Hong Kong and the Pearl River Delta (PRD) do not even register a blip on Japanese and Korean firms' radar screens when it comes to investing in China, a recent survey shows.

Up to 80 percent of Japanese SMEs are trading or actively exploring investment opportunities in China, with the majority of them going directly into the northeast of the country.

Saimond Ip, Executive Director of the Hong Kong Pearl River Delta Foundation, which carried out the study with The Hong Kong Economic and Trade Office Tokyo, said more needs to be done to increase the mind share of Hong Kong and the PRD among Japanese and Korean firms.

"In Japan, people are not talking about Hong Kong at all," he said. "Excluding the one-country, two-system policy, the reality is there is close to zero mind share on Hong Kong. Everybody is focusing on China, especially Shanghai, and northeast China, and as a result Hong Kong is becoming irrelevant."

Speaking at the Chamber's July 30 roundtable luncheon, Mr Ip said Hong Kong needs to reposition itself not just as the entrepot into the PRD, but as the hub for southern China.

For Japanese firms already in Hong Kong, they clearly understand the benefits of operating in the SAR. However, SMEs in Japan see Hong Kong as an expensive Chinese city and as such don't even consider investing here.

"We need to clearly articulate how the division of labour works," he said. "This has been working very well for a long list of Hong Kong and Taiwanese companies, in that only value added services are done here, and the labour intensive operations are done in China. We need to show them how they can benefit from this."

Hong Kong also needs to put more emphasis on specific industries to attract investors, because promotion of support services that Hong Kong excels in has so far failed to stimulate much interest from Japanese investors. Mr Ip suggests efforts shift to sectors that Japanese investors are focusing on, such as the information technology, bio-tech and environmental protection sectors.

Only 3.8 percent of Korean investments in China last year were made in the PRD. Almost all of the huge wave of Korean investment pouring into China since 2000 has been going into the Beijing and Yangtze River Delta regions.

Both Korean and Japanese firms operating in Hong Kong clearly understand the benefits that Hong Kong affords them. However, "Koreans back home do not understand this. They have hardly heard of this region," he said. "Like in Japan, there needs to be an aggressive marketing campaign not just to bring investors into Hong Kong, but Hong Kong plus the PRD, so that Korean businesses better understand the whole region with Hong Kong as the engine," he said.

In the meantime, he said more needs to be done to welcome new Korean investors who still find it easier to set up business in Shanghai than in Hong Kong. The SAR's rule of law, financial services, and clearly improving environment are all positives for attracting investors, and now with the Closer Economic Partnership Arrangement, or CEPA, Hong Kong never looked so attractive to investors.

Anna Wu, then Chairperson of the Equal Opportunities Commission, explained at the Chamber's July 25 seminar, co-organised by EOC, that the survey also showed SMEs wanted more information about their obligations under the anti-discrimination laws, in a clear, concise language.

"In response to these very clear messages, the EOC has developed the 'Equal Opportunity Essentials Kit for SMEs,' a free, self-help guide on compliance," she said. "We realize that many businesses in Hong Kong are facing difficult times, and this kit will assist SMEs understand their obligations under the existing anti-discrimination laws."

Herman Poon and Dr Andy Chiu of EOC, also speaking at the event, explained a checklist in the kit can enabled SMEs to find out how well their business meets its obligations under the anti-discrimination law. For areas that still need some improvement, the tools inside the kit can help small businesses implement EO effectively.

The seminar moderator, Chamber Vice Chairman, former SME Committee Chairman, and member of the EOC, K K Yeung, drew to the EOC's attention that too much legislation would put an unnecessary burden on SMEs. He urged the EOC to strike a balance between legislation and practicalities when formulating future legislation.