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Hong Kong: Corporate Investment

Availability of Skilled Workers and Business Infrastructure

A survey in 2002 cast some doubt on the competitiveness of the Hong Kong labour force. Looking primarily at the quality of labour within the Asian region, the results of the poll suggested that inadequate education investment and rising labour costs have meant that although salaries for white collar workers and managerial staff are higher, the quality of service provided is not necessarily any greater than that provided by labour in other Asian countries.

The survey showed that the jurisdiction still excels in terms of language skills, overall professionalism, and technical expertise, but warned that on a comparative 'value for money' basis, the competitive margin between Hong Kong and the Chinese mainland was narrowing, and regional rivals such as Singapore, Taiwan, and India have overtaken the SAR.

The labour market improved in the second quarter 2007, with the seasonally adjusted jobless rate edging down to 4.2%, the lowest since mid-1998. Wages and earnings continued to rise, while job vacancies surged to a post-1997 high in March.

Labour market conditions remained firm in the second quarter of 2008. The seasonally adjusted unemployment rate stayed at a 10-year low of 3.3% and the underemployment rate was stable at 1.9%, with labour earnings and wages on the rise.

In October, 2007, Hong Kong leader Donald Tsang announced new plans designed to ensure that Hong Kong's position as a leading global finance hub is consolidated and strengthened. He observed that China's rapid development and the opening up of its financial sector have presented unprecedented opportunities for Hong Kong's financial-services sector.

Tsang added that with these large-scale development projects, Hong Kong will need to expand its pool of skilled workers, and will "require talented people from everywhere". Consequently, to help attract more qualified people, the Quality Migrant Admission Scheme's requirements will be relaxed and widely promoted. In 2006, 28,000 foreigners came to work in Hong Kong and settled in the jurisdiction, including about 5,500 from the Mainland.

During the Chief Executive’s 2010-11 Policy Address it was announced that the investment, net asset and net equity entry requirements for admission to Hong Kong under the Capital Investment Entrant Scheme have been increased.

After a review of the scheme, during which the government took into account overseas practices, changes in economic indicators, and the views of the public and Legislative Council members, the requirement is raised to HKD10m (US$1.3m) from HKD6.5m. In addition, real estate is suspended temporarily as a class of permissible investment assets under the Scheme.

Telecommunications and the Internet

Hong Kong is a leader in telecommunications with a strong market infrastructure. As at January 2010, there were over 4.1 million exchange lines. The telephone density was 101.6 lines per 100 households or 60 per cent by population, which was among the highest in the world. All exchanges are digital. In 2009, Hong Kong had over 11.5m mobile phone subscribers out of a population of 7m.

The Office of the Telecommunications Authority (OFTA), established in 1993, is responsible for regulating the rapidly developing and increasingly competitive telecommunications industry in Hong Kong. In 2010, the government proposed an overhaul of the regulatory structure in this area (see below).

In June 2010, the Communications Authority Bill which seeks to establish a unified regulatory body, the Communications Authority (CA), to cover both telecommunications and broadcasting sectors. The Bill will be introduced into the Legislative Council on June 30.

"Rapid advancement in technology has led to the increasing convergence of the two sectors. Hong Kong needs to review its overall regulatory regimes to meet the challenges arising from such changes effectively. As the first step of this review, we propose to restructure the regulatory institutional arrangements by merging the two existing regulators, the Broadcasting Authority (BA) and the Telecommunications Authority (TA)," a spokesman for the Commerce and Economic Development Bureau said.

Under the Bill, the CA will administer and enforce the existing Broadcasting Ordinance (BO), the Broadcasting Authority Ordinance which is to be renamed, the Telecommunications Ordinance (TO) and the Unsolicited Electronic Messages Ordinance. The existing statutory powers and functions of the BA and the TA will be transferred to the CA.

The CA will be a governing board and comprise no fewer than five and no more than ten non-official Members (including a non-official Chairperson), a public officer and the Director-General of Communications (DG Com) as an ex-officio Member. Except the DG Com, all other Members of the CA will be appointed by the Chief Executive.

In September, 2004, the director general of OFTA announced that the regulatory body would not be seeking to interfere overmuch in the development of the burgeoning Voice over Internet Protocol (VoIP) industry. Au Man-ho was responding to a drive by incumbent telecommunications provider, PCCW to thwart the growth of the industry.

Following the launch of a VoIP service by City Telecom, PCCW lodged a complaint with OFTA, and then wrote to its 750,000 broadband subscribers, warning them that the installation of VoIP software could reduce the quality of their broadband service.

But the OFTA director general said that the Authority was not interested in imposing arbitrary regulations, and suggested that: "The pace of transition to IP-based services should be decided by the market." However, he went on to observe that "if the IP telephony service is to be marketed as a substitute for public telephone service, there may be some minimum conditions that need to be satisfied to prevent consumer confusion and safeguard public interest".

The Hong Kong Office of the Telecommunications Authority announced in September 2006, that telecommunications resellers in the SAR will be put under the regulation of a class licensing regime, in order to ensure a level playing field and enhance consumer protection.

Resellers offer a wide range of telecommunications services. In view of the rapid telecommunications market development and the thriving of various means of resale activities, the Authority has decided to regulate the sector.

According to OFTA, when the new regime came into force in February 2007, resellers automatically became class licensees without any requirements to obtain individual licence applications or registrations. Class licensees will be required to provide specified information, including their names and services provided, to help consumers make informed choices.

They will also be bound to follow statutory provisions under the Telecommunications Ordinance. For example, they will be prohibited from engaging in misleading or deceptive activities.

However, licensed operators' agents or contractors who sell or promote telecommunications services for or on behalf of the operators will not fall under the remit of the regulation.

In May 2008, the government decided to create the Unified Carrier Licence (UCL) as a single licensing vehicle for fixed, mobile and/or converged services, subject to the negative vetting of the amendment regulations by the Legislative Council.

Distinction between fixed and mobile networks and services is becoming increasingly blurred due to market and technology developments. This phenomenon is commonly referred to as "Fixed-Mobile Convergence" (FMC). The new UCL regime will enable facility-based operators to provide different services under a single and flexible licensing framework, thereby paving the way for FMC.

Hong Kong continues to be in the forefront amongst telecommunications markets worldwide, according to the performance report published by the Office of the Telecommunications Authority (OFTA) on October 12, 2008.

The report compares Hong Kong's performance in four telecommunications sectors ( local fixed voice services, mobile services, broadband services and data services) with that of the Organisation for Economic Co-operation and Development (OECD) economies and Singapore. Studies with similar objective were undertaken in 2003 and 2005.

The study reveals that, compared with the OECD economies and Singapore, the take up of fixed voice services, mobile services, broadband services and data services in Hong Kong is in the top tier. At the same time, telecommunications services in Hong Kong are amongst the least expensive. Prices for telecommunications services in Hong Kong are across the board significantly lower than those in most advanced economies.

"We are pleased to see that the telecommunications market of Hong Kong continues to have such a good performance. The result of the study clearly shows that quality telecommunications services are extensively available to the public at affordable prices", a spokesperson of OFTA said.

"With the rapid roll-out of fibre networks, the penetration rate of the fibre network of Hong Kong ranks only second to South Korea . The continued development in telecommunications infrastructure would equip Hong Kong with the capability to meet the demand for high quality telecommunications services in the future," the spokesperson continued.

In January 2009, OFTA announced that the auction of radio spectrum in the 2.3 GHz and 2.5 GHz bands had been completed. Three bidders have successfully bid for a total of 90 MHz of radio spectrum in the 2.5 GHz band at a total of spectrum utilization fee of 1.5357 billion dollars.

"With the assignment of the radio spectrum, the successful bidders will be able to deploy the next generation Broadband Wireless Access (BWA) technologies and offer a variety of advanced high-speed multimedia services. This should create a lot of opportunities for both network operators and providers of content and service applications," a spokesperson of OFTA said.

"This is the first time that the government deploys an Internet-based software platform for auctioning radio spectrum, which is an important scarce public resource. With the participation of five bidders, we went through a total of 56 rounds of bidding over the past nine business days," the spokesperson said.

The Internet access business in Hong Kong is highly competitive, with more than 100 providers, with at least 10 of them being substantial and well-financed operations. Internet access is available throughout the SAR.

With a sophisticated telecommunications infrastructure, Hong Kong offers access to broadband connectivity to more than 90% of all households. The take up of broadband services got off to a slow start, but a boom in broadband access took off in 2003. According to government statistics, Hong Kong has an online population of 4.3 million with the penetration rate standing at 69.4%.

In December, 2003, website owners in Hong Kong expressed outrage at plans unveiled by the Hong Kong Domain Name Registration Company to launch a .hk domain in 2004. Current domain name designations in Hong Kong include .com.hk, .edu.hk, and .org.hk, and many website and business owners have argued that they are happy with these categories, and resent being forced to pay again to protect their brand.

Jim Morgan, founder and chief technology officer of security firm Datalude, suggested that the move would "create anarchy", as businesses rush to register domain names with the Hong Kong local authority. "The resulting legal disputes and unfairness would go down in folklore. The other outcome would be that a large amount of money would find its way into Hong Kong Domain's coffers," he predicted.

Mr Morgan also observed that: "I see no real need for the .hk namespace. We already have a .com.hk which conforms, more or less, to accepted international standards."

The Hong Kong Internet Registration Corporation Limited (‘HKIRC') and its wholly owned subsidiary Hong Kong Domain Name Registration Company Limited (‘HKDNR') jointly announced the launch of the Second Level ‘.hk' Domain Name on 31 May 2004.

By February 2006, 100,000 .hk domain names had been registered with the HKIRC.

In March 2007, the HKIRC announced the official launch of the new ‘.hk’ Chinese Domain Name (CDN). Christopher To, Chairman of HKDNR, endorsing the adoption of the ‘.hk’ CDN, said:“Leveraging on technology and market readiness in Hong Kong, the launch of the new ‘.hk’ Chinese Domain Name will strengthen the social and business networking potential of the Internet for the Chinese community all over the world. HKDNR is fully confident that the ‘.hk’ Chinese Domain Name will gain momentum in Hong Kong very quickly as it meets the needs of both the Hong Kong business and social communities.”

“We received overwhelming response from the community, with 6,862 applications during the soft launch period. These positive results testify to both the need and the great support for ‘.hk’ Chinese Domain Names as shown by users in different sectors,” added Jonathan Shea, Chief Executive Officer of HKDNR.

Many of the early applications were from luxury brands, consumer brands, banks and financial institutions, shopping arcades, office and residential complexes, educational institutions, public utilities and government departments and programs such as Brand Hong Kong, reflecting the importance of brand awareness and visibility on the Internet for a diverse range of industries and organizations. During the third phase, registration right was opened to the public. Applicants included a wide array of individuals from all walks of life, including some celebrities.

In June 2010, the HKIRC announced that it had received ICANN’s approval to delegate the Chinese equivalent of the ‘.hk’ Top Level Domain using Chinese characters. A recent survey shows that at the end of 2009, over 75% of web users in China used the Chinese language to surf the Internet and 23% used both Chinese and English, reflecting the use of the native Chinese language by the vast majority of Chinese web users when browsing websites.



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