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Country Commercial Guides for FY 2000:
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CHAPTER V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
Hong Kong, with the second highest per capita income in Asia, continues to offer good opportunities to U.S. businesses despite the economic slowdown that this region has been mired in for nearly two years. Telecommunications products and services are among the most promising as Hong Kong continues to liberalize its telecommunications market. Interest in computers and other information technology products should remain high given their high priority in the Hong Kong Government's agenda, and given the anticipated growth in electronic commerce. Plans for a Cyberport and a Science Park in Hong Kong and continued environmental spending suggest strong markets for scientific equipment and pollution control products. Increasing consumer sophistication is also leading to growth in areas such as cosmetics, insurance services, medical equipment and franchising. Other "best prospect" sectors include paper products to support Hong Kong's large printing and publishing industry, and building materials for residential and commercial projects.
Total U.S. agricultural exports to Hong Kong reached US$1.48 billion in 1998, making Hong Kong the 7th largest export market for U.S. agricultural products. For Asia, Hong Kong ranks as the fourth largest U.S. agricultural export market among 18 Asian countries after Japan, the Republic of Korea, and Taiwan. In 1998, U.S. agricultural exports to Hong Kong decreased 12.8 percent from 1997's US$1.7 billion due to the onset of recession in early 1998 and the regional financial crisis. If seafood and forestry products are included, the 1998 total reached US$1.6 billion. Hong Kong has become an increasingly important market for consumer-oriented American foods, ranking as the fourth largest importer of consumer-oriented agricultural products after Canada, Japan and Mexico. Hong Kong imported US$1.07 billion of consumer-oriented products in 1998.
There is also potential growth for U.S. grocery line items as the number of food retail outlets continues to increase. Because of established ties and advantageous trading arrangements, most of Hong Kong's grocers have traditionally looked to the United Kingdom, Europe, Australia and New Zealand for supplies. In recent years, however, those buying habits have been shifting and many American items are now available on local shelves at highly competitive prices. U.S. style warehouse/club retail stores in Hong Kong continue to grow. Unlike most supermarket chains, there are no slotting fees, giving U.S. companies access to this highly competitive market. Over the past few years a variety of new players have joined the local retail scene, such as Carrefour. Additionally, traditional supermarkets such as Park'N Shop have adopted the warehouse concept and have dedicated space in some of their stores for bulk items. A host of other new players have also entered the market and include Guangnan KK, City Super and Market Republic.
A. Best Prospects for Non-Agricultural Goods and Services
Following is a list of the non-agricultural goods and services best prospects sectors for U.S. exporters to Hong Kong:
No. Code Sector Description 1 TEL Telecommunications Equipment 2 TES Telecommunications Services 3 INS Life Insurance 4 CPT Computers/Peripherals 5 CSF Computer Software 6 PAP Paper 7 AIR Aircraft/Parts 8 FRA Franchising 9 COS Cosmetics/Toiletries 10 LAB Laboratory/Scientific Instruments 11 FPP Food Processing/Packaging Equipment 12 RRE Railroad Equipment 13 MED Medical Equipment 14 POL Pollution Control Equipment 15 MCS Environmental Consultancy Services 16 DRG Drugs/Pharmaceuticals 17 BLD Building ProductsNote: All Figures in U.S. Dollar millions unless otherwise indicated.
1. TELECOMMUNICATIONS EQUIPMENT (TEL)
For many years Hong Kong has been an important market for telecommunications equipment in the Asia Pacific region. The Hong Kong Government's decision in May of 1999 to further liberalize the telecommunication services market will stimulate additional demand for new equipment. The granting of Wireless Local Loop licensees will create a need for local multipoint distribution service (LMDS) equipment and related support systems. New licensees offering international service via satellite will require new ground stations and all the necessary ancillary equipment. In addition, existing fixed line and cellular operators continue to aggressively expand their physical networks and range of services. This will maintain the strong demand for switches, network hardware and software, administrative and billing systems, in-building cabling, planning software, testing equipment, and outside plant equipment such as optical fiber cables.
As of the end of March, 1998, there were 4.6 million telephone sets in Hong Kong, serviced by 3.68 million exchange lines (of which 42.1 percent were business exchange lines), and 346,000 dedicated facsimile lines. The telephone density was 71 telephone sets and 56.54 lines per 100 people, the highest in Asia. International Direct Dialing service is available to over 230 countries and 1,300 mainland cities. These figures are expected to increase with the introduction of additional competition and new value-added services.
The mobile telecommunications market in Hong Kong continues to increase its already phenomenal market penetration. By the end of 1998, the penetration rate of mobile phone subscribers in Hong Kong surpassed 45 percent, the highest in the world outside Scandinavia. Further, the introduction of mobile phone number portability in March of 1999 further intensified an already competitive market. To attract and retain customers, the operators are starting to introduce new data and other value added services to their networks.
With the growing popularity of the Internet, the demand for high-speed modems remains high. In addition, local operators are introducing broadband services via xDSL (digital subscriber loop) and cable modems. Given the ongoing global trend toward convergence of the telecommunications, information technology, and broadcasting industries, the demand for products such as multimedia and IP (Internet protocol) hardware continues to expand. Technologies such as Asynchronous Transfer Mode, frame relay, and encryption solutions are also in high demand.
Finally, Hong Kong remains an important distribution and sourcing point for China's telecommunications market. As China's own telecommunications market continues to grow, Hong Kong will continue to benefit from the great demand in China for telecommunications equipment.
Value of Telecom Equipment Products
1997 1998 1999 Total Market Size 4,621 4,912 5,572 Total Local Production 1,207 1,267 1,203 Total Exports 4,293 4,593 4,363 Total Imports 7,707 8,238 8,732 Total Imports from the US 754 947 1,135All figures are in US$ million. The above statistics are unofficial estimates.
2. TELECOMMUNICATIONS SERVICES (TES)
In early May this year, the Hong Kong Government announced its decision to extend the moratorium on new fixed wireline licenses from 1999 to the end of 2002. However, the Government will allow companies to offer local service by using Wireless Local Loop (WLL) technologies, such as MMDS/LMDS (local multipoint distribution service), which the existing four Fixed Telecommunications Network Service (FTNS) providers have not offered to date. This presents an opportunity for companies to offer an alternative to Hong Kong Telecom for broadband data as well as traditional voice services. An unspecified number of licenses will be issued at the end of 1999. This provides market entry opportunities for operators who can offer fixed service via new wireless equipment such as intelligent base stations or residential pico-cells. Furthermore, the government will allocate new frequencies for the WLL licensees. This could include LMDS frequencies as well as 2Ghz frequencies.
The government has also decided to further open the External Facilities-based market effective January 1, 2000. Currently Hong Kong Telecom is the only provider of international capacity. Other companies can offer IDD service via International Simple Resale (ISR) of HKT's capacity. Beginning next year, the other three FTNS operators will also be allowed to operate their own facilities-based international services to compete with HKT. In addition, companies that offer non-wireline facilities-based international service (primarily satellite communications) can also get a license. Because there are seven satellites currently serving Hong Kong, new licensees can establish new international telephony gateways by using satellite uplinks to provide international services. Companies that invest in bringing physical cable to Hong Kong can also get this external facilities license.
On the cellular side, currently there are three cellular licensees operating five networks (1 CDMA, 1 TDMA, 3 GSM), as well as 6 PCS (GSM 1800 frequencies) licensees. Although no more licenses will be offered in the near future, there are opportunities for partnerships or other arrangements to provide these companies with enhanced technologies and value-added services to assist them to differentiate themselves in this very competitive market.
1997 1998 1999 Telephone lines 3,624,000 3,707,000 3,747,000 Fax lines 364,630 359,779 342,671 Outgoing 1.74 B min. 1.72 B min. 1.75 B min. International Traffic Incoming 2.12 B min. 1.96 B min. 2.10 B min. International Traffic Cellular mobile 1,830,000 2,080,000 3,500,000 Subscribers3. LIFE INSURANCE (INS)
As Hong Kong's affluence has grown, so has the market for life insurance. In 1998, despite the Asian financial turmoil, the life insurance business grew 17 percent, with premium receipts of US$ 2.9 billion.
In 1998, U.S. insurance firms accounted for 10 percent of Hong Kong's 209 insurance firms but enjoyed a 45 percent market share. Companies such as American International Assurance (AIA), CIGNA Worldwide, Metropolitan Life, Prudential Insurance, and New York Life are dominant in Hong Kong's life insurance industry. AIA has an approximate 20 percent market share, followed by Manulife (Canada) and National Mutual (Australia). Other major competitors are HSBC Life (Bermuda), Prudential Assurance (UK), Top Glory Insurance (Bermuda), Royal & Sun Alliance (Isle of Man), East Asia Aetna (Bermuda), CMG (Bermuda), and Eagle Star Life (UK).
Market commentators predict that life, not property and casualty, will continue to be the main growth area in the insurance business. With approximately 30 percent of the population covered by individual life policies and an increase in the average age of the population, there is clear potential for further expansion.
The most significant development in Hong Kong's life insurance market is the introduction of the Mandatory Provident Fund (MPF), a mandatory retirement protection scheme. The Hong Kong Government expects to launch the scheme in mid-2000. The MPF will include all employees between age 18-64 in Hong Kong. The estimated market for the MPF in 2000 is approximately US$ 22 billion.
1997 1998 1999 Number of Insurers 214 209 220 Population with insurance coverage 30% 33% 40% Number of U.S. Companies 19 20 22 U.S. Market Share 40% 45% 48% The above statistics are unofficial estimates.4. COMPUTER AND PERIPHERALS (CPT)
Despite the regional economic downturn, Hong Kong's total IT spending reached USD 2.6 billion in 1998, up from USD 2.2 billion in 1997. Industry observers predict that Hong Kong's IT spending will grow at a nine percent average annual rate between 1999 and 2001.
Under its Digital 21 IT strategy, the Hong Kong Government is committed to a number of projects that promote the development of the local IT industry. These include:
Outsourcing Hong Kong Government IT projects. In FY 1998 estimated government spending on IT was US$ 270 million, an 11 percent increase over 1997. Beginning in FY 1999, the Government will outsource all of its IT development and maintenance projects, and hopes to outsource two-thirds of its new IT projects by 2001. U.S. firms are off to a good start in landing this business. For example, Hewlett Packard won the first outsourcing contract offered by the Hong Kong Government.
Development of a Public Information Infrastructure. The Government has allocated US$ 22 million for an Electronic Service Delivery (ESD) Project that will deliver government services on-line 24-hours a day, seven days a week. Besides providing more effective and efficient government services for the public, the ultimate objective of ESD is to provide an open, common information infrastructure which can serve as a platform for the private sector to conduct electronic business.
Establishment of a Public Key Infrastructure (PKI) and a Certification Authority. To support the ESD system and to instill public confidence in the security and integrity of electronic transactions, the Government has budgeted US$ 10 million to establish a public key infrastructure to identify parties involved in on-line trading. Demand for PKI from other industry sectors will provide substantial opportunities for U.S.firms.
IT in Education. The government has a five-year strategy to promote IT in education. The target is to teach 25 percent of the school curriculum through IT. This will involve not only the provision of hardware, but also the development of educational software to meet the needs of local students. This should create tremendous business opportunities for educational application software and equipment for U.S. companies in the coming years.
The government's initiative to build e-commerce infrastructure is expected to stimulate the private sector to use e-commerce and the internet for routine business transactions. Small and medium size companies that cannot afford to build their own network will be able to ride on the public infrastructure and benefit from e-trading. Another noticeable trend is the emerging demand for IT solutions and IT service outsourcing. Aside from the Hong Kong Government's outsourcing strategy, a number of large corporations are starting to look into the cost of outsourcing all or part of their IT operations. This will drive up demand for IT total solution consultants and services.
Best Sales Prospects: e-commerce related networking equipment, voice over IP devices, network management devices, remote access equipment, wireless networking equipment, virtual private network devices, video conferencing devices, data warehousing products. The U.S. is the market leader for these products. U.S. networking equipment companies such as Cisco, 3Com, Lucent, Bay Network, Intel, Shiva, and Hayes pretty much dominate the networking equipment market.
On the PC side, competition is very keen, with Compaq, Hewlett Packard, IBM and Dell maintaining their position as leaders, followed by Acer and NEC. Notebook PC market leaders are Compaq, Hewlett-Packard, IBM, NEC, Toshiba and Acer. On the printer side, Hewlett Packard, Canon, Epson, and Xerox dominate the market.
1997 1998 1999 Total Market Size 1500 1700 1785 Total Local Production 446 370 389 Total Exports 4724 4044 4246 Total Imports 5778 5374 5642 Total Imports from the U.S. 2200 2046 2143All figures are in US$ million. The above statistics are unofficial estimates.
5. COMPUTER SOFTWARE (CSF)
According to a local market survey, customer spending on software and services in Hong Kong has grown from US$770 million in 1997 to US$940 million in 1998 and is projected to grow to US$1.4 billion in 2001. At present, 75 percent of the 1,800 packaged-software products available in Hong Kong are imports. The United States supplied over 50 percent of the total imported software in 1998.
Web-based applications, multimedia and e-commerce will continue to be the main areas of growth. E-commerce, which requires heavy re-engineering and the development of new business models, will provide excellent business opportunities for software and solutions.
Local Internet Service Providers (ISPs) are keenly interested in value-added services such as Voice over Internet Protocol (VOIP) and Virtual Private Network Solutions (VPNs).
Enterprise applications are another growth area. Demand for business-critical applications such as Enterprise Resources Planning (ERP) and Supply Chain Management (SCM) is taking off. To survive the economic downturn in the region, companies are using ERP to integrate or re-engineer their business process, reduce expenses, and improve customer service. Macola, Fourth Shift, QAD, Bann, Platinum, Oracle are some of the U.S. solution providers.
Y2K solutions will still be in demand for small to medium-sized companies that seek last-minute or post-Y2K conversion services or replacement systems. Educational software and content providers and computer graphics will also be in demand.
1997 1998 1999 Total Market Size - Products * 70 90 108 - Services ** 700 850 1020 Total Local Production - Products * 18 30 36 - Services ** 600 630 756 Total Exports - Products * 98 140 168 Total Imports - Products * 150 200 240 Total Imports from the U.S. - Products* 80 90 108* Standard software packages sold in recorded media form for other than sound or images.
** Customized software systems and services sold usually on a project basis.
All figures are in US$ million. The above statistics are unofficial estimates.
6. PAPER (PAP)
There are two groups of paper users: the printing sector and the packaging sector. These two sectors' performance depends largely upon other industry users, e.g., advertising, textiles and electronics. The Asian financial crisis which swept through Hong Kong and its major export markets in 1997 and 1998 had a negative impact on the entire manufacturing industry, and indirectly affected Hong Kong's overall paper consumption. While paper imports decreased 19 percent in 1998 from 1997, high paper consumption should resume soon.
Hong Kong is the world's fourth biggest printing and publishing center. It is home to 45 newspapers, 693 registered periodicals and approximately 150 international media organizations. Its strategic location, excellent transport and telecommunications networks, and freedom of the press have all contributed to the industry's success.
The printing and publishing industry is the third largest manufacturing industry in terms of gross output and is the second largest employer in Hong Kong's manufacturing sector. In 1998, the industry employed approximately 44,000 workers in its more than 4,700 establishments and gross output was estimated at US$3.3 billion. The average annual growth rate for the industry was approximately five percent for the last five years despite a sluggish economy in late 1997 and 1998. Prospects for the industry remain promising as Hong Kong's telecommunications infrastructure continues to improve, and its industrialists continue to invest in modern printing equipment such as six or more color automatic printing machines and computerized printing production management systems.
The packaging sector serves primarily local manufacturers in Hong Kong or their production facilities set up in Mainland China. In 1998, there were approximately 500 establishments in the packaging industry, employing more than 3,000 workers. Gross output for the industry was estimated at more than US$450 million. Due to an increasing environmental awareness, and global demand for biodegradable packaging materials, the outlook for paper packaging remains bright.
1997 1998 1999 Total Market Size 1,275 952 1,140 Total Local Production 400 380 390 Total Exports 1,507 1,348 1,400 Total Imports 2,382 1,920 2,150 Total Imports from the U.S. 449 315 405All figures are in US$ million. The above statistics are unofficial estimates.
7. AIRCRAFT AND PARTS (AIR)
Hong Kong's new airport located at Chek Lap Kok, approximately 25 kilometres west of Hong Kong's central business district, opened in July 1998. The airport, which operates 24 hours a day, had initial annual capacity for 35 million passengers and three million tons of cargo. The second runway commenced operation on May 26, 1999, bringing the annual capacity of the airport to 87 million passengers and nine million tons of cargo.
At present, Hong Kong is served by 65 scheduled airlines which operate 2,920 direct flights in and out of Hong Kong weekly to 100 cities. Although these numbers are below initial projections because of the regional economic downturn, they are projected to increase as the region's economy continues to recover. Hong Kong has three locally-based airlines (Cathay Pacific, Hong Kong Dragon Airlines and Air Hong Kong) which own a total of 82 aircraft. Macau opened its airport in 1995, with one locally-based airline, Air Macau. Replacement needs and expansion opportunities both in Hong Kong and Macau continue to create a demand for more aircraft and parts.
At present, the Hong Kong Aviation Engineering Company (HAECO) provides both line and base maintenance services for aircraft. China Aircraft Services Ltd. and Pan Asia Pacific Aviation Services Ltd. both provide base service. The expected increase in aircraft movements made available by the larger capacity of the airport will increase the demand for aircraft maintenance parts. Also, nearly half of Hong Kong's re-export of aircraft parts go to Mainland China, where the aviation industry has been growing rapidly, and it is projected that parts demand for replacement and maintenance purposes will increase tremendously.
In Hong Kong, the United States already maintains a 34 percent and 50 percent share of the import market for aircraft and aircraft parts, respectively. American aircraft and parts manufacturers' long established reputation in Hong Kong should enhance their competitiveness still further in the expanded market after 2000.
1997 1998 1999 Total Market Size 467 1,814 1,996 Total Local Production 0 0 0 Total Exports 108 111 122 Total Imports 575 1,925 2,118 Total Imports from U.S.(*) 162 752 827* This includes imports of both aircraft and parts. For 1998, the figure reflects mainly the purchase of 14 new aircraft. For 1997, the figure represents mainly aircraft parts imports. We estimate that imports of U.S. aircraft parts is growing at a 10 percent annual rate.
All figures are in US$ million. The above statistics are unofficial estimates.
8. FRANCHISING (FRA)
The number of franchise operations in Hong Kong increased from 52 in 1992 to 111 in 1998. Nearly 80 percent of all franchise sales in Hong Kong are made by U.S. franchises. The 111 franchise operations in Hong Kong (60 percent foreign) operate approximately 2,000 outlets. Master franchisees operate about half of these foreign franchises and do not have sub-franchising activities. Food-related franchises dominate the market, occupying 37 percent, whereas retailing and other services account for 18 percent and 45 percent, respectively. A growing number of local bakeries and herbal tea shops have adopted franchising as a preferred method of market expansion.
Technology franchising (such as computer training), commercial cleaning and maintenance service franchises have all become popular in Hong Kong in recent years. Nearly all of these franchises are from overseas.
Well-known U.S. brands such as Hardee's, Haagen-Dazs, Jack-in-the-Box, KFC, McDonald's and Futurekids are well received by Hong Kong customers. Foreign brands such as Benetton (apparel), Fujicolor (photo products), IKEA (furniture) and Yoshinoya (fast food) are also popular.
Hong Kong's high per-capita income and westernized lifestyle offer tremendous opportunities to interested U.S. franchise firms.
1997 1998 1999 Total Sales by Franchises 859 902 992 Sales by Local Franchises 172 181 199 Sales by Foreign Franchises 687 721 793 Sales by U.S. Franchises 670 703 773All figures are in US$ million. The above statistics are unofficial estimates.9. COSMETICS AND TOILETRIES (COS)
With a US$24,653 per-capita GDP, Hong Kong's sophisticated, bilingual consumer market offers outstanding opportunities for American cosmetics and toiletries.
In 1998, Hong Kong's cosmetics and toiletries imports were US$1 billion. Of this, US exports had a healthy 17 percent market share, due to an excellent reputation for quality, especially for medium to high-end products. Well-known brand names such as Nu Skin, Max Factor, Avon and Revlon are popular in the market.
Hong Kong consumers prefer foreign cosmetics, so U.S. exporters face keen competition from both Japan and Europe. In order to maintain their competitiveness, U.S. suppliers frequently introduce new products such as concept nails, whitening powder and age management kits.
Tourism, the territory's second largest earner of foreign exchange, also provides a substantial market for cosmetics and toiletries. Tourists that visit Hong Kong make cosmetics and perfume prime targets for their shopping. In 1998, tourists spent nearly US$200 million on cosmetics, while spending on perfume topped US$70 million.
In order to assist U.S. exporters, the U.S. cosmetics industry organizes a pavilion at the annual Cosmoprof Asia Show, supported by FCS Hong Kong. Historically, U.S. companies have enjoyed tremendous success during this show. As these companies have realized, Hong Kong is important both as a major market in its own right, and as a springboard for exporting U.S. cosmetics products to the rest of the region.
1997 1998 1999 Total Market Size 1,652 1,465 1,758 Total Local Production 565 491 589 Total Exports 114 81 97 Total Imports 1,201 1,055 1,266 Total Imports from the U.S. 203 176 211All figures are in US$ million. The above statistics are unofficial estimates.
10. LABORATORY AND SCIENTIFIC INSTRUMENTS (LAB)
Over the past two decades, Hong Kong has transformed itself from a manufacturing to a service-oriented economy. In 1998, the manufacturing sector contributed less than 10 percent to Hong Kong's total GDP. Without a solid manufacturing base, Hong Kong has found itself facing economic difficulties during the recent economic downturn. In light of this, in late 1998 the Hong Kong Government announced various initiatives to diversify the economy by creating more favorable conditions for hi-tech industry sectors to grow. Initiatives to help strengthen the manufacturing and hi-tech industries include: establishing an Applied Science and Technology Research Institute; setting up of an Innovation and Technology Fund with an injection of US$650 million; and stimulating the collaboration of academic institutions and industry in research and development. All these measures and activities will generate an increase in demand for laboratory and scientific instruments.
Another plan high on the Hong Kong Government's agenda is to make Hong Kong the international center for Chinese medicine, in part through the application of the latest technology. To facilitate the commercialization of Chinese herbal health food and medicinal products in the global market place, detailed analysis of the chemical content of Chinese herbs is critical, thus further fueling a demand for quality laboratory and analytical instruments.
1997 1998 1999 Total Market Size 586 402 445 Total Local Production 160 145 150 Total Exports 921 964 980 Total Imports 1,347 1,221 1,275 Total Imports from the U.S. 404 367 390All figures are in US$ million. The above statistics are unofficial estimates.
11. FOOD PROCESSING & PACKAGING EQUIPMENT (FPP)
The food and beverage industry is the fourth largest manufacturing industry in Hong Kong in terms of gross output and employment. Owing to an increasing population, a change in lifestyle and a significant tourism industry, the industry has experienced an average growth of more than five percent per annum since 1993. The recent economic slowdown has had some negative effects on the industry, but the future remains promising as signs of recovery emerge. In 1998, approximately 650 establishments in the industry employed more than 20,000 workers, and the industry's gross output was estimated at approximately US$2.5 billion. Of the total production, about 20 percent (or US$500 million) was for export.
The majority of Hong Kong's food and beverage output serves local consumers. However, due to an increasingly competitive domestic market and a growing interest in Chinese cuisine overseas, there is a rising trend to produce export-oriented food products. The major export markets include Japan, the United States and Mainland China. To meet Hong Kong's and western export markets' tightening food hygiene standards, the food and beverage industry has imported the latest in food processing and packaging machinery. Many local producers have also installed their own R&D units and laboratories to develop new recipes and upgrade product quality. Further, due to a growing international concern for the environment, Hong Kong's food and beverage manufacturers have started to invest in newer and more environmentally friendly packaging methods. In addition, the local government has funded the establishment of the Food Packaging Technology Center to promote safe, high quality food packaging.
In late 1998, the Hong Kong Government announced its commitment to make Hong Kong an innovation and technology center in the region. Among the various initiatives the government will support include positioning Hong Kong as a world center for health food development and production based on Chinese medicine. This will further stimulate the growing utilization of modern food processing and packaging equipment.
1997 1998 1999 Total Market Size 112 79 105 Total Local Production 10 15 15 Total Exports 145 136 140 Total Imports 247 200 230 Total Imports from the U.S. 28 17 30All figures are in US$ million. The above statistics are unofficial estimates.
12. RAILROAD EQUIPMENT (RRE)
Although the downturn in the Asian economies is slowing down projects in some countries, the Hong Kong Government is actually accelerating its infrastructure developments. In the next five years, Hong Kong will invest more than US$15 billion to expand its railway network, which will include domestic and cross-border links. The priority railway projects consist of the West Rail, Tseung Kwan O Extension (TKO), Tsimshatsui Extension (TST), Ma On Shan Extension (MOS) and Lok Ma Chau Spur Line (LMC), all of which will come into operation between 2002 and 2004. With the exception of TKO, which is a Mass Transit Railway Corporation (MTRC) project, the rest are all Kowloon-Canton Railway Corporation (KCRC) developments. Construction for the West Rail and TKO already commenced in late 1998. The Hong Kong Government further approved KCRC to proceed with the detailed planning and design of the TST and MOS in September 1998. LMC, which is the second rail crossing between Hong Kong and China, was granted the go-ahead by the Hong Kong Government in June 1999.
For the next several years, Hong Kong's railway operators will be pre-qualifying and awarding the construction and system-wide contracts associated with these railway network projects in phases. (Note: the system-wide contracts refer to areas such as electrical & mechanical projects, rolling stock and fare collection systems) Traditionally, few U.S. construction companies have been active in Hong Kong. However, U.S. equipment suppliers, especially in signaling and communications, environmental protection and train control system, have successfully taken part in Hong Kong's railway expansion and refurbishment projects. In light of the huge expenditure planned for the series of railway projects, which will create an expanding market for railroad equipment, the outlook for American railroad products is very promising.
1997 1998 1999 Total Market Size 91 290 500 Total Local Production 0 0 0 Total Exports 0 0 0 Total Imports 91 290 500 Total Imports from the U.S. 3 9 15All figures are in US$ million. The above statistics are unofficial estimates.
13. MEDICAL EQUIPMENT (MED)
The market potential for U.S. medical products is strong. Total medical equipment imports in 1998 were US$727 million. U.S. companies have the largest share of the market, with imports from the United States reaching US$223 million in 1998, approximately 30 percent of the total. American, German and Japanese equipment dominate the Hong Kong medical equipment market. German products are extremely popular with the medical industry in Hong Kong due to their durability and reliability, while Japanese products are popular because the devices tend to be compact and versatile, and because Japanese companies typically offer extremely competitive prices.
The Hong Kong Government's Hospital Authority is the principal customer for medical equipment. Best prospects for American suppliers include medical devices/equipment for diagnosing and treating malignant neoplasms, heart disease, cerebrovascular diseases, chronic liver disease, cirrhosis and septicaemia. Other promising areas include equipment for diabetes mellitus, respiratory disease, cancer treatment, blood and virus analyzers and X-ray equipment, as well any equipment with leading-edge technology.
In recent years, the Hong Kong Government has placed more emphasis on rehabilitation for the disabled and for the elderly. Best prospects for rehabilitation equipment are: assessment equipment and tools, functional equipment and tools, therapeutic equipment for heart disease and for pain reduction and exercise equipment.
1997 1998 1999 Total Market Size 220 175 193 Total Local Production 48 42 57 Total Exports 552 594 620 Total Re-exports 504 552 563 Total Imports 724 727 756 Total Imports from the U.S. 235 223 227All figures are in US$ million. The above statistics are unofficial estimates.
14. POLLUTION CONTROL EQUIPMENT (POL)
In the next five years, U.S. firms will enjoy good opportunities in pollution control equipment as planned infrastructure projects come on line and as industry works to comply with environmental regulations. The key opportunity areas for U.S. firms are municipal sewage, industrial wastewater, air pollution control and solid waste minimization equipment.
To cope with Hong Kong's environmental infrastructure requirements, the government anticipates awarding over US$ 900 million of project contracts from 1999 to 2001. Projects currently being awarded or planned include: municipal sewage treatment systems and related equipment for US$ 500 million; two refuse transfer stations for US$ 65 million; two landfill restoration sites for US$ 80 million; two one-million ton per year waste-to-energy incinerators for US$ 300 million; and a low-level radioactive waste storage facility for US$ 20 million. Equipment to support these projects typically accounts for 15-20 percent of the project cost, and will offer over US$ 150 million in sales opportunities for U.S. suppliers.
There are also many business opportunities in pollution prevention and control technologies. In May 1999, the Hong Kong Government announced its intention to use catalytic converters on the existing fleet of diesel buses and trucks to reduce particulate emissions. It is estimated that a total of 7,700 diesel vehicles (40 percent of the existing diesel fleet) require retrofitting of their converters during the next three years, and this provides over US$ 15 million in sales opportunities. In addition, the government has plans to replace a fleet of 18,000 taxis currently using diesel as fuel with cleaner liquefied petroleum gas (LPG). It is expected that about 3,000 taxis will be replaced each year during the next six years, which will open up opportunities for the sale of LPG vehicles and refueling equipment. In May 1998, the government put forward a waste reduction framework plan which includes a policy of waste avoidance, minimization, and material recycling. The goals are to reduce the amount of waste requiring disposal, to prolong the service life of landfills, and to reduce the costs involved in transporting, disposing, and treating the waste. Total waste reduction cost, including waste minimization technologies and management service, will be US$ 300 million over the ten year period 1998-2008. This should provide excellent opportunities for U.S. firms, as U.S. technology is considered highly competitive in Hong Kong's market.
In 1996, the government implemented water quality control zone effluent discharge regulations for Hong Kong waters. The Hong Kong Industry Department estimates that the total cost of compliance for Hong Kong's two thousand factories now affected by the water quality control zone will reach US$ 200 million, spread over a period of five to eight years. The key industries requiring wastewater control equipment are electroplating, printed circuit board, bleaching and dyeing, food processing, and printing.
Year 1997 1998 1999 Total Market Size 228 224 230 Total Local Production 12 18 20 Total Exports 48 54 60 Total Imports 264 260 270 Total Imports from the U.S. 89 95 98All figures are in US$ million. The above statistics are unofficial estimates.
15. ENVIRONMENTAL CONSULTANCY SERVICES (MCS)
The International Organization for Standards (ISO) 14000 series of Environmental Management Systems (EMS) has been developing in Hong Kong since 1995, as a means for companies to conform to tightening environmental regulations. After four years of EMS development, many business leaders recognize that developing an EMS is an effective way to improve the image of their organization, in addition to being responsible corporate citizens.
The next five years will see more opportunities for the provision of EMS consultancy and training courses. Many industry leaders believe that building/construction and service/manufacturing companies will be the first to seek ISO 14000 certification. This will create a favorable environment for U.S. companies that provide EMS training. It is estimated that the market size for EMS consultancy is US$ 2 million with annual growth of three to five percent.
In addition, Hong Kong passed the Environmental Impact Assessment (EIA) Ordinance in April 1998. Under the EIA Ordinance, all major infrastructure projects are required to conduct environmental impact assessments and ecological evaluations before starting any construction work. In the next five years, Hong Kong has plans to construct major infrastructure projects, including the West Rail, Route 7, and an incineration facility. These projects will provide opportunities for U.S. environmental consultancy firms to bid on the environmental assessment portion of these projects. It is estimated that the market size of the EIA consultancy service market is US$ 30 million per year over the next three years.
Year 1997 1998 1999 Total Market Size 15 25 32 Total Local Production 2 5 8 Total Exports 0 0 0 Total Imports 13 20 24 Total Imports from the U.S. 4 8 11All figures are in US$ million. The above statistics are unofficial estimates.
16. DRUGS/PHARMACEUTICALS (DRG)
Sales potential for U.S. medicines in Hong Kong is substantial. Total pharmaceutical imports in 1998 reached US$1.1 billion, and demand for pharmaceutical products will continue to expand. The population is projected to increase from 6.8 million in 1998 to 7.3 million by 2006, while the percentage of elderly persons in the total population is projected to increase from 10.2 percent in 1998 to 11.2 percent in 2006. In addition, Hong Kong also re-exports an increasingly large quantity of imported pharmaceutical products to China.
Hong Kong consumers generally consider U.S. pharmaceuticals to be effective and safe. Other major pharmaceutical suppliers to Hong Kong include the United Kingdom, Germany, China and Australia.
The over-the-counter drug market in Hong Kong enjoyed six percent growth in 1998. There is increasing demand for new vitamins and dietary supplement products for toddlers and osteoporosis supplements for elders, while middle age consumers (particularly women) seek natural remedies for dieting and nutrition.
The Pharmacy and Poisons Board at the Department of Health requires registration of all drugs (including OTC drugs) in Hong Kong. The process takes approximately six to nine months.
1997 1998 1999 Total Market Size 360 345 367 Total Local Production 180 172 175 Total Exports 966 882 926 Total Re-exports 864 781 812 Total Imports 1,146 1,055 1,118 Total Imports from the U.S. 91 93 95All figures are in US$ million. The above statistics are unofficial estimates.17. BUILDING PRODUCTS (BLD)
Heading into the new millennium, Hong Kong is striving to become a city that is innovation led and technology intensive, while maintaining its international and cosmopolitan nature. The call for a better quality of life, concern for sustainable development and the natural environment will be reflected in future building standards, and hence the need for energy efficient and environmentally friendly building materials and technology.
Despite the economic downturn dampening activities in the local construction market, particularly in the private property market, opportunities continue to exist in the areas of housing, healthcare, schools, environment, entertainment and infrastructure projects. The Hong Kong Government is planning to invest US$30 billion in road, rail, land formation, housing, and port development during the next five years, and urban renewal as well as development of new land for housing is also high on the government agenda.
A few examples of planned Hong Kong projects are: the US$4.7 billion "City within a City" Kai Tak redevelopment project, Cyberport (a US$1.6 billion high-technology project) and a possible Disney theme park project. It is expected that the demand for building products in satisfying the needs for these projects alone will be substantial in the coming years. Further, Hong Kong continues to be a major re-exporter to the Chinese Mainland.
Hong Kong relies heavily on imports of building products because local production is too small to meet demand. In the import market, competition is keen with major players from China, Japan, Italy, Germany, Spain and the United Kingdom competing against U.S. companies. However, strength of American products lies in their quality and advanced technology. U.S. companies should target the high-tech niche, as well as environmentally friendly building materials. Companies should also develop more competitive pricing strategies for penetrating the market during the present economic situation.
Scarcity of land and high labor costs have long been problems for Hong Kong's building industry. Skyscraper-type buildings, therefore, have been the solution. Building products that reduce the use of labor and save on construction time will always be favored by the market. Also, due to the increasing environmental concern especially by the government, market potential will increase for products that enhance lighting and ventilation in buildings, heat transfer among buildings, and products that reduce energy consumption in buildings. Immediate sale opportunities also exist in site formation equipment, slope stabilization equipment and related building materials.
1997 1998 1999 Total Market Size 3,272 2,017 1,054 Total Local Production 800 600 480 Total Exports 1,549 1,749 1,959 Total Imports 4,021 3,166 2,533 Total Imports from U.S. 310 224 182All figures are in US$ million. The above statistics are unofficial estimates.B. Best Prospects for Agricultural Products
Sector Description
1. Poultry 2. Fresh Fruit 3. Soybean Oil 4. Red Meats 5. Cotton 6. Variety Meats 7. Processed Fruit and Vegetables 8. Hardwood Lumber 9. Hides and Skins 10. Tree Nuts 11. Dairy Products 12. Snack Food 13. Wine and Beer 14. Fish and Seafood ProductsOf all U.S. agricultural exports to Hong Kong, the leading items are: poultry meat, ginseng, fresh fruits and vegetables (including a significant number of oranges and apples), cotton, hides and skins, red meats, tree nuts, lumber, dairy products, wine and beer. Poultry meat once again topped the list of U.S. food exports to the territory in 1998, reaching US$369.8 million. Although this represents a 15 percent decrease when compared to the 1997 amount of US$436 million, Hong Kong remains the second largest export market for U.S. poultry meat after Russia. Of the poultry exported to Hong Kong, chicken meat (US$351 million) was the star performer as Hong Kong consumers continued to enjoy U.S. chicken wings, feet and franks.
Exports of U.S. fresh fruit and vegetables to Hong Kong totaled US$223 million in 1998. The United States is the number one supplier of fresh fruit to Hong Kong, and Hong Kong purchases account for approximately 10 percent of total U.S. fruit exports. The territory is among the top three U.S. export markets for fresh fruit and is the fourth largest export market for fresh vegetables. The largest selling items in these two categories are oranges, apples, grapes, tomatoes, celery, lettuce, peppers and onions. Hong Kong, with perhaps the highest per capita consumption of fresh oranges in the world, imported 204,970 metric tons of oranges from the United States in 1998.
U.S. exports of tree nuts including pistachios, almonds and macadamias have also done extremely well in this market over the past few years. Although in 1998 total tree nut exports decreased by 27.9 percent to US$42.8 million, this level still represents an approximate fourfold increase over the 1990 level of US$10.8 million. Frozen vegetable imports too, led by mostly french fries, continue to do well fueled by the large and busy fast food service sector.
In 1998 U.S. cotton exports to Hong Kong continued to rebound, increasing 78 percent from 1997. The market share occupied by U.S. cotton increased from 23 percent in 1997 to 33 percent in 1998, re-capturing the number one supplier position from India. U.S. exports of undressed mink fur skins to Hong Kong jumped from less than half a million dollars in 1978 to over US$24.5 million in 1998. Hong Kong remains one of the largest export markets for U.S. mink.
U.S. ginseng exports to Hong Kong, on the other hand, have fluctuated up and down over the past few years. For 1998, U.S. ginseng exports to Hong Kong totaled 1,145 metric tons or US$47 million, which is equivalent to the 1997 export level in terms of volume. U.S. wild and cultivated ginseng is still much sought after in this market and is the second largest supplier in terms of value behind the PRC.
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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