Increasing property costs impede regional HQs, offices devt: agencies

Nearly 40 percent of overseas companies operating in Hong Kong believe that the cost of residential or business accommodation as well as their availability is an unfavorable factor for Hong Kong as a location for setting up regional headquarters, according to a survey by government agencies.

As of June 1, 2012, the total number of Hong Kong business operations with parent companies overseas and on the mainland reached 7,250, an all- time high figure having increased by 4.3 percent from a year ago, according to a survey conducted by Invest Hong Kong (InvestHK) and the Census and Statistics Department (C&SD).

"The growth in the number of foreign and mainland companies running business operations in Hong Kong is proof of the city's continued appeal as an ideal business hub in Asia," Simon Galpin, director-general of Investment Promotion at InvestHK told a press conference on Thursday.

But Hong Kong is far from a "perfect" place for overseas companies, as around 40 percent of overseas companies that operate business in Hong Kong said the availability and cost of residential or business accommodation impedes companies' choice of Hong Kong as a preferred location for setting up regional headquarters or regional offices.

"Well, nobody is complaining that Hong Kong's real-estate is too cheap," said Galpin, but he stressed that the high Hong Kong property price should not be a major challenge for overseas companies.

Galpin explains that when foreign companies' entrepreneurs visit Hong Kong, InvestHK will show them different accommodation options to support their decision to establish their business operations on Hong Kong Island or in the New Territories.

"Generally (the price) is not a barrier to entry once they understand there is a whole range of choices including prices."

The survey also shows that 24 percent of overseas companies in Hong Kong believe that the overall business environment in the city was deteriorating compared with a year ago; only 6 percent believe the environment has improved.

Iris Law Chui-fung, senior statistician of Sectoral Economic Statistics Branch at C&SD, said that while the department did not ask why the companies believe the business environment is getting worse, instead the companies were asked about their business plans for the next three years, to which, only 3 percent of respondents said they will consider withdrawing from Hong Kong.

"We have to recognise that a difficult global environment and the slowdown in economy on the mainland may have a negative impact on the number of foreign companies setting up ing Hong Kong in the short term," said Galpin.

But he pointed out that the pipeline of companies that are planning to expand or set up their business in Hong Kong, especially those from the mainland, is getting stronger than ever.

"We are cautiously optimistic that the number (of overseas companies operating in Hong Kong) will increase next year, if nothing very dramatic happens in the global economy," said Galpin.

sophiehe@chinadailyhk.com

(HK Edition 10/19/2012 page2)