Hong Kong to reap benefit from growth of neighbours

PUBLISHED : Friday, 28 June, 2013, 12:00am
UPDATED : Friday, 28 June, 2013, 4:30am

Hong Kong would benefit from and not be threatened by neighbouring economies' rising importance as destinations for foreign direct investment, InvestHK said.

Simon Galpin, the director-general of the public institute, which helps foreign companies set up offices in the city, said Hong Kong had ample room for growth as Chinese and global enterprises continued to use the city as a two-way conduit for investments into and out of the mainland.

"It's a good thing for Hong Kong [that mainland China increased its investments in Southeast Asia] because most mainland companies tend to channel their investments through Hong Kong," he said.

As major regions including North America, Europe and Asia all reported a fall in their FDI inflows last year, Southeast Asia saw a 2 per cent increase to US$111 billion, thanks to rising investments in Singapore, Indonesia and the Philippines. Cambodia, Myanmar and Vietnam also gained momentum as manufacturers targeted these low-income nations as alternatives to the traditional hub of China in light of rising costs and wages.

While China retained an investor's role, it is quickly narrowing the gap with the United States in terms of inflows, and Galpin said it could become the world's largest FDI recipient in time.

Although Hong Kong moved up one notch to rank as the world's third-largest FDI recipient last year, the amount actually fell 22 per cent to US$75 billion in dollar terms - a sharper fall than the global decline rate of 18 per cent.

According to an UNCTAD report released yesterday, a significant drop in both greenfield and merger and acquisition projects, coupled with divestments from major banks and firms in developed economies, contributed to the decline in FDI in Hong Kong last year, although there was a strong recovery in inflows by the end of the year.

But Wong Tak-jun, the dean of the faculty of business administration at the Chinese University, said he expected Hong Kong to see slow FDI growth this year as a real recovery would not come until 2014.