With the gradual easing of Covid restrictions, Hong Kong is edging its way back to normality. While exactly when further opening will take place remains unclear, businesses and organizations have been toiling to keep the wheels oiled so we are ready for relaunch.
The Hong Kong economy contracted 4% year-on-year in the first quarter amid the fifth wave.
Financial Secretary Paul Chan Mo-po said Hong Kong could be on the brink of a technical recession, as exports and investments remained sluggish. Our closed borders mean that results for the second quarter are likely to be similarly grim reading.
Attracting businesses to Hong Kong while we enforce tough Covid-related restrictions will remain difficult. Perhaps surprisingly, companies from around the world have continued to launch in Hong Kong, albeit at lower levels than before the pandemic.
Invest Hong Kong focuses on "classic foreign direct investment," explained Director General Stephen Phillips – that is, attracting businesses with a physical presence that generate jobs in the city.
"In 2019 we helped 487 companies expand or set up in Hong Kong," he said. "In 2021, the number was 333. This is a pattern that we have seen globally, as Covid hit FDI very significantly around the world."
Despite the drop in new businesses opening amid Covid, the total number of Mainland and international companies in the city has stayed consistent in recent years, at more than 9,000 in 2021. And start-ups have seen remarkable growth, reaching 3,755, an increase of 12%.
"So there is reason to be cautiously optimistic that investment is still stable, despite the challenges," Phillips said.
"We haven't stopped talking about Hong Kong and getting our messages out there," he added.
With restrictions easing around the world, the team has been ramping up in-person activity. Phillips himself travelled to the Middle East and Europe recently, and will be heading to Australia soon.
While the reopening of Hong Kong's borders will help attract more businesses, Phillips cautioned that the fragility of the global economy could have an impact on FDI. But ultimately, he remains upbeat on the city's future.
"Existing and prospective investors know that Hong Kong's fundamentals – including our geographic positioning and 'one country, two systems' – remain robust."
Waiting game for businesses
While we wait for reopening to restore normality, the ongoing restrictions are "just a nightmare" for businesses, said Allan Zeman, Chairman of Lan Kwai Fong Holdings.
Best known for its property development business, the company is active in a number of sectors including marketing, film and tourism. In Hong Kong, Zeman's property tenants include bars, restaurants and nightclubs, so he is attuned to the particular difficulties that these businesses have been facing.
"Covid has really had a huge drag on the nightlife business economy," he said. "The restrictions, and the on-again, off-again measures, have put businesses under a lot of pressure, and many have gone bankrupt."
A recent requirement that customers must take an RAT test has further hit the sector. "It is a tragedy for the bars and clubs, which were already following very stringent rules."
The Government is considering a colour-coded app that would restrict the movement of Covid patients and other high-risk people. In theory, other rules could then be relaxed. However, Zeman said, businesses cannot plan ahead without more concrete guidelines.
A broader issue for Hong Kong is the impact on our reputation as a global and cosmopolitan city.
"We are the laggard in opening up, and that gives the West the opportunity to say that Hong Kong has changed and has lost some of its freedom," Zeman said.
"We will have to fight to get our reputation back. The quicker we can show the world that we can reduce the quarantine or eliminate it, the quicker we can get back to business again."
In the longer term, however, Zeman is optimistic. He noted that President Xi Jinping during his recent visit had underlined the importance of Hong Kong's unique attributes, our role as an international financial centre, and the success of "one country, two systems." This speech helped reassure the business community about the city's status as a global hub.
"I do believe that, once the border restrictions are released, Hong Kong's strength will come back very quickly," Zeman said. "It has happened in the past and there is no reason to think it won't happen again."
Tourism and trade
The travel sector has undoubtedly been hard hit by the pandemic, businesses and the economy have been battered by prolonged restrictions. Business is unlikely to improve until quarantine requirements end.
"Seven days in a hotel is a disincentive for any type of visitor," said YK Pang, Chairman of the Hong Kong Tourism Board (HKTB).
With so few arrivals in the past few years, HKTB has redirected it efforts towards local activities.
"We have organized staycations and local tours to keep the sector going and to keep people in the industry employed," Pang said. Around 200,000 people are directly employed in tourism, with a further 600,000 in related sectors.
HKTB has continued to promote Hong Kong overseas, including using KOLs and social media, to keep people's appetite whetted while waiting for the doors to open, he added.
"One of these is a Japanese family who live in Hong Kong and have a business here. So they are speaking to a Japanese audience about their social and cultural life in Hong Kong."
Pang noted that Hong Kong is traditionally a popular destination for MICE travellers – meetings, incentives, conferences and events. "The MICE segment is a very important part of our tourism ecosystem," he said. "So when travel resumes, one of the things we will prioritise is people on MICE visits."
Pang is confident that these events will return to the city due to our unique advantages, in particular our connections to the Mainland.
"One of the things that we market to potential organizers of conferences, fairs and exhibitions is that if you come for a conference or meeting in Hong Kong, you can then go to the Greater Bay Area."
Just over the border are high-tech innovators, light industry, and a huge concentration of wealth, while Shanghai and other cities are only a short flight away, he added. "This network makes a trip to Hong Kong much more productive than other cities in the region."
Organizing major trade shows is an important part of the remit of the Hong Kong Trade Development Council (HKTDC). Peter Lam, Chairman of the HKTDC, explained how they have been running their programme amid the many challenges.
"By using virtual and hybrid platforms, the HKTDC has continued to hold our flagship trade shows and conferences these past few years, despite the pandemic," he said.
For example, the Asia Summit on Global Health last November saw 1,000 people attending at the HKCEC, and an additional 20,000 virtual attendees from more than 50 countries and regions around the world.
The TDC has also continued to serve specific product areas and sectors with online events, business matching and sourcing assistance.
Lam noted that Asian economies had remained relatively stable, compared to some other parts of the world, while huge opportunities continue to emerge in the Mainland and ASEAN. Meanwhile, Hong Kong is encouraging the development of emerging sectors as well as our pillar industries. All of these factors will be in our favour when we do reopen.
"To attract businesses back, I think we should redefine Hong Kong's strengths by articulating how our traditional sectors such as finance, trade and logistics can synergise with newer sectors such as tech and innovation, medical and healthcare, and creative industries, thereby creating new opportunities," he said.
We should also reassert Hong Kong's strong fundamentals, including our stable legal and financial system, a clean, safe living environment, excellent healthcare and education, and a cosmopolitan community, he added.
With the relaxation of some restrictions recently, Lam is hopeful of more clarity on reopening that will ultimately hasten the city's revival.
"In fact, as international travel and quarantine requirements are becoming less strict, we have seen more overseas businesses enquiring about coming to Hong Kong for our conferences such as the Belt and Road Summit," Lam said.
Airport for the Future
Central to Hong Kong's success as a global city has long been our world-class airport. The pandemic had a devastating impact on arrivals, but the easing of travel restrictions this year has spurred a revival.
Vivian Cheung, Executive Director, Airport Operations, Airport Authority Hong Kong (AAHK), said the airport had handled 94,000 passengers in March and 295,000 in June – still far below the 6.3 million passengers in June 2019 before the pandemic, but a step in the right direction.
She noted that, with fewer travellers than usual, Hong Kong International Airport (HKIA) had used the opportunity to carry out improvements.
"AAHK has made use of the period with lower passenger flow to upgrade facilities, including enhancing retail and dining areas," she said, with a new food court, wider mix of shops and a children's play area.
These are in addition to the huge redevelopments that are taking place at the airport, including facilities to enable seamless connections with the rest of the Greater Bay Area (GBA).
"The key to making it hassle-free for GBA travellers is to enable them to board their flights at HKIA without having to go through Hong Kong's immigration and customs procedures," Cheung explained.
Already, passengers travelling to the airport via high-speed ferry from nine sea ports in the GBA can transfer directly to their flights. In future, travellers arriving via the Hong Kong-Zhuhai-Macao Bridge will enjoy a similar procedure.
These developments are part of the plans for HKIA to evolve into an "Airport City" – a destination in its own right.
"We expect these developments to create strong synergy and transform HKIA into a regional hub for entertainment, consumer events and business services, as well as a MICE event destination," Cheung said.