1. Investment opportunities in Asia Pacific via the Hong Kong platform Siegfried Verstappen, Invest Hong Kong Brussels office Thessaloniki and Athens seminars March 17-18 2015 Hong Kong’s advantages when doing business in Asia

2. Where Business Goes to Grow Discover the Best Place to Do Business in Asia

3. Are you an SME? (MKB in the Netherlands) BECAUSE, IF YOU ARE, YOU ARE: - short of cash - short of management time - short of affordable qualified personnel

4. Are you an SME? (MKB in the Netherlands) HONG KONG WILL HELP YOU OVERCOME THOSE SHORTCOMINGS This speech will show you how a Hong Kong presence will optimize your operations with a minimum of commitment in terms of risk, cost and personnel

5. Connectivity to the World 4 hours Most of Asia’s key markets within four hours’ flight time 5 hours From half the world’s population

6. Rule of law and independent judiciary Level playing field and no foreign ownership restrictions Political stability and pro-business governance The World’s Freest Economy for 20 consecutive years Hong Kong negotiates and signs its own economic and trade agreements and is a full and separate member of the WTO and APEC Free flow of information One Country Two Systems

7. VAT/GST/Sales tax Capital Gains Tax Withholding tax on investments Estate duty Global taxation Wine and beer duty Low and Simple Tax System NO * There is no standard rate across the Mainland China. Shanghai is used as an example Percentage

8. World Class ICT – Connecting 8th in the Global Innovation Index Report (INSEAD 2012) 2nd in Asia Cloud Readiness Index (Asia Cloud Computing Association, Sept 2011) Fastest broadband globally 65.4 Mbps The safest place in Asia for setting up data centres (Data Centre Risk Index, Cushman $ Wakefield, 2013) Highest mobile internet usage rate in Asia Pacifc (96% users online daily) (Google) Mobile phone penetration rate >238.6% (Feb 14, OFCA)

9. Forbes Tax Misery Index 2009 Hong Kong - 3 rd lowest tax misery score = 41.5 Singapore - eight positions higher, score = 78.5 Bulgaria – 7 th lowes, score = 73.5 Belgium – nr 3, score = 156 China – nr 2, score = 159 France – nr 1, score = 167 Low and simple tax system

10. Hong Kong: best place to launch a new venture In Hong Kong you have freedom to move: - capital - people - ideas Unmatched anywhere else except Silicon Valley Source: Dr. Jong Lee, CEO RGL Holdings Ltd (Korean venture capitalist, moved his global head office to Hong Kong)

11. “”” No other city in the world can help overseas investors manage the risks inherent in entering Mainland markets as well as Hong Kong. This is an important part of the reason why overseas firms prefer Hong Kong for the highest-value activities that they perform in the Asia-Pacific region. ” Michael Enright, Sun Hung Kai Properties Professor, School of Business, University of Hong Kong Hong Kong is China ’ s Risk Manager

12. Hong Kong’s Elements of Strategic Confidence Intellectual property rights and brands issue Legal recourse Access to the Chinese market (CEPA) Credit risk insurance Chinese wall between suppliers/customers Lower financing cost Low threshold for starting up HK office Market research Support for SME loans and marketing RMB currency developments Taxes

13. Access Chinese markets: brand problem Because quality guarantees are insufficient in mainland China, Chinese consumers have a positive bias towards foreign brands. But if those brands aren’t present in Hong Kong, they lose credibility in China, because the Chinese consumers trust Hong Kong’s IPR and brand protection regulatory framework and its enforcement Source: Prod. Dr. Justina Yung, Polytechnic University Hong Kong, speech on long term PRD development December 2013

14. IP rights in China: latest update Intellectual Property Rights Protection in China are improving 2010: 42.000 IPR related lawsuits filled in PRC Highest number in the world MNC’s success rate as plaintiffs:60-90% vs below 60% in USA/EU BUT damages awarded are very small: Microsoft receives on average 50000 RMB Strong,determined,aggressive policy on building PRC’s own IPR governance regime 2010: 750.000 patens applications filed – world largest patent-filing country 2011-2015: 2.000.000 domestic applications ANNUALLY The annual patent transaction annual target is to reach 100 billion yuan (USD 15 billion) by 2015 Major sectors: technology and clean energies Source: SCMP, “China’s reputation in IP rights is still dismal” Denise Tsang

15. Legal recourse: problem Mainland China has no tradition of Western style law and jurisprudence Many lower courts are not yet fully conversant with new laws regulating commercial, investment or IPR issues Non-Chinese firms (and most Chinese firms) find it very difficult and time-consuming to obtain their rights through the Chinese courts

16. Solution A: HK International Arbitration Centre Insert clause in contract with the mainland Chinese partner that any disputes regarding the execution of the contract will be submitted to the Hong Kong International Arbitration Centre. Both Hong Kong and mainland China have signed the Convention of New York : any arbitration award from HK is immediately executable in China* HK based law cabinets confirm that the system is working speedily, smoothly and satisfactorily Website: www.hkiac.orgwww.hkiac.org *(enforceable between HK and mainland China since February 2000)

17. Sol. B: Sue in HK, enforce in China A new agreement on July 16, 2006, between HK and mainland China : if parties provide for this in their contract, verdicts from the Hong Kong courts are immediately executable in mainland China* It covers money judgments and commercial cases The contract has to stipulate expressly in writing that the HK court has exclusive jurisdiction Applicable whenever the judgment debtor keeps his assets in mainland China *(enforceable between HK and mainland China since August 2008)

18. Access Chinese markets: problem Many foreign investors find that, although China has joined the WTO, its markets remain closed or protected against foreign competition This applies both to trade in goods and trade in services

19. Solution: Closer Economic Partnership Arrangement (CEPA) Since July 2003, Hong Kong and mainland China have signed a type of free trade agreement, providing preferential access into mainland China for HK based goods and service providers (CEPA) Overseas companies can take advantage of CEPA by outsourcing to, partnering with a CEPA qualified manufacturer or service provider, or having their goods qualified as HK origin. CEPA being rolled out in phases : current scope and benefits of CEPA likely to expand – CEPA VII now applicable. Listing of applicable CCN can be found at: http://www.tid.gov.hk/english/cepa/tradegoods/files/mainland_201 0.pdf http://www.tid.gov.hk/english/cepa/tradegoods/files/mainland_201 0.pdf

20. Solution: Closer Economic Partnership Arrangement (CEPA) Latest development: free trade by 2015 China’s Vice Premier of the State Council Li Keqiang announced in Hong Kong in August 2011 that the latest supplement of the Hong Kong-mainland Closer Economic Partnership Arrangement, expected to be signed in October, will broaden Hong Kong’s access to mainland services industries. “The target is to realise free services trade with Hong Kong by the end of the 12 th five-year period,” Mr Li said at a Hong Kong forum on China’s 12 th Five-Year Programme.

21. Hong Kong: Chinese wall between supplier and customer merchandise can be shipped directly from mainland factories to end customers overseas without showing the factories’ details if you follow these steps HK office is the shipper and books the shipping line with forwarding company. A shipping order (S/O) will be prepared by the forwarding company and sent to the HK office. Since HK office is the shipper, there is no need to show the Chinese manufacturer's details. When the HK office receives the shipping order, they send it to the Chinese manufacturer who take this to send the merchandise to the forwarding company

22. Hong Kong: Chinese wall between supplier and customer After shipment, a set of bill of lading (B/L) will be sent by the forwarding company to the HK office. The B/L information is prepared according to the info on S/O, and there is no info of manufacturers. Then HK office could send the B/L to their customer for collecting goods at forwarder. As such, from shipping order to bill of lading, no manufacturer’s info will be shown. HK office can also hide the consignee info on the shipping order so that the Chinese factories cannot access the customer info when they take the S/O to send the goods to the freight forwarder.

23. Hong Kong: Chinese wall between supplier and customer Please note: this works when the importing country requires no country of origin (C/O) for the importing goods. If C/O is required, then it might not be possible to hide the manufacturer's details in some other documents is only applicable to the documents of shipping order, bill of lading, invoice and packing list

24. Hong Kong’s credit risk insurance advantage Hong Kong based firms exporting goods to other markets can obtain both country risk and buyer risk insurance from a HKSAR agency called: Hong Kong Export Credit Insurance Corporation (ECIC) Website: http://www.hkecic.com/eclink/infoCenter.jsphttp://www.hkecic.com/eclink/infoCenter.jsp Insurance premium can be as low as 0.39%

25. Hong Kong’s lower financing cost advantage Hong Kong based firms trading goods with other markets can obtain a lower financing cost as the base rate HIBOR is consistently lower than EURIBOR, since Hong Kong in effect follows U.S. monetary policy

27. Hong Kong’s lower financing cost advantage CAUTION !!!!! Eurozone firms wishing to use this benefit have to accept a currency risk exposure, as the financing will be handled in the HK $ zone

28. Hong Kong was, is and will remain a global financial center attracting high volumes of capital to support growth Hong Kong usually is the best option for your route into China As a financial center it brings innovation by offering RMB financial products Hong Kong is currently the main player in the globalization of the RMB and will have the highest volumes and liquidity going forward Renminbi liquidity is supported and controlled by the PBoC by means of currency swaps with HKMA resulting in sharper pricing for your foreign exchange in HK and support for your capital investments, trade flows, and repatriations of profits. Hong Kong: China’s offshore renminbi centre

29. Low threshold for starting up HK office New arrivals worry about 2 major cost aspects in Hong Kong: –labour cost –real estate expense

30. Low threshold for starting up HK office Typical gross salary cost to the employer will vary between 25K and 35K annually Most positions will also have variable bonus of 10% to 30% of the salary A typical contract is for 12 months, the average notice period is 1 month

31. Low threshold for starting up HK office Real estate expense: HK is ranked among the 3 most expensive cities in the world But there are low entry solutions in the private sector, with prices as low as: –1000 HK$ per month per workplace (Cocoon) to –4500 HKS$ per month per workplace (Hive) Some venture capitalists will finetune your concept: e.g. Nest will invest 500,000 HK$ in 3 months time if they accept your proposal

32. Coworking space: COCOON CoCoon is a coworking place where entrepreneurs, creative talent, successful leaders and investors meet, collaborate and deliver results together Theodore Ma, Co-founder - T: 852 3158 2999 - theodore@hkcocoon.orgtheodore@hkcocoon.org www.hkcocoon.orgwww.hkcocoon.org - 3/F, Citicorp Centre - 18 Whitfield Road -Causeway Bay, Hong Kong

33. Coworking space for creative industries:The Hive The Hive is Hong Kong’s first purpose designed members’ co worker space for those in creative industries. Constant Tedder, Founder – 852 9356 7883 – constant@thehive.com.hk www.thehive.com.hk – 21/F The Phoenix, 23 Luard Road, Wan Chai

34. Investment Platform: NEST NEST is an investment platform focused on investing in scalable consumer businesses in the lifestyle space. Simon Squibb, CEO - T 852 2721 2787 – simon@nestideas.com www.nestideas.comwww.nestideas.com – 3d floor Chao’s Building – 143-145 Bonham Street – Sheung Wan

35. Creative Space for Digital Start-ups Cocoon –US$128/mth Fill in the Blanks –US$102/mth Good Lab –US$230/mth The Hive –US$359/mth Hong Kong Commons –US$205/mth

36. Support for SME’s

37. Hong Kong’s market research advantage Hong Kong based firms can access the database managed by the Hong Kong Trade Development Council The TDC manages an online sourcing platform that connects over 120,000 credible suppliers over 800,000 worldwide buyers use the platform to source products and services provided by China, Hong Kong, and Asian suppliers for free at www.hktdc.com/sourcingwww.hktdc.com/sourcing Website: www.tdctrade.org www.tdctrade.org

38. Chinese taxes: problem China is nr 2 worldwide on the Forbes Tax Misery Index

39. Chinese taxes: solutions Objective: reduce your taxable income in mainland China The Double-taxation avoidance treaty between HK and mainland China allows, to a certain degree, the imputation of expenses by HK parent companies to mainland affiliates Examples that could qualify under certain conditions: market research, personnel support or recruitment, quality control inspectors, logistics coordination, etc…. Hong Kong corporate tax rate is 16.5% and even 0% for offshore incomes Hong Kong companies can deduct 50% of their income from joint ventures with mainland Chinese firms from taxable revenue

40. Chinese taxes: solutions The Double-taxation avoidance treaty (DTAT) between HK and mainland China brings in new and highly favourable rates for transfer of dividends, interest, and royalty payments from mainland China firms to their HK parent companies In practice, withholding taxes are now greatly reduced on these forms of transactions: 5% for dividend payments 7% for interest payments 7% for royalty payments

41. Confirmed Double Taxation Relief Agreements with 23 trading partners: Double Taxation Agreements In negotiations: Bangladesh Canada Finland India Korea Macau Malaysia Mexico Saudi Arabia the United Arab Emirates Austria Belgium Brunei Czech Republic France Hungary Indonesia Ireland New Zealand Portugal Spain Switzerland Thailand Italy UK Vietnam Japan Jersey Kuwait Liechtenstein Luxembourg Mainland of China Malta Netherlands As of February 2013 * - Pending entry into force

42. How InvestHK helps investors Networking events, introduction to service providers PR and marketing support for launch/expansion Facilitation of visa applications, schooling Information to aid planning and evaluation

43. Rue d ’ Arlon/Aarlenstraat 118, B-1040 Brussels, Belgium Telephone +32/2/775 00 76 E-mail: siegfried_verstappen@hongkong-eu.orgsiegfried_verstappen@hongkong-eu.org Websites: www.investhk.gov.hk and: www.hongkong-eu.orgwww.investhk.gov.hkwww.hongkong-eu.org Hong Kong background information: http://www.brandhk.gov.hk/en/#/en/facts/factsheets/index.html Invest Hong Kong Brussels office