SMEs thrive in world's freest economy (hktdc.com)


	Global entrepreneurs flock in their thousands to Hong Kong’s annual SME World Expo

	Canadian Brie Sievert found it easy to set up and run her landscape garden business in Hong Kong

	SME entrepreneur Corinne Jedwood found plenty of support when she needed it

Executives from the world’s leading small and medium-sized enterprises (SMEs) flocking to Hong Kong this month will find a city that has long counted the sector as its main economic growth engine.

Entrepreneurs from 30,000 SMEs will converge on Hong Kong’s Convention and Exhibition Centre on November 29 for three days of networking seminars and marketing, in an event organised by the Hong Kong Trade Development Council. (World SME Expo)

A particular focus will be on how to exploit China’s accession to the World Trade Organisation and Hong Kong’s Closer Economic Partnership Arrangement (Cepa) with China, which allows Hong Kong-based enterprises special access to mainland markets.

The world’s SMEs will find their Hong Kong counterparts have an enviable environment in which to operate. The city’s economy has for years been dubbed the freest in the world by global think-tanks, allowing SMEs to thrive in the city.

Dynamic force

Private sector employment in Hong Kong rose 2 per cent in March versus a year earlier in the most recently available government figures, with 1.8 per cent of the extra jobs being created by SMEs and only 0.2 per cent by large enterprises. SMEs are defined as manufacturing companies with less than 100 employees and non-manufacturing businesses with less than 50 staff.

“SMEs provide a very dynamic force in the Hong Kong economy. They provide a major source of employment and they are also a source of Hong Kong’s economic flexibility,” said Hong Kong government economist K.C. Kwok.

“Typically if you have a new type of business, the SMEs are there first,” he said. “Some of them may fail but others survive and that provides the dynamism”.

Hong Kong had nearly 271,500 SMEs at the end of March, accounting for 98 per cent of business establishments by number. They provided 1.18 million jobs or about 50 percent of total employment outside the civil service.

Bedrock of Hong Kong

“My impression is that SMEs have not only been the bedrock of the Hong Kong economy but have a major share of Hong Kong’s productivity [gains],” said Simon Lee, co-founder of Lion Rock Institute, a Hong Kong-based free-market think tank.

“That contribution to the economy has been because the economy has been driven by a free market. There are virtually no barriers to entry for people to start their own business, especially in goods and services.”

Hong Kong has a corporate profits tax rate of 17.5 per cent, one of the lowest in the world, while unincorporated businesses pay only 16 per cent. All tax payers are treated equally, regardless of their residential status. No tax is levied on profits arising from abroad.

The biggest portion of Hong Kong SMEs are in the import/export trade, underlining the importance of small businesses in the city’s traditional role as middleman for commerce between Asia and the West.

The real estate, insurance and financial sectors are also heavily populated with SMEs.

“Setting up the company in Hong Kong was super-easy. It only took a few days,” said fund manager David Devine, who decided to open his own business, Lynas Capital, in 2002.

Strong support

Hong Kong has great support services for SMEs with specialist lawyers and corporate facilitators on hand to speed the creation of a new company.

“You can even buy a new company off the shelf,” said Mr Devine, whose company has grown quickly to have more than HK$467 million (US$60 million) under management.

He also noted that Hong Kong officials were efficient and fair, a big plus in a region which has its share of corrupt bureaucracies for business people to deal with. SMEs in other parts of the world often have to suffer the heavy hand of regulators and local officials, but Hong Kong small business owners say the light touch in terms of red tape in their city means entrepreneurs can focus on business rather than completing endless official documents.

“It was pretty straight forward to set it up and once it’s up and running it’s easy as well,” said Brie Sievert, a 34-year-old Canadian who operates a landscape garden business in Hong Kong called Asian Earth.

Asian Earth imports plant pots and other supplies from Indonesia and Vietnam and Ms Sievert has found processing the imports through Hong Kong’s port straightforward. That’s a rarity in Asia where form filling and unscrupulous customs officials can make importing goods into a country a real headache.

Help when needed

On occasion, entrepreneurs need help from officialdom. Corinne Jedwood, who runs a successful community magazine, Inside DB, for Hong Kong’s Discovery Bay district, recalled being impressed with how the city’s Small Claims Tribunal helped her recover some overdue payments. Hong Kong’s SME-friendly environment has played a part in helping her business thrive.

“I had never done a publication before. I started working from home in a little corner of my living room. I just wanted to do something small and it got bigger and bigger,” said Ms Jedwood, a French national who is a long-time Hong Kong resident.

She now has seven full and part-time employees and this year has successfully launched a second magazine, Square Foot, which focuses on the city’s property market.

One lasting impression for her when she was starting up was how executives at established companies in Hong Kong would offer help, advice and even capital.

“People were very supportive. There was a need for the magazine and now we have a niche in the market.”