As the “voice of business”, the Hong Kong General Chamber of Commerce (HKGCC) hears the views and concerns of the city’s businesses, big and small, and right now the call for resilient companies is louder and clearer than ever.
When it comes to Hong Kong small- and medium-sized enterprises (SMEs), over three quarters (77 percent) of them have not yet recovered to pre-pandemic levels and 39.2 percent of those expect their business to decline further this year, according to findings of the HKGCC’s recent SME Survey.
“We tried to understand the biggest challenge, which is cash flow. They are also concerned about high rents, high labour costs and changing customer behaviour, for example a lot of people go to Japan because of currency. These are challenges that we have tried to address by bringing it to the attention of the government,” says Agnes Chan, Chairman of the HKGCC, and a member of the Hong Kong Institute of CPAs. She took up the position in May, succeeding fellow Institute member Betty Yuen, Non-executive Director at CLP Holdings.
The chamber included urgent measures to assist SMEs in its submission for the 2024 Policy Address, which Chief Executive John Lee delivered on 16 October after Chan spoke with A Plus. Following the address, the chamber said it “lauded the decision to relaunch the principal moratorium under the SME Financing Guarantee Scheme, allowing businesses to apply for principal moratorium for up to 12 months, and extending the guarantee period to 10 and eight years for 80 percent and 90 percent guarantee products, respectively.”
With 360,000 SMEs in Hong Kong, representing 98 percent of companies in the city, SMEs are the backbone of Hong Kong’s economy, says Chan.
“We can’t let them down. We need to help SMEs with potential to continue,” she adds. “The entrepreneurship in Hong Kong is strong. With everybody focused on building up an innovation and technology (I&T) hub, it’s important to note that these I&T companies all start small and grow with government support and with different investors, so that’s why we see the importance of helping them, especially in the current operating environment.”
Chan believes the focus should not only be on helping SMEs grow, but also on their sustainable growth. As part of this, the chamber is driving a “transformation agenda” for SME members. “Out of our more than 4,000 members we have a large group of SMEs, and we are helping them to drive digitalization and innovation, adopt artificial intelligence, understand what environmental, social and governance is, and how to integrate cybersecurity. Once they go digital, cybersecurity risks would be a major challenge,” says Chan. “Besides having the government address some of the immediate cash flow issues, SMEs need to do their part by, for example, digitalizing some of their processes. I think the roll-out of e-consumption vouchers helped many SMEs to digitalize and adopt e-payments.”
Her views echo those expressed by the Chief Executive during the Policy Address, who said SMEs needed to strive “for self-improvement” amid “a transitional period” of the economy.
Accountants are uniquely positioned to support struggling SMEs, Chan notes. “I’ve been in this field for decades so I do see our value in helping SMEs grow. We see so many different scenarios and business models that we can share the success stories as well as the pain points with SMEs.” With cash flow being the biggest challenge faced by SMEs, accountants have the expertise and experience to run diagnostics on the company’s business operations to find possible improvements in cash flow management, cost control and forecasting, she adds.
International outreach
Another priority for Chan is to build up the HKGCC’s connections globally. Aside from the challenges faced by SMEs, large corporations are continuing to look for new markets amid the effects of geopolitical shifts on supply chains.
“Some need to move their manufacturing base to places offering more competitive pricing, and some of our members have set up IT offices in Vietnam because of the tech-savvy younger generation there,” she adds. “International outreach is something we do to identify new markets and to help businesses strengthen their presence in the key markets. Our members have visited the Middle East and Association of Southeast Asian Nations (ASEAN), and we are working on trips to Europe and United States as we also want to cover traditional markets.”
“Talking to the government officials on trade and investment on some of their policies and areas of focus, you see a lot of opportunities and mutual benefits.”
ASEAN, in particular, and its economic significance to Hong Kong, have been a key focus recently. Hong Kong’s Chief Executive visited Laos, Cambodia and Vietnam from 28 July to 2 August, and Chan was part of the high-level delegation. “Visiting those places in person, and talking to the government officials on trade and investment on some of their policies and areas of focus, you see a lot of opportunities and mutual benefits,” says Chan.
During the trip, 55 memoranda of understandings (MoUs) were signed in various fields, including trade, finance, aviation, fintech, education and digital technology. “This shows a very wide coverage. ASEAN has always been the second-largest trading partner of Hong Kong, so it’s not a new market as such, but it shows that we are strengthening our focus in these markets. In Laos and Cambodia, you see a lot of infrastructure projects that we can provide support, and in Vietnam, the rising middle class are looking at how to invest their money,” says Chan, who signed an MoU with the Cambodia Chamber of Commerce in Phnom Penh and another in Hanoi with the Vietnam Chamber of Commerce and Industry during the mission.
Hong Kong and the three countries also contemplated easing visitor entry requirements in both directions. “In Cambodia, the Deputy Prime Minister was suggesting a special economic zone for Hong Kong businesses. By going there and talking about business, you can really negotiate more incentives for our people,” says Chan. The trip also served as an opportunity to promote the value of Hong Kong’s professional services for ASEAN companies, she adds. “We are very strong in terms of professional services, and every place that we visited, they really look to the professional services team to help them.”
In a recent chamber survey, members ranked ASEAN as their key area of interest for the upcoming year. Chan says plans are in place to send delegations to Cambodia and Vietnam at the end of October to build on the MoUs signed and reinforce HKGCC’s collaboration with the two countries. After the Policy Address, the HKGCC also welcomed the injection of HK$1 billion into the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund) and expansion of the coverage to e-commerce to ASEAN countries.
The increasing importance of Southeast Asia and the Middle East to the global economy will be one of the topics explored during the chamber’s flagship event, International Business Summit, taking place on 28 November. The conference will bring together business leaders and experts from around the world to share their industry forecasts as well as discuss the impact of new technologies.
Business as usual
In the Global Financial Centres Index (GFCI) 36 Report published in September, Hong Kong ranked third globally, up from fourth place in the March version of the index. Its scores were among the highest for business environment, human capital, infrastructure, and reputational and general competitiveness.
Chan says the news brought a boost of encouragement for both herself and the general business community. “Whether this means Hong Kong is back to business as usual, my view is as an international financial centre, Hong Kong is always ready for business. I like to draw people’s attention to the diverse and dynamic financial infrastructure of Hong Kong. The news also demonstrates the city’s resilience, because we’ve really gone through a lot since 2019 and COVID,” she says.
However, a closer look at the GFCI report shows a more cautionary picture. “It’s just a one-point difference between the number two and number three spots, and with number three and number four, it’s two points. So what does that mean? Hong Kong needs to work hard. We can’t be complacent,” says Chan. “We have to continue to enhance our IFC capabilities. I really think the Greater Bay Area integration and the opportunities of the emerging ASEAN market, the Middle East and North Africa, will help push Hong Kong higher up the ranking.”
Meanwhile, the issue of labour shortages persists in Hong Kong, and the government has been addressing this with talent admission schemes. In sharing her thoughts on how to tackle this issue in the long term, Chan, who is Senior Advisor, Chairman Office at EY Greater China, refers to her conversations with chief executive officers who she advises, helping them identify and assess new market opportunities. She says the choice of CEOs when considering where to set up their headquarters in Asia usually depend on the “three Es” – environment, estate (or real estate) and education.
“In terms of environment, people are getting more environmentally conscious, so what is the environmental situation like in Hong Kong?” she says. “With the second ‘E’, it’s about whether we can provide more reasonably priced accommodation for expats.”
“Businesses follow the opportunities, people follow the business. Headquarter economy offers employment
opportunities with mobility, and people may be interested in these opportunities where they can move around the region.”
Chan also supports the government’s push to develop Hong Kong as a “headquarter economy” to attract enterprises from outside Hong Kong to set up headquarters in the city. This could in turn attract talent, she says. “Businesses follow the opportunities, people follow the business. Headquarter economy offers employment opportunities with mobility, and people may be interested in these opportunities where they can move around the region.”
Besides efforts to attract overseas professionals, Chan thinks reskilling and upskilling the local workforce is also key both to retain them and ensure they thrive in a fast-changing environment.
The first to know
Becoming an accountant felt predestined for Chan. Her elder brothers are accountants, while her father would jokingly call himself a “CA – a Chinese accountant.” “He was very good with his abacas because he used to run a small business himself,” she says.
As a child, she saw the fun in calculating change during trips to the wet market with her mother. She recalls racing against vendors to calculate the change and winning.
Chan, who joined EY in Australia in 1986 and returned to Hong Kong in 1991, worked her way up in the field of tax, eventually becoming a leading tax advisor in Hong Kong. The former managing partner of the EY firms in Hong Kong and Macau speaks with admiration about the accounting profession and credits it as giving her an edge. “I still love this profession because we get to know things very much in advance,” she says.
Chan gives the example of a former client who, without her realizing it, was at the forefront of electronic navigation systems or GPS technology. “A guy from the U.S. came to Hong Kong and said ‘I have this intellectual property and it can tell you where you are.’ I was totally lost. He wanted to set up in Asia, and see how to structure his business. Now thinking back, this is the well-known GPS technology. We always get to learn new stuff.”
Chan’s memory is well-stocked with jobs that made her career as a tax specialist exciting. They include the time she first learned about tax-free zones in Dubai when companies first started showing interest in going into the Middle East, and when clients sought advice on how to structure their business during the peak of the dotcom bubble in 2000.
“We looked at how to capture the residual profit in a very low tax country when the Internet first took off. And at that time, Bermuda was the first place that recognized e-signature legally. I remember trying to find Bermuda on the world map hanging in my room, figuring out what to do. Of course now, the whole tax landscape has changed with global minimum tax.”
These memories serve as advice for accountants just starting out in their careers. “You need to know what is happening globally as well as locally. You can’t just know what’s happening within your firm,” says Chan.
Overcoming struggles
With the global and sometimes urgent nature of the work, Chan remembers long days at the office. “There was a period of time when I left home at 6:00 a.m. because I have to talk to a client in Australia because they wanted to list in Hong Kong, and finished at midnight because I had calls with Canada or the U.S.,” says Chan.
To maintain balance, she sets time aside to do the things she loves outside of work, such as cooking and baking with her son. “I make banana bread and sushi, and get him involved in the process,” says Chan. “I started cooking in Australia because it was expensive to eat outside. I love tasting good dishes when eating out and then recreating them at home. Cooking also helps build up your relationship with family.”
Her weekends are mainly spent doing Church duties. “My weekends are quite busy, but it somehow helps me relax from a busy life,” she says.
Chan’s other favourite way of relieving stress is going back in time with the help of historical Chinese dramas, or C-dramas. “The costumes are very detailed, and I love the scenery and watching the horses running,” she says. “You also learn something from these dramas. You learn about history and culture, and how people struggle and overcome it.”
74.3%
The percentage of SMEs that cited cash flow as the biggest challenge for the next 12 months by 74.3% of SMEs, followed by high rents (33.8%) and high labour costs (25.7%), according to the findings of the Hong Kong General Chamber of Commerce’s SME Survey, released in August.
