Register a business in 15 minutes? Not in Hong Kong, thanks to old ways, red tape and vested interests
N. Balakrishnan says tech-savvy societies are revolutionising the way people live and work, yet Hong Kong, which prides itself as a business and financial centre, remains stuck with archaic, paper-based processes
Hong Kong need not fear HSBC choosing to keep its headquarters in London. After all, London is the financial capital of the world, with support services for international finance with more depth than New York, let alone Hong Kong. So a global bank choosing London over a city on the coast of China is understandable.
What Hong Kong needs to worry more about is the news that HSBC is rolling out voice recognition and touch security in the UK to replace six-digit passwords that can easily be hacked. Everyone’s voice is unique and the bank takes 100 “points” on first registration to identify an account holder. What is more, even the flu or a sore throat won’t affect these 100 points.
In the US, banks already have ATMs that can be operated using mobile phones, despite the fact that mobile phones in the US do not work as well as in Hong Kong. No doubt such services will eventually arrive here but it is surprising that banks have chosen bigger countries with more complex regulations to roll out these services rather than Hong Kong, which, as far as hardware is concerned, is the “mobile phone capital of the world”.
Since internet speed, consumer acceptance and density of banks or hardware are not an issue in Hong Kong, it must be legislation and other “soft” business support services that are holding back progress.
Let me cite a personal example of how far behind Hong Kong’s bureaucratic attitudes lag with regard to technology. A government department recently wrote to me to say that it would accept only a “wet” signature – that is, one signed using a pen and ink – for a certain document, rather than an electronic signature.
Clearly, the process of setting up a business is not up to date, as anyone who does this for a living knows, even though US and Swiss consultants who visit Hong Kong and stay in five-star palaces declare the city to be the freest economy in the world.
For the sake of comparison, we might want to look to the Baltic republic of Estonia, which has announced that you will be able to register a business in just 15 minutes and is in the process of giving out “e-identity” cards not just to its own people but to anyone who registers with the relevant department. You do need to go to Estonia to open a bank account but officials say they are working on a solution that will allow you to open one with just an interview online. And, since this tiny country of 1.3 million is known for inventing Skype, the application that allows millions to make free video calls, we can believe that promise.
So tiny Estonia is working on opening bank accounts using biometrics and Skype while Hong Kong is still requesting “wet signatures”. It is clear which method is better for creating jobs in the new economy.
In one sense, Hong Kong is a victim of its own success. When the Octopus card and the Hong Kong identity card with the embedded chip were introduced more than two decades ago, they were state of the art. But, unfortunately for Hong Kong, technology moves at a fast pace, whereas its bureaucracy does not. In the coming decade or two, Hong Kong faces the prospect of having to update its business processes to join the “electronic” age or be rendered archaic.
To be fair to the bureaucrats, it is not just their blinkered view that is preventing progress. The vested interests here, in the form of numerous accountants and lawyers who don’t want to risk letting go of an income stream from existing archaic processes, are mostly to blame for the current state of affairs.
Take the example of private companies and the need to audit them. In Singapore, there is no need to pay an auditor if you qualify as a small company with revenue of less than S$10 million (HK$55 million) a year, among other criteria. In Hong Kong, by contrast, you need to get your company audited even if you make just a few dollars a year, and audit fees can be as high as HK$20,000 per company.
The authorities may be under the impression that those who want to do business in Hong Kong will still need to register their company here. But in this day and age, with IT service companies operating in the “cloud” and cross-border servers used to back up “big data”, there is really no need to have a Hong Kong-registered company to do business here , as some of the tycoons from the “old economy” – who are in the process of switching registration from Hong Kong to the Bahamas – can testify.
Hong Kong did bring in a new Companies Ordinance in 2014, which has updated the more ridiculously archaic provisions. However, some processes have actually become more complex, not less. Take the “annual return”, for example, which used to consist of two pages; it is now 20! While others are simplifying, Hong Kong is making things more complex. Even India, the grand old dame of useless and archaic legislation in the Commonwealth, recently simplified its Companies Act and has almost completed the process of giving its billion citizens a biometric ID card.
It’s perhaps time for Hong Kong officials to hire a consultant from Estonia to educate them about the emerging “e-rules” for business, rather than wasting time with those who have a vested interest in milking money from archaic, paper-based processes.
N. Balakrishnan is a Hong Kong-based businessman