HONG KONG remains an attractive business hub in the Asia-Pacific region with a 26 per cent increase in the number of regional operations set up by foreign companies, despite high labour and accommodation cost and political uncertainty. A survey by the Industry Department revealed there were 714 regional headquarters and 1,132 regional offices in Hong Kong as at June 1, which represented a rise of 14 per cent and 34 per cent respectively over the previous period. Between 94 per cent and 96 per cent of respondents said they would continue to use Hong Kong as their regional headquarters or offices. Sixteen companies indicated their intention to relocate their regional operations, citing reasons of costs in Hong Kong and attractiveness of other locations in Asia. The survey was conducted in two parts, with the first half seeking to ascertain the number of regional operations while the latter part explored companies' views on how favourable Hong Kong was as a regional base. The first part of survey received responses from 41 per cent of 7,219 companies while the second half had a response rate of 81 per cent, with 200 companies polled. An overwhelming majority - 95 per cent - of respondents considered that banking and financial facilities were the most important favourable factors in choosing Hong Kong. Other important and encouraging factors included Hong Kong's infrastructure and regional location, the Government's economic policy and the availability of managerial skill. Property and labour costs remained the two adverse factors most cited by respondents. (Cont'd from Page 1) The political climate became more of a concern, with 28.9 per cent of respondents saying it unfavourably affects Hong Kong as a regional base, compared with eight per cent last year. About 82 per cent of the companies named high rental cost as a major problem encountered by their regional operations. This came as no surprise as a recent survey confirmed that Hong Kong overtook Tokyo to become the most expensive place in the world to have an office. Although high property and labour costs worked against Hong Kong, Director-General of Industry Denise Yue Chung-yee said these two factors were not 'so unfavourable to the effect that there was no new external investment in Hong Kong and no newcomers to Hong Kong'. Stressing Hong Kong's strategic position as a major regional representation centre, Miss Yue said: 'Why labour and land cost is higher than other places is because there is sufficient demand for both labour and accommodation in Hong Kong to drive prices up. 'You cannot artificially keep prices for a lengthy period of time,' she said. Other problems faced by the regional operations included high staff costs, high staff turnover and a shortage of qualified personnel. Of the 714 regional headquarters, the United States has the largest share - with 178 operations here. It was followed by Japan and the United Kingdom with 91 offshoots. With regional offices, Japan came first with a total of 257 companies out of 1,132. China ranked fourth both in terms of the number of regional headquarters and regional offices, which were 62 and 69 respectively. Many respondents regarded the investment climate in both Hong Kong and China for the next five years as favourable. The survey showed that in between 1980 and 1984, there was an average of 20 new regional headquarters set up each year. From 1985 to 1989 the average number grew to 44 and the number further increased to 53 from 1990 to 1993. The major lines of business included wholesale/retail, import/export, followed by manufacturing, finance and banking, and transport. and related services. The Government received an overall response rate of 41 per cent from the 7,219 companies surveyed.