prada’s pop-up store in Pacific Place Mall

Rise of the pop-ups

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hen shoppers passed by the Pacific Place mall in April, they would have likely caught a glimpse of Prada’s eye-catching pop-up store made in the likeness of a railway station. More luxury brands, including VLTN Men’s sports-themed spectacle in the IFC mall, are setting up pop-up shops that draw in onlookers and create the kind of physical shopping excitement that online shops can only dream of. Pop-up stores are meant to appeal to both Hong Kongers and Mainland Chinese tourists, who are starting to return in droves to the island but with a tweaked shopping agenda. The focus is less on luxury items, which have become increasingly available in the mainland and in online shops, often at lower prices. Pop-up shops may help encourage shoppers to splurge directly in physical stores instead of hunting for the products online at a bargain. “Showrooming, where shoppers browse in stores but don’t make purchases, is becoming a bigger problem for traditional retailers and it is almost impossible to avoid. The price gap between online and

Grana, for example, used pop-up stores to enable customers to check out products in person, and then purchase the items later online.

Experiential retail JLL noted that the shopping experience provided by physical stores cannot be replaced despite the greater variety and more competitive pricing in online retailing. This insight has led to an interesting trend: Hong Kong e-commerce brands setting up their own physical stores. Grana, for example, used pop-up stores to enable customers to check out products in person, and then purchase the items later online. The eye-catching and interactive designs that pop-up stores often employ draw from the so-called experiential retail approach. “‘Experiential retail’ is another option to attract shoppers away from their computers and into physical stores. Done correctly, this is not just about elaborate designs or gimmicks within the four walls of a store; it could be a signature scent or soundtrack, technologically advanced fitting rooms, or an optimised checkout process that’s more convenient to customers,” said JLL. Pop-up stores also offer increased cost flexibility for brands compared to full-fledged physical branches, which may be saddled with high rental costs due to longer-period contracts.

Grana’s approach to experiential retail


FIRST To improve their chances of receiving a licence, WeLab, TNG and other firms will need to align with the revised guidelines published in May.

WeLab wants to be Hong Kong’s first virtual bank

HK embraces virtual banking

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hen the Hong Kong Monetary Authority set out to update its regulatory guidelines for virtual banking in preparation for granting licences, WeLab was keen to be the one of the first companies to secure one. The Alibaba-backed fintech lending platform considers a virtual banking licence as the key ingredient to its transformation as a full services bank. WeLab is a popular loans provider in both Hong Kong and China with 25 million users and US$28b in loans processed

since its founding in 2013. Having recently raised US$220 million in Series B financing from the Chinese technology giant, the International Finance Corporation and other global banks, it is looking to expand its services and become a key player in Hong Kong’s smart banking transformation. The Next Generation e-wallet is also reportedly eyeing to be included in the first batch of virtual banking licences, which HKMA Chief Executive Norman Chan hopes could be issued towards the end of 2018 or

in the first quarter of 2019. To improve their chances of receiving a licence, WeLab, TNG and other firms will need to align with the revised guidelines published in May. HKMA said priority will be given to companies from both financial and non-financial firms who have sufficient financial, technology and other relevant resources to operate a virtual bank. They must also have credible and viable business plan, has expertise to develop a proper IT platform to support their business plan, and can commence operation soon after being granted a licence. “The HKMA would like to point out that a key objective of introducing virtual banks in Hong Kong is to help promote financial inclusion by leveraging on these banks’ IT platforms that would lower the incremental cost of taking in additional customers,” HKMA said.

Customers would be willing to shift 35% to 40% of their wallet to a digital-only proposition

Source: McKinsey

The Chartist: Panda BONDS TO OVERTAKE HONG KONG’S DIM SUM BONDS Competition in bonds is expected to grow tighter as the Chinese central government undertakes a series of financial reforms to liberalise onshore capital markets. According to a report by BMI Research, Hong Kong’s offshore CNH (dim sum bond) market will be negatively impacted and will continue on its downward trend from 2014. Analysts reported that despite the rebound in early 2018, the growth in the issuance of dim sum bonds is rather limited vis a vis the growth in the onshore bond market. “It is likely that Panda bonds will continue to threaten dim sum bonds. In 2018, the amount of Panda bonds that have been issued is also slightly above that of dim sum bonds, coming in at RMB23.2b (compared with RMB20.1bn) as of March, and looks set to outperform once again,” BMI said.

Increased utilisation of stock connects

Source: BMI Reseach

Panda bonds versus Dim Sum bonds

Source: BMI Research

HONG KONG BUSINESS | JULY 2018

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FIRST more jobs, thanks to chinese buyouts

Facing the payment giants

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ong Kong’s real estate market has been bolstered by the entrance of Chinese and foreign investors, with multiple job opportunities in architectural, building services, civil and structural engineering, leasing, quantity surveying, as well as technical and property management, according to CBRE. Major Chinese investors will be less conspicuous in the coming year, focussing on relatively smaller lump sum deals for Grade A offices for investment or self-use, in consideration of their ability to move capital offshore. Despite this, Chinese firms that have already set up shop in the city seem to be putting up “business as usual” signs on their front doors. Sharmini Wainwright, managing director at Michael Page Hong Kong, said that the mainland’s growth in Hong Kong has created new employment prospects for the city’s labour market. “This typically comes with an opportunity to step up, share in attractive bonus schemes and make a significant and broad contribution to a business in setup phase,” she added.Despite the shifting tides between Hong Kong and China, business is expected to remain stable and may in fact benefit more with the Guangdong-Hong Kong-Macau Bay Area being fully operational soon. Michael Page Hong Kong’s Salary Benchmark 2018 reported that 2018 is earmarked as a significant year with Hong Kong positioning itself amidst a changing landscape within Greater China and Asia.“The digital space has been identified as the growth engine of 2018 in Hong Kong, fuelled by the continued surge in e-commerce and fintech investments. To support these thriving industries, hiring managers in Hong Kong will seek digital marketing, social media, and e-commerce managers,” Wainwright said, adding that the city is edging closer to its goal of becoming a Smart City, as government boosts employment across property, infrastructure, technology, and digital.

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HONG KONG BUSINESS | JULY 2018

hen Chinese Internet behemoths Tencent and Alibaba launched their respective mobile payment apps, WeChat Pay and Alipay in Hong Kong, they first sought to cater to the droves of mainland visitors that flocked the island. But since then, the two have started to ramp up their reach amongst locals, putting pressure on incumbent mobile payments scene to step up their game. WeChat Pay has emerged as the best-rated mobile payment app among Hong Kongers with a satisfaction rating of 7.7 out of 10, just edging out Apple Pay’s 7.6, according to a JD Power survey in March. Apple Pay still holds the clear edge in popularity with 29% of respondents considering it their main mobile wallet. But 8% said they use WeChat Pay and 15% used AlipayHK, compared with 17% for Octopus O! ePay and 16% for Android Pay, underlining the growing clout of the Chinese entrants. “Whilst Alipay and WeChat pay expanded their services internationally to Hong Kong to primarily assist travellers from China, it is fast becoming popular among the locals,” said Johnson Arul, research analyst Asia at RFi Group, a financial services intelligence provider. He also noted that more than a million users have signed

Hong Kong’s Octopus card

up for Alipay in Hong Kong in 2017. Should the Octopus be threatened? The emergence of AlipayHK and WeChat Pay even seems to have threatened the ubiquitous Octopus card, which has responded by deploying QR codes in cabs and an app for drivers that enables them to scan the cards that is used at some point by virtually all Hong Kong residents. However, the pair had generated a good head start by wooing cabs with an array of incentives such as cash rebates. The broadening merchant acceptance for mobile payment apps has also driven up their appeal. AlipayHK users can use it to pay for Watsons purchases The and ParknShop groceries, amongst emergence others, in Hong Kong dollars. Other of AlipayHK convenient features include offline and WeChat capabilities and removing the identity Pay even verification process when opening an seems to have account. Still, it is far from being a fullthreatened service app. It does not support peer-tothe ubiquitous peer money transfers and bill payments, Octopus card. but those are reportedly in the works.

Mobile App Watch

Travel tech startup Trip Guru scores US$500,000 seed fund Hong Kong-based travel tech startup Trip Guru raised US$500,000 in its seed round from a consortium of angel investors, venture capital firms and publicly listed companies to jumpstart its expansion plans into Southeast Asia. Trip Guru is a booking platform that curates global tours with the aim of connecting travellers via authentic experiences. Since its launch in April 2017, Trip Guru claims to have become the preferred travel platform for over 10,000 independent travelers, shortly after it graduated from the Betatron startup accelerator programme in January. It currently operates in seven countries and sixteen destinations including Bali, Chiang Mai, Bangkok, Phuket and Ho Chi Minh.“After a year of our product launch, we are honored with the vote of confidence from our investors and the trust of over 5,000 loyal customers” said Trip Guru CEO and founder Sebastian Renzacci.

Trip Guru CEO and founder Sebastian Renzacci


FIRST

Firms move out of Central as Kowloon and Hong Kong East offer alternative

W

hen DBS Hong Kong unveiled its newest office location in Kwun Tong district in April, it joined the growing flock of financial institutions moving out of Central. The Singaporean bank signed an agreement to lease 126,000 sq. ft. of office space at Two Harbour Square where it will be an anchor tenant occupying seven floors, a move that highlights Kowloon as one of the increasingly attractive office centers in Hong Kong. Kowloon East and Hong Kong East accounted for about three-fourths of all new office lettings in April, according to JLL, as banks move out of Central to escape staggering rental costs that has shown no signs of letting up for the rest of 2018 amid high demand from Chinese firms and tight occupancy. “Coupled with the city’s buoyant economic climate, we expect leasing demand for office space and rentals to continue to grow in the months ahead. As a result, we’ve revised our forecast upwards and now expect Grade A office rents to advance in the range of 5-10% in 2018,” said Denis Ma, head of research at JLL. In late May, there were also reports warning that office rents in Central, already

the most expensive place the in the world to do so, is set to push up to levels seen before the 2008 financial crisis past the record high of HK$210 per sq. ft. Emerging office districts such as Kowloon are challenging the dominance of Central, although this is not to say that the latter is losing its luster. In fact, strong expansion demand from the banking and professional services sector buoyed leasing activity in Central, with Guotai Junan reportedly leasing 10,100 sq. ft. at Man Yee Building. Banks lead the exodus DBS Hong Kong said its office move, which is expected to start in the fourth quarter of 2018, is part of a strategic occupancy programme. The bank is looking to build “an interactive community workspace” for its technology and operations support units, among others. The new DBS Hong Kong office will boast common facilities, including social hubs, nursing rooms, meeting rooms with harbour views, and quiet areas. The DBS office transfer follows that of Citi’s exit from Central in 2017 to the Citi Tower in East Kowloon. Citi’s Hong Kong head Weber Lo had been quoted as saying that he sees a trend for other banks

Kowloon is the new Central

and financial firms to weigh moving out of Central to Kowloon East due to the cheaper cost and better working environment these new commercial areas tend to offer. He compared the exodus to a similar occurrence in the financial hub of London where rentpressured banks transferred their offices from the traditional centre city to the Canary Wharf. Rising rents With more firms moving to Kowloon East and Hong Kong East and amidst tightening overall vacancy levels, the rents in the two submarkets rose 3.1% and 1.2%, respectively, on a month-on-month basis, although still apparently a small price to pay compared to staying in Central. Net rents at Two International Finance Centre (IFC), for instance, above Central’s Hong Kong station currently start at HK$192 per square foot and is the city’s most expensive office site. Meanwhile, net office rents in ICC range from HK$105-$135 per square foot, the highest in Kowloon, according to JLL.

OFFICE WATCH

Check out Standard Chartered’s new HK hub Standard Chartered’s10,000 sqft new office space in Kwun Tong servesas a representation of everything the bank stands for: excellence, innovation, and a focus on customer welfare. Aptly named the eXellerator, the new office provides a collaboration space for its units. “Whilst banking may be complex, Standard Chartered’s goal is to empower innovation in multiple parts of the bank, simplify processes and digitise the client experience whilst providing the human touch,” said Carol Hung, Chief Information Officer of Standard Chartered Hong Kong. “With the eXellerator, the bank has leveraged this as a hub to enable innovation through the application of human-centred design.”The space was built in conjunction with coworking company WeWork to allow teams to work in a flexible and collaborative manner. The eXellerato includes an open coworking and hot desk space, 5 dedicated project rooms, two training rooms, and a usability testing lab, allowing bank staff to test solutions in real-time. 10

HONG KONG BUSINESS | JULY 2018

Lobby

Meeting room

Project rooms

Lounge


FIRST NUMBERS

Work incentives

Naked Hub’s co-working space in Hong Kong

Flexible working space in Hong Kong doubled over the past three years

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Source: Randstad

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hen Mainland-based coworking space operator Naked Hub leased the two top floors in Two Harbour Square for its first location in Kowloon, the brand was keen to get ahead of the curve in what is set to become one of the most blistering growth trends in the island’s property scene. Flexible work spaces could easily account for a third of global corporate commercial property portfolios by 2030, according to JLL, which will be underpinned by the government cranks up its support for entrepreneurs to offset an expected muted growth in traditional economic bulwarks like manufacturing. The past three years alone have seen a doubling of flexible working spaces in Hong Kong to more than 50 operators in over 80 locations, covering over 1 million sq. ft. in land areas.“Notwithstanding that co-working is still a relatively new concept in Hong Kong, we still see plenty of room for growth ahead with many operators, especially those from mainland China, still eager to establish a foothold in the city,” said Denis Ma, head of research at JLL Hong Kong. The coworking trend propped up office leasing demand in the first quarter of 2018, with operators committing to 14,300 sq. ft. of new

space in Hong Kong Island, or nearly 60% of net absorption in the area. One of the notable transactions is a U.S. coworking operator WeWork leasing a 46,000 sq. ft. unit in Cityplaza Three in Hong Kong East. Two other popular coworking space locations were the emerging office districts of Kowloon and New Territories, which have become increasingly attractive to companies that want to move away from Central amid staggering rental costs and tight vacancy rates. Mainland The coworking Chinese coworking operator ATLAS trend propped established its first centre in Hong up office Kong at a 435,400 sq ft unit in The leasing demand Gateway in Tsim Sha Tsui. in the first Seeing the potential of Hong Kong quarter of 2018, and China for robust growth, the with operators world’s largest coworking operator committing to WeWork bought Naked Hub as 14,300 sq. ft. part of its aggressive expansion in of new space the region. China market leader, in Hong Kong Ucommune, is also eyeing to set up Island . its new locations in Hong Kong.

There are now more than 50 co-working operators in Hong Kong


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startups

No bridezillas with Hitchbird

B

ridezillas can turn into bridechillas real quick with Hong Kong’s new start up Hitchbird. Hitchbird is a new wedding portal that connects couples to various wedding venues and vendors across 53 cities in Asia. With convenience in mind, the startup provides a platform for couples to book and research wedding venues and find all the information they need to plan the perfect occasion—from the dreamy venue down to the bouquet provider. “It’s kind of like a trip advisor of wedding—for couples to research wedding venues and vendors based on their wedding needs—often luxury or

overseas locations,” said Hoi Cheung, founder of Hitchbird. “There hasn’t been a platform which focuses on luxury or destination weddings in Asia. There are many vertical platforms but these cater for mass populations.” Cheung noted, however, that her startup is not exactly a wedding planning service, but more of a platform to help couples make their own plans. “We are not a wedding planner, we just know a lot about destination weddings and can point couples in the right direction,” he said. “The site also gives couples choice/options they might not have considered before. For example, the homogenous wedding couples looking for a Phuket beach wedding is the same couple who might choose a chateau wedding in Bordeaux—just that they haven’t decided yet.” In terms of the reception of the market with the company’s overarching goal of being the “trip advisor for weddings”, Cheung revealed that there’s a big market for wedding marketplaces. “Often couples want the dream, and just don’t know where to start,” Cheung said. “They also have budget concerns and Hitchbird steers them in the right direction.”

Gravity secures US$7m funding in May our Hong Kong based development team as well, so we can build more features faster all the while increasing the quality of the Gravity application.” Parker said the emphasis on sales comes amid “extremely positive” reaction among the brand owners, retailers, manufacturers, and freight and logistics providers that use the Gravity platform. hen Gravity Supply Chain He added that the supply chain platform nearly doubled its total is best suited for companies that have fundraising to US$15 million after its latest US$7 million round in May, cross border, global supply chains due to its unique approach in connecting the it decided to double down on the two myriad of data and partners. factors that make it such a promising Parker said Gravity users are currently technology-powered startup: Strong seeing, on average, 47% faster and client interest in its cloud-based, supply more effective reaction times to supply chain platform and the developer talent chain issues than they did before using powering the proprietary solution. the software, especially with the system “In the coming 12 months we will incorporating outside data like labour place significant emphasis on our sales, customer success and marketing activities strikes and natural disasters. Parker estimates that the company as we grow revenues and market share,” overlays around 40,000 external data said CEO Graham Parker. “Because sources such as data from carriers, ports, technology is at the core of what we do at Gravity, these plans facilitate expanding news feeds and social media into a single

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AI chatbot company Rocketbots scores undisclosed seed fund

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ocketbots, a Hong Kong-based AI Chatbot company, has just closed its Seed Round to help kickstart it’s new Software-as-a-service (SaaS) AI Chatbot Platform. The round was led by angel investment group Global Technology Alliance. The start up aims to help businesses provide a more intuitive and effective engagement with its customers through artificial intelligence-powered chatbots. Gerardo Salandra, Rocketbots CEO, noted that part of the reason why he founded the startup is to banish the misconception that developing and deploying good chatbots is an uphill climb. “We started the business because chatbots these days lack a number of features that make them more realistic and accurate. Furthermore, there’s a misconception of the difficulty of making a good chatbot,” said Salandra, who is also the chairman of the Artificial Intelligence Society of Hong Kong. “Rocketbots created both a platform that deploys features that enhance a bot’s believability, and an academy which aims to teach users how to develop their own chatbots.” Challenges The conception of the startup came from a vision Salandra had a couple of years ago that AI will become a big topic in the next few years. Although there were birthing pains, with the Rocketbots CEO going almost 11 months without salary at the first year, the company now works with some of the world’s largest brands to manage their customer support through chatbots. A big portion of their operations also goes in supporting small and medium-sized enterprises, offering them flexibility and affordability to build their own unique solutions. Regarding the persistent debate about whether AI is more of a bane towards the job market, Salandra noted that AI products like chatbots would not take jobs away from people; rather people’s jobs will be enhanced because of it. “Chatbots are only accurate 55% of the time, and for very specific jobs. The aim of a chatbot in a job function is not to automate it, but to enhance that job,” he explained. “The advantages of a chatbot is it can magnify a customer service representative’s ability to help more customers at once. Having a chatbot tackle those questions on the frontline frees up customer service’s time to take on customers who have real issues that require human assistance.” As for the future of Rocketbots, Salarda reckoned that the company’s main product and service —AI-powered chatbots—can help customer service provision to reach new heights.

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FINANCIAL INSIGHT: Venture capital

Deal #1: LaLaMove raised US$100 million in a Series C round led by ShunWei Capital a venture firm founded by Xiaomi CEO Lei Jun

Deal #2: GoGoVan merged with 58 Suyun, the freight division of 58 Home, to form a US$1 billion logistics firm

Hong Kong’s venture capital investment hit record highs at US1.14b in 2017 Analysts reckon that Hong Kong is poised to have its own funding boom due to robust dealmaking in tech and logistics sectors and the government’s HK$2b Innovation & Technology Venture Fund programme.

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hen venture capital investment in Hong Kong more than doubled year-over-year in 2017, analysts took note that the island is starting to follow in the footsteps of Singapore and is poised to have its own funding boom, helped along by strong government support for local startups and robust dealmaking in the technology and logistics sectors. Venture capital investment in Hong Kong reached a record US$1.14b in 2017, continuing a rapid growth trend over the past three years, data from the Hong Kong Venture Capital and Private Equity Association, or HKVCA showed. This amount was more than double from US$547.4m in 2016 and up sevenfold from US$159.1m in 2014. Average deal size in 2017 climbed to US$42.4m, also more than doubling from US$19.6m and up more than tenfold from US$3.9m in 2014. The recent growth in venture capital investment has been underpinned by Hong Kong’s favourable startup environment, said Dennis Plomp, principal at Nest Ventures, citing the rise in new coworking spaces and venture builders setting up shop in the island to help incubate startups. CBRE had estimated the total footprint of the coworking sector in Hong Kong would rise to 1.18 million sq. ft. by end-2017 from 700,000 sq. ft. in 16

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We also see more and more high quality startups in Hong Kong and as we expect by 2022, there will be at least 5 unicorns from Hong Kong.

2016. Amsterdam-based coworking office provider Spaces led with a headline-grabbing agreement to rent a whole Grade B office block, the 77,000 sq. ft. Sun House at 90 Connaught Road, in Hong Kong’s Central for an undisclosed price. Plomp reckoned another key driver to the venture capital investment momentum is the steady improvement in funding availability over the past two years. “The funding does not only come from local investors, but also from Chinese and Southeast Asian capital providers. Active local investors include Alibaba Entrepreneurs Fund and the Hong Kong X Technology Fund,” he said. “Furthermore, the pool of angel investor capital has grown considerably.” Notable deals Hong Kong’s venture capital scene is “flourishing” with a focus on new technologies such as AI, blockchain, fintech, and healthtech, said Lap Man, co-founder and managing partner at Beyond Ventures, a Hong Kongfocused venture capital fund. In April 2018, one of the most notable deals was SenseTime raising US$600 million in its Series C round of funding, with Chinese technology behemoth Alibaba Group taking the lead role


FINANCIAL INSIGHT: venture capital and Temasek and Suning, among others participating. Man, whose company Beyond Ventures is one of the shareholders before this round, reckoned this was regarded as the biggest round of funding in an AI company and the largest technology startup funding so far. Plomp said SenseTime’s Series C round placed the firm’s valuation at US$4.5b, and was a notable deal since the company started out in Hong Kong, before quickly taking off in China. Currently, SenseTime is one of the leading companies in AI globally, he said, and plans to use the fresh capital to further expand overseas and to develop industrial applications for its AI technology. Looking a bit further back in 2017, notable deals were also focused in logistics firms GoGoVan and LaLaMove, according to Denis Tse, managing principal of Asia-IO Advisors Limited. Logistics on-demand platform startup GoGoVan, which operates in more than a dozen cities across Asia, merged with 58 Suyun, the freight division of 58 Home, to form a US$1b logistics firm. Market observers had noted at the deal’s announcement that the headlinegrabbing, 10-digit valuation should serve to galvanize Hong Kong’s startup scene. Meanwhile, LaLaMove raised US$100 million in a Series C round led by ShunWei Capital, a venture firm founded by Xiaomi CEO Lei Jun, with participation from previous investors including Xiang He Capital and MindWorks Ventures. The company said the funding will help fund talent and process improvements as it tries to expand rapidly across China and Southeast Asia, having already amassed more than 15 million users across 100 cities and a network that exceeds 2 million drivers. “Logistics and the sharing economy have been key sectors in Hong Kong in the last few years,” said Plomp, adding that “AI and blockchain will remain some of the hottest technologies in 2018.” Bright outlook Analysts held a bright outlook for venture capital investment in 2018, citing the continued improvement in the environment supporting local startups, and, in turn, the quality and quantity that are ripe for dealmaking. “More and more venture capital firms have been formed to help drive the innovation ecosystem in Hong Kong and we are confident that the venture capital outlook for 2018 continues to be optimistic,” said Man. “We also see more and more high quality startups in Hong Kong and as we expect by 2022, there will be at least 5 unicorns from Hong Kong.” Plomp said Hong Kong “will not be an exception” to the global trend of investors putting their money into fewer, “hopefully higher quality” deals. He also expects a pickup in M&A deals in the region, which would help create a healthy market for venture capital exits. “Many acquisitions will be driven by China’s technology giants, as they look to expand internationally in various highly competitive geographies and industries.” But whilst Hong Kong appears to be building a more accommodating environment for planting venture capital seeds, it remains to be seen whether it can nurture those seeds into high-value fruits. “The Hong Kong venture

capital scene still has to demonstrate consistent longterm returns and success stories to justify the attention of big money,” said Plomp. “Many local private equity and venture capital players are so far mainly interested in China or Silicon Valley.” Dennis Plomp

Lap Man

Denis Tse

Taking to the next level But in order to take Hong Kong’s venture capital scene to the next level, the government has to support the island’s young startup scene, analysts said. “Whilst Hong Kong’s startup ecosystem has made progress in recent years, more needs to be done to nurture local startups and help them grow beyond our borders and contribute to Hong Kong’s economy and international reputation,” said Man. Man noted that the Hong Kong government recently launched the HK$2b Innovation and Technology Venture Fund, or ITVF, aims to stimulate private investment in local innovation and technology startups. The ITVF Corporation, which was set up as a specialpurpose vehicle, will passively co-invest with partner venture capital funds in local startups at an overall matching investment ratio of approximately one to two. Partner venture capital funds must have a minimum remaining committed capital of HK$120m when applying, amongst a few other qualifications, to be eligible for the co-investment arrangement. “More and more Hong Kong startups have garnered support from investors, incubators and the government in various ways,” said Man. “We can see a number of significant venture capital investments for Hong Kong startups in the past months. The momentum is expected to continue in the rest of the year.” “A few Hong Kong-backed companies are reaching growth inflection point and more are expected to follow suit. This growth cycle is similar to what we were seeing in Singapore around two years ago,” said Asia-IO Advisors Limited’s Tse. Tse noted that one of the key factors driving the growth cycle is increasing government support, which was further bolstered by the recently announced Innovation & Technology Venture Fund, or ITVF. He said the ITVF effectively supports a HK$6 b investment programme -HK$ 2bfrom ITVF and HK$4b from the private sectors -- and translates into a HK$1.2b annual investment

Top 10 global financing in Q1’18

Sources: Venture Pulse, Q1’18, Global Analysis of Venture Funding, KPMG ENterprise

HONG KONG BUSINESS | JULY 2018

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FINANCIAL INSIGHT: VENTURE CAPITAL Singapore view

Asia venture financings by sector

ICO boom threatens VC scene in SG

W Sources: KPMG

outlay, assuming a five-year investment period. “This is roughly the total venture amount investment in Hong Kong as recently as 2014, before the market was tilted by a few large fundraising rounds in 2016-2017,” he said. The ITVF also supports at least 66 rounds of venture investments since it can only contribute no more than HK$30m in each company funding round. “This means that ITVF will have to proceed with some 13-14 investments a year, which would require a streamlined, rule-based approval process,” noted Tse. “At a current rate of less than 30 cases of institutional venture rounds in Hong Kong, the ITVF’s target investment frequency could theoretically cover up to 45-50% of the current market size, enough to move the market.” Much needed push Furthermore, Tse reckoned selected co-investing venture managers are expected to make at least three to four investments in Hong Kong a year, preferably without overlapping, which he sees as a “high level of commitment” given that less than 30 Hong Kong institutional venture rounds had been consummated yearly. Partnering managers are also given a “generous” carry of 35% and “very low-cost” call option of 5.5% per annum or less to purchase ITVF’s unrealised portfolio, in spite of limitations that the ITVF is not intended to be a limited partner of an existing or a specially formed fund nor pays a management fee. “Overall, in our view, ITVF is a potentially effective program that is well-designed to attract venture capital partners to prudently pursue investment in innovative Hong Kong companies based on commercial, risk-sharing principles,” said Tse. Looking forward, Tse said that the ITVF must be part of a more comprehensive government strategy to stimulate innovation and commercialisation. This means the government must look to push for stock exchange reforms, income tax reduction for small enterprises and financial technology sandboxing, which would help “stimulate an impactful trickle-down effect on high-quality new enterprise formation for the real economy, which Hong Kong lacks.” It should also pursue a more progressive foreign talent attraction scheme, more entrepreneurship education, assurance for access for small and medium enterprises to basic banking services, and a friendlier regulatory environment for business model experimentation. 18

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The ITVF also supports at least 66 rounds of venture investments since it can only contribute no more than HK$30m in each company funding round.

hen Uber bowed out of its Southeast Asian operations this year, it sent a clear signal to venture capitalists: transport and logistics startups have had their day. Whilst deals in technology, transport, and logistics, have dominated the scene and should continue to do so as seen in Grab’s $2.5b Series G funding, funds will now start to pour into promising areas such as blockchain, medical technology, and artificial intelligence. Venture capital activity in Singapore is widely expected by analysts to maintain solid momentum not only for the rest of 2018 but also for the next few years due to an influx in growth-stage funds, a stronger corporate expansion drive into Southeast Asia, and an expected boom in attractive exit deals. But funds will likely have to fight tooth-andnail for talent and deals amidst strong competition and a growing interest in initial coin offerings as an alternative fundraising path. Notable deals There have been a record 23 deals that raised US$2.68b of venture capital funding in the first quarter of 2018, surpassing previous records, said Kenn Lim, senior associate at CNP Law. “Whilst we are still in the early half of 2018, we have witnessed a vibrant venture capital scene in Singapore thus far.” Aside from the Grab-Uber deal, which saw the largest amount raised globally from venture capital funding in the first quarter of 2018, analysts said another notable deal in the early part of the year was logistics startup Ninja Van raising US$85m in its Series C funding round, which was one of the largest ever raised in the region at that stage. These deals, together with venture capital firm B Capital Group closing out its first fund and raising US$360m, suggests that “venture capital investors continue to invest large pools of money into late-stage companies, in part because of the number of unicorns that have remained private,” said Ken Cheung, partner at Bird & Bird ATMD. He added that so far in 2018 have been predominantly in the transport, logistics, and technology sectors. One technology deal that was “notoriously underreported” was GO-JEK’s acquisition of Mapan, according to Justin Hall, principal at Golden Gate Ventures. He said the founders and assets of that sale will underpin GO-PAY, which he considers the region’s first “genuinely viable” mobile wallet that has “extraordinary” distribution, integration with many services, and the potential to spin off from GO-JEK.

PE and VC tech activity in Southeast Asia by investment type

Source: KPMG


economy watch

1 in 5 Hong Kong jobs may be affected by US-China row Hong Kong’s downside risk is escalating due to possible targeted investment restrictions and technology tariffs.

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hen the U.S. imposed new tariffs on steel and aluminum imports in March, it prompted Hong Kong Finance Secretary Paul Chan Mo-po to warn that a trade war between the U.S. and China would affect one in five Hong Kong jobs. Since then, tensions have further escalated in April, with the world’s two largest economies threatening further tariffs on other’s products worth billions of dollars. Still, the chances of a full-blown U.S.-China trade war is low, according to analysts, adding that the current impact of current trade tensions on the Hong Kong economy remains minimal. But they cautioned that Hong Kong’s downside risk is escalating due to possible targeted investment restrictions and technology tariffs, which would hit the territory harder. “The impact from the ongoing trade tensions on the Hong Kong economy has so far been limited, but there are signs of moderating export momentum as new orders from China soften,” said Sian Fenner, economic advisor at ICAEW and lead Asia economist at Oxford Economics. 20

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The ultimate question on the impact is about the determination by the U.S. on targeting trade and investment rerouting by Chinese corporates, or whether Hong Kong will be treated as a separate tax zone from China.

“Robust domestic strength amidst strong labour market performance could shore up growth, though the momentum will also likely moderate as interest rates are set to rise going forward.” Fenner reckoned Asia’s growth will be protected to some extent by greater intra-regional trade and domestic demand’s rising contribution to GDP. But she warned that Hong Kong, as well as Singapore, would be especially vulnerable to high tariffs on electronics. Alicia Garcia Herrero, chief economist, Asia Pacific at Natixis noted as well that the tariffs’ impact is cushioned by Hong Kong’s small

domestic exports, which is just about 2% of GDP. By comparison, Singapore’s domestic exports account for about 54% of GDP. “Clearly, much of what’s happening in Hong Kong is basically re-exporting so the impact is very different for Singapore and Hong Kong, as Singapore will be worse hit,” she said. “The ultimate question on the impact is about the determination by the U.S. on targeting trade and investment rerouting by Chinese corporates, or whether Hong Kong will be treated as a separate tax zone from China by the U.S. in any tariff and investment restriction move,” said Herrero. With the U.S. planning new investment restrictions as well as other possible measures targeting the technology sector, Fenner said “the downside risk is rising” for Hong Kong’s economy. The impact of trade tensions also extend beyond Hong Kong’s ports, to affect major central banks and Asian economies at a time when growth momentum has likely peaked and will slow into the second half of 2018, said Selena Ling, head of treasury research & strategy at OCBC Bank. “For Asian economies, being caught between two economic giants’—U.S. and China’s—trade spat is clearly discomforting, especially since many Southeast Asian economies count China as their key trading partner,” Ling said, adding that the timing amplifies the discomfort since economic indicators, including manufacturing PMIs, suggest growth momentum has peaked. “Hence, the trade tensions clearly pose a downside risk to economic growth in addition to adding to market volatility.”

Hong Kong exports to selected countries (YoY)

Source: Bloomberg, Natixis


Sector report: insurance

Manulife launched an e-claims solution letting customers make a medical insurance claim anytime anywhere

Hong Kong insurers play the digital game by forging fintech and insurtech allies The challenge now has become full integration of technology with the insurance experience of customers.

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hen Manulife launched claimsimple.hk in January, it finally abandoned a decades-long complex legacy system filled with paper claims and branch visits. More than that, it also launched a programme that tracks client fitness and rewards them with huge discounts and promos. Insurers in Hong Kong are finally learning to deal their digital cards right, with some of the city’s best insurtechs keeping them close company. Early this year, insurers such as MetLife, AIA, Allianz, and Zurich announced some of their insurtech plans after the Hong Kong Insurance Authority rolled out a sandbox for insurers to flexibly partner with tech guys. Guy Mills, chief executive officer, Manulife Hong Kong said that with insurtech, some products such as health insurance as well as mutual funds can actually be sold online. He said that Hong Kong 22

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consumers have an increased awareness towards health and strong demand for medical insurance and critical illness products, as a result of significant medical inflation, advances in medical technology, and the underserved health market. This provides insurers with open doors to provide sophisticated medical insurance for the entire population. Furthermore, with a rapidly ageing population and a significant retirement income gap, Hong Kong is a hotbed for customers who wish to improve their quality of life during retirement, which provides huge growth opportunities for insurers. Digitalising at last Across the globe, the insurance industry has been one of the laggards in terms of riding the digital wave. Complex legacy systems, company culture, and various tolerances for risk have made it difficult for innovators

The top priority to overcome new challenges is to encourage staff and agents to adapt and modernise, and support insurtech innovations.

to integrate new technology and data into existing business strategies. Lee Wood, chief executive officer, MetLife Hong Kong said that the top priority to overcome these challenges is to encourage staff and agents to adapt and modernise, and support insurtech innovations. Despite being a latecomer, the insurance industry has finally come to grips with the need to evolve with rapidly changing technologies. Consumers of all other sectors have already immersed themselves in the digital space, and if insurers wish to capture this huge digital market, they have to get their foot in as well. “The insurance industry is increasingly leveraging connected technologies to improve customer experience and build deeper relationships with customers. New tools and platforms are driving deeper engagement and enhancing efficiency – for example, connecting


sector report: insurance insurance plans with digital tools or health apps to encourage better self-disciplined health management,” Wood added. Mark Christal, head of region in Northeast Asia, and chief executive officer, Old Mutual International, Hong Kong, said that digitalisation has definitely helped streamline processes and give customers greater access to their finances amidst their increased expectations. He added that this has become a key part of the value proposition that insurance companies and advisers offer their customers, presenting a greater opportunity for them to develop deeper and longer relationships with customers. Christal said that digitalisation for insurance not only means roboservices, but also complex financial planning for evolving customer demographics. According to him, insurers are seeing more highly mobile individuals with different assets across countries and requiring professional advice on holistic wealth, tax, and legacy planning. The flip side But whilst digitalisation offers several opportunities, it also poses new challenges for insurers. According to Wood, more than five years ago, the industry was focused on simply moving offline engagement online. Nowadays, the challenge has become full integration of technology with the insurance experience to deeply engage with customers and provide what they need. He said that insurers are not only giving consumers one more channel to buy insurance, but providing a new experience that was unavailable to them before. Mills added that the growth of insurtech will have a long-lasting impact on the insurance landscape. Insurance companies must have a way of productively and strategically collaborating with insurtech companies, lest they trail behind again in the digital game. The challenges that insurtechs pose have encouraged more and more insurers in the city to leverage new technology, data, and analytics and to engage with customers digitally. “A key challenge for the sector as a whole is to continue to meet customer

expectations whilst adhering to the regulatory challenges posed. This is perhaps why digital transformation in the financial industry is, relatively speaking, less advanced than other sectors. Having said that, we believe leveraging technology to engage customers is absolutely critical to the future success of the sector,” Christal said. Additionally, increasing regulations around the world have made wealth planning more complex. Christal said that independent financial advice has become more important than ever in providing better customer outcomes. Don’t beat them, join them To play the digital game well, insurers in Hong Kong have learned to make insurtechs their allies in coming up with personalised and accessible insurance solutions. For instance, Manulife launched its ManulifeMOVE programme in Hong Kong, one of the firsts to integrate an innovative health-tracking programme with insurance solution that rewards customers who maintain active lifestyles with discounted premiums. In January 2018, Manulife launched claimsimple.hk, an e-claims solution that lets customers make a medical insurance claim online anytime, anywhere via their mobile device or PC in less than a minute. Meanwhile, Old Mutual International rolled out Wealth Interactive, an online platform to keep track of investment performance no matter where consumers are, whenever they need it. Christal said that it is not only an online servicing platform, but a channel for distributors to provide better service to their customers. “Alongside greater customer access, it allows advisers to leverage technology and tools to manage customers’ portfolios whilst remaining close to them. Wealth Interactive also provides data to support client segmentation, so advisers can ensure a consistent and structured approach to servicing clients,” Christal added. In terms of insurance education, MetLife Hong Kong’s MetLife Discovery allows a quick and easy access to information about insurance

and the specific terms of insurance coverage that a certain demographic is considering. Information includes money that consumers should expect to spend and general price indicators for the cost of such a coverage. Mark Christal

Guy Mills

Lee Wood

Insurance of the future Wood said that four changes are likely to further transform the insurance market in the future: digital transformation, the importance of a trusted advisor, increasing health consciousness, and transparency and trustworthiness. According to him, insurance will be enormously different in the future, and data analysis will revolutionise how insurers meet their customers’ changing needs. He added that the ability to mine big data for deep insights has radically altered the dynamics of how one becomes “the trusted advisor”. “The regulatory and consumer demand for greater transparency will continue to shape the services the sector offers. The landscape for giving advice internationally is changing and as more advisers are moving towards clear, transparent, customer centric charging models, the need for advisers to demonstrate the value they are adding is becoming increasingly important. Advisers can utilise technology to increase customer engagement and understanding, and to share information efficiently and effectively,” Christal added. At the end of the day, customer centricity is key. Mills said that the demand for a better customer experience will continue to drive technology change in the next few years, with all sorts of information available at their fingertips.

Hong Kong’s share of China’s GDP

Source: WIllis Towers Watson

HONG KONG BUSINESS | JULY 2018

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salary survey 2018

Workers enjoy 5.7% higher salaries in 2018, but also suffer longer work hours The banking and finance sector continues to enjoy the highest average salary increment of 8%, with salaries in the risk analysis and management positions boosted by as much as 19.1% and 11.1% respectively.

T

he salaries of Hong Kong employees rose to an average of 5.7% in 2018 from the previous year’s 3.9%, according to an annual survey by jobsDB. Average bonuses also clocked in at 1.6 times the basic monthly wage which represents a better showing than the past two years. The banking and finance sector continues to enjoy the highest average salary increment of 8%, with salaries for those in the risk analyst and risk management positions boosted by as much as 19.1% and 11.1% respectively. “At the same time, regulators in Hong Kong and other parts of the world are increasingly tightening regulations, resulting in an increased demand for risk management professionals,” said Isaac Shao, country manager of jobsDB Hong Kong Limited. Hot demand for top IT talent across all industries also buoyed average salary increments in the sector by 7% with network engineers and programmers receiving double-digit salary growth of 13.3% and 10.2% respectively. “The IT industry has a growing thirst for talent. If a company promotes a positive work-life balance, a friendly working environment, or offers some special employee benefits, it could provide details in its recruitment advertisement to help attract talents and enhance 24

HONG KONG BUSINESS | JULY 2018

Hot demand for top IT talent across all industries also buoyed average salary increments in the sector by 7% with network engineers and programmers receiving double-digit salary growth of 13.3% and 10.2% respectively.

company image,” Shao added. Although salary increase and bonus packages have improved across the board, many local employees are also suffering from longer working hours as 15% of respondents admitted to working more than 50 hours per week. The hospitality and F&B sector emerged as the hardest hit industry in terms of long working hours as up to 70% work more than 50 hours per week followed by those in the building and construction sector and management sectors. Hiring expectations Unemployment in Hong Kong has fallen to its lowest level since the 2008 financial crisis as headcount freezes are loosened in key sectors and more vacancies are opened— and this trend is expected to maintain momentum this year, with the technology and innovation sector expected to lead the way. “Hiring expectations for Hong Kong in 2018 are optimistic as companies are continuing to invest in digitalisation, increasing the demand for talented professionals with the right knowledge and skills to contribute towards business expansion,” said Adam Johnston, managing director of Robert Half Hong Kong. These efforts towards digital transformation and


salary survey 2018 Real wage (%YoY)

Source: CEIC, Natixis

technological integration in every facet of business operations is nothing new in the region, particularly in Hong Kong, as it has been happening over the last few years. For instance, more than half of banks and other financial institutions in the Asia-Pacific region are expected to prioritise the integration of technology and innovation in their strategies and operations, according to a report by EY, to achieve digital maturity and leadership in the next two years. These steps and corporate endeavours mean that more people will have to be hired to perform these tasks and maintain the new status quo in business operations. “Technology and innovation will continue to be engines for growth across multiple industries,” said Matthew Bennett, managing director of Robert Walters Greater China. “Digital transformation projects are high on the agenda for many companies looking to maintain their competitiveness and cost efficiency.” This continued growth in technology and digitalisation efforts, according to Bennett, is expected to encourage the increased hiring of technology talent across multiple industries, particularly professional with niche and emerging skill sets, including development operations, big data, cybersecurity, and cloud services, will be highly sought after. “Also, the ongoing digitalisation and automation of financial processes will generate strong demand for specialists that could show a willingness to up-skill in order to drive digital transformation projects,” he noted. This is echoed by Richard Eardley, managing director for Asia at Hays, when he noted that organisations in Hong Kong are leading a charge for candidates with cybersecurity, digital technology, and data science expertise. Overall view With Hong Kong’s economy continues to gain momentum as international trade picks up and employment maintains its growing pace, professionals beyond the IT sector living in or are planning to settle in the territory for work and career growth and development will find a more welcoming year. In terms of hiring trends, according to data from Hays, 43% of employers in Hong Kong are expected to increase staff numbers in the next 12 months, which is a 3% rise on the actual increase number reported

Adam Johnston

Matthew Bennett

Richard Eardley

in 2017. “2018 is shaping up to be a good year for professionals looking to change jobs as hiring sentiment is positive, buoyed by team expansion and multinational companies settling their regional headquarter in Hong Kong,” Johnston said. Expected pay rises are expected to reach 20% particularly for in-demand information technology professionals job movers within the financial services sector, according to Robert Walters Salary Survey 2018. “Although hiring levels in the financial services sector were conservative against the background of a complex and volatile global business environment, banks that had headcount freeze in previous years increased staffing levels, in particularly front office investment banking and IT,” Bennett said. Eardley noted that there will likely be a continued and steady increase in demand for bancassurance in Hong Kong. “Banks and insurers are intent this year on harnessing data and analytical capabilities to develop sophisticated pictures of their customers in an attempt to better address their needs and rising expectations,” he said. For the human resources sector, the hiring market last year was fairly slow, with replacement hiring accounting for the majority of vacancies, particularly in the financial service industry. For 2018, the human resources hiring market will most likely to remain slow, as the hiring and onboarding processes will likely lengthen procedures. Robert Walters noted in its report that many companies will likely only recruit to replace critical HR roles in 2018, choosing instead to invest more in strategies to retain their best talent. The accounting and finance sector in Hong Kong, meanwhile, experienced a decline in mergers and acquisitions (M&A) activities compared to the last couple of years, partly due to the government tightening its rules regarding foreign exchange trading and capital outflows. For this sector, professionals are encouraged to learn and possess both technical and soft skills to be deemed as ideal hires in 2018. Companies are increasingly relying on data in their decision making, hence, many finance leaders will seek to strengthen their teams with talent that ca improve problem-solving. The legal sector will also have some of the brightest Nominal wage (%YoY)

Source: Bloomberg, Natixis

HONG KONG BUSINESS | JULY 2018

25


salary survey 2018 Labor force and participation rate

Source: Hays Asia Source: Bloomberg, Natixis

prospects this year, continuing the stellar performance last year which saw Hong Kong’s legal community growing. Main driver is increasing regulatory developments as well as the rapid development of digital and fintech legal issues, which has pushed the sector’s hiring activity. “The current increase in regulatory standards in Hong Kong is increasing demand for compliance professionals within financial services who can effectively minimise the costs for business whilst maintaining regulatory standards,” Johnston said. Bennett echoes this statement, saying that steady growth in the legal and compliance market is anticipated in 2018, with the main drivers including surging regulatory developments, entrance of new industries, rapid development of digital and fintech legal issues, and stronger investment inflow from China. Flex jobs on the rise Across the Asia-Pacific region, there is a growing trend in the hiring and employment sector where more professionals and employers are increasingly getting engaged in contracting work, allowing more flexibility and openness—and Hong Kong is no exception to this phenomenon. Data from Hays’ 2018 Salary Guide revealed that 62% of employers in Hong Kong hired temporary or contract workers workers in 2017, with Eardley going so far as reckoning that this contracting trend will likely be the “new normal” in workplaces in the coming years. Michael Page’s Wainwright noted that there is already a growing number of professionals and specialists doing contracting work, which is gaining popularity rapidly, in Hong Kong as the benefits become more apparent. “Companies have acknowledged contracting as a viable option to addressing any talent challenges they may have including permanent headcount freezes and acute talent shortage,” she said. “This has in turn led to increased visibility of such roles and a more dynamic employment landscape in Hong Kong.” For Bennett, this phenomenon signifies a significant shift in mindset in both the employee and employer market in Hong Kong and will likely become a business mainstay in the territory in the future.“Contract hiring will be a significant trend in 2018 as more employers adopt new mindset and are more flexible,” he said. 26

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expats’ pay packages in Hong kong Deploying expats to Singapore may be cheaper for some companies compared to deploying them in Hong Kong, W as the average pay package in the Asian financial hub is fourth most expensive in APAC and fifth globally, according to a report from ECA International. The value of a typical expat pay package in Hong Kong stands at US$268,514 compared to typical annual compensation and benefits package for an expat middle manager in Singapore at US$223,095. A typical expat package includes cash salary, tax and various benefits like accommodation, international schools, and utilities. “Cash salaries offered to local staff increased marginally by an average rate of 4%, and the cost of benefits provided has risen significantly. Consequently, the total costs associated with employing expatriates in Hong Kong increased in 2017 versus 2016,” said ECA International regional director for Asia Lee Quane. A separate survey reveals that Hong Kong outperforms both Singapore and Shanghai in terms of perception by its foreign talent as almost a fourth (24%) of expats believe that the city offers ‘fantastic job opportunities’ compared to only a fifth (19%) of expats who believe that Singapore offers fantastic job opportunities whilst only 16% cite Shanghai’s diverse employment offerings. ECA’s MyExpatriate Market Pay Survey looks at pay levels for expatriates around the world, including information on benefits, allowances, salary calculation methods and tax treatment. Cost of living Hong Kong has plunged from second to 11th place in the global cost of living rankings for overseas workers in a mere span of 12 months, according to a report by ECA International, representing the city’s lowest position in three years.“Although the price of goods has continued to rise in Hong Kong in the past 12 months, the Hong Kong dollar has weakened over the same period of time” said Lee Quane, regional director for Asia at ECA International. This has meant that Hong Kong has fallen behind Tokyo, Seoul and Shanghai in the rankings. Tokyo emerged as the most expensive Asian country for expats and seventh in the global rankings due to the sustained strength of the Japanese yen against the dollar, a stark contrast against the Hong Kong dollar which has required the central bank to intervene several times to defend the flailing currency peg. “Tokyo’s global ranking has remained relatively static over the past few years. It is only the yen’s relative strength against the US dollar that has seen the Japanese capital has become the most expensive place in Asia for foreigners to live and work at Hong Kong’s expense,” Quane added. Seoul also outpaced Hong Kong to score the eight spot globally and second spot in Asia. The cost of living for Chinese cities also continued to climb with Shanghai managing to score the tenth spot globally, just a notch above Hong Kong whilst Beijing is just a few spots away from the Asian top ten after ranking thirteenth.


salary survey 2018 Digital years of experience Agency SEO / SEM Executive SEO / SEM Manager SEO / SEM Director Affiliates Manager Advertising Operations Manager Head of Search In-House Digital Producer Web Designer Online / Digital Marketing Manager Digital Acquisition Manager Content Production Manager Online Product Manager Digital Project Manager Director / Head of Digital Social Media Executive Social Media Manager Senior Social Strategist SEO / SEM Executive Web Analytics Specialist User Experience Specialist e–Commerce Executive e–Commerce Manager Director / Head of e–Commerce

MIN 192 MIN 180 180 168 192 192 192 168 -

Finance & Accounting years of experience Qualified Accounting Assistant Accountant (PQ / Qualified) Accountant (PQ / Qualified) Senior Accountant (Qualified) Financial Analyst / Business Analyst Senior Financial Analyst Internal Auditor (Regional / Local) Assistant Audit Manager (Regional / Local) Audit Manager (Regional / Local) Transactional Accounting Payroll Manager Credit Manager Credit Controller Shared Service Center Director

MIN 240 300 MIN -

0-3 MAX 390 429 MAX -

AV 315 365 AV -

360 336 300 MIN -

456 455 480 MAX -

408 396 390 AV -

455 420 MIN 480 420 600 -

540 600 MAX 780 585 845 -

498 510 AV 630 503 723 -

600 MIN 1000

1000 MAX 1500

AV 800 AV 1250

Banking & Financial Services years of experience Financial Control–Investment Banking FO Developer Developer Mobile Developer Mobile Architect Analyst Programmer System Analyst Solution Architect Application Development Manager Head of Application Development Infrastructure/Network Network Administrator Network Engineer Network Architect (CCIE) System Administrator Information Security Cyber Security Infrastructure Manager Head of Infrastructure Support/Administration IT Helpdesk Desktop Support Analyst Service Desk Manager Head of Operation and Support Support/Administration IT Manager IT Director Chief Technology Officer Chief Information Officer

MIN 360 204 240 240 480 MIN 300 300 300 300 360 MIN 180 300 MIN -

0-3 MAX 480 300 360 360 540 MAX 360 420 360 420 480 MAX 300 420 MAX -

AV 420 252 300 300 510 AV 330 360 330 360 420 AV 240 360 AV -

MIN 480 300 360 480 360 550 540 660 MIN 360 420 360 420 480 600 MIN 300 420 540 MIN 720 -

3-5 MAX 720 420 540 720 480 600 840 900 MAX 540 600 480 720 720 840 MAX 480 480 660 MAX 960 -

AV 600 360 450 600 420 575 690 780 AV 450 510 420 570 600 720 AV 390 450 600 AV 840 -

MIN 720 420 540 720 480 600 840 900 1080 MIN 480 600 900 720 720 840 960 MIN 480 660 720 MIN 960 780 900 1020

5-10 MAX 1080 600 780 1080 624 720 1320 1080 1260 MAX 560 780 1080 1200 1200 960 1200 MAX 600 840 960 MAX 1080 960 1080 1500

AV 900 510 660 900 552 660 1080 990 1170 AV 520 690 990 960 960 900 1080 AV 540 750 840 AV 1020 870 990 1260

MIN 1080 780 1080 1320 1080 1260 MIN 780 1080 1200 1200 960 1200 MIN 960 MIN 960 1080 1500

10+ MAX 1320 1080 1200 1680 1260 1600 MAX 960 1500 1500 1800 1200 1500 MAX 1380 MAX 1320 1440 2200

AV 1200 930 1140 1500 1170 1430 AV 870 1290 1350 1500 1080 1350 AV 1170 AV 1140 1260 1850

28

HONG KONG BUSINESS | JULY 2018

AV 278 AV 270 233 227 278 278 324 266 -

MIN

300 MIN 260 340 300 240 300 300 -

MIN

3-5 MAX

Salary (S$’000)

0-3 MAX 364 MAX 360 286 286 364 364 455 364 -

AV

546 423 MAX AV 300 280 360 350 500 400 280 260 520 410 480 390 3-5 MAX

MIN

680 382 360 700 MIN 360 360 360 500 300 480 -

Salary (S$’000) AV

MIN

5-10 MAX

AV

5-10 MAX

AV

980 830 880 631 780 570 1500 1100 MAX AV 800 580 780 570 720 540 900 700 540 420 840 660 -

MIN

10+ MAX

980 880 MIN 1000 900

1000 1000 MAX 2000 1800

MIN

10+ MAX

AV 990 940 AV 1500 1350


salary survey 2018 Financial Services years of experience Financial Control Investment Banking Analyst Associate / Assistant Vice President Vice President Senior Vice President / Director Country Chief Financial Officer Regional Chief Financial Officer Regulatory Finance Analyst Associate / Assistant Vice President Vice President Executive Director Managing Director / Head Tax Analyst Associate / Assistant Vice President Vice President Executive Director Managing Director / Head Corporate Banking Relationship Manager Analyst Associate Vice President Director Managing Director Private Banking Private Banking Assistant Assistant Private Banker Junior Private Banker Director Managing Director Private Equity Analyst Associate Vice President Director Managing Director Internal Audit Investment Banking Analyst Associate / Assistant Vice President Vice President Executive Director Managing Director / Head Investment Management Analyst Associate / Assistant Manager Manager Senior Manager Director / Head of Audit Insurance Auditor Assistant Manager Manager Senior Manager Director / Head of Audit Compliance Investment Banking Analyst Associate / Assistant Vice President Vice President Executive Director Managing Director / Head

0-3 YEARS

3-5 AV

Salary (S$’000) AV

5-10

10-15 AV

BONUS (%)

15+

MIN

MAX

MIN

MAX

MIN

MAX

MIN

MAX

MIN

MAX

240

480

360

-

-

-

-

-

-

-

-

-

AV

-

-

-

AV

5

low Med high 15

30

-

-

-

500

750

625

-

-

-

-

-

-

-

-

-

5

15

30

-

-

-

-

-

-

-

-

750

1000 875

-

-

-

-

5

15

30

-

-

-

-

-

-

-

-

-

1000 1500 1250 -

-

-

5

15

40

-

-

-

-

-

-

-

-

-

-

-

-

1500 2200 1850 5

20

50

-

-

-

-

-

-

-

-

-

-

-

-

2000 2700 2350 5

25

60

MIN MAX AV 240 500 370

MIN MAX AV -

MIN MAX AV -

MIN MAX AV -

MIN MAX AV -

low Med high 5 15 25

-

-

-

500

750

625

-

-

-

-

-

-

-

-

-

5

15

30

MIN 300

MAX 600

-

MIN -

MAX -

-

800 MIN -

1200 MAX -

1000 AV -

1200 MIN -

1500 MAX -

1350 AV -

1500 MIN -

2000 MAX -

1750 AV -

5 5 5 low 5

15 15 25 Med 10

30 40 60 high 25

-

-

-

-

-

-

-

AV 450

-

AV

-

-

-

600

900

750

-

-

5

15

30

-

-

-

-

-

-

900 -

1300 1100 5 1300 1500 1400 5 1500 2500 2000 5

20 20 20

30 50 50

MIN

MAX

AV

MIN

MAX

AV

MIN

MAX

AV

MIN

MAX

AV

MIN

MAX

AV

300 MIN 300 MIN 420 -

500 MAX 660 MAX 720 -

400 AV 480 AV 570 -

450 MIN 600 MIN 720 -

850 MAX 1000 MAX 1500 -

650 AV 800 AV 1110 -

850 MIN 1000 MIN 1100 -

1650 MAX 1950 MAX 1900 -

1250 AV 1475 AV 1500 -

1600 MIN 1600 MIN 1500 -

2200 MAX 2500 MAX 2700 -

1900 AV 2050 AV 2100 -

1900 MIN 2000 MIN 1950

2500 MAX 4000 MAX 4000

2200 AV 3000 AV 2975

MIN MAX AV 300 420 360

MIN MAX AV -

MIN MAX AV -

MIN MAX AV -

MIN MAX AV -

low Med high 5 8 25 35 35 low 15 15 15 25 25 low 20 25 35 35 35

12 25 50 50 50 Med 25 35 50 50 60 Med 30 50 60 65 75

25 50 70 70 75 high 50 50 100 100 100 high 50 100 100 100 100

low Med high 5 15 25

-

-

-

450

900

675

-

-

-

-

-

-

-

-

-

10

20

30

MIN 320

MAX 400

-

AV 360

MIN -

MAX -

-

900 MIN -

1400 MAX -

1150 AV -

1400 MIN -

1900 MAX -

1650 AV -

1900 MIN -

2700 MAX -

2300 AV -

15 30 40 low 0

20 30 40 Med 15

30 50 50 high 30

-

-

-

400

650

525

-

-

-

-

-

-

-

-

-

0

15

40

MIN 320 -

MAX 400 -

-

MIN 400 -

MAX 650 -

-

650 MIN 650 -

1000 MAX 1000 -

825 AV 825 -

1000 MIN 1000 -

1400 MAX 1400 -

1200 AV 1200 -

1400 MIN 1400

2500 MAX 2500

1950 AV 1950

10 10 10 low 5 5 10 15 20

25 25 25 Med 10 10 25 25 25

60 60 60 high 25 30 40 50 50

AV 360 -

-

AV

AV 525 -

MIN MAX AV 300 500 400

MIN MAX AV -

MIN MAX AV -

MIN MAX AV -

MIN MAX AV -

low Med high 5 15 30

-

-

-

500

900

700

-

-

-

-

10

20

40

-

-

-

-

-

-

950 -

1400 1175 10 1400 2000 1700 15 2000 3000 2500 20

20 25 30

40 50 70

-

-

-

-

-

HONG KONG BUSINESS | JULY 2018

29


salary survey 2018 Human Resources years of experience Financial & Professional Services HR Assistant HR Officer HR Assistant Manager HR Manager HR Director HR Vice President HR Senior Vice President C&B Executive Compensation & Benefits Manager Compensation & Benefits Director Recruiter Campus Recruiter Talent Acquisition / Recruitment Manager Director of Talent Acquisition Director of Campus Recruitment Training Executive/ Coordinator Training Manager HRIS Analyst HRIS Manager Head of Organisational Development Head of Learning & Development Head of HR Transformation Sales years of experience Advertising & Public Relations Agency Account Manager Account Director Group Account Director Business Director Managing Director / General Manager Consumer Products & FMCG Key Account Executive Assistant Key Account Manager Key Account Manager Sales Manager Business Manager Sales Director General Manager Financial Services Sales Executive Sales Manager Sales Director IT & Telecommunications Channel Account Manager / Account Manager Sales Manager / Global Account Director Division Manager / Sales and Marketing Manager / General Sales Manager Vice President / Sales and Marketing / Sales and Marketing Director / Marketing Director Managing Director / General Manager Sales Director / Business Development Director General Manager Media/Entertainment Assistant Sales Manager Sales / Business Development Manager Advertising / Media Sales Manager Sales / Business Development Director Advertising / Media Sales Director General Manager IT & Telecommunications Marketing, Public Relations & Communications Assistant Marketing Communications Manager Marketing Communications Manager / Regional Communications Manager / Public Relations Manager Marketing Communications Director / Public Relations Director Marketing Communications Director Internal Communications Executive

30

HONG KONG BUSINESS | JULY 2018

MIN 168 240 340 200 240 180 260 -

0-3 MAX 240 300 400 240 280 240 300 -

Salary (S$’000)

MIN 240 300 360 300 360 240 300 -

3-5 MAX 260 360 450 360 480 360 400 -

MIN 240 MIN 168 MIN 180 MIN 360 -

0-3 MAX AV 325 283 MAX AV 264 216 MAX AV 260 220 MAX AV 455 408 -

MIN 360 MIN 216 450 MIN 400 MIN 400

Salary (S$’000) 3-5 MAX AV MIN 585 473 480 650 600 MAX AV MIN 408 312 384 480 465 480 600 1200 1200 MAX AV MIN 500 450 480 650 MAX AV MIN 600 500 550

780 900 800 MAX 600 720 960 1400 1500 MAX 750 900 MAX 850

630 775 700 AV 492 600 780 1300 1350 AV 615 775 AV 700

750 780 1200 MIN 540 660 720 1200 1400 MIN 850 MIN -

950 1050 1600 MAX 660 800 1100 1600 2500 MAX 2000 MAX -

AV 850 915 1400 AV 600 730 910 1400 1950 AV 1425 AV -

-

-

-

-

750

625

700

1100

900

AV 204 270 370 220 260 210 280 -

-

AV 250 330 405 330 420 300 350 -

-

MIN

440 600 540 400 400 700 700 660 600 -

500

5-10 MAX

550 900 720 600 600 900 900 900 900 -

5-10 MAX

AV

495 750 630 500 500 800 800 780 750 -

AV

MIN

10+ MAX

700 1000 1200 1500 600 1000 1000 1000 1000 1000

900 1400 1500 2200 900 1400 1400 1300 1300 1300

MIN

10+ MAX

AV 800 1200 1350 1850 750 1200 1200 1150 1150 1150

-

-

-

-

-

-

750

1100

925

1000

1500

1250

-

MAX -

-

-

-

-

MAX 455 650 650 -

800 1200 MIN 500 500 700 550 -

1100 1500 MAX 700 700 900 750 -

950 1350 AV 600 600 800 650 -

1500 950 1400 MIN 800 700 900

2500 1500 2500 MAX 1100 850 1250

2000 1225 1950 AV 950 775 1075

MIN 240

MAX 300

AV 270

-

-

-

-

-

-

-

-

-

-

-

-

300

360

330

360

800

580

-

-

-

-

MIN

AV

MIN 300 455 455 MIN

AV 378 553 553 -

MAX

AV

MIN

MAX

AV

MIN

MAX

AV

-

-

-

-

-

-

-

-

-

900

1500

1200

192

234

213

-

-

-

-

-

-

1000 -

1500 -

1250 -


salary survey 2018 Paralegals & Other Legal Support Roles Private Practice Paralegal Domestic Paralegal International Senior Paralegal Domestic Senior Paralegal International Translator International Librarian / Knowledge International Management Officer Knowledge Manager International (Department Head) Lawyer Role

MIN 144 216 180

MAX 240 360 264

AV 192 288 222

MIN 220 300 240

MAX 360 432 480

Salary (S$’000) AV MIN 290 366 432 360 -

MAX 576 -

AV 504 -

-

-

-

216

276

246

300

480

390

-

-

-

-

-

-

-

-

-

-

-

-

600

900

750

-

-

-

MIN

MAX

AV

Salary (S$’000) NEWLY QUALIFIED 1 PQE 2 PQE 3 PQE 4 PQE 5 PQE 6 PQE 7-8 PQE MIN MAX AV MIN MAX AV MIN MAX AV MIN MAX AV MIN MAX AV MIN MAX AV MIN MAX AV MIN MAX AV

Lawyers, 720 1020 870 840 1032 936 900 1056 978 936 1224 1080 1020 1320 1170 1080 1416 1248 1128 1464 1296 1200 1680 1440 International Law Firms Lawyers, Magic 960 996 978 1008 1068 1038 1068 1200 1134 1224 1380 1302 1248 1464 1356 1344 1608 1476 1620 1776 1698 1632 1900 1766 Circle Firms2 The above table includes salary data collected from international law firms of varying sizes.

1

Procurement & Supply Chain years of experience Supply Chain Planner / Analyst Senior Planner / Senior Analyst Assistant Supply Chain / Planning Manager Supply Chain Manager Regional Supply Chain Manager (APAC) Supply Chain Director Head of Supply Chain Warehousing Warehouse Supervisor Assistant Warehouse Manager Warehouse Manager Warehouse Operations and Logistics Manager Regional Warehouse Operations and Logistics Manager Logistics Logistics Supervisor Assistant Logistics Manager Logistics Manager Senior Logistics Manager Director Vice President – Operations and Logistics Engineering Project Management Engineering (Manufacturing, Mechanical, Electrical and Electronic) Retail & Sourcing years of experience Design Designer Senior Designer Chief Designer Design Manager Creative Director Senior Buying Manager Merchandising Director Retail Operations & Store Management Sales Associate Senior Sales Associate / Supervisor Supervisor Store Manager (Single Store) Senior Store Manager / Store Director Retail Operation Manager Retail Operation Director General Manager Food & Beverage Restaurant Manager F&B Manager Executive Chef F&B Director / Operations Director

MIN 240 MIN 200 -

AV 270 AV 230 -

312 MIN 270 -

384 MAX 336 -

348 AV 303 -

420 480 MIN 380 450

500 620 MAX 520 750

460 550 AV 450 600

650 900 1300 MIN -

880 1100 1600 MAX -

AV 765 1000 1450 AV -

-

-

-

-

-

-

-

-

-

750

1200

975

MIN 220 MIN 216

MAX 300 MAX 264

AV 260 AV 240

312 MIN 288

360 MAX 360

336 AV 324

420 500 MIN 420

700 820 MAX 600

560 660 AV 510

800 1200 MIN 500

100 1500 MAX 1200

AV 900 1350 AV 850

216

264

240

312

360

324

420

600

510

500

1200

850

MIN 150 MIN 100 MIN -

0-3 MAX 220 MAX 150 MAX -

AV 185 AV 125 AV -

MIN

MIN

MIN

300 500 500 MIN 130 MIN -

3-5 MAX

Salary (S$’000)

0-3 MAX 300 MAX 260 -

MAX

3-5 MAX

500 650 800 MAX 180 MAX -

AV

AV

MIN

MIN

Salary (S$’000) AV

400 575 650 AV 155 AV -

-

MIN

MIN 180 265 340 480 MIN 360 480 -

5-10 MAX

MAX

5-10 MAX

MAX 265 340 500 720 MAX 480 600 -

AV

AV

-

AV

AV 223 303 420 600 AV 420 540 -

MIN

MIN

MIN

800 550 750 MIN 700 950 1400 MIN 600 800

10+ MAX

MAX

10+ MAX

1000 750 1200 MAX 960 1300 1800 MAX 800 1000

AV 900 650 975 AV 830 1125 1600 AV 700 900

HONG KONG BUSINESS | JULY 2018

31


event coverage: HKB AWARDS

Hong Kong Business hails 2018’s most exceptional products

Hong Kong Business honoured twelve innovative products manufactured and designed in Hong Kong during its inaugural Made in Hong Kong Awards and Designed in Hong Kong Awards held at Island Shangri-La, Hong Kong on April 19, 2018. The awards night was attended by over 80 executives across various industries. This year’s winners were judged by Charbon Lo, Director at Crowe Horwath (HK) CPA Limited; Kevin Lam, Partner at ShineWing; Matthew Tong, Audit and Assurance Director at Baker Tilly Hong Kong; Zhang Tian Bing, China Consumer Products and Retails Sector Leader at Deloitte; and John Poon, Head of Accounting and Outsourcing Solutions at Mazars Hong Kong. The Made in Hong Kong Award is given to firms with exceptional products that are manufactured in Hong Kong whilst products that are conceptualised by a Hong Kong-based office but are manufactured outside the country were lauded in the Designed in Hong Kong Awards.

Award Trophy

The Dairy Farm Company Ltd.

Hong Kong Business congratulates the following winners: Made in Hong Kong Awards Food – Morris Salad Cookies - Morris Cookies (Asia) Limited Made in Hong Kong Awards Healthcare – myDNA Pro for Prudential - Prenetics Limited Made in Hong Kong Awards Personal Care – Mannings Wet Wipes - The Dairy Farm Company Ltd. Designed in Hong Kong Awards Computer Hardware – Back Lit Keyboard & Wireless Keyboard with Round Keys - Astrum Holdings Limited

YULU International Ltd.

Designed in Hong Kong Awards Electronics – Motorola Halo+ - Binatone Electronics International Limite Designed in Hong Kong Awards Healthcare – STICKu - BNET-Tech Company Limited Designed in Hong Kong Awards Hospitality Products – Epure Dispenser - Ming Fai Enterprise International Company Limited

Hong Kong Business Annual 2018

Designed in Hong Kong Awards Apparel (Women) – Digital Printed Silk Jumpsuits - MSENVY Corporation Limited Designed in Hong Kong Awards Healthcare security – SonneBand Security System - Sonne International Company Limited Designed in Hong Kong Awards Personal Care (Women) – FTecHealth Nursing Bra & Postnatal Slimming Legging - Sonne International Company Limited Designed in Hong Kong Awards Security – Long Range Wireless Driveway Alert - Venture Global Limited Designed in Hong Kong Awards Toys and Novelties – Operation: Escape - YULU International Ltd. 32

HONG KONG BUSINESS | JULY 2018

Networking


Brian Lam Representatives of BNET-Tech from Prenetics and Company Limited Prudential Hong Kong Limited

Raymond Lee of The Dairy Farm Company Ltd.

Made in Hong Kong and Designed in Hong Kong Awards Gala Dinner

Venture Global

Jun Wong of MSENVY Corporation Limited

MSENVY Corporation Astrum Holdings Limited Limited

Binatone Electronics BNET-Tech Company International Limited Limited

Ming Fai Enterprise International Company Limited

KE Liu and Celine Delforn of Ming Fai Enterprise International Company Limited

Matthew Tong and Anntice Lai of Baker Tilly Hong Kong

Morris Cookies (Asia) Representatives Limited from Sonne International HONG KONG BUSINESS | JULY 2018

33


Apparel

Quality and Excellence never go out of style with MSENVY Their motto is “Make the world better by what you wear everday”.

F

ounded in 2004, MSENVY is an apparel design, development, sourcing, manufacturing, and export company serving fashion retailers brands around the world. The Company has an office and factory located in Hong Kong and Guangdong, China. MSENVY is one of Hong Kong’s leading silk luxury fashion design and manufacturing company. With a renowned reputation for product quality and workmanship, MSENVY designs and manufactures highly desirable silk fashion products. The strength of MSENVY is that over 90% of its products are designed and manufactured in-house. Aside from this, through the long years of cooperation with different superior textile printing design house, MSENVY constantly provides exclusive & spectacular print collections to different customers. A premium portfolio Over the years, MSENVY has amassed a premium portfolio of serving over hundreds private labels across different countries. Carrying a diligence that constantly seeks to push beyond client expectations, MSENVY has established a strong reputation in the Clothing industry based on its unique blend of silk technical excellence, commercial acumen and design sensibilities. MSENVY products are sold exclusively to different worldwide renowned fashion brands, the current client list including 34

HONG KONG BUSINESS | JULY 2018

Spain’s Roberto Verino, Jota Mas Ge, Japan’s Rose Bud, Abiste, Italy’s Purificacion Garcia, Blurgirl, Giorgia & John, Russia’s “Zarina”, Greece’s Lussile, Denmark’s Club Collection, Australia’s Picnic, Poland’s Molton, Saudi Arabia’s Femi9, Turkey’s Vakko, Cashmere & Silk. Since most MSENVY’s products are made by silk, the company is quoted as Eco Supplier for years through Hong Kong Trade Development Council (HKTDC). Based on the trusted ability and expertise to deliver high quality products, HKTDC has recommended MSENVY to different global media on several occasions. MSENVY is guided by their vision to ensure that they go the extra mile to help their clients reach their customers. At MSENVY, challenges are welcomed to foster creativity. The company stands by their motto, and that is to “Make the world better by what you wear everday”.

Casual luxury

CONTACT Company name: MsEnvy Corporation Limited Address: Unit 1809, Eastern Harbour Center, 28 Hoi Chak Street, Quarry Bay, Hong Kong. Phone number: (852) 2180 7063 Fax number: (852) 2180 7064 Website: www.msenvy.com

Provence wanderer

“MSENVY has amassed a premium portfolio of serving over hundreds private labels across different countries. ”


Security

VENTURE redefines safety and security with the Long-ranged Wireless Driveway Alert The technology provides an alert signal when the wireless outdoor motion sensor detects a person or a vehicle approaches your home or premises, thereby ensuring an added protection to every household.

W

hen it comes to safety and security, will the bare minimum be enough? For Adam Chow, chief executive officer of Venture Global Limited—the Hong Kong-based company who introduced a simple and useful alert monitoring system for the safety and security of homes, offices, and properties—everybody deserves to feel safe and secure in the places they live, work, and play in, not just from robbers and criminals but also from external threats like fires and faulty utility systems. This need to inspire security and confidence in people in the places they live and work in is what prompted Adam and his company to develop and introduce the Long Ranged Wireless Driveway Alert, which won the Hong Kong Business Designed Award for Safety and Security in the Hong Kong Awards 2018. The award-winning technology, which is basically a wireless alerting system according to Adam, can detect moving vehicles, people, or animals that shows up in a user’s monitoring area . The technology “[The technology] provides you an alert signal when the wireless outdoor motion sensor detects a person or [a] vehicle approaches your home or premises,” said Adam. “It’s a reliable security alert system for your property, garage, gate, driveways, back entrances, or business premises.” The Venture Global Limited chief executive added that their wireless alerting system also supports multiple receivers and sensors or transmitters, with all of the company’s receivers and transmitters also being compatible and interoperable. Some of these extra receivers or transmitters can be added for a more comprehensive coverage, including door or window alarms, water leakage notifiers, smoke or fire detection. Adam noted that this wide array of combinations offers significant flexibilities for consumers and provides comprehensive protection for each user. Venture’s alerting system utilises SUB-1G RF frequency with cutting-edge wireless outdoor motion sensor, which can be installed anywhere and can be mounted on walls, posts, fences, or trees with mounting

support. The system is also expandable for up to 16 sensors, whilst 32 different tones can be chosen for loud and clear alert sounds. The wireless outdoor motion sensor is also weather-proof, designed to withstand the elements including blazing heat, severe snow, hail storms, strong winds, and heavy rains. It features an adjustable sensitivity control with narrow aperture lens and a swivel mount to focus the detection distance and the angle of the sensor in order to prevent false alarms. The sensor can detect motion of up to 12 meters and transmit a wireless alert signal to the receiver when it detects a motion passing through. The commitment Adam noted that the constant and persistent implementation and application of these various cutting-edge technologies and innovations to their products are what sets Venture Global Limited apart from other companies, particularly in the cutthroat safety and security industry. Some of the efforts by Adam’s company include the continuous research and development for innovative safety and security products; using internet of things to build a total home

and personal monitoring and management platform; and continuous nurturing of talents within the company through training and human capital development. Some of the other unique features of Venture’s Long Ranged Wireless Driveway Alert include the far-reaching transmission distance of up to 1 kilometres; user friendliness from set up to usage; high-level of personalisation options; formidable build quality with the use of industrial-grade engineering plastic and weather-proof designed casing with sun shade; heightened sensitivity and smaller margin of error; wide customisation options with the extra receivers and transmitters. With the company’s hard work validated by the award won, Venture Global Limited remains committed to providing cuttingedge technology and innovation for the safety and security of its customers. Adam shared that his company will remain focused on the satisfaction of their customers and the communities they operate in by listening to their needs and developing products based on those needs and demands, whilst also pursuing corporate sustainability in every facet of the company’s operations and strategies.

“Venture’s Long Ranged Wireless Driveway Alert has farreaching transmission distance of up to 1 kilometres.”

Venture’s award-winning product

HONG KONG BUSINESS | JULY 2018

35


Healthcare security Personal Care

WE POSSESS THE PRODUCT KNOW-HOW AND EXPERTISE FOR PRODUCT DEVELOPMENT SONNE INTERNATIONAL COMPANY LIMITED OUR SUCCESSFUL STORY

L

everaging on our years of experience in sales of medical devices, our product know-how and our relationship with reputable suppliers of medical devices, we believe we are well-positioned to assimilate technological advances, strengthen our product development efforts and expand our product portfolio with functionality that addresses our customers’ requirements.

Hybrid Security System & Utilising farinfrared technology To further tap into the elderly care home market, we have, through our R&D efforts, developed a hybrid security system under our brand, by utilising a combination of technologies, such as EAS and RFID, for hospitals and elderly care homes to prevent missing of patients and medical equipment or elderly residents. In September 2015, our design for the housing of a security tag was registered with the Designs Registry of the Intellectual Property Department in relation to the security system designed for hospitals and elderly care homes. We were granted two patents by the Patents Registry of the Intellectual Property Department and a patent by the United States Patent and Trademark Office in relation to the 36

HONG KONG BUSINESS | JULY 2018

security system designed for hospitals and elderly care homes in December 2016 and January 2018, respectively. In March 2016, we obtained CE certification for our EAS disposablemodel tag. Nevertheless, in January 2016, we collaborated with a department of the Government’s health sector division to conduct an on-site demonstration, testing and commissioning of our security system for use in a public hospital. After giving birth to a baby, breastfeeding

is an ideal way for infants to provide the nutrients needed for healthy growth and development. As the perfect newborn food recommended by WHO, yellowish, viscous milk is produced at the end of pregnancy and breastfeeding should begin during the first hour of delivery. In Asia, above 40% of women cannot provide sufficient breastmilk. Far Infrared Radiation promotes water molecules inside the blood vessel to vibrate and increase their hydration capacity. Combined with the heat-expanded blood vessels, the result is thinned body fluids, increasing circulation & accelerating toxin removal. The Far Infrared Radiation emissivity is above 90% under normal condition that guarantee the proven benefits. In January 2018, we were granted a utility model patent by the State Intellectual Property Office of the PRC for our nursing bra. Future plan strategy To support our product development, we will continue to expand our in-house R&D team and co-operate with universities and other research partners. In order to strengthen our product R&D capability, we plan to expand our portfolio of products and services and enter into new areas with steady growth potential.


Electronics

The perfect baby monitor to watch over your precious one The new Halo+ from Motorola has been specifically developed to give new parents peace of mind and flexibility in watching over their kids.

B

eing a new parent is both exciting and scary. Every hiccup seems like a serious illness, a crack in the pavement is a precipice and a friendly house cat becomes a sabre-tooth-tiger. Parents need to watch over their new-borns 24/7. The new Halo+ from Motorola has been specifically developed to give parents peace of mind and flexibility when it comes to keeping an eye on their new edition. The award winning design attaches over the cot showing the parent a superb overhead view of the child. The camera can be detached from the mount and moved anywhere in the house, ideal for when your child falls asleep outside the nursery, allowing you a few precious moments of ‘me-time’ whilst still keeping an eye on junior. A wide range of capabilities The unit’s audio-capabilities have a wide range of uses which include playing lullabies and bedtime stories. Colour changing mood lighting helps sooth the child with seven colour settings available on three brightness levels. The unit can also project dreamy images onto the ceiling of the nursery which includes astral pictures of stars and rockets. A companion parent unit with 4.3” screen allows you to watch over and talk to your baby day and night, with IR night vision and two-way audio. The new Halo+ also connects via the Hubble app to give remote access over a paired smartphone, allowing both

parents to be connected, even when they may be away from the house at work. About Hubble Connected: Hubble makes it easy to stay connected with your favorite people, places and pets with live video streaming and up-todate smart notifications wherever you are. Hubble is also the first Platformas-a-Service for the connected home. Offering complete SDK, API integration documentation and reference design. Hubble enables leading brands and hardware manufacturers to rapidly integrate and connect new products to the cloud. About Binatone: Binatone, a sister company of Hubble Connected, is a leading global manufacturer of innovative IoT, smart home and consumer electronic devices for the baby, pet, home, personal audio and lifestyle camera categories. As well as selling products under its own name, Binatone is a licensee of Motorola and AEG. Binatone products are now sold in over 50 countries. Binatone is one of the world’s leading consumer electronics companies with over 50 years of experience in creating

Halo over the crib

outstanding consumer products. Over the years Binatone has received countless awards for innovation and design. Based on expertise in research, production and marketing Binatone develops products that are user friendly and deliver the best in functionality at affordable prices. iDECT products combine advanced communication technologies with outstanding design for discerning consumers. For special consumer groups such as seniors and children Binatone offers specifically developed product ranges. Aside from its own brands Binatone, iDECT and Voxtel, the company has been very successful in reviving and managing product groups for other brands.

CONTACT Company name: Binatone Electronics International Ltd Address: Floor 23A, 9 Des Voeux Road West, Sheung Wan, Hong Kong Phone number: +852 2802 7388 Fax number: +852 2802 8138 Website: http://www.binatoneglobal.com/

“The award winning design attaches over the cot showing the parent a superb overhead view of the child.” HONG KONG BUSINESS | JULY 2018

37


marketing Briefing

How can marketers leverage on voice AI? CMOs who are prepared to shift and maximise the use of voice devices will be in the best position to grow.

A

s more and more consumers find voice shopping appealling with the launch of devices such as Amazon’s Alexa-powered speakers and Google Home, marketers should also be prepared to embrace voice feedback integration in their marketing models in order to tap into the growing market. By 2022, voice shopping is expected to jump to US$40b United States, from US$2b today, according to a survey this year by OC&C Strategy Consultants. Whilst Hong Kong is still stuck in the dark abbyss in terms of AI integration, some marketers in the city are already seeing voice AI’s potential. Voice feedback integration Steven Kaiser, founder and managing director, AimMatic Hong Kong said that voice feedback integration is an important tool and easily outperforms surveys for brand insights. Natural Voice, the company’s flagship voice AI product, leverages Google Cloud AI and is available on GitHub. According to Kaiser, Google Cloud has billions of AI trainers, and more training makes the AI smarter and more efficient. For Natural Voice, Google Cloud AI has enabled the inclusion of the native language of over 130 countries out-of-the-box. Analysts at the Asia Business Council (ABC) noted that China trumps Singapore, Japan, South Korea, and Hong Kong in terms of rolling out voice recognition features. In fact, among eight countries assessed by the ABC, Hong Kong was ahead of only one country - Indonesia. ABC’s research showed that Hong Kong lacks a strong link between research and industry, as evidenced in the market’s below average startup activity and AI-startup equity funding. In China, e-commerce giant Alibaba prides itself with Ali Xiaomi, a chatbot that employs voice recognition and neural networking to troubleshoot customer issues. Chinese startup Mobvoi has also broken into the voice AI space, offering voice search capabilities for chatbots. Cheryll Cheah, sales and marketing executive at Quorier, said that voice AI is definitely a feature that will

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compliment traditional marketing methods perfectly and will take the brand experience to new heights. She said that this is especially true for the logistics industry in terms of delivering proactive information and helping users search and navigate according to their needs. “Apart from employing the use of chatbots, our team is also developing a smart-routing feature that will enable us to analyse our Qouriers’ behavioral data and make intelligent job suggestions to suit their delivery habits as well as job preference. We look forward to exploring voice activation in the future,” Cheah said.

Brands prompt users to naturally speak about their lifestyle related the brand experience feedback, then machine learning extracts the content category from the voice feedback. Marketers then enlist their media agency to make ad placements that target exactly the categories that match the interests of their various user groups. Steven Kaiser

Cheryll Cheah

Benny Chow

Benny Chow, project and marketing manager, Firefly Photography Pte Ltd, said that their services at present require the human touch for most touchpoints. However, he believes that voice AI can definitely raise the status of a brand in this current era that differentiates a firm’s level from that of another through technology indicators. Not just that, voice AI could also provide data accurately and efficiently such as a call center agent could be replaced with an AI voice command. Automating brand insights Going forward, Kaiser said that voice AI or voice feedback automates brand insights in-store, on-location, onpremise, on-trade, in-app, and online. According to him, cost, privacy, respondent burden, scope, simplicity, and speed to knowledge are all improved with voice AI. “An advanced use case of voice feedback for marketers is content category targeting on programmatic platforms. Brands prompt users to naturally speak about their lifestyle related the brand experience feedback, then machine learning extracts the content category from the voice feedback. Marketers then enlist their media agency to make ad placements that target exactly the categories that match the interests of their various user groups,” he added. Beyond the marketing space, Chow said that voice AI could track most commonly asked questions via calls or touchpoints. He said that voice technology could also finetune the landing page of any service to improve customer experience. “There will be apps like Invoca which is a voice marketing cloud service, which marketers will use it to track most commonly used terms,” Firefly’s Chow added.


FOOD

Enjoy guilt-free treats with Morris Salad Cookies Morris Cookies was founded on the principle that delicious food should not be polluted with unnecessary ingredients that are potentially harmful to the body.

M

orris Cookies is one of the World’s leading purveyors of chemicalfree, healthy treats designed to delight the senses without any of the toxic or chemical additives added to so many baked goods today. Known for artisan, chemical-free baked goods that are loved for both their taste and their quality, Morris Cookies was founded on the principle that delicious food should not be polluted with unnecessary ingredients that are potentially harmful to the body. The Company’s history is deeply rooted in developing natural, healthy products through scientific method and personal experiences. During a family member’s battle with breast cancer, Morris sought to create freshly baked products that were both chemicalfree and non-GMO. After discovering so many harmful chemicals were being added to food, Morris committed to developing mouthwatering and healthful alternatives that could be enjoyed by one and all, launching the company in 2012.. Taste and quality Known for artisan, chemical-free baked goods that are loved for both their taste and their quality, Morris Cookies was founded on the principle that delicious food should not be polluted with unnecessary ingredients that are potentially harmful to body. The company’s commitment to just more than organic, sustainable and socially responsible practices has made this food purveyor amongst the best in the industry. Morris products are subjected to rigorous testing of high-risk ingredients at critical control points—allowing for certified chemical-free raw materials that are traceable and segregated from genetically modified or chemically-altered products. The result is not only healthy—it’s absolutely yummy! And Morris has no intention of stopping there! For the first time ever, you can design your very own unique cookies with totally personalised flavor profiles! Even better? They’re completely chemical-free, totally organic and utterly delicious! Introducing Morris SALAD COOKIES: the revolutionary new treat that lets you create delectable, healthy treats for yourself and your loved ones! It’s easy and fun to do! Just

choose from a variety of fresh ingredients: fruits, vegetables, herbs and more to create yummy flavors and combinations! Morris Cookies uses a proprietary and completely chemical-free baking method to create your desserts Salad in a cookie, a world’s first Our Salad Cookies are SGS certified, meaning they contain no preservatives or unnatural food colorings. Our raw materials are rigorously tested against 457 types of pesticides in Taiwan (maximum test in Hong Kong is 237 and 311 in Malaysia) and contain no Acrylamide. In fact, Salad Cookies are the first and only Acrylamide-free cookies available worldwide! Morris uses an innovative low-temperature baking method that prevents Arcylamide from rising with 100% healthy and delicious results! This low-temperature baking method was a challenging task that resulted in thousands of hours of R&D and innovative experimentation, and Morris eventually sold his properties to finance his dream, but five years later, the result is tasty, curative, guiltfree treats! Each day, employees take meticulous care to maintain Morris’s commitment to taste and wholesome quality even as the brand grows market share in one of the world’s biggest markets. Morris Cookies is constantly developing heavenly, goodfor-you products customers can feel pride in, knowing they’re making the right choice for their bodies. Morris Cookies makes sweet treats, specialty cakes, desserts and Acrylamide-free cookies that can be enjoyed by the whole family! Cookie with a purpose Morris is also dedicated to serving local communities as well! The company has allocated 15% of their sales to “the HUB” and the “Hong Chi Association” in Hong Kong with plans to create similar charitable partnerships in each country where their products are manufactured and sold! Perfect for birthday parties, Christmas gifts and for anyone who adores guilt-free

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sweet treats, Salad Cookies are the perfect present for every occasion and available online, making them both fun and easy to purchase! Salad Cookies will be officially launched in 3 countries 6 locations: Hong Kong, China, Macau, Taiwan, Malaysia & Singapore and also available online, Fun and easy to create, come create your very own designer cookies from all-natural ingredients just in time for the holidays!

CONTACT Company name: Morris Cookies (Asia) Limited Address: G/F, No.33 Luen Cheong Street, Luen Wo Market, Fanling N.T. Hong Kong Phone number: +852 53242411 Fax number: 26750551 Website: https://morriscookies.asia

“Morris Salad Cookies are the first and only Acrylamidefree cookies available worldwide! ” HONG KONG BUSINESS | JULY 2018

39


Legal briefing

Will Hong Kong enterprises fully embrace the statutory transfer pricing regime? Hong Kong is looking to bolster its concessionary tax regime to ensure it meets international standards, and legal experts advise firms to prep early in what is expected to be an administration burden for enterprises.

W

hen the Hong Kong government put forward the Inland Revenue Amendment Bill No. 6, which serves to codify transfer pricing and introduce country-by-country reporting, it had the effect of jolting businesses into action to start getting their filing systems and pricing analysis well in order to avoid penalties. Hong Kong is looking to bolster its concessionary tax regime to ensure it meets international standards, and legal experts advise firms to prep early and thoroughly in what is expected to be a notably heavier administration burden for enterprises. What are the key features of the bill? The amendment bill is the first comprehensive transfer pricing legislation in Hong Kong, codifying the key definitions and fundamental transfer pricing rules into Hong Kong’s domestic legislation, said Windson Li, partner and head of tax group for DLA Piper in Beijing. He said the transfer pricing rules will apply to all associated persons and enterprises, as well as foreign head offices and their permanent establishments, or PEs, in Hong Kong, covering inter-company buy-sale, services, financing and asset transfer.

The amendment bill is the first comprehensive transfer pricing legislation in Hong Kong. Li said the bill allows a taxpayer to apply for double tax relief if a tax adjustment has been made abroad based on the arm’s length principle resulting in double taxation of the Hong Kong taxpayer’s income. The bill stipulates that a transaction or a series of transactions made between two associated persons must be made on arm’s length basis, applying to both domestic and cross-border transactions, said Michael Nixon, director of economics (transfer pricing) at Baker & McKenzie.Wong & Leow in Singapore. He noted that a Hong Kong entity entering into transactions with associated persons is required to prepare and keep on record a local file and a master file, if they meet specified enterprise conditions and transaction thresholds. The bill also states that multinational corporations, or MNCs, that meet the threshold requirement as a reportable group revenue of at least HK$6.8 billion, will be required to file a detailed countryby-country report. Nixon added that the bill also includes the introduction of an anti-avoidance provision and applicable penalties in relation to a number of offences, primarily fines for non-compliance but also include potential imprisonment in cases of fraud. In relation to country-by-country reporting, directors or other officers or reporting entities 40

HONG KONG BUSINESS | JULY 2018

and their third-party service providers will also face similar penalties.

Windson Li

Michael Nixon

Cecilia Lee

How will the bill likely impact firms? While introducing comprehensive legislation to bring Hong Kong’s tax system in line with international norms is understandable, “companies that are seeking to expand their operations in Hong Kong – particularly those that are dependent on R&D and intellectual property – will want reassurance that they will be able to operate in a flexible environment,” said PwC Hong Kong Transfer Pricing Services Partner Cecilia Lee. The bill legally mandates taxpayers to prepare the stipulated documentation and to make specific filings in a timely manner with the tax authorities, said Nixon, and “failure to do so can result in penalties and an inability to defend a tax a position.” He also warned that failing to prove the transaction was conducted at arm’s length could lead to an adjustment to the taxpayer’s taxable profits. Nixon advised taxpayers to conduct a thorough and defensible transfer pricing analysis to substantiate the arm’s length nature of their transactions, and to prepare and retain appropriate documentation - and the earlier the better. The enhanced transfer pricing documentation requirements also means that supporting information such as contracts, invoices and supporting memoranda detailing key business and commercial activities should be reviewed for accuracy and completeness, he added. “It is also very important to look further into the substantive functions of existing businesses and align transfer pricing arrangements inside and outside Hong Kong to make sure the foundation of transfer pricing compliance is robust under the bill,” said Li, especially for any IP-related returns since such returns in Hong Kong would need to be supported by appropriate functions, risks and assets going forward.


Richard Wolf GmbH

spirit of excellence Richard Wolf GmbH is a mid-sized medical technology company based in Germany. It supplies a broad spectrum of products and solutions for endoscopy and extracorporal shock wave treatment. Richard Wolf also offers integrated operating room (OR) management systems. A track record spanning more than 100 years empowers Richard Wolf to contribute to the development at new and innovative medical products. The experience also includes a continuous process of advanced evolution of patient-friendly, minimally invasive treatment methods. The company‘s core competence and experience is in the area of endoscopic systems for a range of disciplines in human medicine. Richard Wolf employs some 1,500 people worldwide with a workforce of around 1,100 employees in Germany. The company maintains a global network of 14 subsidiaries and 130 foreign representatives. The headquarters and the facility for production, development and sales are in Knittlingen / Baden-WĂźrttemberg, Germany.

excellence in healthcare


Event coverage: NET EVENTs or worse, failure,” he added. Brian Issac, senior director, global business development of NetFoundry, concurred, saying that this is a very complex issue and as an industry player, participants are looking at a highly connected network of over 3 million devices. The issue now, he said, is determining what the best practices are , and how businesses can work together with a massive connection in their hands. “As Mansour previously said, excitement may fuel a jump but companies have not really come together to come up with standard practices,” Issac explained. NetEvents Global Press & Analyst Summit held in Dolce Hayes Mansion, San Jose, California.

Is IoT the ultimate driver of digital transformation?

Pick a market sector and the Internet of Things is present: manufacturing, smart cities, retail, transportation, healthcare, education.

I

oT is a massive area using realtime connectivity, data analytics, and business applications, business managers are looking to improve customer experience and business efficiency using IoT tools. So how is this going to transform business--will there be more functionality for consumers, will big and smart data help them improve operations? Predictive data analytics is one of the benefits for businesses wherein companies use data collection and analytics to provide foreseeable capabilities about products and customers. IoT can also assist in digital supply chain wherein they use real-time data to predict outcomes. Some of the real-world digital transformation examples are Rockwell Automation that collects device data from industrial devices and analyzes data in the cloud. Southern Company is another example, an energy provider that builds real-time tracking, enhancing strom recovery and customer service. Qualcomm also uses it in bringing C-V2X vehicle to vehicle communications standard. Even 42

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Predictive data analytics is one of the benefits for businesses wherein companies use data collection and analytics to provide foreseeable capabilities about products and customers.

cocktail mixing is part of the trend now as German firm Keith & Koep released a cocktail booster, an automated cocktail mixer connected to Microsoft Azure IoT Cloud with 60 different ingredients and targets making a cocktail in just six seconds. These were fleshed out in a conference debate chaired by Scott Raynovich, principal analyst, Futuriom, at the NetEvents Global Press & Analyst Summit held in Dolce Hayes Mansion, San Jose, California. Riding the revolution Mansour Karam, CEO and founder of Apstra, with new software-based techniques said that one has to rethink the use of IoT in running businesses because until and unless their systems and business models are ready for the massive amount of data that’s about to come in, they will not be able to maximize the potential of this revolution. “Some are just too excited to jump in on the wagon and tell customers, ‘Hey we are using today’s latest technology’ without realising they may be setting themselves up for an embarrassment

Data security Jeff Baher, senior director, product & technical marketing-networking & service provider solutions, Dell EMC said that some enterprises have come forward to take the lead in responsibility handling and ensuring that data is secured, but he claimed that there’s still a long way to go. Russ Currie, vice president, enterprise strategy of NetScout, concluded, “We have so much information coming to us, and just this morning one of our customers came to us saying that they have too much information to deal with, and this becomes an issue to businesses. How do we normalize this without losing the value of big data just because there were too much of them coming in?” The industry’s biggest players are embracing the vision, each with its own specific angle they believe will earn new customers. Even so, there’s not enough business for every top-shelf vendor to succeed, not with enterprises pressing hard to cut costs. The network has never been critical, but it has never been more complex. Why is AI at a critical juncture right now? Tom Burns, senior vice president, Dell EMC Networking and Solutions, pointed to two particular reasons why this is happening at the moment: digital transformation and technology change. “We believe very much in the way open source is going to change the industry. All these changes are happening very quickly and must be embraced by the industry, he said.


Event coverage: International transport Forum 2018

Panel discussion on cybersecurity threats to transport at the 2018 International Transport Forum held at Leipzig, Germany on May 22-25, 2018.

Cybersecurity risks pose threats to transport industry Despite the current projection of transportation cybersecurty spending hitting $14b by 2022, the industry still remains vulnerable to attacks.

A

s more of people’s data get recognised and stored digitally for a more intuitive experience, vulnerability to cyberattacks also run high— affecting both the security of individuals as well as the integrity of operations of these transportation services. These transport systems are, by nature, complex and vulnerable to cyberattacks, according to Gene Seroka, executive director of the port of Los Angeles, which handles goods with a total value of around $1b. Seroka was part of a panel session talking about the rising cybersecurity threats to transport during the International Transport Forum in Leipzig, Germany in May 2018. Seroka explained that his port implemented the first ever cybersecurity centre in the U.S. to mitigate cybersecurity risks that observe a cybersecurity threat once every eight seconds. He stressed that to address this issue, partnership between the public and private sectors is extremely important, particularly in sharing lessons and learning from the experiences of each other.

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Cybersecurity threats can affect operations—both internal and external—of transportation companies and service providers.

Despite the current projection of transportation cybersecurity spending increasing to around $14b by 2022 from the current $8b annually, according to ABI Research, the transportation industry could still be highly vulnerable from certain attacks. Michela Menting, digital security research director at ABI Research, noted that there is very poor cybersecurity being applied or implemented within transportation operational technologies and control systems. Cybersecurity threats can affect operations—both internal and external—of transportation companies and service providers. Solid business case This is echoed by Henrik Kiertzner, principal business solutions manager at SAS, when he said that capabilities for cyberattacks are widespread given that sophisticated tools can be bought or rented easily, “even for the most imbecile criminals.” Cyberattacks have become attractive moves for criminals and states engaged in illegal and heinous activities, because of their low investment needs and low risks. Kiertzner said that some

security officers in firms often face difficulties in making the business case for more cybersecurity, no matter how enormous the cybersecurity risks and threats are to a company or institution. Stéphane Feray Beaumont, vice president at Alstom Digital Mobility, meanwhile, emphasised the importance of conducting training and spreading awareness amongst relevant stakeholders to be able to create the right mindset and develop much-needed vigilance to be alert when cyberthreats emerge. In terms of raising awareness and information-sharing, Peter Kummer, chief information officer at SBB or the Swiss Federal Railways echoed the same sentiments. He, for instance, had raised and increased the awareness of cyberattacks in his company, for example, by conducting tests to find out how employees react to phishing messages, or dubious email messages that asks people to give out their information. He noted that the results of these tests showed that a quarter of the employees in his companies were willing to provide passwords. In terms of what can be done, Beaumount explained that regular changes and refreshing of account information are needed to keep security on a high level, helping institutions distinguish cybersecurity from other security issues. He recommended designing systems in such a way that cyberattacks do not corrupt everything by having sort of a layered system where troubleshooters would be able to deal and solve issues without the whole system breaking down. In terms of governments, Seroka said they could facilitate collaboration between stakeholders and concentrate on areas where the cybersecurity threats have the largest economic and security impacts. Kiertzner noted that the most successful collaborations start small, focusing on common and interlocking interests given that the whole transport sector is large and diverse, so segmenting the sector would make sense. Genelie De Leon


THE

ASIAN

EXPORT AWARDS

2018

RECOGNISING THE LEADING EXPORTERS IN ASIA Deadline for nominations is on 27 July 2018 For more details, contact: Eleonor Angeles +65 3158 1386 ext 209 eleonor@charltonmediamail.com

visit www.asianexportawards.com


OPINION

tim hamlett

Keeping track of the MTR tim hamlett Former Editor of Sunday Standard and Associate Professor of Journalism

T

he MTR – once the pride of Hong Kong – seems to have come down with a nasty case of the Reverse Midas effect: everything it touches turns to dross. Its trains are unreliable, its building projects have defects (besides being over budget and late, which is normal for railway projects) its interventions in the co-location debate are tactless and its boss picks fights with the press if the weather is too hot. What is going on? Some observers hold that the current bad press reflects a deterioration in the corporation’s performance. When there was still a separate KCR we had two competing railway systems and both had an incentive to look good. Now we have a railway monopoly and the sincerest efforts to do a good job are diluted by the knowledge that after all the clients have no choice. Another controversial move is the MTR offering its services overseas. This is no doubt very exciting for the staff concerned. But whatever comes of this wanderlust it is a distraction. Talent and effort devoted to the railway needs of distant cities are withdrawn from Hong Kong’s requirements. A kinder theory is that the MTR is suffering from what is known technically as an availability cascade, where a topic in the news becomes a sort of self-propelling typhoon. Stories make the topic newsworthy and produce more stories which attract more media attention and the public gets the impression that something major has changed. Which may not be the case at all. A good local example was the Light Rail Transit system in the North West New Territories. This attracted no media attention when it opened until a van ran a red light and was hit by an LRT train, killing the van’s passenger. Suddenly any incident, however minor, on the LRT was a news story. Anything less trivial than a loose screw was front page material. After a few months in which the new system was routinely described as “troubled”, “controversial” or even “defective”, the government imported a railway expert who looked at the whole network and announced that there was nothing wrong with it. The incidence of defects and minor glitches was normal. The MTR is bound to get some stick every year when it adjusts (or as we peasants say raises) fares. Delays may be rare, as the corporation says they are, but the system is close to full capacity in the rush hour, so any hold-up in the proceedings produces spectacular crowds of disgruntled commuters. Then there was the case of the stray dog on the tracks which was sacrificed to the timetable. The dog died, and with it a good deal of the affection and respect which the public had nurtured for the MTR. Reporters are paid to remember these things. There’s blood on those tracks. A quite different theory has it that the MTR is performing no worse than it did, but 46

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Hong Kong’s MTR

is making a mess of its public relations. Personally I am reluctant to believe that PR is that important, but this theory has some facts going for it. The MTR has a PR department, of course. Most of the people in it were apparently recruited from TVB. This is the sort of thing that looks a good move if you are a non-journalist staffing a PR department. Journalists, on the other hand, know that television people are widely regarded by their peers as a bunch of over-paid prima donnas who, because of the need for pictures with everything, spend most of their time covering events staged for their benefit. The relations between journalists and ex-journalists in PR are always a bit prickly anyway. The poacher turned game-keeper thinks he should still be on warm sociable terms with the other poachers. This doesn’t seem obvious to the poachers. One of my colleagues has recently been struggling with the MTR’s PR department, which seems to suffer from that delusion common among amateur PR people that their job is to avoid at all costs giving a straight answer to a simple question. For the question we need a bit of background. Until last year the government adamantly refused to recognise internet-only web sites as media. This meant they were not sent official releases, were not admitted to press enclosures at events like elections, and were not invited to press conferences where the government lies, I beg your pardon the government lines, were expounded. Our new Chief Executive promised before her election to do something about this, and something has been done. Suspicious minds may wonder if this was in any way connected with the appearance of a small fleet of pro-government news websites. Well, news websites can now if they wish register with the government, pay a small fee, jump through some awkward bureaucratic hoops and get the same service from the Information Services Department as their print counterparts.

Hung Hom Station


OPINION

Hemlock

Land cretins on rampage as usual

T

he Hong Kong government takes a break from bemoaning the shortage of land for affordable housing and auctions off a plot at a price equivalent to apartments costing HK$32,000 a square foot. I think there are people out there who point out the contradiction. Maybe a few of them see the link between government revenues and housing prices. Perhaps one or two even turn the numbers round and perceive the budget surpluses actually causing the homes to be unaffordable. But these lateral thinkers are on the fringes, and possibly in lunatic asylums.We will have another opportunity to question the bureaucracy’s robotic determination to maximize land revenues regardless of any wider social or economic cost – the Central waterfront. It could be a world-class harbour site, or it an ugly and oversized pile of glass boxes. Redevelopments To put the questions a different way: Are the planning and lands bureaucrats cretins? For the answer, let’s look at their latest achievements over at the Urban Renewal Authority. They have identified some dilapidated residential blocks in Sai Ying Pun to redevelop. The practice is to buy owners out in line with current prices in the locality – in this case HK$24,000 psf. The subsequent redevelopment would apparently comprise apartments going for HK$30,000 psWf. Not only does the URA create unaffordable housing, it hikes the benchmark prices for old or new properties throughout the neighbourhood. As an analyst points out, the public might ask what the point is – and will blame the URA not only if the eventual redevelopment sells for megabucks prices, but if the market falls in the meantime and the whole project makes a loss. One obvious course of action for the URA would be to not bother. If, owing to forces beyond human control, the only alternative is to replace old neighbourhoods with unaffordable luxury megatowers – just leave the rat-infested slums, which at least serve a social purpose. Or… dream up a solution that isn’t total crap. Off the top of my head, they could demolish the 100 crumbling units and build a bigger complex of (say) 400 no-frills flats. The 100 original owners each get one of these new units, and the remaining 300 are sold/rented at a price that covers the project’s costs. Duh. No doubt I am missing dozens of zoning/landpremium/lack-of-consensus/Town Planning Board/ how-would-the-tycoons-eat? insurmountable barriers that would make this utterly impossible. 48

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Is it just me, or has the ‘Belt and Road’ hype been dying down lately? One skeptic asks where the infrastructure-related trade flows are. Perhaps one problem, aside from the debt-trap/resources-grabs vibes, is that applying the label to anything anywhere overloads the audience or dilutes the brand. Starting to miss the good old ‘Belt and Road’ baloney Whilst we’re waiting to see whether the mega-visionary plan withers or gets repositioned, there’s always the Belt and Road Restaurant. And on Hollywood Road today, I see the Yan Gallery is prominently displaying some sort of glossy Belt and Road coffee-table book. It has the National Geographic logo on the cover and is authored by one Eddy Li. Apparently the same Eddy Li Sau-hung who is a businessman and cheerleader for Beijing’s pet projects – hence perhaps the sub-title’s stress on the ‘market, sceneries and people’ of the exotic and picturesque locations. It’s HK$400, if you’re interested, and they seem to have plenty left. In Hong Kong, ‘Belt and Road’ is rapidly being superseded by ‘Greater Bay Area’ as the inspiring, mesmerizing and exciting vision-project-concept du jour. One or two members of the city’s Great and Good have recently been overheard fretting about a ‘conspiracy theory’, spread by the ugly likes of Apple Daily, along the lines that the Bay Area Thing is essentially a Beijing plot to absorb Hong Kong into the surrounding region and diminish its identity. When reminded that former Chief Executive CY Leung (and the South China Morning Post) expressly urges youngsters to forget about being Hongkongers and become happy smiling da wan qu ren, the Great and Good sniff that CY is desperate for a local platform and overdoes things.

by hemlock www.biglychee.com Email: hemlock@hellokitty.com

Smaller and smaller homes in Hong Kong


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Hong Kong Business (June - July 2018)  
Hong Kong Business (June - July 2018)  
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