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Bringing in business

August 2017

The new Director-General of InvestHK, Stephen Phillips sees his role as helping companies navigate their way to opportunities in Hong Kong, China and beyond. He explains to George W. Russell how the investment promotion agency can connect the dots amid new technology and emerging industries

Photography by Juliet Shayne Lui

Given that Hong Kong is one of the world’s leading financial centres, has few barriers to international investors, no funds repatriation controls, a simple tax system (including the lowest Asia-Pacific corporate tax rate) and is a gateway to the Mainland China market, it would seem an investment promotion body is unnecessary.

Yet all is not as rosy as it seems. Foreign investment inflows into Hong Kong fell sharply from US$174 billion in 2015 to US$108 billion in 2016, according to the United Nations Conference on Trade and Development. After years of high inflows, Hong Kong has been hobbled by stratospheric property costs. Meanwhile, a lack of competition in some sectors, and a relatively constrained domestic market, acts as further obstacles.

Hong Kong also faces stiffer regional and global competition for investment, both from within China – from dynamic urban areas like Shenzhen and Shanghai – and beyond, from rival financial centres Singapore and Tokyo and ambitious trading entrepôts such as Dubai and Abu Dhabi, to emerging technological hubs like Kuala Lumpur and Bangalore.

For Stephen Phillips, the recently appointed Director-General of InvestHK, it has never been more important to get the word out about Hong Kong’s investment opportunities. “It’s a great destination for companies from all around the world, whether it’s to enter the Hong Kong market itself, the Chinese market, or the broader Asian regional markets.”

InvestHK’s mandate is to attract and retain foreign direct investment of strategic importance to economic development. “I think InvestHK’s role is quite simple in principle – in essence it is to help foreign and Mainland companies grow in and via Hong Kong,” says Phillips, who took up his post in May. “Hong Kong has a phenomenal mix of ingredients: a sort of ‘best of the east and west’ biculturalism, the rule of law and intellectual property protection, but is also part of China through ‘one country, two systems’.”

As Hong Kong’s economy has transformed from colonial outpost to manufacturing hub to international port to China’s gateway, Phillips believes the evolution will continue as the city draws in emerging technologies. He rejects recent headlines that suggest Hong Kong can’t hold on to its start-ups.

“One of the facts that amazes me is 35 percent of start-ups in Hong Kong have international founders, which is incredibly high and that I think just demonstrates what an international city this is,” he says. “People from around the world – China, Taiwan, France, United Kingdom, United States – decide to set up a business in Hong Kong because they see the potential.”

Supporting services

Phillips sees Hong Kong-based accounting firms as “incredibly important partners” in the quest to attract foreign investment. “They’re not only clients in that we can help them expand their business, but also clearly they work with so many Mainland and international companies who are considering setting up in Hong Kong – it’s very much a symbiotic partnership.”

He points to emerging financial technologies – FinTech – as a case study. “The accounting profession is very supportive of development,” he says, noting the Big Four firms’ participation in the launch of the FinTech Association of Hong Kong on 28 June. “They are really playing a facilitation role for this vibrant up-and-coming, largely start-up type sector,” he says.

InvestHK’s role in drawing companies to Hong Kong is helped by the world-class professional services sectors, including banking, legal and accounting. “Obviously if you look at professional services, it is a core strength of Hong Kong already,” says Phillips. “You’ve got the top players globally, as well as incredibly strong local players already in Hong Kong.”

“You’ve got the top players globally, as well as incredibly strong local players already in Hong Kong.”

Phillips sees the role of financial services increasing in the future, especially with the development of China’s Belt and Road initiative: a land trade route known as the Silk Road Economic Belt and a sea link, the 21st-century Maritime Silk Road. “I think as the Belt and Road initiative pans out, there will be opportunities for Hong Kong to attract more regional banks, more regional law firms, and more regional accounting firms.”

Belt and Road, he says, is a genuine opportunity, but he acknowledges that it is difficult to comprehend at this early stage. “It’s quite hard for most businesses still to go from this very big overarching concept of Belt and Road to working out what are the real business opportunities that’s going to hit the bottom line in the next 12 or 24 months.”

However it pans out, he says, Hong Kong will be in the box seat. “There are very few places in the world that are so efficient in terms of getting around and having meetings you can fit into a day because of the phenomenal public transport network.”

However, Phillips says the high level of development is multifaceted. “I mean the environment in all sorts of ways: it’s the depth of the talent, it’s the sophistication of the bankers, the lawyers, the accountants, the development of the regulatory institutions, the whole bundle of stuff that makes for a genuinely world-class city.”

China experience

The British-born Phillips – director-general of investment promotion is one of the highest Hong Kong government positions open to expatriates – obtained a science degree from the University of Exeter and first came to Hong Kong in 1989 with what was then Barclays Merchant Bank (later Barclays Capital and now Barclays Investment Bank).

“I originally came to do aircraft financing and then moved into structured and project finance and throughout the 1990s did a lot of work across Asia,” he recalls.


Phillips was involved in the government’s pre-handover infrastructure spree, such as the Western Harbour Crossing. After riding out the Asian financial crisis, he joined Deutsche Bank in Singapore. “Not surprisingly that was more about restructuring rather than new greenfield investments.”

Soon after returning to Hong Kong with Deutsche Bank, Phillips decided to strike out on his own. “I co-founded a start-up here in Hong Kong, mostly with some former colleagues, and it was tech related. I was running that for about four years or so.”

Phillips returned to the U.K. and spent two years with the British government helping domestic companies explore global markets. “I joined the China-Britain Business Council, which promotes trade and investment between China and the U.K. and I was running that for almost 11 years – until May.”

He estimates that about half of that decade was spent in China, “including occasional forays to Hong Kong.” The other half was spent in the U.K. or in other European Union member nations. “The bulk of my career has been very focused on this region,” he says. “For me, it’s great to be back in Hong Kong because it’s such a vibrant, dynamic city, with things always changing. At InvestHK we work with clients to seize the new opportunities arising from this change.”

One change over the past 20 years has been the closer relationship with the Mainland. “There is this amazing blend of Hongkongers, bicultural, bilingual and trilingual more often than not, then there is the international talent pool that gravitates from all around the world, and now of course there’s also a Mainland community. So this provides an amazing mix of networks that businesses can leverage across the entire region.”


Mainland depth 

Phillips acknowledges that the Mainland investment is having an obvious effect on Hong Kong. Chinese investors spent US$5.32 billion on Hong Kong property last year, up from just US$3.31 billion in 2015. “It is inevitable with such a large country on Hong Kong’s doorstep and Hong Kong being part of it, that the Mainland is going to be a major driver of business.”

Phillips says the question for Hong Kong is how to make the most of that investment rather than to try to hold back the tide. “For some companies it will mean increased competition but that is good because it encourages companies to innovate, it encourages efficiency, it drives better products or services for the consumers.”

From InvestHK’s perspective, the Mainland brings Hong Kong a host of new investment partnerships. “For example, if you’re an industrial designer, you can work with Chinese companies to help them develop their consumer goods so they can meet the tastes of consumers in the west,” he says. “So I think the opportunity far outweighs the challenge.”

“If you go to tier 2, 3 and 4 cities, there is this tremendous thirst from companies to rapidly develop and internationalize.”

Phillips believes Hong Kong has only seen the “tip of the iceberg” when it comes to servicing Mainland companies. Recently, InvestHK conducted a roadshow in Taiyuan, a city of about 4 million people and the capital of Shanxi province in northern China.

“If you go to tier 2, 3 and 4 cities, there is this tremendous thirst from companies to rapidly develop and internationalize,” says Phillips. “So I would challenge companies to think about going off the beaten track a little bit more. Talk to companies that aren’t over-banked, over-lawyered or over-accountant-ed, if that was a word.”

Closer to home, InvestHK will be looking at the developments in innovation in Hong Kong. “There are some fantastic pockets of research and development going on,” he says. “This is where the universities and business have real scope to collaborate. They have the ability to do innovation and design in Hong Kong but then look for manufacture on the Mainland or in Vietnam. It’s a viable business model.”

Phillips says his job will be to lead the agency in “terms of banging the Hong Kong drum” from its 31 offices worldwide. “Our job is to shout from the rooftops [about] what is special about Hong Kong because ultimately what we want to do is generate great jobs for the people of Hong Kong and improve the economic well-being of society as a whole. ◆

InvestHK was established in July 2000. Its mission is to attract overseas and Mainland companies and entrepreneurs to set up and expand their business in Hong Kong, and in so doing strengthen the city’s status as the leading international business centre in Asia.