Hong Kong, a stepping stone to China
The Jakarta Post, Jakarta
The lucrative Chinese market and the fact that business practices in China and Indonesia are different should prompt Indonesian businesspeople to use Hong Kong as a "stepping stone".
"There are advantages of going through Hong Kong to explore the Chinese market," Hong Kong Economic and Trade Office in Southeast Asia director Lam Kam Kwong said on Thursday.
One of the benefits, according to Lam, is that foreign companies can take part in the Closer Economic Partnership Arrangement (CEPA) but they must operate in Hong Kong for at least a year first. The CEPA, signed by the Hong Kong Special Administrative Region and the Chinese government, took affect early last year.
Under the agreement, Hong Kong-registered companies are exempt from paying up to 35 percent customs tax if exporting any of the 1,100 listed commodities to China.
"But the goods must have 30 percent value added derived from Hong Kong," Lam said, adding the cost provisions were "generous" and included categories such as "research and development".
Hong Kong, which experienced a 8.1 percent gross domestic product (GDP) growth in 2004, is one of the most conducive investment climates in the world.
A foreign company only needs a day to register without the need to obtain the government's permission. They are also excluded from tax payments, at a rate of 17.5 percent, until they earn profit.
Speaking on the possibility of Hong Kong investors putting their money in Indonesia, Lam said the country's new government would bring a significant improvement to the domestic investment climate.
"The new president (Susilo Bambang Yudhoyono) has given us a lot of expectations," he said. "But his track record is still too short."
He also noted that although Hong Kong investors were generally "very sharp and shrewd" in finding investment opportunities worldwide, it took "two sides to tango."
"Whether or not they decide to invest also depends on how keen the Indonesian government is in attracting foreign investment," said Lam, who has been in his Singapore-based post for two months.
He said Hong Kong businessmen were used to a "very fast and efficient investment environment" back home and as such often did not "feel at ease" with Indonesia's relatively complicated investment procedures.
In Indonesia, businessmen need around 150 days to get a license.
According to Lam, foreign investors will automatically pour in when Indonesia has good infrastructure and simplified investment procedures.
"We don't demand any preferential treatment, such as tax incentives," said Lam. "All we want is easier procedures here."
He said investors were also monitoring closely the developments of Hutchison Telecom, which acquired a 60 percent stake in Indonesia's Cyber Access for US$120 million in March.
"If it is successful, it will open the eyes of other Hong Kong investors, who will want to come to Indonesia as well," said Lam.
Hutchison Telecom is a subsidiary of Hong Kong conglomerate Hutchison Whampoa, which is chaired by Li Ka-shing, ranked the 22nd richest person in the world by Forbes with an estimated net wealth of $13 billion.