# Presentation: 687700

## Building Products Sector

**in Hong Kong**
**Presented by****Elanna Tam****Commercial Specialist****U.S. Commercial Service Hong Kong**** **

## Topics to cover 

- Why Hong Kong?
- Overview of Construction and Building Products sector
- Competition and Market entry strategy
- Major upcoming projects in Hong Kong and Macau
- Niche market for U.S. firms

## Why Hong Kong?

- Growing economy
- Easy place to do business
- Access to the China and regional markets
- Helping you get your China Strategy right

## Hong Kong developers’       Land reserve in China(in USD)

**Hong Kong developers’       Land reserve in China****(in USD)**

| Developers | Location | Total Site Area
million sq ft | Total Land Cost
million USD |
| --- | --- | --- | --- |
| Cheung Kong/Hutchison Whampoa | China |                   4.11 |                4115.11 |
| Sun Hung Kai Development | China |                   1.77 |              18961.55 |
| Henderson Land | China |                  - |                  365.10 |
| Sino Group | China |                   0.12 |                    20.21 |
| Shui On Holdings | China |                   0.60    |                  423.14 |
| Shimao Group | China |                   1.34 |                  433.13 |
| Kerry Construction | China |                   0.09 |                  307.06 |
| New World China | China |                   3.25 |                  280.60 |
| Hang Lung Development | China |                   0.11 |                  193.26 |
| Kowloon Wharf | China |                   0.09 |                    97.24 |
| Pacific Century Premium Development | China |                   0.03 |                    63.66 |
| Hong Kong Construction Holdings | China |                   0.11 |                  423.14 |
|  | Total: |                 11.08 |              25683.19 |

- * Not including China Overseas, China Resources and CITIC, which portfolios focus in investment in China.

## Why Hong Kong, not Shanghai or Singapore

|  | Hong Kong | Singapore | Shanghai |
| --- | --- | --- | --- |
| Fee |  US$3 for name search
 US$220 for company registration |  US$9 for name search
 US$173 for company registration |  US$18 for name search
 0.08% of registered capital  for 1st US$1.2M
 0.04% after US$1.2M
 US$ 5,314 for registered capital exceeding US$12M |
| Processing Time | Maximum 6 days for limited companies | 2 hours for limited companies | 10 days for name search
Regularly 30 days (10 days for projects approved by authorities) |
| Remarks | Directors need not be Hong Kong residents. | One of the two directors required must be a local resident |  |

## Why Hong Kong, not Shanghai or Singapore

**Why Hong Kong, ****not Shanghai or Singapore**

|  | Hong Kong | Singapore | Mainland China |
| --- | --- | --- | --- |
| Corporate tax rates | 17.5% | 22% | 33% 
+ Business tax: 3 – 5% |
| Personal tax rates | Cap at 15%*
(Note: top marginal tax rate is 17%) | Top marginal tax rate is 22% (starting from taxable income exceeding S$320,000 per year) | Top marginal tax rate is 45% (starting from taxable income exceeding RMB 120,000 per year) |
| VAT/GST | Nil | 4% GST on taxable supplies except for export services 
(Will raise to 5% in 2004) | Generally 17% VAT |
| Income not subject to tax | Offshore income; dividends; capital gains, interest on bank deposits unless the deposit is used to secure a loan | Certain interest income; certain shipping income; certain dividends; income of foreign investors arising from funds managed by Asian Currency Units; capital gains | All income subjected to tax |
| Source: National Knowledge Management Office of Deloitte Touch Tohmatsu (January 2003)
* Corporate tax rate is 17.5% and Personal Tax Rate is 15.5% for April 2003 – March 2004 |  |  |  |

## Overview on Construction and Building Sector

- Construction Industry: 3.2% of Hong Kong’s GDP
- In 2004, the total gross value of construction work = USD12 billion
- Public Sector Work: 30% (USD3.6 billion)
- Private Sector Work: 30% (USD3.6 billion)
- Other e.g. Renovation, E&M Fitting-Out: 40% (USD4.7 billion)

## Overview on Construction and Building Sector

- Imports from the world (2004): 2.056 billion
- Imports from the States: $183 million (9%)
- Local market: $905 million.

## Overview on Construction and Building Sector 

- British Building Code, British Standard
- Metric System
- Environmentally-friendly Technology
- Energy-efficient Products
- Public Awareness
- Government Incentives

## Competition and Market entry strategy 

- Imports mainly, local production negligible (paint, cement, steel I-beam, steel bar)
- Competition: China (middle-ranking ceramic tiles, cement, glass, reinforcing steel bar, wooden doors, furniture)
- Germany (sanitary fittings, water taps, kitchen cabinets, lighting equipment)
- Italy (tiles, sanitary fittings, lighting equipment)
- Japan (ceramic wall tiles)
- Spain (tiles, sanitary fittings)
- United Kingdom (fire resistant materials e.g. instumescent strips, instumescent paints, ironmongery, metal lathing, angle lathing)
- U.S. known for quality and advanced technology

## Competition and Market Entry Strategy 

- No trade barrier
- Hong Kong re-export 50% imports to China
- 200,000 SME
- Agent/distributor
- Brand-build with specifiers, professional institutes

## West Kowloon Cultural Hub				5,000
Hong Kong-Macau-Zhuhai Bridge				2,200
Ocean Park Revamp Plan 					705
Stadium (70,000-seat) for Kai Tak Airport site			647
Cruise Terminal						87
Expansion of HK International Airport at Chek Lap Kok 	 
	(upgrade passenger terminal – USD200 Million                                	
      airfield improvement USD388 million) 			582
Logistic Park (USD194 million govt infrastructure work)		400
Hong Kong Government Headquarters			513
TST civic center 						10
Tai O Village heritage restoration				9
Aberdeen waterfront beautification work(4-5 contracts)						5
Lantau Island other theme park				?	
Golf at Lantau island and Saikung				?
							TOTAL   10,100

- West Kowloon Cultural Hub				5,000
- Hong Kong-Macau-Zhuhai Bridge				2,200
- Ocean Park Revamp Plan 					705
- Stadium (70,000-seat) for Kai Tak Airport site			647
- Cruise Terminal						87
- Expansion of HK International Airport at Chek Lap Kok
- 	(upgrade passenger terminal – USD200 Million
-       airfield improvement USD388 million) 			582
- Logistic Park (USD194 million govt infrastructure work)		400
- Hong Kong Government Headquarters			513
- TST civic center 						10
- Tai O Village heritage restoration				9
- Aberdeen waterfront beautification work(4-5 contracts)						5
- Lantau Island other theme park				?
- Golf at Lantau island and Saikung				?
- 							TOTAL   10,100

**Major upcoming projects in Hong Kong**** (in USD million)**

## Major upcoming projects in Macau (in USD million)

-  Wynn Resorts (Macau)			705  	million
-  The Venetian (Macau) 			 1.8  	billion
-  MGM Mirage – SJM (Macau) 			800  	million

**Major upcoming projects in Macau (in USD million)**

## Niche Market for U.S. firms 

- Tourism projects building materials and construction equipment
- Green Building Products

## Niche Market for U.S. firms 

- Materials from sustainable sources e.g. timber
- Recycled content: wall, tiles, carpet, board, countertop
- Improves IEQ or IAQ: PVC-free carpet, low VOC content paint/adhesives, air filtration system
- Improve water efficiency: low flow/waterless toilet fixture, reuse grey water
- Energy-saving lighting equipment and motors
- Infra-red motion sensors
- Heat recovery devices
- Other environmentally-friendly building products

## Thank you for your attention! 

**	****Elanna Tam****Commercial Specialist**
**	****U.S. Commercial Service****American Consulate General**
- 	33 Garden Road, Central
- 	Hong Kong (SAR)
- 	Phone:	+852 / 2521-5950Fax:		+852 / 2845-9800Email: 	Elanna.Tam@mail.doc.gov** **