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‘Make in India’ roars: Hong Kong shifts industrial base from China to India

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Image source: mediaroom.hktdc.com

Hong Kong: Even as it promotes Hong Kong as the gateway for Indian companies to the Chinese markets, the Hong Kong Trade Development Council (HKTDC) is promoting India as an alternative manufacturing base for its industries based in China, states a research report.

“In recent years, the sustained rise in production costs on the Chinese mainland has eroded the profit margins of many Hong Kong companies with labour-intensive factories located on the Chinese mainland, prompting them to seek alternative production bases elsewhere,” the report states.

“In a nutshell, India offers many advantages as an alternative production base, along with the added advantage of having a domestic market of great potential,” notes the report.

Most of the manufacturing units in Hong Kong migrated to China to take advantage of the low costs after the region was handed over to the latter by the British in 1997.

Some of the multi-storeyed buildings that once housed garment units are now used as offices or are lying vacant.

With manufacturing units shifting base, Hong Kong has turned into a business services hub.

According to HKTDC’s report, India was the world’s second biggest exporter of textile and garment products in 2014, shipping goods worth $36 billion, behind China’s exports worth a whopping $399 billion.

The report also cites the lower import tariff levied on Indian goods by the US and the European Union (EU).

India has been an active player in Asia, securing free trade agreements (FTAs) inside and outside the region. India has also been in talks on an FTA with the EU.

Further, US import tariff rates for Indian yarn-related products range between zero percent and 2.7 percent. The weighted average import tariff rates of the EU and US on non-agricultural products from India are 4.5 percent and 2.5 percent, respectively.

On the demographic profile, the report states that the Indian median age of 27 is way below China’s 37, ensuring a good supply of young workers for many years to come.

“As an aside, China recently announced the abandonment of its one-child policy in response to the country’s ageing population, though the effect would not be appreciable over the short-to-medium term,” the report added.

According to HKTDC, the Indian wage levels are comparatively lower than what is paid in China. Furthermore, labour productivity in India is going up while that in China has been declining.

The report also cites the presence of industrial estates with plug and play facilities in India for Hong Kong manufacturers to relocate their factories rather than getting bogged down in land acquisition and other issues.

The HKTDC report cites the huge domestic market available in India for Hong Kong manufacturers apart from the country being an alternative production site for overseas markets.

Meanwhile, businessmen in Hong Kong said that the region is the best route to do business with the Chinese.

“We know the people who have shifted operations out of Hong Kong to China. It is better for Indian companies to set up an office here than landing directly in China,” Noordin A Ebrahim, director of Masterful Ltd, told reporters.

Referring to credit rating agency Moody’s Investors Service to cut Hong Kong’s long-term debt outlook due to its close link to China, Ebrahim said: “I feel it is a political judgement rather than financial.”

Ebrahim is of the view that China would not do anything to shake the confidence of the Hong Kong business community and would like to see that peace continued to prevail in the former British colony.

Hong Kong has transparent and rules-based systems, very low taxes and knowledgeable work force, he added.

“Knowledge of the local market is important while branding products for China and other markets. Hong Kong-based brand consultants would provide the same for Indian companies,” David Lo, chairman, Hong Kong Designers Association, told agencies.

“The Closer Economic Partnership Arrangement (CEPA) between the mainland (China) and Hong Kong would result in the liberalisation of trade in service between the two regions from June 2016,” Yvonne So, director, corporate communication and marketing at HKTDC, told reporters.

“Overseas companies can take advantage of CEPA by outsourcing to, or partnering with, a CEPA-qualified manufacturer or services provider in Hong Kong,” she added.

As for the human resources available, she cited Hong Kong’s nine major universities having more than 75,000 full-time undergraduate students and 8,000 taught and researched full-time postgraduates. (Venkatachari Jagannathan, IANS)

Next Story

Internet Of Things Needs World Market Leaders, Interest Turns to Startups

Google and Microsoft dominate markets worldwide

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An employee displays ASUS’s new computer products during the Computex Taipei, one of the world's largest IT expos, in Taipei, Taiwan, Tuesday, June 5, 2018. Computex will run in Taipei from June 5 to 9. VOA
An employee displays ASUS’s new computer products during the Computex Taipei, one of the world's largest IT expos, in Taipei, Taiwan, Tuesday, June 5, 2018. Computex will run in Taipei from June 5 to 9. VOA

A surge in participation by startup companies this week, at a highlight of Asia’s biggest annual tech event, shows an increased reliance on young entrepreneurs and leaders to come with the IT industry’s strongest ideas for connected devices and artificial intelligence.

The InnoVEX segment of Taipei Computex 2018 brought together 388 startups, a term usually defined as founder-owned firms of three to five years old. That number is a jump from 272 at the same event a year ago. Venture capitalists, including at least one with half a billion dollars in investment funds, evaluated them one-on-one and at formal pitching events.

Startups are catching attention as inventors of Internet-of-things technology because there’s no market leader yet, said Jamie Lin, founding partner of AppWorks Ventures, a startup accelerator in Taipei. That technology refers to software and hardware that let computers or phones communicate with everyday devices such as cameras and alarm systems.

Some connections run on artificial intelligence, which means computerized processing of the data collected from those devices. That can mean making human-like decisions.

“Computers continue to morph and there are no dominant players in IoT,” Lin said. “That’s why they need startups and that’s what makes the show relevant.”

In software, by contrast, Google and Microsoft dominate markets worldwide. Apple and Samsung, among others, lead in smartphones.

Coinciding with the tech show this week, Lin’s accelerator, another like it and a Japanese venture capital firm are all holding their own events in Taipei this week for startups.

Visitors review new MSI computer products during the Computex Taipei, one of the world's largest IT expos, in Taipei, Taiwan, June 5, 2018
Visitors review new MSI computer products during the Computex Taipei, one of the world’s largest IT expos, in Taipei, Taiwan, June 5, 2018, VOA

Expanding market

More than 20 billion things will be connected to the internet by 2020, up from 8.4 billion connected last year, market research firm Gartner forecasts. The number will pick up especially as 5G wireless services speed up connections.

By next year, Gartner anticipates, startup firms working with artificial intelligence will overtake Amazon, Google, Microsoft and IBM in “driving the artificial intelligence economy” for businesses.

Artificial intelligence, also known by its abbreviation AI, will reach a market value of $1.2 trillion per year by 2020 as investment triples between now and then, Forrester Research said.

“There’s a process, which is experimental — error and trial, error and trial – so there’s no one with a ready solution, and AI is so broad that one that can do it all,” said Tracy Tsai, a Gartner research VP in Taipei.

“With AI startups, they say ‘I’m focused, I just do some part of it and I do it well, and I do it attentively,’” she said. “For companies looking for a full solution, if you can show your part works, then they use it.”

Competitors perform speed tests using dry ice to cool hardware at OC World Record Stage 2018 during the Computex Taipei, one of the world's largest IT expos, in Taipei, Taiwan, June 5, 2018.
Competitors perform speed tests using dry ice to cool hardware at OC World Record Stage 2018 during the Computex Taipei, one of the world’s largest IT expos, in Taipei, Taiwan, June 5, 2018.VOA

Venture capitalists watching

Venture capital firms at the three-day InnoVEX show Wednesday watched a spread of mostly Asian startups with software and hardware ideas focused largely on connected devices. Healthcare and the management of drones were among the fields that companies said they could help with AI.

The show offered chances for startups to pitch their ideas to venture capital firms and accelerators, which are programs that show young firms how to improve their businesses.

Startup promotion authorities from 13 countries, including France and the Netherlands, also scanned the exhibition hall for Asian firms that might complement their own.

Visitors review Thermaltake's MFC 2 2nd Place MOD during the Computex Taipei, one of the world's largest IT expos, in Taipei, Taiwan, June 5, 2018.
Visitors review Thermaltake’s MFC 2 2nd Place MOD during the Computex Taipei, one of the world’s largest IT expos, in Taipei, Taiwan, June 5, 2018. VOA

“What we care about the most is whether these startups or smaller firms have technology, so if it’s a just a business model only, they aren’t suitable for us,” said Amanda Liu, CEO of the Taiwan government-backed business accelerator StarFab. Her accelerator takes 10 to 15 of every 100 applicants. “They need to have products and their core competence must come from technology.”

Taiwanese firms are good at altering hardware specs, Liu said, and for technology ideal for businesses rather than individual consumers, Liu said. Taiwan positioned itself decades ago as a high-tech hardware manufacturing hub for much of the world.

Qara was one AI-dependent startup at InnoVEX. The 4-year-old South Korean developer with $1 million in venture capital funding uses an AI algorithm to predict the movement of stock and cryptocurrency markets. It has earned revenues of $1.5 million and reports a profit.

“Anyone can see the predictions powered by AI,” said Qara’s global CEO Katie Bomi Son. In terms of accuracy, she said, “Some are from 70, or between 70 to 90. Most of our information [comes] from the machine.”

Also read: Russia’s heavy hand to internet to block messaging app

Qara counts mostly companies as clients but it’s looking for a way to monetize the free app for common users. (VOA)