Information Technology (IT) Security Software in Hong Kong: A Strategic Reference, 2006

Information Technology (IT) Security Software in Hong Kong: A Strategic Reference, 2006 Edited by Philip M. Parker, Ph...

Author: Philip M. Parker

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Information Technology (IT) Security Software in Hong Kong: A Strategic Reference, 2006

Edited by

Philip M. Parker, Ph.D. Eli Lilly Chair Professor of Innovation, Business and Society INSEAD (Fontainebleau & Singapore)

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©2007 Icon Group International, Inc.

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COPYRIGHT NOTICE ISBN 0-497-35999-5 All of ICON Group International, Inc. publications are copyrighted. Copying our publications in whole or in part, for whatever reason, is a violation of copyrights laws and can lead to penalties and fines. Should you want to copy tables, graphs, or other materials from our publications, please contact us to request permission. ICON Group International, Inc. often grants permission for very limited reproduction of our publications for internal use, press releases, and academic research. Such reproduction requires, however, confirmed permission from ICON Group International, Inc. Please read the full copyright notice, disclaimer, and user agreement provisions at the end of this report.

IMPORTANT DISCLAIMER

Neither ICON Group International, Inc. nor its employees can be held accountable for the use and subsequent actions of the user of the information provided in this publication. Great efforts have been made to ensure the accuracy of the data, but we cannot guarantee, given the volume of information, accuracy. Since the information given in this report is forward-looking, the reader should read the disclaimer statement and user agreement provisions at the end of this report.

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About Icon Group International, Inc. Icon Group International, Inc.’s primary mission is to assist managers with their international information needs. U.S.-owned and operated, Icon Group has field offices in Paris, Hong Kong, and Lomé, Togo (West Africa). Created in 1994, Icon Group has published hundreds of multi-client databases, and global/regional market data, industry and country publications. Global/Regional Management Studies: Summarizing over 190 countries, management studies are generally organized into regional volumes and cover key management functions. The human resource series covers minimum wages, child labor, unionization and collective bargaining. The international law series covers media control and censorship, search and seizure, and trial justice and punishment. The diversity management series covers a variety of environmental context drivers that effect global operations. These include women’s rights, children’s rights, discrimination/racism, and religious forces and risks. Global strategic planning studies cover economic risk assessments, political risk assessments, foreign direct investment strategy, intellectual property strategy, and export strategies. Financial management studies cover taxes and tariffs. Global marketing studies focus on target segments (e.g. seniors, children, women) and strategic marketing planning. Country Studies: Often managers need an in-depth, yet broad and up-to-date understanding of a country’s strategic market potential and situation before the first field trip or investment proposal. There are over 190 country studies available. Each study consists of analysis, statistics, forecasts, and information of relevance to managers. The studies are continually updated to insure that the reports have the most relevant information available. In addition to raw information, the reports provide relevant analyses which put a more general perspective on a country (seen in the context of relative performance vis-à-vis benchmarks). Industry Studies: Companies are racing to become more international, if not global in their strategies. For over 2000 product/industry categories, these reports give the reader a concise summary of latent market forecasts, pro-forma financials, import competition profiles, contacts, key references and trends across 200 countries of the world. Some reports focus on a particular product and region (up to four regions per product), while others focus on a product within a particular country.

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Table of Contents 1

INTRODUCTION & METHODOLOGY.............................................................................1

1.1

What Does This Report Cover?

1

1.2

How to Strategically Evaluate Hong Kong

1

1.3

Latent Demand and Accessibility in Hong Kong

3

2 2.1

INFORMATION TECHNOLOGY (IT) SECURITY SOFTWARE IN HONG KONG ..5 Latent Demand and Accessibility: Background

5

2.2 Latent Demand: Market Composition 5 2.2.1 China .......................................................................................................................................................... 6 2.3

Market Data

7

2.4

Best Prospects

7

2.5 Major Players 7 2.5.1 Anti-Virus and Firewall.............................................................................................................................. 8 2.5.2 Encryption .................................................................................................................................................. 9 2.5.3 PKI System and Government Initiatives .................................................................................................... 9 2.5.4 Intrusion Detection Systems (IDS)........................................................................................................... 10 2.5.5 Content Security Products ........................................................................................................................ 10 2.5.6 Continuous Data Protection and Disaster Recovery................................................................................. 10 2.6

Target Buyers

11

2.7

Market Entry

12

2.8

Market Issues and Obstacles

13

2.9 Key Contacts 13 2.9.1 Trade Events............................................................................................................................................. 13 2.9.2 Resources ................................................................................................................................................. 13 2.9.3 IT Journals in Hong Kong ........................................................................................................................ 14

3

FINANCIAL INDICATORS: PREPACKAGED SOFTWARE .......................................15

3.1 Overview 15 3.1.1 Financial Returns and Gaps in Hong Kong .............................................................................................. 16 3.1.2 Labor Productivity Gaps in Hong Kong................................................................................................... 19 3.1.3 Limitations and Extensions ...................................................................................................................... 19 3.2 Financial Returns in Hong Kong: Asset Structure Ratios 20 3.2.1 Overview .................................................................................................................................................. 20 3.2.2 Assets – Definitions of Terms .................................................................................................................. 20 3.2.3 Asset Structure: Outlook .......................................................................................................................... 23 3.2.4 Large Variances: Assets ........................................................................................................................... 24 3.2.5 Key Percentiles and Rankings .................................................................................................................. 27 3.3

Financial Returns in Hong Kong: Liability Structure Ratios

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Contents 3.3.1 3.3.2 3.3.3 3.3.4 3.3.5

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Overview .................................................................................................................................................. 42 Liabilities and Equity – Definitions of Terms .......................................................................................... 42 Liability Structure: Outlook ..................................................................................................................... 44 Large Variances: Liabilities ..................................................................................................................... 45 Key Percentiles and Rankings .................................................................................................................. 48

3.4 Financial Returns in Hong Kong: Income Structure Ratios 61 3.4.1 Overview .................................................................................................................................................. 61 3.4.2 Income Statements – Definitions of Terms .............................................................................................. 61 3.4.3 Income Structure: Outlook ....................................................................................................................... 64 3.4.4 Large Variances: Income.......................................................................................................................... 65 3.4.5 Key Percentiles and Rankings .................................................................................................................. 68 3.5 Financial Returns in Hong Kong: Profitability Ratios 83 3.5.1 Overview .................................................................................................................................................. 83 3.5.2 Ratios – Definitions of Terms .................................................................................................................. 83 3.5.3 Ratio Structure: Outlook .......................................................................................................................... 86 3.5.4 Large Variances: Ratios ........................................................................................................................... 87 3.5.5 Key Percentiles and Rankings .................................................................................................................. 90 3.6 Productivity in Hong Kong: Asset-Labor Ratios 105 3.6.1 Overview ................................................................................................................................................ 105 3.6.2 Asset to Labor: Outlook ......................................................................................................................... 106 3.6.3 Asset to Labor: International Gaps......................................................................................................... 107 3.6.4 Key Percentiles and Rankings ................................................................................................................ 110 3.7 Productivity in Hong Kong: Liability-Labor Ratios 125 3.7.1 Overview ................................................................................................................................................ 125 3.7.2 Liability to Labor: Outlook .................................................................................................................... 126 3.7.3 Liability and Equity to Labor: International Gaps.................................................................................. 127 3.7.4 Key Percentiles and Rankings ................................................................................................................ 130 3.8 Productivity in Hong Kong: Income-Labor Ratios 143 3.8.1 Overview ................................................................................................................................................ 143 3.8.2 Income to Labor: Outlook ...................................................................................................................... 144 3.8.3 Income to Labor: Gaps ........................................................................................................................... 145 3.8.4 Key Percentiles and Rankings ................................................................................................................ 148

4

MACRO-ACCESSIBILITY IN HONG KONG ...............................................................163

4.1 Executive Summary 163 4.1.1 Government Intervention Risks.............................................................................................................. 163 4.1.2 Infrastructure Situation........................................................................................................................... 164 4.1.3 Macau Economic Scene ......................................................................................................................... 165 4.1.4 Pearl River Delta - Hong Kong's Hinterland .......................................................................................... 165 4.2 Political Risks 166 4.2.1 Nature of Political Relationship with the United States ......................................................................... 166 4.2.2 Major Political Issues Affecting the Business Climate .......................................................................... 166 4.2.3 The Political System............................................................................................................................... 166 4.2.4 Macau Political Scene ............................................................................................................................ 167 4.3 Marketing Products and Services 167 4.3.1 Distribution and Sales Channels............................................................................................................. 168

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Contents 4.3.2 4.3.3 4.3.4 4.3.5 4.3.6 4.3.7 4.3.8 4.3.9 4.3.10 4.3.11 4.3.12 4.3.13

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Use of Agents and Distributors/Finding a Partner.................................................................................. 168 Franchising ............................................................................................................................................. 168 Direct Sales ............................................................................................................................................ 169 Joint Ventures/Licensing........................................................................................................................ 169 Steps to Establishing an Office............................................................................................................... 169 Selling Factors/Techniques .................................................................................................................... 170 Advertising and Trade Promotion .......................................................................................................... 170 Pricing Product....................................................................................................................................... 174 Sales Service/Customer Support ............................................................................................................ 174 Selling to the Government...................................................................................................................... 174 Protecting Your Product from IPR Infringement ................................................................................... 175 Need for a Local Attorney...................................................................................................................... 175

4.4 Trade Issues 176 4.4.1 Customs Valuation ................................................................................................................................. 176 4.4.2 Trade Regulations and Standards ........................................................................................................... 177 4.4.3 Membership in Free Trade Arrangements.............................................................................................. 178 4.5 Investment Climate 178 4.5.1 Openness to Foreign Investment ............................................................................................................ 178 4.5.2 Conversion and Transfer Policies........................................................................................................... 179 4.5.3 Expropriation and Compensation ........................................................................................................... 180 4.5.4 Dispute Settlement ................................................................................................................................. 180 4.5.5 Performance Requirements and Incentives ............................................................................................ 180 4.5.6 Right to Private Ownership and Establishment ...................................................................................... 181 4.5.7 Protection of Property Rights ................................................................................................................. 181 4.6 Transparency of the Regulatory System 182 4.6.1 Efficient Capital Markets and Portfolio Investment............................................................................... 182 4.6.2 Political Violence ................................................................................................................................... 184 4.6.3 Corruption .............................................................................................................................................. 184 4.6.4 Bilateral Investment Agreements ........................................................................................................... 184 4.6.5 OPIC and Other Investment Insurance Programs................................................................................... 184 4.6.6 Labor ...................................................................................................................................................... 185 4.6.7 Foreign Trade Zones/Free Ports ............................................................................................................. 185 4.6.8 Major Foreign Investor Firms ................................................................................................................ 185 4.7 Trade and Project Financing 188 4.7.1 General Availability of Financing .......................................................................................................... 188 4.7.2 How to Finance Exports/Methods of Payment....................................................................................... 188 4.7.3 Types of Available Export Financing and Insurance ............................................................................. 188 4.7.4 The Asian Development Bank................................................................................................................ 189 4.8 Travel Issues 190 4.8.1 Travel Advisory and Visas ..................................................................................................................... 190 4.8.2 Business Infrastructure ........................................................................................................................... 190 4.8.3 Temporary Entry of Goods..................................................................................................................... 191 4.8.4 Country Data .......................................................................................................................................... 191 4.9 Key Contacts 191 4.9.1 U.S. Consulate General Trade-Related Contacts.................................................................................... 191 4.9.2 U.S. Commercial Service Offices in China............................................................................................ 193 4.9.3 American Chamber of Commerce and U.S. China Business Council.................................................... 194 4.9.4 Hong Kong Trade or Industry Associations in Key Sectors................................................................... 194 www.icongrouponline.com

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Contents 4.9.5 4.9.6 4.9.7 4.9.8 4.9.9

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Hong Kong Government Offices Relating to Key Sectors and/or Significant Trade Related Activities 201 Hong Kong Market Research Firms ...................................................................................................... 206 Licensed U.S. Commercial Banks in Hong Kong.................................................................................. 208 U.S. Contacts in Washington ................................................................................................................. 210 U.S. Market Development Cooperator Organizations Represented in Hong Kong ............................... 211

DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS .........215

5.1

Disclaimers & Safe Harbor

215

5.2

Icon Group International, Inc. User Agreement Provisions

216

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1 1.1

INTRODUCTION & METHODOLOGY WHAT DOES THIS REPORT COVER?

The primary audience for this report is managers involved with the highest levels of the strategic planning process and consultants who help their clients with this task. The user will not only benefit from the hundreds of hours that went into the methodology and its application, but also from its alternative perspective on strategic planning relating to information technology (it) security software in Hong Kong. As the editor of this report, I am drawing on a methodology developed at INSEAD, an international business school (www.insead.edu). For any given industry or sector, including information technology (it) security software, the methodology decomposes a country’s strategic potential along four key dimensions: (1) latent demand, (2) micro-accessibility, (3) proxy operating pro-forma financials, and (4) macro-accessibility. A country may have very high latent demand, yet have low accessibility, making it a less attractive market than many smaller potential countries having higher levels of accessibility. With this perspective, this report provides both a micro and a macro strategic profile of information technology (it) security software in Hong Kong. It does so by compiling published information that directly relates to latent demand and accessibility, either at the micro or macro level. The reader new to Hong Kong can quickly understand where Hong Kong fits into a firm’s strategic perspective. In Chapter 2, the report investigates latent demand and micro-accessibility for information technology (it) security software in Hong Kong. In Chapters 3 and 4, the report covers proxy operating pro-forma financials and macro-accessibility in Hong Kong. Macroaccessibility is a general evaluation of investment and business conditions in Hong Kong.

1.2

HOW TO STRATEGICALLY EVALUATE HONG KONG

Perhaps the most efficient way of evaluating Hong Kong is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to information technology (it) security software are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).

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Introduction & Methodology

2

Framework for Prioritizing Countries Demand/Market Potential Driven Firm

High

Highest Priority

High Priority Latent Demand

Moderate Priority Low Priority

Low

Lowest Priority Low

High Relative Accessibility

Accessibility/Supply Averse Firm High Highest Priority High Priority Latent Demand

Moderate Priority Low Priority Lowest Priority

Low High

Low Relative Accessibility

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Introduction & Methodology

3

In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market – neither a market-driven nor a costdriven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).

1.3

LATENT DEMAND AND ACCESSIBILITY IN HONG KONG

This report provides a detailed overview of factors driving latent demand and accessibility for information technology (it) security software in Hong Kong. Latent demand is largely driven by economic fundamentals specific to information technology (it) security software. This topic is discussed in Chapter 2 using work carried out in Hong Kong on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for information technology (it) security software in Hong Kong. I use the term “micro” since the discussion is focused specifically on information technology (it) security software. Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in Hong Kong. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in Hong Kong. The numbers are only indicative of an average firm whose primary activity is in Hong Kong. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in Hong Kong. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “prepackaged software”, as defined in Chapter 3. Again, while “prepackaged software” does not exactly equate to “information technology (it) security software”, it nevertheless gives an indicator of how Hong Kong compares to other countries for a proxy adjacent category along various dimensions. Chapter 4 deals with macro-accessibility and covers factors that go beyond information technology (it) security software. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Hong Kong: •

Openness to Trade in Hong Kong

•

Openness to Direct Investment in Hong Kong

•

Local Marketing and Entry Strategy Alternatives

•

Local Human Resources

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Introduction & Methodology •

4

Local Risks

Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in Hong Kong. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Hong Kong. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.

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2 2.1

INFORMATION TECHNOLOGY (IT) SECURITY SOFTWARE IN HONG KONG LATENT DEMAND AND ACCESSIBILITY: BACKGROUND

Hong Kong is one of Asia’s leading technology cities in terms of personal computer (PC) and Internet penetration and, more importantly, in terms of its I.T. spending per capita. Growth in the information security sector has been hampered in recent years due to an economic slow down. Hong Kong, however, is regaining its growth momentum, with GDP rising strongly during the past two years. This has resulted in increased spending on information security products. Industry players estimated that total I.T. spending in Hong Kong will increase by 5% per year, reaching U.S. $4.8 billion by 2010. Information security related spending is estimated to account for as much as 6% of the total I.T. spending, expected to represent U.S. $290 million by 2010. The adoption of information security systems, however, still remains patchy depending on the industry and size of company. That being said, the local market still offers lucrative opportunities for U.S. I.T. suppliers because U.S. security products enjoy an excellent reputation in Hong Kong due to their superior and robust technology. In addition, Hong Kong is also an excellent gateway for U.S. companies who are interested in entering the mainland China market.

2.2

LATENT DEMAND: MARKET COMPOSITION

Hong Kong is a vibrant city with a sophisticated information technology infrastructure and widespread adoption of computers at home and in the workplace. Hong Kong’s broadband network now reaches all commercial buildings and virtually all residential buildings. Hong Kong was ranked seventh globally and second in Asia in the Networked Readiness Index 2004-05 by the World Economic Forum. According to the International Telecommunication Union, the city has the world’s second highest broadband penetration. According to a 2005 survey conducted by the Hong Kong Census and Statistics Department, 1.6 million households (or 70.1%) have personal computers, and among these 92.2% are connected to the Internet. On the business side, the percentage of establishments using PCs and Internet connections in 2005 rose to 60.5% and 54.7% respectively, up from 58.4% and 50.4% the previous year. The wide adoption of I.T., however, opens up networks and servers to potential external and internal attacks. According to the Information Security Survey 2004 conducted by the Hong Kong Computer Emergency Response Team (HKCERT), viruses remain the dominant type of cyber attack, accounting for 80.2% or U.S. $89,000 of total financial losses.

Financial Losses by Type of Cyber Attack, 2000-2004 (USD) Type of attack Virus Denial of Service Hacking Theft of Information Total

2000 161,493 0 14,871 0 176,365

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2001 185,448 0 9,935 0 195,384 (+10.8%)

2002 173,395 12,371 26,525 23,076 235,369 (20.5%)

2003 105,070 4,211 36,666 10,641 156,589 (-33.5%)

2004 87,711 16,262 5,403 0 109,378 (-30.1%)

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Information Technology (IT) Security Software

6

The same report also suggested that 96% of the surveyed companies had deployed security technologies. Among all security products, the most commonly used were anti-virus software (90.9%), physical security (65.5%), firewalls (65.4%) and passwords (60.6%). The awareness of information security increased significantly in 2004. The percentage of companies without any security measures dropped from 10.1% in 2003 to 3.6% in 2004. As more companies begin to realize the benefits of implementing security measures, the demand for information security products will increase, creating a potential market for U.S. security solutions providers.

Security Technologies, 2003-2004 Security Technologies Anti-Virus Software Physical Security Firewall Password Access Control File Encryption Encrypted Login Virtual Private Network Digital ID Public Key Infrastructure Intrusion Detection System Non-reusable Passwords Biometrics None

2.2.1

2003 (%) 81.2 44.5 44.5 53.1 10 6.5 7.2 4.6 3.5 1.4 1.6 1.3 0.1 10.1

2004 (%) 90.9 65.5 65.4 60.6 15.3 9.7 8.4 7.6 4.6 1.6 1.2 0.5 0.2 3.6

China

Hong Kong remains a major gateway for U.S. companies interested in expanding into Mainland China. According to the China Internet Network Information Center (CNNIC), at the end of 2004 there were 94 million Internet users in China, second only to the U.S. The cities immediately to the north of Hong Kong—Shenzhen, Dongguan and Guangzhou—are among the wealthiest and most advanced cities in terms of technology implementation. China has committed to opening up its technology sector to foreign investment in phases, and established Hong Kong I.T. companies have been among the first to benefit. According to the IDC research agency, China’s security content management (SCM) market was estimated at U.S. $90.4 million in 2005, of which 87.1% of the revenue or U.S. $78.7 million was attributed to SCM software. Hardware, on the other hand, accounted for 12.9% or U.S. $11.6 million. In the five years from 2006 to 2010, the compound annual growth rate (CAGR) of China’s SCM market is predicted at 17.4%, and the market is expected to reach U.S. $262.8 million by 2010. Although China has tremendous market potential for information security products, weak law enforcement against software piracy has stifled demand for legitimate off-the-shelf products such as anti-virus software. As enforcement improves and as the market matures, there is no doubt that China’s demand for legitimate information security products, software and technology will increase.

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Information Technology (IT) Security Software

2.3

7

MARKET DATA

The rebound in Hong Kong’s economy coupled with greater awareness of the importance of information security has led to increased spending on information security products in the past two years. Hong Kong’s role in assisting mainland companies with their security needs has also boosted local purchasing as buying decisions for mainland companies, or mainland-based facilities of overseas companies, are often made in Hong Kong.

Spending on Information Security Products Forecast, 2004-2010 (USD Billions) Total IT Spending

2004 3.1

2005 3.4

2006* 3.7

2007* 3.9

2008* 4.1

2009* 4.3

2010* 4.5

Information Security (%)

3.6

4.1

4.5

5

5.5

6

6.5

Information Security

0.11

0.14

0.16

0.19

0.22

0.28

0.29

Software(%)

28

26

25

23

23

23

23

Hardware(%)

36

36

37

37

37

35

32

Services(%)

36

38

38

40

40

42

45

*Estimated Source: IDC and Industry Players Industry players estimated that total I.T. spending in Hong Kong will increase by 5% per year, reaching U.S. $4.5 billion by 2010. Information security-related spending is estimated to account for 6.5% of the total I.T. spending, expected to represent U.S. $290 million by 2010.

2.4

BEST PROSPECTS

The best selling prospects in Hong Kong for U.S. suppliers center on: •

Home Users: Anti-virus, firewall, data recovery software for PCs and handheld devices (must be able to support English and Chinese characters).

•

Business users: Cost-competitive security software targeting small businesses (98% of Hong Kong’s GDP comes from small-to-medium sized firms); and disaster recovery, encryption for larger companies in the financial and logistics sectors.

2.5

MAJOR PLAYERS

U.S. information technology companies have an excellent reputation for high-quality and innovative products and services in Hong Kong. Currently, the competition comes from the U.K, Finland, and to a lesser extent, Israel. However, China is a potential competitor in the mid-to-long term because of its substantial land and labor cost advantage and its investment in research and development.

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Information Technology (IT) Security Software

2.5.1

8

Anti-Virus and Firewall

Most major players for both the consumer and commercial markets originate from the U.S. These include Symantec, Norton, Norman, McAfee and Trend Micro. Anti-virus software is available for U.S. $25-50 depending on the features. The use of firewalls increased significantly in 2004. This is partly due to the fact that a growing number of companies find the basic security tools like anti-virus software can no longer completely stop virus or other computer attacks, and therefore, install firewalls to further protect their computer systems. In addition, software vendors have been heavily promoting the use of Firewalls. For instance, a firewall is automatically loaded if Windows XP Service Pack 2 is applied. The retail price for high-end U.S. brand firewall software ranges from U.S. $35 to U.S. $50, while the price of hardware can range from U.S. $750 to U.S. $10,000, depending on the features and number of users. Brand reputation and price are equally important when making purchasing decisions.

Major Players (Anti-Virus) Symantec/Norton Microsoft Antigen Norman McAfee Kaspersky BitDefender Trend Micro

Product Origin U.S. U.S. U.S. U.S. Russian German U.S.

Major Players (Firewall Software) Check Point Software Computer Associates Symantec Secure Computing

Product Origin Israeli/U.S. U.S. U.S. U.S.

Major Players (Firewall Hardware) Netscreen Cisco (PIX) Sonic Wall Watchguard Nokia

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Product Origin U.S. U.S. U.S. U.S. Finland

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Information Technology (IT) Security Software

2.5.2

9

Encryption

The most commonly used encryption protocols in Hong Kong are Secure Sockets Layer (SSL), Rivest-ShamirAdleman (RSA), SSH, PGP and Advanced Encryption Standard (AES), which is gradually replacing Data Encryption Standard (DES). SSH is mostly used to secure Transmission Control Protocol (TCP) connections between remote sites. SSL is commonly used in Web browsers to secure Web traffic. RSA is for Public Key Infrastructure (PKI) system authentication and authorization. AES, which is designed to replace DES, is intended for the encryption of commercial and government data.

Major Players (Encryption) PGP Utimaco F-Secure SSH (Security Shell) RSA

2.5.3

Product Origin U.S. U.S. Finland Finland U.S.

PKI System and Government Initiatives

PKI covers the use of public key cryptography for authentication and access control of a user, guaranteeing the integrity and non-repudiation of documents signed by the user, thus reinforcing confidentiality of the data. Two Hong Kong Certificate Authorities (CA), Digi-Sign Certification Ltd. and the Hong Kong Postmaster General, use Baltimore’s product. Another Hong Kong CA, Hi-TRUST, and the Macau CA use products from VeriSign. Entrust is widely adopted in China. Hong Kong also has a PKI Forum with 32 corporate associates who aim to promote the advantages of the sector.

Major Players (PKI) Baltimore VeriSign Entrust

Product Origin U.K. U.S. U.S.

The Hong Kong Government is undergoing a massive program to replace the existing identity cards with smart ID cards. The new smart cards carry an optional (and free to use) digital certificate. Other E-Government services are available in the departments of Immigration, Logistics, Inland Revenue, Transport and the Electoral Office. The scheme is still in its infancy and the Government acknowledges that, to date, public uptake has not been strong.

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Information Technology (IT) Security Software

2.5.4

10

Intrusion Detection Systems (IDS)

The most significant purchasing criteria for end users are quality, reliability and compatibility. Price is not a key factor as IDS systems are generally purchased by larger companies.

Major Players (IDS) ISS (Real Secure) Enterasys (Dragon) Symantec (Intruder Alert) Tripwire (Tripwire) Computer Associates (Etrust Intrusion Protection) Cisco (Secure IDS)

2.5.5

Network or Host-Based Both Network-based Host-based Host-based Network-based Network-based

Content Security Products

Major Players (Content Inspection and Filtering) Product Origin U.S. U.S. U.S. U.S. U.S.

Clearswift Websense Trendmicro McAfee Serve Control

Clearswift is the current market leader and claims to have some 50% of the local market, while Websense occupies close to 25% of the market.

2.5.6

Continuous Data Protection and Disaster Recovery

Continuous Data Protection (CDP) and Disaster Recovery software have emerged as the leading growth areas among all information security products. In Hong Kong, data loss or corruption are generally caused by viruses, software errors or user errors. The software allows users to recover data back to any point in time. In general, the software is host-based and managed from a central console. It works with the user’s existing hardware and software to provide fast recovery of lost data.

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Information Technology (IT) Security Software

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Major Players (Data Protection) XOsoft – Assured Recovery, Enterprise Rewinder, WANsync

Product Origin Hong Kong Companies Recently Acquired by Computer Associates

Fujitsu/Softec – Softec Replicator Symantec Veritas Backup Exec IBM – HACMP/XD Relectronic-Remech

Japan U.S. U.S. U.S. German

2.6

TARGET BUYERS

In terms of industry adoption, banking and financial companies are the largest adopters of security systems. Sectors such as retail, hotels, and restaurants have lower adoption rates, but the percentage growth in these sectors (up 44% and 34% respectively in the past two years) gives optimism to companies providing products and prices suited to these specific sectors.

Advanced Security Levels, 2002-2004 (%) Industry Sector Banking and Finance Manufacturing Transport and Communication Import and Export Business Services Community/Personal Services Wholesale Construction and Real Estate Retail Restaurant and Hotel

2002 27.8 22.9 16.5 18.4 21.2 13.8 15.5 19.5 10.8 9.3

2003 34.6 24.8 15.5 16.6 24.7 15.5 16.3 8.6 11.7 13.2

2004 36.9 33.3 26.5 20.5 20.2 19 16.8 16.1 15.5 12.5

% Change 32 45 61 11 -ve 38 8 -ve 44 34

Among business users, large enterprises generally maintain a more advanced security level, while smaller companies with budget constraints tend to use basic security measures. Overall, the security level has greatly improved. The percentage of large companies without any security measures fell to zero in 2004 from 2.4% in 2003. Among small companies, this number dropped significantly from 12.1% in 2003 to 4.4% in 2004.

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Information Technology (IT) Security Software

12

Security Levels by Staff Size, 2003-2004 (%) Level of Security None Basic Advanced Total

Staff of 1-19 2003 2004 12.1 4.4 79.1 86.1 8.8 9.5 100 100

Staff of 20-99 2003 2004 3.1 1.3 50.7 43.1 46.2 55.6 100 100

Staff of 100 or Above 2003 2004 2.4 0 26.2 11.3 71.4 88.7 100 100

However, there remains room for substantial improvement as many companies still have not taken sufficient proactive initiatives in preventing computer intrusions. The percentages of surveyed companies that had information security risk assessment and audit, information security policy and incident response procedures in place were still low in 2004, with only 11.6%, 18.1% and 22.6% respectively. In general, large companies are more proactive in implementing a comprehensive security management strategy than small-to-medium sized companies.

Security Management in Place, 2003-2004 (%)

Staff Size 1-19 20-99 100 or Above All Companies

2.7

Information Security Risk Assessment and Audits 2003 2004 8.3 6.8 25.3 25.2 57.1 41.5 12.5 11.6

Information Security Policy 2003 2004 11 11.2 38.6 37.9 57.1 60.4 17.3 18.1

Incident Response Procedures 2003 2004 20.5 16 46.2 42.2 69 58.5 26.5 22.6

Incident Response Procedures 2003 2004 47.2 56.9 73.3 79.4 85.7 90.6 53.1 62.6

MARKET ENTRY

Not only is the growth of the IT sector in China/Hong Kong rapid, but Hong Kong is also considered a key player in buying decisions, with many of the major companies being headquartered in the city. After trading with the PRC for over 50 years, many Hong Kong traders have developed a particular expertise in selling to China and have set up offices in key cities such as Beijing, Shanghai, and Guangzhou. Accessing the China market through a Hong Kong agent/distributor with a sound track record in China trade can help U.S. firms, particularly small and medium enterprises (SMEs) succeed in China. Working with agents and distributors in Hong Kong is very much like working with an agent in the United States. Hong Kong has no special legislation regarding agents and distributors. Virtually anything that both sides can agree to and can put into a written contract is acceptable and enforceable, including restrictions on territory and a grace period for termination of the agreement. As well as having a long history of working with China and wide networks of business contacts, Hong Kong also has a preferential business relationship with the Chinese mainland, assisted by a free trade agreement (known as the Closer Economic Partnership Arrangement, or CEPA). CEPA was established to remove barriers to trade between Hong Kong and the Mainland and to promote investment and cooperation.

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Information Technology (IT) Security Software

13

For U.S. companies to benefit from CEPA’s duty-free access, they must satisfy the ‘rule of origin’ with regard to the equipment under production. The ‘ROO’ states that up to 30%—depending on the product line—of the value of the equipment be ‘added’ in Hong Kong. For more details please refer to the Trade and Industry Development Web site at www.tid.gov.hk and click on ‘CEPA.’

2.8

MARKET ISSUES AND OBSTACLES

Hong Kong has no special legislation regarding setting up representative offices, or engaging an agent or distributor. Few product safety standards are required for the domestic Hong Kong market, except products related to fire control. U.S. companies seeking to export to Hong Kong should check with potential agents and customers to determine exact standards required. Hong Kong is also a duty free port, and the Hong Kong Government levies no import tariffs on industrial process hardware. For inquiries on specific products, please contact: Customs and Excise Department 8th Floor, Harbor Building 38 Pier Road Central, Hong Kong Tel: (852) 2852-3324 Fax: (852) 2541-9827 (Dutiable Commodities Division)

2.9

KEY CONTACTS

2.9.1

Trade Events

•

ICT Expo: www.ictexpo.com

•

Hong Kong PKI Forum: www.hkpkiforum.org.hk

•

Asian Elenex, Asian Building Technologies, Asian Securitex: www.asianelenex.com, www.asianbt.com, www.asiansecuritex.com

2.9.2

Resources

•

Professional Information Security Association: www.pisa.org.hk

•

Hong Kong Computer Emergency Response Team: www.hkcert.org

•

Hong Kong SAR Government Digital 21 Strategy: www.info.gov.hk/digital21

•

Information Security and Forensics Society: www.isfs.org.hk

•

Hong Kong Information Technology Federation: www.hkitf.org

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Information Technology (IT) Security Software

2.9.3

14

IT Journals in Hong Kong

•

Hi-Tech Weekly (best-selling Chinese language magazine): www.hitechweekly.com

•

Computer World: www.cw.com.hk

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15

3 3.1

FINANCIAL INDICATORS: PREPACKAGED SOFTWARE OVERVIEW

Is Hong Kong competitive? With the globalization of markets, the increased mobility of corporate assets, and the need for productive human resources, this question has become all the more complex to answer. The financial indicators section was prepared to tackle this question by focusing on certain fundamentals: financial performance and labor productivity. Rather than focus on the economy as a whole, the analysis presented here considers only one sector: prepackaged software. We are essentially interested in the degree to which firms operating in Hong Kong have fundamentally different financial structures and performance compared to firms located elsewhere. With respect to this view of competitiveness, if one were to invest or operate in Hong Kong, how would the firm’s asset structure likely vary compared to a firm operating in some other country in Asia or average location in the world? In Hong Kong, do firms typically hold more cash and other short term assets, or do they concentrate their assets in physical plant and equipment? On the liability side, do firms operating in Hong Kong have a higher percent of payables compared to other firms operating in Asia, or do they hold a higher concentration of long term debt? The structure of the income statement is also telling. Do firms operating in Hong Kong have relatively higher costs of goods sold, operating costs, or income taxes compared to firms located elsewhere in the region or the world in general? Are returns on equity higher in Hong Kong? Are profit margins greater? Are inventories held longer? The financial indicators section was designed to answer these and similar questions that naturally affect one’s decision to invest or operate in Hong Kong. Again, we are particularly interested in prepackaged software, and not the economy as a whole. In many instances, people make all the difference. In addition to financial competitiveness, we consider the extent to which labor deployment and productivity in Hong Kong differs from regional and global benchmarks. In this case, we are interested in the amount of labor required to operate a typical business in Hong Kong and the likely returns on this human investment. What is the typical ratio of short-term and long-term assets to employee (employed in prepackaged software operations)? What are typical capital-labor ratios? How different are these ratios to those in Asia in general and the world as a whole? What are the average sales and net profits per employee in Hong Kong compared to regional benchmarks? The goal of this section is to assist managers in gauging the competitive performance of Hong Kong at the global level for prepackaged software. With the globalization of markets, greater foreign competition, and the reduction of entry barriers, it becomes all the more important to benchmark Hong Kong against other countries on a worldwide basis. Doing so, however, is not an obvious task. This report generates international benchmarks and measures gaps that might be revealed from such an exercise. First, data is collected from companies across all regions of the world. For each of these firms, data are standardized into comparable categories (assets, liabilities, income and ratios), by country, region and on a worldwide basis. From there, we eliminate all currency effects by standardizing within each category. Global benchmarks are then compared to those estimated for prepackaged software in Hong Kong. Though we heavily rely on historical performance, the figures reported are not historical but are forecasts and projections for the coming fiscal year.

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Financial Indicators

3.1.1

16

Financial Returns and Gaps in Hong Kong

The approach used in this report to evaluate operating performance for prepackaged software in Hong Kong is called "vertical analysis." For those unfamiliar with this type of analysis, frequently taught in graduate schools of business, the reader is recommended Jae K. Shim and Joel G. Siegel’s recent book titled Financial Management.1 In their discussion of financial statement analysis and ratios, Skim and Siegel (p. 42-43), describe common-size statement (vertical analysis) as follows: A common-size statement is one that shows each item in percentage terms. Preparation of common-size statements is known as vertical analysis, in which a material financial statement item is used as a base value and all other accounts on the financial statement are compared to it. In the balance sheet, for example, total assets equal 100 percent, and each individual asset is stated as a percentage of total assets. Similarly, total liabilities and stockholders’ equity are assigned a value of 100 percent and each liability or equity account is then stated as a percentage of total liabilities and stockholders’ equity, respectively. … For the income statement, a value of 100 percent is assigned to net sales, and all other revenues and expense accounts are related to it. It is possible to see at a glance how each dollar of sales is distributed among various costs, expenses, and profits. The authors suggest that vertical analyses involve industry-based comparisons. Such a comparison “allows you to answer the question, ‘How does a business fare in the industry?’ You must compare the company’s ratios to… industry norms.” (p. 43-44) This approach is extended to country competitiveness (in this case Hong Kong) for a particular sector (in this case prepackaged software). This involves calculating country, regional and global norms. This introduction will describe the seven-stage methodology used to perform this analysis. Each stage should be seen as a working assumption behind the numbers presented in later chapters. Stage 1. Industry Classification. This stage begins by classifying the company into an industry. For this, we have relied on a combination of the North American Industry Classification System (NAICS pronounced “Nakes”), a relatively new system for classifying business establishments, and the older Standard Industrial Classification (SIC) system. Adopted in 1997, NAICS codes are the new industry classification codes used by statistical agencies of the United States. NAICS was developed jointly by the U.S., Canada, and Mexico to provide comparability in statistics about business activity across North America. After 60 years of service, the outdated SIC system was retired on October 1, 2000, leaving only the NAICS codes for official use. The NAICS classification system adds some 350 new industries and represents a revision to over 60% of the previous SIC industries. Despite its official retirement, the SIC system is still commonly used (and often reported in firm’s financial statements). For most companies in the world, classification within either the new NAICS or older SIC systems is a rather straight forward exercise. For some, however, it can be problematic. This is true for several reasons. The first being that the SIC or NAICS classification systems are rather broad for many product and industry categories (a firm’s products or services may be only a minor aspect of the classification’s definition). The second is that some firms’ activities span multiple codes. Finally, it is possible that a firm is classified by one source using its SIC code, and by another using its NAICS code, and by a third using both. Furthermore, some sources do not report either code, but instead use qualitative statements of the firm’s activities. Nevertheless, if one wishes to pursue a vertical analysis, some classification needs to take place which selects a peer group. In making this classification, one can rely on a number of sources. In some countries, firms must “self” classify in official periodic reports (e.g. annular reports, 10Ks, etc.) to public authorities (such as the Securities and Exchange Commission). These reports are then open for public scrutiny (e.g. EDGAR filings). In other cases, commercial data vendors or private research firms provide SIC/NAICS codes for specific companies. These include: •

Bloomberg - www.bloomberg.com

•

Datastream (Thomson Financial) - www.datastream.com

1

Skim and Siegel (2000), Financial Management published by Barron’s Educational Series, Inc. (BARON’S BUSINESS LIBRARY Series), ISBN: 0-7641-1402-6. www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators •

17

Dun & Bradstreet - www.dnb.com

•

Hoovers - www.hoovers.com

•

HarrisInfoSource - www.HarrisInfo.com

•

InfoUSA - www.infousa.com

•

Investext (Thomson Financial) - www.investext.com

•

Kompass International Neuenschwander SA. – www.kompass.com

•

Moody's Investors Service - www.moodys.com

•

Primark (Thomson Financial) - www.primark.com

•

Profound (The Dialog Corporation – A Thomson Company) - www.profound.com

•

Reuters - www.reuters.com

•

Standard & Poor's - www.standardandpoors.com

It is interesting to note that commercial vendors often report different qualitative descriptions and industrial classifications from one to another. These descriptions and classifications may also be different from those reported by the firm itself. Anyone hoping to perform a benchmarking study, therefore, has to make a judgment call across these various sources in order to determine a reasonable classification. In this report, we have decided a metaanalytic process, by combining various sources (including linking a classification’s keywords to qualitative descriptions of the firm’s product line). In cases of inconsistency, the most recent or globally comparable available is chosen. Again, the overall goal is to classify firms, which either produce similar products, offer similar services, or are in the same stage of the value chain for a particular industrial classification. In the case of this report, the SIC code selected is: 7372 which is defined as “prepackaged software”. This classification should be seen as a working assumption. In order to obtain a more detailed discussion of this classification, the reader is referred to the Web sites developed by the U.S. Census Bureau: http://www.census.gov/epcd/www/naics.html. Basic definitions and descriptions are provided at: http://www.census.gov/epcd/www/drnaics.htm#q1. A full correspondence table between SIC and NAICS codes, and detailed definitions are given at http://www.census.gov/epcd/www/naicstab.htm. Stage 2. Firm-Level Data Collection. A global search was conducted across over 20,000 companies in over 40 major economies, including Hong Kong, for those that report financials (balance sheet and income statements) and that are involved in prepackaged software. It should be noted that the public-domain financials can be either historic or projections. It should also be noted that even historic figures can be modified in the future and often represent “estimates” of performance. Stage 3. Standardization. Once collected, public domain financial figures of firms identified in Stage 2 are standardize into comparable categories (assets, liabilities, and income). Again, these are limited to firms involved in some aspect of prepackaged software (i.e. are members of the value chain). From there, we eliminate all currency effects by standardizing within each category (creating ratios). In order to maintain comparability over time and across countries, vertical analysis is used. In the case of a firm’s assets, we treat the total assets as equaling 100, irrespective of the value of the local currency. All other assets are then calculated as a percent of total assets. In this way, the structure of the firm’s assets can be easily interpreted and compared with international benchmarks. For liabilities, total liabilities and equity are indexed to equal to 100. For the income statement, total revenue is indexed to equal 100, and all other figures are calculated as a percent of these figures. Stage 4. Filtering. Not all the firms selected in Stage 2 or the ratios calculated in Stage 3 are used for the country, regional or global benchmarks, as a number of companies are purposely dropped from the analysis. This is justified by the “outlier” phenomenon that plagues such analysis. The problem lies in that any given company in the benchmarking pool may be facing some exceptional event or may be organized in an exceptional way so as to make its ratios vastly different from the norm. By including such firms, the global benchmarks can be overly skewed. In many countries, firms are organized into holding groups. These groups nominally have very few employees (e.g. 4

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Financial Indicators

18

to 25 employees), but have extremely large assets, liabilities, or revenues. As such, the inclusion or exclusion of firms having this form of management can affect the ratios and benchmarks reported. Likewise, some firms have no net sales, no assets, no liabilities, or ratios. Others have ratios that appear implausible for a normal or viable company. In order to not allow these firms to affect the global benchmarks, only those firms with reasonable financials have been chosen. Finally, in some countries, detailed financials are not available or are not comparable to either the company in question or the global norm (e.g. various forms of depreciation). In this case, only those which exist and are comparable are reported. The details, therefore, that comprise a given ratio or set of ratios may not be reported. This may lead to the addition of several ratios, not summing to the whole. Stage 5. Calculation of Global Norms. Once the filtering process has eliminated outliers, a final list of companies included is compiled. Based on this list, the ratios discussed in Stage 3 are calculated for every firm, and then averaged to create country, regional and global benchmarks. The world average is calculated using each country’s population as a weight. Stage 6. Projection of Deviations. The goal of this report is not only to estimate raw ratios or averages, but also to present the difference between Hong Kong and projected global averages for that same ratio. Furthermore, it can be insightful to know the location of each ratio within the distribution of the countries represented in Stage 5. These deviations, in fact, can be seen as projections or likely scenarios for the future. This is often true for two reasons. First, while a company’s financials change from year to year, its ratios are often stable. This is especially true for the country, regional and global benchmarks which represent averages across companies. From a purely Bayesian sense, the difference between the company’s recent ratios and the benchmarks are a reasonable prior for future deviations. This is true, even if the entire industry is hit by an external or exogenous shock, such as an oil crisis or economic slowdown. In other words, we assume that the structure of the variance in the industry’s financials remains stable. Second, many of the data are based on preliminary reports that might be changed in future filings. As forecasts, therefore, the numbers derived from these are also forecasts of past and future performance (with associated uncertainties). The calculation of the difference between a country’s ratios and the global benchmarks is meant to yield roughly approximate forecasts, or "useful measures". Within Asia, the reliability of estimates varies from one country to another for those ratios given in tables that report national averages. This is true because reliable source statistics are not available for all countries in Asia. Countries with the highest reliability, or sample sizes after filtering in Stage 4, include China, Hong Kong, India, Japan, and South Korea. Others are generally econometrically extrapolated using models that use country characteristics (e.g. income per capita) as independent variables (i.e. countries having similar economic structures are assumed to have similar operating ratios). Again, the forecasts are based on the assumption of relative stability. This assumption has proven extremely robust in previous applications of this methodology (i.e. today’s weather is a good predictor of tomorrow’s weather, but not the weather three years from now). The results reported should be viewed as those for a “proto-typical” firm operating in Hong Kong whose primary activity is prepackaged software. Stage 7. Projection of Ranks and Percentiles. Based on the calculation of deviations, relative ranks and percentiles are calculated across the firms used in the benchmarks. The percentile estimates the percent of a representative sample of countries in the world having values of the ratio lower than Hong Kong. It is important to note that a percentile being high (or low) does not mean good (or bad) past, present or future financial performance. The reader must draw this conclusion on their own. The estimates provided were created to provide managerial insight, and not a recommendation with respect to particular investments within any country. We graphically report, for each part of the financial statement, the larger structural differences between Hong Kong and the regional and global benchmarks, and provide a summary table of ranks and percentiles. These are estimates for firm which would be involved in prepackaged software. A deviation from the global norm need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or perhaps signal a country's relative strength or weakness for the coming fiscal year.

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Financial Indicators

3.1.2

19

Labor Productivity Gaps in Hong Kong

In the case of labor productivity measures, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. The seven stage approach given above is used in a similar manner. We then report, for each part of the financial statement, the larger labor productivity gaps that Hong Kong has vis-àvis the worldwide average (for prepackaged software). Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.

3.1.3

Limitations and Extensions

Shim and Siegal (p. 60) stress that “while ratio analysis is an effective tool for assessing a company’s financial condition,” operating Hong Kong or any other country, “its limitations must be recognized.” They find that (p. 59) “no single ratio or group of ratios is adequate for assessing all aspects of a company’s financial condition” operating in a particular country. The authors note the following limitations associated with ratio analyses which apply to the global benchmarking and vertical analysis presented here (p.60): •

Accounting standards or policies may limit useful comparisons across companies

•

Management accounting practices across companies and countries may not be performed in the same style

•

Ratios are static and do not reveal future trends

•

Ratios do not indicate the quality of the components used to calculate the ratios (i.e. ratios have ambiguous interpretations)

•

Reported ratios may not reflect real values

•

Companies may be highly diversified, limiting the comparability of their ratios to others

•

Industry averages or norms are approximate; finer industry definitions may be required for certain interpretations or comparisons

•

Financial statements and resulting ratios often mean different things to different people depending on their points of view or motivations.

Again, all figures reported here are estimates, so due caution is required. The above caveats, and the fact that statements made in this report are forward-looking, requires that this point be emphasized. A number of intervening factors can have material effect on the ratios and variances forecasted. These include changes in a company's management style, exchange rate volatility, changes in accounting standards, the lack of oversight or comparability in accounting standards, changes in economic conditions, changes in competition, changes in the global economy, changes in source data quality, and similar factors.

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Financial Indicators

3.2 3.2.1

FINANCIAL RETURNS RATIOS

IN

20

HONG KONG: ASSET STRUCTURE

Overview

In this chapter we consider the asset structure of companies involved in prepackaged software operating in Hong Kong benchmarked against global averages. The chapter begins by defining relevant terms. A common-size statement, or vertical analysis of assets is then presented for companies operating in Hong Kong and the average global benchmarks (total assets = 100 percent). For ratios where there are large deviations between Hong Kong and the benchmarks, graphics are provided (sometimes referred to as a financial “gap” analysis). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key vertical analysis asset ratios are highlighted across countries in the comparison group.

3.2.2

Assets – Definitions of Terms

The following definitions are provided for those less familiar with the asset-side of financial statement analysis. As this chapter deals with the vertical analysis and global benchmarking of assets, only definitions covering certain terms used in this chapter’s tables and graphs are provided here . The glossary below reflects commonly accepted definitions across various countries and official sources. •

Accumulated Depreciation - Buildings. Accumulated depreciation is commonly understood as a contra asset account used to report the accumulation of periodic credits to reflect the use of the estimated service life of a fixed asset. Buildings are fixed assets which represent the acquisition and improvement costs of permanent structures owned or held by the company. Such structures typically include office buildings, storage quarters, or other facilities and also associated items such as loading docks, heating and airconditioning equipment, refrigeration equipment, and all other property permanently attached to or forming an integral part of the structure. However, it generally does not include furniture, fixtures, or other equipment which are not an integral part of the building.

•

Accumulated Depreciation – Property, Plant & Equipment Under Capitalized Leases. Accumulated depreciation of property, plant and equipment under capitalized leases is commonly understood as a contra asset account used to report the accumulation of periodic credits to reflect the use of the estimated service life of property, plant and equipment under capitalized lease obligations.

•

Accumulated Depreciation - Transportation Equipment. Accumulated depreciation of transportation equipment is commonly understood to be contra asset account used to report the accumulation of periodic credits to reflect the use of the estimated service life of transportation equipment.

•

Accumulated Depreciation -Machinery & Equipment. Accumulated depreciation of machinery and equipment is commonly understood to be contra asset account used to report the accumulation of periodic credits to reflect the use of the estimated service life of machinery and equipment.

•

Buildings. Buildings are defined as fixed assets which represent the acquisition and improvement costs of permanent structures owned or held by the company. Such structures include office buildings, storage quarters, or other facilities and also associated items such as loading docks, heating and air-conditioning equipment, refrigeration equipment, and all other property permanently attached to or forming an integral

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Financial Indicators

•

21

part of the structure. However, it does not include furniture, fixtures, or other equipment which are not an integral part of the building. Cash. Cash is typically defined as money on hand, on deposit with chartered bank, or held in the form of eligible securities.

•

Current Assets. Current assets are generally defined to be resources which are available, or can readily be made available, to meet the cost of operations or to pay current liabilities.

•

Deferred Charges. Deferred charges are generally understood to represent the amount which has been paid for services already received by the company but has not been charged to operations.

•

Finished Goods. Finished goods generally comprise the ready-for-sale inventory.

•

Intangible Other Assets. Intangible assets are generally understood to be nonphysical assets such as legal rights (patents and trademarks) recorded at their historical cost then reduced by systematic amortization.

•

Investments in Unconsolidated Subsidiaries. Investments in unconsolidated subsidiaries are typically defined as investments for the purpose of generating revenue in subsidiaries whose financial statements are not combined with the company's.

•

long Term Receivables. Long-term receivables are commonly defined as amounts due within a period exceeding one year from private persons, businesses, agencies, funds, or governmental units which are expected to be collected in the form of moneys, goods, and/or services.

•

Machinery & Equipment. Machinery and equipment is commonly defined as a fixed asset classification which typically includes tangible property (other than land, buildings, and improvements other than buildings) with a life of more than one year. Such assets typically include office equipment, furniture, machine tools, and motor vehicles. Equipment may be attached to a structure for purposes of securing the item, but unless it is permanently attached to an integral part of the building or structure, it will generally be classified as equipment and not buildings. Equipment is generally defined as tangible property other than land, buildings, or improvements other than buildings, which is used in operations. Examples include machinery, tools, trucks, cars, furniture, and furnishings.

•

Prepaid Expenses. Prepaid expenses are typically defined as those supplies and/or services (not inventory) acquired or purchased but not consumed or used at the end of the accounting period.

•

Progress Payments. Progress payments are commonly defined as periodic payments to a supplier, contractor, or subcontractor for work as it is completed as desired, in order to reduce working capital requirements.

•

Property Plant & Equipment Under Capitalized Leases. Property plant & equipment under capitalized leases generally consists of the gross book value (rather than the more commonly-used measures of fixed capital stocks in current or real value), of all commercial buildings, associated land and equipment used therein that are owned by the company and that are either used or operated by the company or leased or rented to others (under capitalized leases).

•

Property Plant and Equipment - Gross. Gross property, plant and equipment generally consists of the gross book value (rather than the more commonly-used measures of fixed capital stocks in current or real value), of all commercial buildings, associated land and equipment used therein that are owned by the company and that are either used or operated by the company or leased or rented to others.

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Financial Indicators

22

•

Property Plant and Equipment - Net. Net PP&E equals the original cost of property, plant, and equipment (PP&E), less accumulated depreciation, depletion and amortization (DD&A).

•

Raw Materials. Raw materials are materials which will be converted by a manufacturer into a finished product.

•

Receivables (Net). Net receivables are defined as the net amount due to the company from private persons, businesses, agencies, funds, or governmental units which is expected to be collected in the form of moneys, goods, and/or services.

•

Short Term Investments. Short-term investments are investments which can be typically liquidated in less than one year.

•

Tangible Other Assets. Other tangible assets are commonly understood to be something substantial or real that is capable of being given an actual or approximate value (market or estimated), not classified elsewhere.

•

Total Assets. Total assets are defined as the financial representation of economic resources, the beneficial interest in which is legally or equitably secured to a particular organization as a result of a past transaction or event.

•

Total Inventories. Total inventories are defined as the total amount of goods on hand.

•

Transportation Equipment. Transportation equipment is equipment used for the transportation of goods for sale.

•

Work in Process. Work in progress includes goods which have been started but are not yet ready for sale.

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Financial Indicators

3.2.3

23

Asset Structure: Outlook

Using the methodology described in the introduction, the following table summarizes asset structure benchmarks for firms involved in prepackaged software in Hong Kong. To allow comparable benchmarking, a common index of Total Assets = 100 is used. All figures are current-year projections for companies operating in Hong Kong based on latest financial results available. Asset Structure Hong Kong Asia World Avg. _________________________________________________________________________________________________________

Cash & Short Term Investments Cash Short Term Investments Receivables (Net) Total Inventories Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Investments in Unconsolidated Subsidiaries Other Investments Property Plant and Equipment - Net Property Plant and Equipment - Gross Buildings Machinery & Equipment Transportation Equipment Other Property Plant & Equipment Property Plant & Equipment Under Capitalized Leases Accumulated Depreciation - Total Accumulated Depreciation - Buildings Accumulated Depreciation -Machinery & Equipment Accumulated Depreciation - Transportation Equipment Accumulated Depreciation - Other Prop & Equip Accumulated Depreciation - PP&E Under Capitalized Leases Other Assets Deferred Charges Tangible Other Assets Intangible Other Assets Total Assets

29.77 20.75 6.62 32.75 5.84 2.49 0.55 2.11 1.31 3.05 0.62 72.48 0.72 1.12 2.72 19.65 29.51 3.79 18.40 1.30 15.90 13.22 9.95 0.13 6.82 0.66 5.47 1.95 7.31 0.76 1.77 5.08 100.00

15.82 7.35 11.62 24.59 7.17 2.20 1.58 2.26 1.68 1.28 3.27 52.11 1.62 1.84 3.89 22.19 39.17 5.98 19.17 1.27 15.99 4.94 17.09 1.25 8.79 0.70 7.30 0.76 8.82 0.36 1.12 5.72 100.00

19.43 9.28 11.78 24.30 6.66 2.22 1.33 2.79 0.89 1.28 3.28 54.42 1.18 4.34 4.13 20.33 36.43 6.92 14.77 1.58 10.71 3.79 15.09 1.16 4.85 0.39 4.74 0.41 10.81 0.45 1.08 7.06 100.00

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.2.4

24

Large Variances: Assets

The following graphics summarize for prepackaged software the large asset structure gaps between firms operating in Hong Kong and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Cash & Short Term Investments 30

29.77

25 20

19.43

15.82

15

10.34

10 5 0 Hong Kong

Asia

World Average

Gap

Gap: Cash 25

20.75

20 15 10

7.35

9.28

11.47

5 0 Hong Kong

Asia

World Average

Gap

Gap: Short Term Investments 15 10

11.62

11.78

6.62

5 0 -5

-5.16

-10 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

25

Gap: Receivables (Net) 40

32.75

30

24.59

24.3

20 8.45

10 0 Hong Kong

Asia

World Average

Gap

Gap: Current Assets - Total 80

72.48 52.11

60

54.42

40 18.06

20 0 Hong Kong

Asia

World Average

Gap

Gap: Property Plant and Equipment - Gross 40 30

39.17

36.43

29.51

20 10 0 -6.92

-10 Hong Kong

Asia

World Average

Gap

Gap: Machinery & Equipment 20

18.4

19.17 14.77

15 10

3.63

5 0 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

26

Gap: Other Property Plant & Equipment 20

15.9

15.99

15

10.71

10 5.19

5 0 Hong Kong

Asia

World Average

Gap

Gap: Property Plant & Equipment Under Capitalized Leases 15

13.22 9.43

10 4.94

5

3.79

0 Hong Kong

Asia

World Average

Gap

Gap: Accumulated Depreciation - Total 17.09

20 15 10

15.09

9.95

5 0 -5

-5.14

-10 Hong Kong

Asia

World Average

Gap

Gap: Other Assets 15 10

7.31

8.82

10.81

5 0 -3.5

-5 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

3.2.5

27

Key Percentiles and Rankings

We now consider the distribution of asset ratios for prepackaged software using ranks and percentiles. What percent of countries have a value lower or higher than Hong Kong (what is the ratio's rank or percentile)? The table below answers this question with respect to the vertical analysis of asset structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key vertical asset ratios are highlighted in additional tables. Asset Structure

Hong Kong

Rank of Total

Percentile

29.77 20.75 6.62 32.75 5.84 2.49 0.55 2.11 1.31 3.05 0.62 72.48 0.72 1.12 2.72 19.65 29.51 3.79 18.40 1.30 15.90 13.22 9.95 0.13 6.82 0.66 5.47 1.95 7.31 0.76 1.77 5.08 100.00

6 of 53 5 of 50 29 of 48 17 of 53 24 of 49 13 of 37 32 of 35 23 of 33 9 of 36 3 of 39 41 of 47 8 of 52 27 of 41 26 of 43 12 of 40 27 of 53 30 of 50 38 of 47 14 of 45 23 of 41 8 of 50 1 of 21 38 of 48 37 of 40 22 of 39 22 of 35 14 of 44 5 of 19 41 of 53 10 of 34 15 of 37 33 of 44

88.68 90.00 39.58 67.92 51.02 64.86 8.57 30.30 75.00 92.31 12.77 84.62 34.15 39.53 70.00 49.06 40.00 19.15 68.89 43.90 84.00 95.24 20.83 7.50 43.59 37.14 68.18 73.68 22.64 70.59 59.46 25.00

_________________________________________________________________________________________________________

Cash & Short Term Investments Cash Short Term Investments Receivables (Net) Total Inventories Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Investments in Unconsolidated Subsidiaries Other Investments Property Plant and Equipment - Net Property Plant and Equipment - Gross Buildings Machinery & Equipment Transportation Equipment Other Property Plant & Equipment Property Plant & Equipment Under Capitalized Leases Accumulated Depreciation - Total Accumulated Depreciation - Buildings Accumulated Depreciation -Machinery & Equipment Accumulated Depreciation - Transportation Equipment Accumulated Depreciation - Other Prop & Equip Accumulated Depreciation - P P & E Under Capitalized Leases Other Assets Deferred Charges Tangible Other Assets Intangible Other Assets Total Assets

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

28

Cash & Short Term Investments Countries

Value (total assets = 100)

Rank

Percentile

49.18 35.01 32.34 31.75 29.89 29.77 29.66 29.43 28.70 28.40 28.31 28.00 27.75 26.29 25.43 25.24 24.20 24.12 22.75 21.40 21.08 20.49 19.51 19.26 19.18 18.42 18.07 17.94 16.95 16.68 16.33 15.89 14.56 12.92 12.51 12.42 12.28 6.96 6.86 6.84 4.84 4.73 3.86 3.75 1.02

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 20 22 23 24 25 26 27 28 29 30 32 33 34 35 36 39 40 41 42 44 45 46 48 49 50 51 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 62.26 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 39.62 37.74 35.85 33.96 32.08 26.42 24.53 22.64 20.75 16.98 15.09 13.21 9.43 7.55 5.66 3.77 0.00

Region

_________________________________________________________________________________________________________

New Zealand Israel Denmark Sweden Czech Republic Hong Kong Japan Brazil Germany Canada Singapore Chile USA China Norway South Korea Poland Indonesia Russia Greece Finland Australia Italy Malaysia India Netherlands the United Kingdom South Africa Thailand France Switzerland Ireland Belgium Philippines Luxembourg Hungary Austria Portugal Turkey Mexico Spain Peru Pakistan Taiwan Argentina

Oceana the Middle East Europe Europe Europe Asia Asia Latin America Europe North America Asia Latin America North America Asia Europe Asia Europe Asia Europe Europe Europe Oceana Europe Asia Asia Europe Europe Africa Asia Europe Europe Europe Europe Asia Europe Europe Europe Europe the Middle East Latin America Europe Latin America the Middle East Asia Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

29

Cash & Short Term Investments (Prepackaged Software) Countries in Asia

Value (total assets = 100)

Rank

Percentile

Hong Kong Japan Singapore China South Korea Indonesia Maldives Malaysia India Sri Lanka Thailand Mongolia Brunei Cambodia Laos Burma Philippines Seychelles Vietnam Bangladesh Bhutan Nepal North Korea Taiwan Papua New Guinea Macau

29.77 29.66 28.31 26.29 25.24 24.12 21.99 19.26 19.18 17.34 16.95 15.12 14.74 14.56 14.04 12.96 12.92 12.90 12.74 10.92 10.40 9.31 4.59 3.75 3.21 1.01

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

30

Receivables (Net) Countries

Value (total assets = 100)

Rank

Percentile

51.67 45.98 45.01 44.19 43.58 43.49 42.95 40.69 39.67 39.52 38.11 36.90 36.78 35.54 34.44 33.63 32.75 31.84 31.78 31.14 30.90 30.43 29.19 28.59 28.48 28.15 27.94 27.87 27.49 26.64 26.02 25.47 25.23 23.84 21.93 21.49 21.28 19.22 18.71 18.48 17.81 17.03 15.91 13.33 4.97

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 32 34 35 37 38 40 41 43 44 45 46 47 49 51 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 39.62 35.85 33.96 30.19 28.30 24.53 22.64 18.87 16.98 15.09 13.21 11.32 7.55 3.77 0.00

Region

_________________________________________________________________________________________________________

Austria Netherlands Portugal Spain France Hungary Ireland Taiwan Greece Belgium Argentina Italy South Africa Poland Norway Singapore Hong Kong the United Kingdom Thailand India Finland Malaysia Sweden Australia Denmark Germany Turkey Mexico Canada Luxembourg Japan USA Switzerland South Korea China Russia Indonesia Philippines Brazil Israel Chile Czech Republic New Zealand Peru Pakistan

Europe Europe Europe Europe Europe Europe Europe Asia Europe Europe Latin America Europe Africa Europe Europe Asia Asia Europe Asia Asia Europe Asia Europe Oceana Europe Europe the Middle East Latin America North America Europe Asia North America Europe Asia Asia Europe Asia Asia Latin America the Middle East Latin America Europe Oceana Latin America the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

31

Receivables (Net) (Prepackaged Software) Countries in Asia

Value (total assets = 100)

Rank

Percentile

Seychelles Taiwan Macau Singapore Hong Kong Thailand India Malaysia Mongolia Japan South Korea Cambodia Laos Brunei China Indonesia Vietnam Maldives Burma Philippines Bangladesh Bhutan Sri Lanka Nepal North Korea Papua New Guinea

45.17 40.69 37.55 33.63 32.75 31.78 31.14 30.43 28.36 26.02 23.84 23.63 22.78 22.78 21.93 21.28 20.67 19.40 19.28 19.22 17.72 16.88 15.30 15.10 12.94 9.05

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

32

Total Inventories Countries

Value (total assets = 100)

Rank

Percentile

34.66 24.37 23.19 12.21 10.75 9.59 9.55 9.42 8.92 8.29 7.77 7.51 7.38 6.76 6.65 6.59 6.53 6.27 5.84 5.74 5.50 5.24 5.13 5.12 5.10 5.05 4.75 4.68 4.67 4.49 4.10 3.97 3.40 2.89 2.46 1.09 1.04 0.79 0.54 0.43 0.16 0.12

1 3 4 5 6 7 8 9 10 12 14 15 16 18 19 20 21 23 24 25 27 28 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

97.96 93.88 91.84 89.80 87.76 85.71 83.67 81.63 79.59 75.51 71.43 69.39 67.35 63.27 61.22 59.18 57.14 53.06 51.02 48.98 44.90 42.86 38.78 36.73 34.69 32.65 30.61 28.57 26.53 24.49 22.45 20.41 18.37 16.33 14.29 12.24 10.20 8.16 6.12 4.08 2.04 0.00

Region

_________________________________________________________________________________________________________

Peru Brazil Chile South Africa China Hungary Philippines Switzerland Indonesia Norway Greece Spain South Korea Thailand Russia Taiwan Singapore Netherlands Hong Kong Germany Denmark France Malaysia Portugal Sweden Japan Austria Canada Belgium Italy the United Kingdom Poland USA Argentina Australia India Czech Republic Finland Luxembourg Israel Pakistan Ireland

Latin America Latin America Latin America Africa Asia Europe Asia Europe Asia Europe Europe Europe Asia Asia Europe Asia Asia Europe Asia Europe Europe Europe Asia Europe Europe Asia Europe North America Europe Europe Europe Europe North America Latin America Oceana Asia Europe Europe Europe the Middle East the Middle East Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

33

Total Inventories (Prepackaged Software) Countries in Asia

Value (total assets = 100)

Rank

Percentile

North Korea Papua New Guinea China Seychelles Burma Philippines Indonesia Brunei Maldives South Korea Thailand Taiwan Singapore Sri Lanka Mongolia Hong Kong Malaysia Japan Macau India Cambodia Laos Vietnam Bangladesh Bhutan Nepal

33.64 23.52 10.75 9.97 9.59 9.55 8.92 8.51 8.13 7.38 6.76 6.59 6.53 6.41 6.03 5.84 5.13 5.05 2.85 1.09 0.83 0.80 0.73 0.62 0.59 0.53

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

34

Current Assets - Total Countries

Value (total assets = 100)

Rank

Percentile

79.78 75.99 73.83 73.48 73.46 73.17 73.13 72.48 71.98 70.56 69.91 68.27 67.66 67.63 67.57 67.21 66.37 66.26 66.13 65.09 62.87 62.42 61.66 61.54 60.74 60.57 60.27 60.22 59.55 58.74 58.16 57.59 56.54 55.54 55.46 54.42 54.30 53.58 53.44 53.34 49.12 44.65 42.45 42.37

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 35 37 38 39 40 41 42 46 47 48 49

98.08 96.15 94.23 92.31 90.38 88.46 86.54 84.62 82.69 80.77 78.85 76.92 75.00 73.08 71.15 69.23 67.31 65.38 63.46 61.54 59.62 57.69 55.77 53.85 51.92 50.00 48.08 46.15 44.23 42.31 40.38 38.46 36.54 32.69 28.85 26.92 25.00 23.08 21.15 19.23 11.54 9.62 7.69 5.77

Region

_________________________________________________________________________________________________________

Greece Norway Austria Brazil Denmark Hungary Netherlands Hong Kong Singapore Sweden Chile France Germany Finland Japan South Africa Thailand Poland Italy New Zealand Canada USA Switzerland South Korea Taiwan the United Kingdom China Portugal Belgium Malaysia India Spain Indonesia Ireland Russia Israel Australia Turkey Mexico Peru Czech Republic Philippines Argentina Luxembourg

Europe Europe Europe Latin America Europe Europe Europe Asia Asia Europe Latin America Europe Europe Europe Asia Africa Asia Europe Europe Oceana North America North America Europe Asia Asia Europe Asia Europe Europe Asia Asia Europe Asia Europe Europe the Middle East Oceana the Middle East Latin America Latin America Europe Asia Latin America Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

35

Current Assets - Total (Prepackaged Software) Countries in Asia

Value (total assets = 100)

Rank

Percentile

Seychelles Hong Kong Singapore Japan Thailand South Korea Taiwan China Mongolia Malaysia India Indonesia Brunei North Korea Maldives Burma Philippines Cambodia Laos Macau Sri Lanka Vietnam Papua New Guinea Bangladesh Bhutan Nepal

76.00 72.48 71.98 67.57 66.37 61.54 60.74 60.27 59.21 58.74 58.16 56.54 55.68 51.78 51.55 44.80 44.65 44.13 42.55 41.82 40.66 38.61 36.20 33.10 31.52 28.21

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

36

Property Plant and Equipment - Net Countries

Value (total assets = 100)

Rank

Percentile

45.92 45.73 45.60 44.62 35.48 35.35 31.26 31.12 29.84 28.00 26.77 25.19 24.97 23.49 20.94 20.85 20.39 19.89 19.79 19.65 18.69 18.26 18.20 17.67 17.31 16.50 15.70 14.61 14.04 14.01 13.97 13.93 13.86 13.50 12.75 12.59 11.74 11.10 9.73 8.92 7.79 7.49 7.39 6.99 6.34

1 2 3 4 6 7 8 9 10 12 13 17 18 20 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 43 44 45 46 47 48 49 50 51 52 53

98.11 96.23 94.34 92.45 88.68 86.79 84.91 83.02 81.13 77.36 75.47 67.92 66.04 62.26 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 18.87 16.98 15.09 13.21 11.32 9.43 7.55 5.66 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Pakistan Turkey Mexico Czech Republic Argentina Peru Indonesia Thailand Philippines Malaysia Taiwan Luxembourg Switzerland Greece Singapore Italy India New Zealand the United Kingdom Hong Kong Japan Hungary Brazil Australia Chile China Norway USA Poland South Africa South Korea Spain Canada Finland Germany Russia Netherlands Belgium Denmark France Ireland Austria Sweden Israel Portugal

the Middle East the Middle East Latin America Europe Latin America Latin America Asia Asia Asia Asia Asia Europe Europe Europe Asia Europe Asia Oceana Europe Asia Asia Europe Latin America Oceana Latin America Asia Europe North America Europe Africa Asia Europe North America Europe Europe Europe Europe Europe Europe Europe Europe Europe Europe the Middle East Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

37

Property Plant and Equipment - Net (Prepackaged Software) Countries in Asia

Value (total assets = 100)

Rank

Percentile

Macau North Korea Indonesia Thailand Burma Philippines Maldives Malaysia Mongolia Taiwan Papua New Guinea Brunei Sri Lanka Singapore India Hong Kong Seychelles Japan China Cambodia Laos South Korea Vietnam Bangladesh Bhutan Nepal

34.96 34.31 31.26 31.12 29.95 29.84 28.50 28.00 27.76 26.77 23.99 22.55 22.48 20.94 20.39 19.65 18.96 18.69 16.50 15.47 14.92 13.97 13.54 11.60 11.05 9.89

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

38

Accumulated Depreciation - Total Countries

Value (total assets = 100)

Rank

Percentile

58.56 36.04 36.01 35.94 34.84 31.96 24.64 21.21 19.88 18.74 18.07 17.83 17.28 17.05 16.96 16.95 16.09 14.89 14.50 13.83 13.43 12.56 12.17 12.08 11.86 11.79 11.77 11.14 10.45 10.00 9.95 9.41 9.31 9.18 7.73 6.94 6.39 5.66 3.84 3.82

1 2 3 4 5 8 10 11 13 14 15 16 17 18 19 20 21 24 26 27 28 29 30 31 32 33 34 35 36 37 38 40 41 42 43 44 45 46 47 48

97.92 95.83 93.75 91.67 89.58 83.33 79.17 77.08 72.92 70.83 68.75 66.67 64.58 62.50 60.42 58.33 56.25 50.00 45.83 43.75 41.67 39.58 37.50 35.42 33.33 31.25 29.17 27.08 25.00 22.92 20.83 16.67 14.58 12.50 10.42 8.33 6.25 4.17 2.08 0.00

Region

_________________________________________________________________________________________________________

Pakistan Turkey Indonesia Mexico Switzerland Czech Republic Philippines Peru Malaysia Thailand Greece Brazil the United Kingdom Japan Chile Netherlands USA India Spain Australia Singapore France Belgium Finland Denmark Canada Germany Italy South Korea Norway Hong Kong Russia Sweden New Zealand Poland South Africa Portugal China Ireland Israel

the Middle East the Middle East Asia Latin America Europe Europe Asia Latin America Asia Asia Europe Latin America Europe Asia Latin America Europe North America Asia Europe Oceana Asia Europe Europe Europe Europe North America Europe Europe Asia Europe Asia Europe Europe Oceana Europe Africa Europe Asia Europe the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

39

Accumulated Depreciation - Total (Prepackaged Software) Countries in Asia

Value (total assets = 100)

Rank

Percentile

Indonesia Maldives Brunei Sri Lanka Burma Philippines North Korea Malaysia Thailand Japan Mongolia India Papua New Guinea Singapore Cambodia Laos South Korea Hong Kong Vietnam Bangladesh Bhutan Nepal China

36.01 32.83 31.46 25.89 24.72 24.64 20.59 19.88 18.74 17.05 16.72 14.89 14.39 13.43 11.30 10.89 10.45 9.95 9.89 8.47 8.07 7.22 5.66

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

95.65 91.30 86.96 82.61 78.26 73.91 69.57 65.22 60.87 56.52 52.17 47.83 43.48 39.13 34.78 30.43 26.09 21.74 17.39 13.04 8.70 4.35 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

40

Intangible Other Assets Countries

Value (total assets = 100)

Rank

Percentile

30.98 25.20 24.49 23.73 21.29 20.92 20.61 20.13 19.88 18.85 18.53 18.50 18.37 18.14 17.80 17.66 14.59 13.40 13.09 11.10 9.62 9.19 9.12 8.45 8.24 7.32 6.47 5.91 5.83 5.19 5.08 4.35 3.76 3.25 3.05 1.48 0.62 0.03 0.03

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 18 19 20 21 22 23 24 25 26 27 28 30 31 32 33 34 35 36 37 38 39 42 43

97.73 95.45 93.18 90.91 88.64 86.36 84.09 81.82 79.55 77.27 75.00 72.73 70.45 68.18 65.91 63.64 59.09 56.82 54.55 52.27 50.00 47.73 45.45 43.18 40.91 38.64 36.36 31.82 29.55 27.27 25.00 22.73 20.45 18.18 15.91 13.64 11.36 4.55 2.27

Region

_________________________________________________________________________________________________________

Luxembourg Belgium Ireland Australia Canada Israel Spain Sweden USA Philippines France the United Kingdom Germany Argentina Austria Finland Norway Netherlands Denmark Italy Switzerland India Portugal Hungary South Africa Poland South Korea Malaysia Russia China Hong Kong Singapore Japan Greece New Zealand Czech Republic Thailand Turkey Mexico

Europe Europe Europe Oceana North America the Middle East Europe Europe North America Asia Europe Europe Europe Latin America Europe Europe Europe Europe Europe Europe Europe Asia Europe Europe Africa Europe Asia Asia Europe Asia Asia Asia Asia Europe Oceana Europe Asia the Middle East Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

41

Intangible Other Assets (Prepackaged Software) Countries in Asia

Value (total assets = 100)

Rank

Percentile

18.92 18.85 17.87 9.19 8.77 8.69 6.98 6.73 6.47 6.10 5.91 5.23 5.19 5.08 4.98 4.46 4.35 3.76 0.62 0.56

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

95.00 90.00 85.00 80.00 75.00 70.00 65.00 60.00 55.00 50.00 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00

_________________________________________________________________________________________________________

Burma Philippines Macau India Seychelles Brunei Cambodia Laos South Korea Vietnam Malaysia Bangladesh China Hong Kong Bhutan Nepal Singapore Japan Thailand Mongolia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.3 3.3.1

FINANCIAL RETURNS STRUCTURE RATIOS

IN

HONG

KONG:

42

LIABILITY

Overview

In this chapter we consider the liability structure of firms operating in Hong Kong benchmarked against global averages. The chapter begins by defining relevant terms. A common-size statement, or vertical analysis of liabilities and shareholder equity is then presented for the proto-typical firm operating in Hong Kong and the average global benchmarks (sometimes referred to as a financial “gap” analysis). The figure reflect firms involved in prepackaged software in Hong Kong. For ratios where there are large deviations between Hong Kong and the benchmarks, graphics are provided (total liabilities and equity = 100 percent). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key vertical analysis liability ratios are highlighted.

3.3.2

Liabilities and Equity – Definitions of Terms

The following definitions are provided for those less familiar with the liability-side of financial statement analysis. As this chapter deals with the vertical analysis and global benchmarking of liabilities and equity, only definitions covering certain terms used in this chapter’s tables and graphs are provided here . The glossary below reflects commonly accepted definitions across various countries and official sources. •

Accounts Payable. Accounts payable are defined as amounts owed on open account to private persons or organizations for goods or services received.

•

Accrued Payroll. Accrued payroll is defined as the cost of payroll that has been incurred but has not yet been paid. Payroll is typically defined as comprising records detailing the salaries, wages, allowances and deductions for each employee for a specific period of time.

•

Capital Surplus. Capital surplus is commonly defined as an amount of equity which is directly contributed capital in excess of the par value.

•

Capitalized Lease Obligations. A capitalized lease obligation is commonly defined as an ownership arrangement in which the item under lease is typically a long-term asset. Capital leases are generally recorded as assets with liability at the current value of the lease payment.

•

Common Equity. Common equity is defined to equal the company's net worth. It typically comprises capital stock, capital surplus, retained earnings, and, in some cases, net worth reserves. Common equity is the portion of total net worth belonging to the common stockholders. Synonyms which are often used for common equity are “common stock” and “net worth”.

•

Common Stock. Common stock is defined as the securities which represent the company's ownership interest. Common stockholders typically assume greater risk than preferred stockholders; although common stockholders maintain greater control and generally greater dividends and capital appreciation. Common stock can be used interchangeably with the term capital stock when the company has no preferred stock.

•

Current Liabilities - Total. Total current liabilities are defined as the total amount of obligations which would require the use of current assets or other current liabilities to pay.

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Financial Indicators

43

•

Current Portion of Long Term Debt. The current proportion of long term debt is typically defined as debt which is payable in more than one year.

•

Deferred Income. Deferred income is commonly defined as the amount for services rendered that has not yet been received.

•

Deferred Taxes. Deferred taxes are compulsory charges from a previous accounting period which are yet unpaid.

•

Deferred Taxes - Credit. Deferred tax credits are defined as credits against compulsory charges from a previous accounting period which are yet unpaid.

•

Income Taxes Payable. Income taxes payable are understood to mean taxes which are levied by state, federal, and local governments on the company's reported accounting profit. Income taxes payable are those which are due in the current accounting period.

•

Long Term Debt. Long-term debt is defined to be due in a period exceeding one year or one operating cycle, whichever is longer. Long-term debt can have an extended repayment period such as a many-year mortgage on land and buildings, or debt that's intended to be permanent such as bonds issued to investors.

•

Long Term Debt Excluding Capitalized Leases. Long term debt excluding capitalized leases is defined as debt which is typically due in a period exceeding one year or one operating cycle, whichever is longer, less capitalized leases (see Long Term Debt for exceptions). Capital leases are generally recorded as assets with liability at the current value of the lease payment.

•

Minority Interest. Minority interest is the proportional share of the minority ownership's interest (less than 50 percent) in the earnings or losses.

•

Retained Earnings. proprietary funds.

•

Shareholders Equity. Shareholders equity is commonly defined to be the amount of total equity reserved for common and preferred shareholders.

•

Short Term Debt. Short term debt is generally defined as debt payable within one year.

•

Total Liabilities. Total liabilities are generally defined to include all the claims against a corporation. Liabilities include accounts and wages and salaries payable, dividends declared payable, accrued taxes payable, fixed or long-term liabilities such as mortgage bonds, debentures, and bank loans.

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Retained earnings is an equity account reflecting the accumulated earnings of

©2007 Icon Group International, Inc.

Financial Indicators

3.3.3

44

Liability Structure: Outlook

Using the methodology described in the introduction, the following table summarizes liability and equity structure benchmarks for firms involved in prepackaged software in Hong Kong. To allow comparable benchmarking, a common index of Total Liabilities & Shareholders Equity = 100 is used. All figures are current-year projections for companies operating in Hong Kong based on latest financial results available. Liability Structure Hong Kong Asia World Avg. _________________________________________________________________________________________________________

Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Deferred Income Deferred Taxes Deferred Taxes - Credit Deferred Taxes - Debit Other Liabilities Total Liabilities Minority Interest Common Equity Common Stock Capital Surplus Revaluation Reserves Other Appropriated Reserves Unappropriated Reserves Retained Earnings Unrealized Foreign Exchange Gain/Loss Total Liabilities & Shareholders Equity

11.43 8.19 0.41 3.01 12.50 31.27 3.12 2.66 0.50 0.27 0.54 4.75 0.49 0.83 34.52 0.97 64.55 8.57 28.14 1.05 8.08 0.73 27.50 -0.04 100.00

9.80 9.07 1.46 2.33 8.19 26.64 6.30 6.03 0.27 0.26 -0.18 0.87 1.32 0.69 33.95 1.25 52.63 25.04 16.42 0.05 1.75 14.21 11.31 -0.14 100.00

7.46 8.65 1.72 1.92 9.50 26.76 5.97 5.82 0.15 0.21 -0.30 0.36 0.83 1.60 34.81 1.45 56.89 20.59 23.44 0.08 3.58 11.10 10.82 -0.03 100.00

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.3.4

45

Large Variances: Liabilities

The following graphics summarize for prepackaged software the large liability structure gaps between firms operating in Hong Kong and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Accounts Payable 12

11.43 9.8

10

7.46

8 6

3.97

4 2 0 Hong Kong

Asia

World Average

Gap

Gap: Other Current Liabilities 15

12.5

10

8.19

9.5

5

3

0 Hong Kong

Asia

World Average

Gap

Gap: Current Liabilities - Total 40

31.27

30

26.64

26.76

20 10

4.51

0 Hong Kong

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Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

46

Gap: Long Term Debt Excluding Capitalized Leases 8

6.03

6 4

5.82

2.66

2 0 -2

-3.16

-4 Hong Kong

Asia

World Average

Gap

Gap: Deferred Taxes - Credit 5

4.75

4.39

4 3 2

0.87

1

0.36

0 Hong Kong

Asia

World Average

Gap

Gap: Common Equity 80

64.55 52.63

60

56.89

40 20

7.66

0 Hong Kong

Asia

World Average

Gap

Gap: Common Stock 25.04

30 20 10

20.59

8.57

0 -10

-12.02

-20 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

47

Gap: Capital Surplus 30

28.14 23.44

25 20

16.42

15 10

4.7

5 0 Hong Kong

Asia

World Average

Gap

Gap: Other Appropriated Reserves 10 8

8.08

6

4.5

3.58

4

1.75

2 0 Hong Kong

Asia

World Average

Gap

Gap: Unappropriated Reserves 14.21

15

11.1

10 5

0.73

0 -5 -10

-10.37

-15 Hong Kong

Asia

World Average

Gap

Gap: Retained Earnings 30

27.5

25 20

16.68

15

11.31

10.82

10 5 0 Hong Kong

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Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

3.3.5

48

Key Percentiles and Rankings

We now consider the distribution of liability ratios for prepackaged software using ranks and percentiles. What percent of countries have a value lower or higher than Hong Kong (what is the ratio's rank or percentile)? The table below answers this question with respect to the vertical analysis of liability structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key vertical liability ratios are highlighted in additional tables. Liability Structure

Hong Kong

Rank of Total

Percentile

11.43 8.19 0.41 3.01 12.50 31.27 3.12 2.66 0.50 0.27 0.54 4.75 0.49 0.83 34.52 0.97 64.55 8.57 28.14 1.05 8.08 0.73 27.50 -0.04 100.00

24 of 47 24 of 52 26 of 26 13 of 41 21 of 52 31 of 52 44 of 52 44 of 52 16 of 30 19 of 21 9 of 44 1 of 23 22 of 27 34 of 48 41 of 53 19 of 45 9 of 53 34 of 50 13 of 44 10 of 27 13 of 50 25 of 33 3 of 51 15 of 29

48.94 53.85 0.00 68.29 59.62 40.38 15.38 15.38 46.67 9.52 79.55 95.65 18.52 29.17 22.64 57.78 83.02 32.00 70.45 62.96 74.00 24.24 94.12 48.28

_________________________________________________________________________________________________________

Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Deferred Income Deferred Taxes Deferred Taxes - Credit Deferred Taxes - Debit Other Liabilities Total Liabilities Minority Interest Common Equity Common Stock Capital Surplus Revaluation Reserves Other Appropriated Reserves Unappropriated Reserves Retained Earnings Unrealized Foreign Exchange Gain/Loss Total Liabilities & Shareholders Equity

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

49

Accounts Payable Countries

Value (total liabilities & equity = 100)

Rank

Percentile

27.71 22.65 17.41 17.10 16.88 16.72 15.62 15.25 14.79 14.45 14.19 13.59 13.22 12.99 12.84 12.80 12.29 11.97 11.96 11.81 11.43 11.32 11.08 10.56 9.61 8.76 7.29 7.05 7.03 6.86 6.60 6.50 6.34 6.08 5.78 5.26 5.02 4.00 2.81 2.48

1 2 3 4 5 6 7 8 9 10 11 12 14 15 16 17 19 20 21 22 24 25 27 28 29 30 31 32 33 34 35 37 38 39 40 41 42 43 44 45

97.87 95.74 93.62 91.49 89.36 87.23 85.11 82.98 80.85 78.72 76.60 74.47 70.21 68.09 65.96 63.83 59.57 57.45 55.32 53.19 48.94 46.81 42.55 40.43 38.30 36.17 34.04 31.91 29.79 27.66 25.53 21.28 19.15 17.02 14.89 12.77 10.64 8.51 6.38 4.26

Region

_________________________________________________________________________________________________________

South Africa Hungary Singapore Poland Switzerland Argentina Philippines Greece Thailand Canada Luxembourg Belgium Japan Ireland Portugal France South Korea the United Kingdom Italy Malaysia Hong Kong Spain Russia Netherlands Australia Denmark Germany Turkey Mexico China India USA Norway Brazil Chile New Zealand Sweden Finland Israel Indonesia

Africa Europe Asia Europe Europe Latin America Asia Europe Asia North America Europe Europe Asia Europe Europe Europe Asia Europe Europe Asia Asia Europe Europe Europe Oceana Europe Europe the Middle East Latin America Asia Asia North America Europe Latin America Latin America Oceana Europe Europe the Middle East Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

50

Accounts Payable (Prepackaged Software) Countries in Asia

Value (total liabilities & equity = 100)

Rank

Percentile

23.52 17.41 16.47 15.67 15.62 15.24 14.79 13.22 13.19 12.29 11.81 11.43 6.86 6.60 5.01 4.83 4.38 3.76 3.58 3.20 2.48 2.26 1.78

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

95.65 91.30 86.96 82.61 78.26 73.91 69.57 65.22 60.87 56.52 52.17 47.83 43.48 39.13 34.78 30.43 26.09 21.74 17.39 13.04 8.70 4.35 0.00

_________________________________________________________________________________________________________

Seychelles Singapore Macau Burma Philippines Brunei Thailand Japan Mongolia South Korea Malaysia Hong Kong China India Cambodia Laos Vietnam Bangladesh Bhutan Nepal Indonesia Maldives Sri Lanka

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

51

Current Liabilities - Total Countries

Value (total liabilities & equity = 100)

Rank

Percentile

57.84 52.26 49.72 48.30 47.94 47.58 47.44 47.30 47.00 44.19 41.60 40.74 40.51 40.28 39.42 38.42 37.57 36.72 36.62 35.86 34.55 34.10 33.72 33.70 33.37 33.04 31.91 31.27 31.26 30.01 29.94 29.63 29.09 29.00 27.98 27.05 27.01 24.77 24.70 24.34 20.78 18.33 18.28 6.28

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 19 20 21 22 24 26 27 28 29 30 31 32 34 35 36 37 38 39 41 42 43 44 46 47 48 49 52

98.08 96.15 94.23 92.31 90.38 88.46 86.54 84.62 82.69 80.77 78.85 76.92 75.00 73.08 71.15 69.23 67.31 63.46 61.54 59.62 57.69 53.85 50.00 48.08 46.15 44.23 42.31 40.38 38.46 34.62 32.69 30.77 28.85 26.92 25.00 21.15 19.23 17.31 15.38 11.54 9.62 7.69 5.77 0.00

Region

_________________________________________________________________________________________________________

Austria Brazil Chile South Africa France Greece Spain Taiwan Portugal Thailand Norway Peru Netherlands the United Kingdom Belgium Hungary Argentina Turkey Mexico Sweden Switzerland Poland Denmark Singapore Italy Japan Luxembourg Hong Kong Australia South Korea Finland Ireland Philippines China Germany Russia USA Czech Republic Canada Malaysia India Israel Indonesia New Zealand

Europe Latin America Latin America Africa Europe Europe Europe Asia Europe Asia Europe Latin America Europe Europe Europe Europe Latin America the Middle East Latin America Europe Europe Europe Europe Asia Europe Asia Europe Asia Oceana Asia Europe Europe Asia Asia Europe Europe North America Europe North America Asia Asia the Middle East Asia Oceana

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

52

Current Liabilities - Total (Prepackaged Software) Countries in Asia

Value (total liabilities & equity = 100)

Rank

Percentile

Taiwan Thailand Seychelles North Korea Mongolia Macau Singapore Japan Hong Kong Brunei South Korea Burma Philippines China Papua New Guinea Malaysia India Indonesia Maldives Cambodia Laos Vietnam Sri Lanka Bangladesh Bhutan Nepal

47.30 44.19 39.91 39.55 39.42 37.02 33.70 33.04 31.27 31.20 30.01 29.20 29.09 29.00 27.65 24.34 20.78 18.28 16.66 15.77 15.21 13.80 13.14 11.83 11.27 10.08

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

53

Long Term Debt Countries

Value (total liabilities & equity = 100)

Rank

Percentile

27.80 21.65 20.84 20.78 18.98 18.57 18.44 15.49 13.92 13.77 13.40 11.36 11.23 10.88 10.35 9.89 9.40 8.85 8.76 8.72 8.53 8.46 8.45 8.10 7.97 7.03 6.96 6.91 6.83 6.62 5.14 5.08 4.64 4.62 3.60 3.40 3.21 3.12 3.12 2.61 2.36 1.11 0.94 0.67

1 2 3 4 7 8 9 10 11 12 13 15 16 17 19 20 21 22 23 24 25 26 27 29 30 31 32 33 34 35 36 37 39 40 41 42 43 44 45 48 49 50 51 52

98.08 96.15 94.23 92.31 86.54 84.62 82.69 80.77 78.85 76.92 75.00 71.15 69.23 67.31 63.46 61.54 59.62 57.69 55.77 53.85 51.92 50.00 48.08 44.23 42.31 40.38 38.46 36.54 34.62 32.69 30.77 28.85 25.00 23.08 21.15 19.23 17.31 15.38 13.46 7.69 5.77 3.85 1.92 0.00

Region

_________________________________________________________________________________________________________

Peru Portugal Turkey Mexico Ireland Poland Pakistan Philippines Spain Argentina Denmark Indonesia Italy Brazil Chile New Zealand South Africa France USA Norway Canada Australia the United Kingdom Finland Luxembourg Belgium Austria Switzerland Japan Netherlands South Korea Sweden Russia Germany Thailand Taiwan Malaysia Hong Kong Greece Israel Singapore China India Hungary

Latin America Europe the Middle East Latin America Europe Europe the Middle East Asia Europe Latin America Europe Asia Europe Latin America Latin America Oceana Africa Europe North America Europe North America Oceana Europe Europe Europe Europe Europe Europe Asia Europe Asia Europe Europe Europe Asia Asia Asia Asia Europe the Middle East Asia Asia Asia Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

54

Long Term Debt (Prepackaged Software) Countries in Asia

Value (total liabilities & equity = 100)

Rank

Percentile

North Korea Papua New Guinea Burma Philippines Macau Indonesia Maldives Sri Lanka Japan Brunei South Korea Thailand Taiwan Mongolia Malaysia Hong Kong Singapore China India Cambodia Seychelles Laos Vietnam Bangladesh Bhutan Nepal

26.98 18.87 15.54 15.49 13.56 11.36 10.36 8.17 6.83 6.24 5.14 3.60 3.40 3.21 3.21 3.12 2.36 1.11 0.94 0.71 0.70 0.69 0.62 0.53 0.51 0.45

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

55

Total Liabilities Countries

Value (total liabilities & equity = 100)

Rank

Percentile

72.50 68.91 66.89 66.88 64.50 63.63 61.75 60.52 60.36 56.68 54.77 52.25 51.97 51.96 51.61 51.48 51.34 50.71 50.57 49.27 48.76 47.65 47.29 47.06 46.11 45.47 44.68 44.41 41.24 39.10 38.64 38.44 38.11 37.41 37.03 34.52 34.13 33.37 30.54 30.43 30.23 30.05 22.30 21.58 17.22

1 2 3 4 5 6 7 8 9 10 12 13 14 15 16 17 18 20 21 22 23 24 25 26 27 28 29 30 32 34 35 37 38 39 40 41 42 44 45 46 47 48 50 52 53

98.11 96.23 94.34 92.45 90.57 88.68 86.79 84.91 83.02 81.13 77.36 75.47 73.58 71.70 69.81 67.92 66.04 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 39.62 35.85 33.96 30.19 28.30 26.42 24.53 22.64 20.75 16.98 15.09 13.21 11.32 9.43 5.66 1.89 0.00

Region

_________________________________________________________________________________________________________

Portugal Peru Spain Brazil Austria Chile France Turkey Mexico South Africa Pakistan Taiwan Belgium the United Kingdom Argentina Italy Poland Thailand Netherlands Greece Luxembourg Denmark Norway Ireland Switzerland Philippines Sweden Japan Australia Hungary Germany USA Finland Singapore South Korea Hong Kong Canada Russia China Indonesia Czech Republic Malaysia Israel India New Zealand

Europe Latin America Europe Latin America Europe Latin America Europe the Middle East Latin America Africa the Middle East Asia Europe Europe Latin America Europe Europe Asia Europe Europe Europe Europe Europe Europe Europe Asia Europe Asia Oceana Europe Europe North America Europe Asia Asia Asia North America Europe Asia Asia Europe Asia the Middle East Asia Oceana

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

56

Total Liabilities (Prepackaged Software) Countries in Asia

Value (total liabilities & equity = 100)

Rank

Percentile

North Korea Taiwan Macau Thailand Papua New Guinea Burma Philippines Mongolia Japan Brunei Seychelles Singapore South Korea Hong Kong China Indonesia Malaysia Maldives Sri Lanka India Cambodia Laos Vietnam Bangladesh Bhutan Nepal

66.89 52.25 50.85 50.71 46.77 45.63 45.47 45.24 44.41 41.64 40.61 37.41 37.03 34.52 30.54 30.43 30.05 27.75 21.88 21.58 16.37 15.79 14.33 12.28 11.70 10.47

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

57

Common Equity Countries

Value (total liabilities & equity = 100)

Rank

Percentile

83.03 77.88 73.83 69.77 69.50 69.41 65.87 64.55 64.05 60.95 60.81 60.73 60.67 59.69 59.57 57.92 55.20 54.99 54.72 54.46 52.84 51.95 51.95 51.04 51.00 48.65 47.84 47.83 47.68 46.41 46.22 45.26 45.23 45.08 40.74 39.48 39.37 37.40 36.63 35.50 33.01 31.72 31.40 31.09 26.19

1 2 3 4 5 6 7 9 10 11 12 13 14 15 16 17 19 20 21 22 23 24 25 26 27 29 30 31 32 33 35 36 37 38 39 41 42 43 45 47 48 49 50 51 52

98.11 96.23 94.34 92.45 90.57 88.68 86.79 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 45.28 43.40 41.51 39.62 37.74 33.96 32.08 30.19 28.30 26.42 22.64 20.75 18.87 15.09 11.32 9.43 7.55 5.66 3.77 1.89

Region

_________________________________________________________________________________________________________

New Zealand India Israel Czech Republic Indonesia Malaysia Canada Hong Kong China USA Germany South Korea Singapore Hungary Finland Australia Sweden Japan Russia Philippines Ireland Denmark Norway Switzerland Luxembourg Netherlands the United Kingdom Thailand Belgium Greece Taiwan Italy Pakistan Poland South Africa Turkey Mexico France Argentina Austria Brazil Spain Chile Peru Portugal

Oceana Asia the Middle East Europe Asia Asia North America Asia Asia North America Europe Asia Asia Europe Europe Oceana Europe Asia Europe Asia Europe Europe Europe Europe Europe Europe Europe Asia Europe Europe Asia Europe the Middle East Europe Africa the Middle East Latin America Europe Latin America Europe Latin America Europe Latin America Latin America Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

58

Common Equity (Prepackaged Software) Countries in Asia

Value (total liabilities & equity = 100)

Rank

Percentile

India Indonesia Malaysia Hong Kong China Maldives Seychelles South Korea Singapore Cambodia Laos Japan Burma Philippines Vietnam Sri Lanka Thailand Taiwan Brunei Bangladesh Mongolia Bhutan Nepal Macau North Korea Papua New Guinea

77.88 69.50 69.41 64.55 64.05 63.36 62.00 60.73 60.67 59.10 56.98 54.99 54.65 54.46 51.71 49.98 47.83 46.22 46.09 44.32 42.67 42.21 37.78 36.09 30.18 21.10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

59

Retained Earnings Countries

Value (total liabilities & equity = 100)

Rank

Percentile

29.85 28.00 27.50 22.90 22.66 22.48 20.43 19.99 19.71 18.98 18.96 18.33 17.75 17.55 15.35 15.17 14.62 14.40 13.44 13.04 12.17 11.24 11.17 9.39 9.36 8.61 8.48 8.26 8.20 7.76 7.32 6.61 6.05 5.62 5.61 5.23 4.84 4.04 2.66 1.95 1.54 0.27 0.00

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 22 23 24 25 27 29 30 31 32 34 35 36 38 39 40 41 42 45 46 47 48 49 51

98.04 96.08 94.12 92.16 90.20 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 64.71 62.75 60.78 56.86 54.90 52.94 50.98 47.06 43.14 41.18 39.22 37.25 33.33 31.37 29.41 25.49 23.53 21.57 19.61 17.65 11.76 9.80 7.84 5.88 3.92 0.00

Region

_________________________________________________________________________________________________________

Israel Norway Hong Kong USA Japan India Canada South Africa the United Kingdom Denmark Switzerland Singapore Finland New Zealand Malaysia Ireland Czech Republic Netherlands Australia Indonesia Germany Spain Belgium Turkey Mexico South Korea Austria Sweden Taiwan Russia Philippines Luxembourg France Argentina Poland Thailand Italy Portugal China Hungary Greece Peru Pakistan

the Middle East Europe Asia North America Asia Asia North America Africa Europe Europe Europe Asia Europe Oceana Asia Europe Europe Europe Oceana Asia Europe Europe Europe the Middle East Latin America Asia Europe Europe Asia Europe Asia Europe Europe Latin America Europe Asia Europe Europe Asia Europe Europe Latin America the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

60

Retained Earnings (Prepackaged Software) Countries in Asia

Value (total liabilities & equity = 100)

Rank

Percentile

Hong Kong Japan India Singapore Brunei Cambodia Laos Malaysia Vietnam Indonesia Bangladesh Bhutan Maldives Nepal Sri Lanka South Korea Taiwan Burma Philippines Macau Thailand Mongolia China Seychelles North Korea Papua New Guinea

27.50 22.66 22.48 18.33 17.12 17.06 16.45 15.35 14.92 13.04 12.79 12.18 11.89 10.90 9.38 8.61 8.20 7.34 7.32 5.53 5.23 4.66 2.66 2.03 0.26 0.18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.4 3.4.1

FINANCIAL RETURNS RATIOS

IN

61

HONG KONG: INCOME STRUCTURE

Overview

In this chapter we consider the income structure of companies operating in Hong Kong benchmarked against global averages. The chapter begins by defining relevant terms. A common-size statement, or vertical analysis of income is then presented for the proto-typical firm involved in prepackaged software operating in Hong Kong and the average global benchmarks (total revenue = 100 percent). For ratios where there are large deviations between Hong Kong and the benchmarks, graphics are provided. Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key vertical analysis income ratios are highlighted across countries in the comparison group.

3.4.2

Income Statements – Definitions of Terms

The following definitions are provided for those less familiar with the income-side of financial statement analysis. As this chapter deals with the vertical analysis and global benchmarking of income, only definitions covering certain terms used in this chapter’s tables and graphs are provided here . The glossary below reflects commonly accepted definitions across various countries and official sources. •

Amortization. Amortization generally refers to the depreciation, depletion, or charge-off to expense of intangible and tangible assets over a period of time. Amortization is commonly understood to be the taking as an expense (writing off) of the loss of value of an intangible asset such as a copyright, a patent, or a mailing list, in an accounting period.

•

Cost of Goods Sold (excluding depreciation). For retail companies, cost of goods sold is generally defined as the equivalent of starting inventory plus purchases minus ending inventory. In manufacturing, cost of goods sold is defined to equal the starting inventory plus the cost of goods manufactured minus ending inventory. Most pure service firms do not generally have cost of goods sold.

•

Current Domestic Income Tax. Current domestic income taxes are commonly defined as compulsory charges levied by the government where the company is located on current income.

•

Current Foreign Income Tax. Current foreign income taxes are commonly defined as compulsory charges levied by foreign governments on current income.

•

Deferred Domestic Income Tax. Deferred domestic income tax is defined as a compulsory charge from a previous accounting period which is yet unpaid to the government where the company is located on current income.

•

Deferred Foreign Income Tax. Deferred foreign income tax is generally defined as a compulsory charge from a previous accounting period which is yet unpaid to foreign governments on current income.

•

Depletion. Depletion is commonly defined to be included as one of the elements of amortization, and is understood to be the portion of the carrying value (other than the portion associated with tangible assets) prorated in each accounting period for financial reporting purposes.

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62

•

Depreciation. Depreciation generally is defined as the expiration in the service life of fixed assets, other than depletable assets, attributable to wear and tear, deterioration, action of the physical elements, inadequacy and obsolescence. Depreciation is commonly defined as the portion of the cost of a fixed asset charged as an expense during a particular period. In accounting for depreciation, the cost of a fixed asset, less any salvage value, is prorated over the estimated service life of such an asset, and each period is charged with a portion of such cost. Through this process, the cost of the asset is ultimately charged off as an expense.

•

Earnings Before Interest and Taxes (EBIT). EBIT is a financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and non-operating profit before the deduction of interest and income taxes.

•

Equity in Earnings. Equity in earnings is defined as a company's proportional share (based on ownership) of the net earnings or losses of an unconsolidated company.

•

Gross Income. Gross income is commonly defined as all the money, goods, and property received by the company that must be included as taxable income.

•

Income Taxes. Income taxes are defined to include those taxes levied by state, federal, and local governments on the company's reported accounting profit. Income taxes generally include both deferred and paid taxes. They are generally determined after the interest expense has been deducted.

•

Interest Capitalized. Interest capitalized is generally added to a fixed asset instead of expensed. Capitalized interest can usually be found in footnotes or the face of the income statement.

•

Interest Expense on Debt. Interest expenses on debt are those which are spent on current debt and added to the net income so avoid underestimating interest coverage.

•

Minority Interest. Minority interest is the proportional share of the minority ownership's interest (less than 50 percent) in the earnings or losses.

•

Net Income Available to Common. Net income available to common is defined as the net income available to common stockholders.

•

Net Income Before Preferred Dividends. Net income before preferred dividends is generally calculated as the difference between total revenues and total expense prior to the granting of preferred dividends.

•

Net Sales or Revenues. Revenues or net sales are defined as payments made to and received by an entity. May take the form of taxes, user fees, fines, fees for service, and so on.

•

Non-Operating Interest Income. Non-operating interest income is generally understood to be any interest received (e.g., royalty, production payment, net profits interest) that does not involve the operation of the company.

•

Operating Expenses. Operating expenses are generally defined as those incurred in paying for the company’s day-to-day activities.

•

Operating Income. Operating income is generally defined to equal operating revenues less operating expenses. It typically excludes items of other revenue and expense such as equity in earnings of unconsolidated companies, dividends, interest income and expense, income taxes, extraordinary items, and cumulative effect of accounting changes.

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•

Pretax Equity In Earnings. Pretax equity in earnings is generally defined to equal a company's proportional share (based on ownership) of the gross earnings or losses of an unconsolidated company.

•

Pretax Income. Pretax income is generally defined as income before tax deductions.

•

Selling, General & Administrative Expenses. Selling, general and administrative expenses are expenses independent from cost of sales for the purpose of illustrating the amount of the company's selling and administrative costs. Generally included in this figure are the costs of employees' salaries, commissions, and travel expenses; company payroll and office costs; and advertising and promotion.

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Financial Indicators

3.4.3

64

Income Structure: Outlook

Using the methodology described in the introduction, the following table summarizes income structure benchmarks for firms involved in prepackaged software in Hong Kong. To allow comparable benchmarking, a common index of Net Sales or Revenues = 100 is used. All figures are current-year projections for companies operating in Hong Kong based on latest financial results available. Income Structure Hong Kong Asia World Avg. _________________________________________________________________________________________________________

Net Sales or Revenues Cost of Goods Sold (Excluding Depreciation) Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Other Operating Expenses Operating Expenses - Total Operating Income Extraordinary Charge - Pretax Non-Operating Interest Income Pretax Equity In Earnings Other Income/Expense Net Earnings Before Interest and Taxes (EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Current Domestic Income Tax Current Foreign Income Tax Deferred Domestic Income Tax Deferred Foreign Income Tax Income Tax Credits Minority Interest Equity in Earnings Net Income Before Extra Items/Prefer Dividends Net Income Before Preferred Dividends Net Income Available to Common

100.00 50.82 5.43 43.53 21.06 74.17 2.28 21.70 0.06 0.95 -0.12 0.78 23.02 0.70 0.05 22.35 2.12 2.54 0.81 -0.05 0.01 -0.03 0.41 0.04 19.95 19.95 19.95

100.00 53.30 6.64 27.86 20.99 74.62 3.66 10.02 0.27 1.68 0.01 2.16 13.33 1.72 0.00 11.69 2.68 2.56 0.26 0.03 0.06 0.00 0.21 0.05 8.89 8.75 8.89

100.00 55.68 7.59 29.38 21.19 78.97 2.66 12.16 0.47 1.79 -0.01 1.49 16.24 3.42 0.01 12.89 2.91 1.90 0.20 0.00 0.05 0.00 0.36 0.00 9.64 9.53 9.63

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

3.4.4

65

Large Variances: Income

The following graphics summarize for prepackaged software the large income structure gaps between firms operating in Hong Kong and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Cost of Goods Sold (Excluding Depreciation) 60

50.82

53.3

55.68

40 20 0

-4.86

-20 Hong Kong

Asia

World Average

Gap

Gap: Depreciation, Depletion & Amortization 8 6

5.43

6.64

7.59

4 2 0 -2

-2.16

-4 Hong Kong

Asia

World Average

Gap

Gap: Gross Income 50

43.53

40 27.86

30

29.38

20

14.15

10 0 Hong Kong

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Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

66

Gap: Other Operating Expenses 80

74.17

74.62

78.97

60 40 20 0

-4.8

-20 Hong Kong

Asia

World Average

Gap

Gap: Operating Income 25

21.7

20 15

10.02

10

12.16

9.54

5 0 Hong Kong

Asia

World Average

Gap

Gap: Earnings Before Interest and Taxes (EBIT) 25

23.02

20 13.33

15

16.24

10

6.78

5 0 Hong Kong

Asia

World Average

Gap

Gap: Interest Expense on Debt 3.42

4 2

1.72 0.7

0 -2

-2.72

-4 Hong Kong

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Asia

World Average

Gap

©2007 Icon Group International, Inc.

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67

Gap: Pretax Income 25

22.35

20 15

11.69

12.89 9.46

10 5 0 Hong Kong

Asia

World Average

Gap

Gap: Net Income Before Extra Items/Prefer Dividends 20

19.95

15 8.89

10

10.31

9.64

5 0 Hong Kong

Asia

World Average

Gap

Gap: Net Income Before Preferred Dividends 20

19.95

15 8.75

10

10.42

9.53

5 0 Hong Kong

Asia

World Average

Gap

Gap: Net Income Available to Common 20

19.95

15 8.89

10

9.63

10.32

5 0 Hong Kong

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Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

3.4.5

68

Key Percentiles and Rankings

We now consider the distribution of income ratios for prepackaged software using ranks and percentiles. What percent of countries have a value lower or higher than Hong Kong (what is the ratio's rank or percentile)? The table below answers this question with respect to the vertical analysis of income structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key vertical income ratios are highlighted in additional tables. Income Structure

Hong Kong

Rank of Total

Percentile

100.00 50.82 5.43 43.53 21.06 74.17 2.28 21.70 0.06 0.95 -0.12 0.78 23.02 0.70 0.05 22.35 2.12 2.54 0.81 -0.05 0.01 -0.03 0.41 0.04 19.95 19.95 19.95

36 of 48 31 of 53 9 of 51 21 of 44 42 of 50 23 of 43 6 of 53 27 of 32 35 of 48 25 of 27 30 of 53 9 of 53 47 of 53 2 of 6 6 of 53 31 of 53 23 of 41 3 of 14 21 of 37 4 of 9 6 of 7 9 of 42 6 of 21 3 of 53 3 of 53 3 of 53

25.00 41.51 82.35 52.27 16.00 46.51 88.68 15.63 27.08 7.41 43.40 83.02 11.32 66.67 88.68 41.51 43.90 78.57 43.24 55.56 14.29 78.57 71.43 94.34 94.34 94.34

_________________________________________________________________________________________________________

Net Sales or Revenues Cost of Goods Sold (Excluding Depreciation) Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Other Operating Expenses Operating Expenses - Total Operating Income Extraordinary Charge - Pretax Non-Operating Interest Income Pretax Equity In Earnings Other Income/Expense Net Earnings Before Interest and Taxes (EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Current Domestic Income Tax Current Foreign Income Tax Deferred Domestic Income Tax Deferred Foreign Income Tax Income Tax Credits Minority Interest Equity in Earnings Net Income Before Extra Items/Prefer Dividends Net Income Before Preferred Dividends Net Income Available to Common

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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69

Cost of Goods Sold (Excluding Depreciation) Countries

Value (total revenue = 100)

Rank

Percentile

89.70 87.06 84.48 84.36 83.71 76.96 75.28 72.71 71.43 71.26 71.23 70.16 69.96 69.18 68.01 65.99 65.44 64.52 63.17 62.65 62.51 62.12 61.28 58.79 58.74 58.44 57.73 57.24 55.56 54.04 52.06 51.51 51.02 50.82 50.36 49.81 46.30 44.50 32.98 19.75 3.27

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 26 27 28 29 30 31 33 34 35 36 37 38 40 41 44 47 48

97.92 95.83 93.75 91.67 89.58 87.50 85.42 83.33 81.25 79.17 77.08 75.00 72.92 70.83 68.75 66.67 64.58 62.50 60.42 58.33 56.25 52.08 50.00 47.92 45.83 43.75 41.67 39.58 37.50 35.42 31.25 29.17 27.08 25.00 22.92 20.83 16.67 14.58 8.33 2.08 0.00

Region

_________________________________________________________________________________________________________

Luxembourg Hungary Belgium Czech Republic Sweden France South Africa Brazil Spain Peru India Norway Netherlands Chile South Korea China Japan Malaysia Switzerland Poland Finland Ireland Russia Denmark Singapore the United Kingdom Philippines Germany Argentina Portugal Thailand Australia New Zealand Hong Kong Canada Italy USA Greece Indonesia Israel Pakistan

Europe Europe Europe Europe Europe Europe Africa Latin America Europe Latin America Asia Europe Europe Latin America Asia Asia Asia Asia Europe Europe Europe Europe Europe Europe Asia Europe Asia Europe Latin America Europe Asia Oceana Oceana Asia North America Europe North America Europe Asia the Middle East the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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©2007 Icon Group International, Inc.

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Cost of Goods Sold (Excluding Depreciation) (Prepackaged Software) Countries in Asia

Value (total revenue = 100)

Rank

Percentile

Seychelles India North Korea South Korea China Japan Malaysia Singapore Burma Philippines Brunei Macau Cambodia Laos Thailand Hong Kong Papua New Guinea Vietnam Mongolia Bangladesh Bhutan Nepal Indonesia Maldives Sri Lanka

90.42 71.23 69.17 68.01 65.99 65.44 64.52 58.74 57.93 57.73 57.05 54.74 54.05 52.12 52.06 50.82 48.37 47.30 46.44 40.54 38.61 34.56 32.98 30.07 23.72

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

96.00 92.00 88.00 84.00 80.00 76.00 72.00 68.00 64.00 60.00 56.00 52.00 48.00 44.00 40.00 36.00 32.00 28.00 24.00 20.00 16.00 12.00 8.00 4.00 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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©2007 Icon Group International, Inc.

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71

Selling, General & Administrative Expenses Countries

Value (total revenue = 100)

Rank

Percentile

53.64 53.42 43.41 40.93 40.63 39.13 37.84 36.42 35.17 34.26 33.28 31.91 31.23 29.85 24.47 23.55 21.06 20.22 18.27 17.36 17.34 17.29 17.29 17.14 15.96 15.91 15.46 15.44 14.90 14.71 14.47 14.44 13.97 13.00 12.36 8.10

1 2 3 4 5 6 8 9 10 11 12 13 14 15 19 20 21 22 23 24 25 26 27 28 29 30 32 33 34 36 37 38 39 40 41 44

97.73 95.45 93.18 90.91 88.64 86.36 81.82 79.55 77.27 75.00 72.73 70.45 68.18 65.91 56.82 54.55 52.27 50.00 47.73 45.45 43.18 40.91 38.64 36.36 34.09 31.82 27.27 25.00 22.73 18.18 15.91 13.64 11.36 9.09 6.82 0.00

Region

_________________________________________________________________________________________________________

Israel Denmark Belgium Indonesia Netherlands Italy USA Canada France Thailand Ireland the United Kingdom Australia India Poland Germany Hong Kong Malaysia Japan China Switzerland Singapore Norway South Korea Turkey Mexico Brazil Russia South Africa Chile Greece Peru Argentina Sweden Philippines Luxembourg

the Middle East Europe Europe Asia Europe Europe North America North America Europe Asia Europe Europe Oceana Asia Europe Europe Asia Asia Asia Asia Europe Asia Europe Asia the Middle East Latin America Latin America Europe Africa Latin America Europe Latin America Latin America Europe Asia Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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©2007 Icon Group International, Inc.

Financial Indicators

72

Selling, General & Administrative Expenses (Prepackaged Software) Countries in Asia

Value (total revenue = 100)

Rank

Percentile

Indonesia Maldives Thailand Mongolia India Sri Lanka Cambodia Laos Hong Kong Malaysia Vietnam Japan China Singapore South Korea Bangladesh Bhutan Brunei Nepal North Korea Macau Burma Philippines Papua New Guinea

40.93 37.32 34.26 30.57 29.85 29.44 22.65 21.84 21.06 20.22 19.82 18.27 17.36 17.29 17.14 16.99 16.18 15.66 14.48 14.01 13.76 12.41 12.36 9.80

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

95.83 91.67 87.50 83.33 79.17 75.00 70.83 66.67 62.50 58.33 54.17 50.00 45.83 41.67 37.50 33.33 29.17 25.00 20.83 16.67 12.50 8.33 4.17 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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©2007 Icon Group International, Inc.

Financial Indicators

73

Operating Expenses - Total Countries

Value (total revenue = 100)

Rank

Percentile

23.14 18.15 16.61 13.94 13.33 12.50 12.03 11.95 10.21 9.13 7.33 7.16 5.63 4.89 4.37 3.98 3.56 3.18 3.11 2.28 1.70 1.48 1.25 0.97 0.90 0.76 0.55 0.53 0.51 0.49 0.48 0.46 0.20 0.05 0.04 -0.14 -0.17 -7.51

1 2 3 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 23 25 26 27 28 29 30 31 32 33 35 36 37 38 39 40 41 42 43

97.67 95.35 93.02 88.37 86.05 83.72 81.40 79.07 76.74 74.42 72.09 69.77 67.44 65.12 62.79 60.47 58.14 55.81 53.49 46.51 41.86 39.53 37.21 34.88 32.56 30.23 27.91 25.58 23.26 18.60 16.28 13.95 11.63 9.30 6.98 4.65 2.33 0.00

Region

_________________________________________________________________________________________________________

Finland Australia Philippines Netherlands Germany Spain Switzerland Ireland Norway Portugal Singapore France South Africa Denmark the United Kingdom Sweden India Peru Indonesia Hong Kong Malaysia USA Poland China Italy Belgium South Korea Luxembourg Argentina Russia Brazil Chile Israel Pakistan Japan Canada Greece Czech Republic

Europe Oceana Asia Europe Europe Europe Europe Europe Europe Europe Asia Europe Africa Europe Europe Europe Asia Latin America Asia Asia Asia North America Europe Asia Europe Europe Asia Europe Latin America Europe Latin America Latin America the Middle East the Middle East Asia North America Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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©2007 Icon Group International, Inc.

Financial Indicators

74

Operating Expenses - Total (Prepackaged Software) Countries in Asia

Value (total revenue = 100)

Rank

Percentile

Burma Philippines Brunei Singapore India Indonesia North Korea Maldives Cambodia Laos Vietnam Hong Kong Sri Lanka Papua New Guinea Bangladesh Bhutan Nepal Malaysia China South Korea Macau Japan

16.66 16.61 10.86 7.33 3.56 3.11 3.09 2.84 2.70 2.61 2.36 2.28 2.24 2.16 2.03 1.93 1.73 1.70 0.97 0.55 0.50 0.04

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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©2007 Icon Group International, Inc.

Financial Indicators

75

Operating Income Countries

Value (total revenue = 100)

Rank

Percentile

44.13 42.82 42.71 22.13 21.70 20.11 18.94 15.51 15.01 14.89 14.41 12.94 12.42 11.66 11.46 11.33 10.30 10.05 9.33 8.23 7.67 7.58 7.42 7.22 7.20 7.06 6.91 6.79 6.72 6.71 6.42 6.34 5.88 5.59 5.48 5.02 4.58 4.55 3.91 3.82 3.49 2.36 0.12 -0.10 -4.06

1 2 3 5 6 7 8 10 11 12 13 14 15 16 17 18 20 21 22 24 25 26 28 29 30 31 32 33 34 35 36 37 38 40 41 43 44 45 47 48 49 50 51 52 53

98.11 96.23 94.34 90.57 88.68 86.79 84.91 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 62.26 60.38 58.49 54.72 52.83 50.94 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 24.53 22.64 18.87 16.98 15.09 11.32 9.43 7.55 5.66 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

New Zealand Turkey Mexico Philippines Hong Kong Israel Greece Argentina India Portugal Singapore Australia China Pakistan Indonesia Czech Republic USA Spain Japan South Korea Malaysia the United Kingdom Russia Canada Poland Brazil Denmark Thailand Chile France South Africa Netherlands Germany Italy Peru Belgium Switzerland Sweden Finland Taiwan Ireland Norway Luxembourg Austria Hungary

Oceana the Middle East Latin America Asia Asia the Middle East Europe Latin America Asia Europe Asia Oceana Asia the Middle East Asia Europe North America Europe Asia Asia Asia Europe Europe North America Europe Latin America Europe Asia Latin America Europe Africa Europe Europe Europe Latin America Europe Europe Europe Europe Asia Europe Europe Europe Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

76

Operating Income (Prepackaged Software) Countries in Asia

Value (total revenue = 100)

Rank

Percentile

Burma Philippines Hong Kong Macau India Singapore China Indonesia Cambodia Laos Maldives Vietnam Japan Bangladesh Sri Lanka South Korea Bhutan Malaysia Nepal Thailand Mongolia North Korea Brunei Taiwan Papua New Guinea Seychelles

22.20 22.13 21.70 15.28 15.01 14.41 12.42 11.46 11.39 10.98 10.45 9.96 9.33 8.54 8.24 8.23 8.13 7.67 7.28 6.79 6.05 5.32 4.14 3.82 3.72 -4.22

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

77

Earnings Before Interest and Taxes (EBIT) Countries

Value (total revenue = 100)

Rank

Percentile

56.35 55.88 55.73 42.24 39.12 26.28 23.20 23.02 22.37 20.54 18.11 17.90 17.41 17.26 17.12 16.42 16.16 16.12 14.48 11.97 11.40 11.10 11.03 10.71 9.67 9.37 9.14 9.14 9.09 8.88 8.30 8.19 8.15 8.15 7.93 7.53 7.35 6.46 5.67 5.07 4.88 4.41 1.52 1.24 0.68

1 2 3 5 6 7 8 9 10 11 13 14 15 16 18 19 20 21 24 26 27 28 29 30 31 32 33 34 35 36 38 39 40 41 42 43 44 46 47 48 49 50 51 52 53

98.11 96.23 94.34 90.57 88.68 86.79 84.91 83.02 81.13 79.25 75.47 73.58 71.70 69.81 66.04 64.15 62.26 60.38 54.72 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 28.30 26.42 24.53 22.64 20.75 18.87 16.98 13.21 11.32 9.43 7.55 5.66 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

New Zealand Turkey Mexico Pakistan Portugal Israel Philippines Hong Kong Greece Thailand India Argentina Czech Republic Brazil Indonesia Chile Australia Singapore China Ireland Denmark Spain Germany USA Malaysia Japan Poland Peru South Korea Italy South Africa Russia the United Kingdom Taiwan France Netherlands Finland Switzerland Canada Sweden Belgium Norway Hungary Luxembourg Austria

Oceana the Middle East Latin America the Middle East Europe the Middle East Asia Asia Europe Asia Asia Latin America Europe Latin America Asia Latin America Oceana Asia Asia Europe Europe Europe Europe North America Asia Asia Europe Latin America Asia Europe Africa Europe Europe Asia Europe Europe Europe Europe North America Europe Europe Europe Europe Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

78

Earnings Before Interest and Taxes (EBIT) (Prepackaged Software) Countries in Asia

Value (total revenue = 100)

Rank

Percentile

Burma Philippines Hong Kong Thailand Mongolia India Macau Indonesia Singapore Maldives China Cambodia Laos Sri Lanka Vietnam Bangladesh Bhutan Malaysia Japan South Korea North Korea Nepal Taiwan Papua New Guinea Brunei Seychelles

23.28 23.20 23.02 20.54 18.32 18.11 17.63 17.12 16.12 15.61 14.48 13.75 13.25 12.31 12.03 10.31 9.82 9.67 9.37 9.09 8.87 8.79 8.15 6.20 5.83 1.58

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

79

Pretax Income Countries

Value (total revenue = 100)

Rank

Percentile

55.18 34.67 34.58 25.27 22.35 21.85 20.54 17.89 16.43 16.14 15.60 15.51 15.02 14.14 12.67 12.16 10.64 9.69 9.69 9.27 9.21 8.79 8.52 8.34 8.30 7.13 6.87 6.76 6.60 6.53 5.69 5.62 5.60 5.41 5.24 5.15 4.51 4.21 4.21 3.65 3.47 2.21 1.22 0.54 0.08

1 2 3 5 6 7 8 10 11 12 13 14 15 17 18 20 23 24 25 26 27 28 29 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 51 52 53

98.11 96.23 94.34 90.57 88.68 86.79 84.91 81.13 79.25 77.36 75.47 73.58 71.70 67.92 66.04 62.26 56.60 54.72 52.83 50.94 49.06 47.17 45.28 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 11.32 9.43 7.55 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

New Zealand Turkey Mexico Israel Hong Kong Philippines Greece India Czech Republic Portugal Singapore Indonesia Thailand Australia China Argentina Pakistan USA Spain Germany South Korea Malaysia Denmark Japan Russia the United Kingdom Taiwan France Italy Poland Switzerland Netherlands Finland Brazil South Africa Chile Sweden Ireland Canada Belgium Norway Peru Hungary Luxembourg Austria

Oceana the Middle East Latin America the Middle East Asia Asia Europe Asia Europe Europe Asia Asia Asia Oceana Asia Latin America the Middle East North America Europe Europe Asia Asia Europe Asia Europe Europe Asia Europe Europe Europe Europe Europe Europe Latin America Africa Latin America Europe Europe North America Europe Europe Latin America Europe Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

80

Pretax Income (Prepackaged Software) Countries in Asia

Value (total revenue = 100)

Rank

Percentile

Hong Kong Burma Philippines India Singapore Indonesia Thailand Maldives Cambodia Mongolia Laos China Macau Vietnam Sri Lanka Bangladesh Bhutan South Korea Malaysia Nepal Japan Taiwan Brunei North Korea Papua New Guinea Seychelles

22.35 21.93 21.85 17.89 15.60 15.51 15.02 14.14 13.57 13.40 13.09 12.67 11.98 11.88 11.15 10.18 9.70 9.21 8.79 8.68 8.34 6.87 5.14 2.14 1.50 1.26

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

81

Income Taxes Countries

Value (total revenue = 100)

Rank

Percentile

15.37 15.32 14.16 8.12 7.61 6.08 5.71 5.25 4.55 4.13 4.09 3.86 3.85 3.55 3.55 3.38 3.09 2.64 2.54 2.53 2.49 2.45 2.35 2.22 2.12 2.05 2.03 1.99 1.98 1.96 1.93 1.85 1.81 1.74 1.40 1.38 1.33 1.22 0.96 0.86 0.68 0.57 0.30 0.17 -0.22

1 2 4 5 6 7 8 9 12 14 15 16 18 19 20 21 22 24 25 26 27 28 29 30 31 32 33 34 35 36 37 39 40 41 42 43 44 45 46 47 49 50 51 52 53

98.11 96.23 92.45 90.57 88.68 86.79 84.91 83.02 77.36 73.58 71.70 69.81 66.04 64.15 62.26 60.38 58.49 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 11.32 7.55 5.66 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Turkey Mexico New Zealand Greece Czech Republic Philippines Thailand Portugal Japan Argentina Indonesia Italy Israel Australia Germany USA Denmark Singapore India South Africa France Belgium Malaysia the United Kingdom Hong Kong South Korea Finland Netherlands Poland Sweden Canada Russia Spain China Brazil Switzerland Chile Ireland Peru Taiwan Norway Hungary Pakistan Austria Luxembourg

the Middle East Latin America Oceana Europe Europe Asia Asia Europe Asia Latin America Asia Europe the Middle East Oceana Europe North America Europe Asia Asia Africa Europe Europe Asia Europe Asia Asia Europe Europe Europe Europe North America Europe Europe Asia Latin America Europe Latin America Europe Latin America Asia Europe Europe the Middle East Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Income Taxes (Prepackaged Software) Countries in Asia

Value (total revenue = 100)

Rank

Percentile

Burma Philippines Thailand Mongolia Japan Indonesia Macau Maldives Sri Lanka Singapore India Malaysia Hong Kong South Korea Cambodia Laos China Vietnam Bangladesh Bhutan Brunei Nepal North Korea Taiwan Papua New Guinea Seychelles

6.10 6.08 5.71 5.09 4.55 4.09 4.07 3.73 2.94 2.64 2.54 2.35 2.12 2.05 1.93 1.86 1.74 1.68 1.44 1.38 1.25 1.23 0.93 0.86 0.65 0.59

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.5 3.5.1

FINANCIAL RETURNS RATIOS

IN

83

HONG KONG: PROFITABILITY

Overview

In this chapter we consider additional financial ratios estimated for firms involved in prepackaged software operating in Hong Kong benchmarked against global averages. The chapter begins by defining relevant terms. Estimates are then presented for the proto-typical firm operating in Hong Kong compared to average global benchmarks. For ratios where there are large deviations between the average firm in Hong Kong and the benchmarks, graphics are provided. Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key ratios are highlighted across countries in the comparison group.

3.5.2

Ratios – Definitions of Terms

The following definitions are provided for those less familiar with financial ratio analysis. As this chapter deals with the global benchmarking of ratios, only definitions covering certain terms used in this chapter’s tables and graphs are provided here . The glossary below reflects commonly accepted definitions across various countries and official sources. •

Accounts Receivables Days. The number of days' receivable sales generally correlates to the amount of the accounts receivables to the average daily sales on account. Accounts receivables days is often determined by dividing the gross receivables by (net sales/365).

•

Cash Earnings Return On Equity (%). Cash earnings return on equity generally measures the return of revenues to the shareholders. This ratio is generally calculated by dividing (net income before nonrecurring items minus preferred dividends) by the average common equity.

•

Cash Flow. Cash flow is generally defined as being equal to the company's net income plus the charge-off amounts for depreciation, depletion, amortization, extraordinary charges to reserves. These are bookkeeping deductions which are not paid out as cash.

•

Current Ratio. The current ratio is generally defined as a ratio of liquidity measuring the ability of a business to pay its current obligations when due. The current ratio is generally calculated by dividing total current assets by total current liabilities. Managers and lenders often want the current ratio to be 2.00 or greater. This ratio is often seen as an indication of short-term debt-paying ability. The higher the ratio, the more liquid the company.

•

Dividend Payout (% Earnings) - Total Dividends (%). The dividend payout ratio is generally used to measure the amount of current earnings per common share which are paid out in dividends. This ratio is generally determined by dividing dividends per common share by diluted earnings per share.

•

Fixed Charge Coverage Ratio. The fixed charge coverage ratio is generally seen as an indication of the company's ability to cover its fixed charges. This ratio is typically determined by dividing recurring earnings excluding interest expense, tax expense, equity earnings, and minority earnings plus interest from rentals by interest expense including capitalized interest and interest from rentals.

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Financial Indicators • •

84

Gross Profit Margin (%). The gross profit margin is typically defined to equals the difference, in percent, between net sales revenue and the cost of goods sold. Inventories (# of Days) Held. Inventory days held is generally determined by dividing the ending inventory by (the cost of goods held/365). The number of days held results in the average daily cost of goods held.

•

Inventory Turnover (%). Inventory turnover is used as a measure of the balance of inventory. It generally compares the amount of inventory with the total sales for the year. The ratio can reflect both on the quality of the inventory and the efficiency of management. Typically, the higher the turnover rate, the greater the likelihood that profits would be larger and less working capital bound up in inventory.

•

Net Margin (%). The net margin is the ratio of net income dollars generated by each dollar of sales.

•

Operating Profit Margin (%). Operating profit margin percent is the ratio of operating profit to net sales. Operating profit (loss) is income or loss before taxes calculated by the difference between total revenues and total expense disregarding the effects of any extraordinary transactions.

•

Quick Ratio. The quick ratio, also commonly known as the “acid test ratio”, is a refined current ratio and is often seen as a more conservative measure of liquidity. The quick ratio is generally determined by dividing cash and equivalents plus trade receivables by total current liabilities. The ratio shows the degree to which a company's current liabilities can be covered by the most liquid current assets. Financial management texts generally conclude that any value of less than 1 to 1 implies a reciprocal dependency on inventory or other current assets to liquidate short-term debt.

•

Reinvestment Rate - Total (%). The reinvestment rate is typically defined as the rate at which an investor assumes interest payments made on a debt security can be reinvested over the life of that security.

•

Return on Assets (%). Return on assets is generally used to measure a company's ability to use assets to create profit.

•

Return on Equity - Total (%). The return on total equity ratio is often seen to reflect the profitability of the company's operations after income taxes. Return on equity is often considered to be a good measure of the company's profitability. Tax laws and tax loss carryovers can affect the net income and therefore can also affect the return on equity.

•

Return on Invested Capital (%). The ratio of return on invested capital is typically defined as an evaluation of earnings performance without regard to the method of financing. This ratio measures the earnings on investment and is an indication of how well the company utilizes its asset base. Return on investment is a type of return on capital, therefore this ratio can be an indication of the company’s ability to reward investors who provide long-term funds and to attract future investors.

•

Tax Rate (%). The tax rate is typically defined as the average rate of domestic tax owed to government by the company.

•

Working Capital. Net working capital equals the difference between total current assets and total current liabilities. Working capital often reflects a company's ability to expand volume and meet obligations. Since growth is usually one goal, the amount of working capital on this year's balance sheet should be greater than that of the previous year's. This is an efficiency, or turnover, ratio which benchmarks the rate at which current assets less current liabilities are used by the company in making sales. A low ratio can indicate a less profitable use of working capital in making sales. On the other hand, a very high ratio can indicate the company is wasting current assets which could be more efficiently deployed in production and in increasing

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Financial Indicators

85

sales and profits; or that the company my be undercapitalized, and thus vulnerable to liquidity problems in a period of weak business conditions.

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Financial Indicators

3.5.3

86

Ratio Structure: Outlook

Using the methodology described in the introduction, the following table summarizes ratio structure benchmarks for firms involved in prepackaged software in Hong Kong. All figures are current-year projections for companies operating in Hong Kong based on latest financial results available. Ratios Hong Kong Asia World Avg. _________________________________________________________________________________________________________

Profitability Return on Equity - Total (%) Reinvestment Rate - Total (%) Return on Assets (%) Return on Invested Capital (%) Cash Earnings Return On Equity (%) Cash Flow % Sales Cost Goods Sold / Sales (%) Gross Profit Margin (%) Selling, General & Administrative Expense/Net Sales (%) Research & Development / Net Sales (%) Operating Profit Margin (%) Operating Inc / Total Capital (%) Pretax Margin (%) Tax Rate (%) Net Margin (%) Total Asset Turnover (X) th USD Asset Utilization Inventory Turnover (%) Net Sales % Working Capital Capital Expenditure % Gross Fixed Assets Capital Expenditure % Total Assets Capital Expenditure % Total Sales Accumulated Depreciation % Gross Fixed Assets Leverage Total Debt % Total Capital Long Term Debt % Total Capital Equity % Total Capital Fixed Charge Coverage Ratio Dividend Payout (% Earnings) - Total Dividends Fixed Assets % Common Equity Working Capital % Total Capital Liquidity Quick Ratio Current Ratio Inventories % Total Current Assets Accounts Receivables Days Inventories (# of Days) Held

60.17 44.82 21.88 37.81 72.75 23.87 50.82 43.53 20.16 1.54 21.70 44.81 22.35 15.26 19.95 1.16

16.39 13.09 10.06 13.23 29.49 15.15 53.30 27.86 19.06 3.11 10.02 15.09 11.69 26.82 8.75 0.87

17.24 14.50 11.56 14.69 40.11 17.05 55.68 29.38 18.11 3.27 12.16 16.09 12.89 26.86 9.53 0.87

10.05 1.48 26.08 4.68 7.68 37.24

27.19 5.15 17.73 6.81 9.20 36.38

56.47 6.44 24.58 7.10 11.27 35.46

14.96 5.51 93.22 190.80 15.18 34.28 59.59

19.02 10.27 75.34 200.48 11.86 47.31 35.53

18.53 10.27 80.35 173.48 14.92 50.83 38.37

3.39 3.65 9.09 123.21 98.85

1.98 2.38 13.01 93.17 77.29

2.00 2.38 10.66 81.98 57.17

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

3.5.4

87

Large Variances: Ratios

The following graphics summarize for prepackaged software the large ratio structure gaps between firms operating in Hong Kong and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Return on Equity - Total (%) 80 60

60.17 42.93

40 16.39

20

17.24

0 Hong Kong

Asia

World Average

Gap

Gap: Reinvestment Rate - Total (%) 50

44.82

40

30.32

30 20

13.09

14.5

10 0 Hong Kong

Asia

World Average

Gap

Gap: Return on Invested Capital (%) 40

37.81

30

23.12

20

13.23

14.69

10 0 Hong Kong

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Asia

World Average

Gap

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Financial Indicators

88

Gap: Cash Earnings Return On Equity (%) 80

72.75

60 40.11

40

32.64

29.49

20 0 Hong Kong

Asia

World Average

Gap

Gap: Operating Inc / Total Capital (%) 50

44.81

40 28.72

30 15.09

20

16.09

10 0 Hong Kong

Asia

World Average

Gap

Gap: Inventory Turnover (%) 56.47

60 40 20

27.19 10.05

0 -20 -40

-46.42

-60 Hong Kong

Asia

World Average

Gap

Gap: Fixed Charge Coverage Ratio 250 200

190.8

200.48

173.48

150 100 50

17.32

0 Hong Kong

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Asia

World Average

Gap

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89

Gap: Fixed Assets % Common Equity 60 40

47.31

50.83

34.28

20 0 -16.55

-20 Hong Kong

Asia

World Average

Gap

Gap: Working Capital % Total Capital 60

59.59

50 35.53

40

38.37

30

21.22

20 10 0 Hong Kong

Asia

World Average

Gap

Gap: Accounts Receivables Days 150

123.21 93.17

100

81.98 41.23

50 0 Hong Kong

Asia

World Average

Gap

Gap: Inventories (# of Days) Held 100

98.85 77.29

80

57.17

60

41.68

40 20 0 Hong Kong

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Asia

World Average

Gap

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Financial Indicators

3.5.5

90

Key Percentiles and Rankings

We now consider the distribution of financial ratios for prepackaged software using ranks and percentiles. What percent of countries have a value lower or higher than Hong Kong (what is the ratio's rank or percentile)? The table below answers this question with respect to financial ratios. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance. After the summary table below, a few key financial ratios are highlighted in additional tables. Ratios

Hong Kong

Rank of Total

Percentile

60.17 44.82 21.88 37.81 72.75 23.87 50.82 43.53 20.16 1.54 21.70 44.81 22.35 15.26 19.95 1.16

1 of 53 1 of 53 2 of 53 2 of 53 5 of 53 10 of 53 36 of 48 9 of 51 22 of 44 19 of 25 6 of 53 2 of 53 6 of 53 48 of 52 3 of 53 19 of 53

98.11 98.11 96.23 96.23 90.57 81.13 25.00 82.35 50.00 24.00 88.68 96.23 88.68 7.69 94.34 64.15

10.05 1.48 26.08 4.68 7.68 37.24

40 of 48 43 of 52 10 of 49 34 of 53 21 of 53 37 of 47

16.67 17.31 79.59 35.85 60.38 21.28

14.96 5.51 93.22 190.80 15.18 34.28 59.59

37 of 53 45 of 52 5 of 53 8 of 53 26 of 39 35 of 53 3 of 52

30.19 13.46 90.57 84.91 33.33 33.96 94.23

3.39 3.65 9.09 123.21 98.85

5 of 52 5 of 52 25 of 48 13 of 49 7 of 48

90.38 90.38 47.92 73.47 85.42

_________________________________________________________________________________________________________

Profitability Return on Equity - Total (%) Reinvestment Rate - Total (%) Return on Assets (%) Return on Invested Capital (%) Cash Earnings Return On Equity (%) Cash Flow % Sales Cost Goods Sold / Sales (%) Gross Profit Margin (%) Selling, General & Administrative Expense/Net Sales (%) Research & Development / Net Sales (%) Operating Profit Margin (%) Operating Inc / Total Capital (%) Pretax Margin (%) Tax Rate (%) Net Margin (%) Total Asset Turnover (X) th USD Asset Utilization Inventory Turnover (%) Net Sales % Working Capital Capital Expenditure % Gross Fixed Assets Capital Expenditure % Total Assets Capital Expenditure % Total Sales Accumulated Depreciation % Gross Fixed Assets Leverage Total Debt % Total Capital Long Term Debt % Total Capital Equity % Total Capital Fixed Charge Coverage Ratio Dividend Payout (% Earnings) - Total Dividends Fixed Assets % Common Equity Working Capital % Total Capital Liquidity Quick Ratio Current Ratio Inventories % Total Current Assets Accounts Receivables Days Inventories (# of Days) Held

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Gross Profit Margin (%) Countries

Value

Rank

Percentile

Israel Turkey Mexico Indonesia USA New Zealand Hong Kong Canada Italy Portugal Australia Germany the United Kingdom Singapore Ireland Philippines Greece Thailand Poland Switzerland Denmark Japan China Argentina Finland Malaysia Pakistan Netherlands South Korea Norway India Russia Peru Brazil Spain Chile South Africa France Sweden Belgium Czech Republic Hungary Luxembourg

73.96 67.41 67.23 55.33 47.75 44.13 43.53 43.50 42.71 42.59 41.33 37.36 36.34 36.02 35.68 35.35 34.98 34.56 32.92 32.55 32.32 30.70 30.63 29.99 28.69 27.90 27.00 26.15 25.91 24.65 24.00 23.35 23.10 23.00 22.55 21.88 21.76 17.53 10.62 10.35 8.75 8.74 7.79

1 2 3 5 7 8 9 10 11 12 13 15 16 17 18 19 20 21 22 23 24 25 26 28 30 31 32 34 35 36 37 39 40 41 42 43 44 45 47 48 49 50 51

98.04 96.08 94.12 90.20 86.27 84.31 82.35 80.39 78.43 76.47 74.51 70.59 68.63 66.67 64.71 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 45.10 41.18 39.22 37.25 33.33 31.37 29.41 27.45 23.53 21.57 19.61 17.65 15.69 13.73 11.76 7.84 5.88 3.92 1.96 0.00

Region

_________________________________________________________________________________________________________

the Middle East the Middle East Latin America Asia North America Oceana Asia North America Europe Europe Oceana Europe Europe Asia Europe Asia Europe Asia Europe Europe Europe Asia Asia Latin America Europe Asia the Middle East Europe Asia Europe Asia Europe Latin America Latin America Europe Latin America Africa Europe Europe Europe Europe Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Gross Profit Margin (%) (Prepackaged Software) Countries in Asia

Value

Rank

Percentile

Indonesia Maldives Hong Kong Sri Lanka Singapore Burma Philippines Thailand Mongolia Japan China Macau Brunei Malaysia South Korea India North Korea Cambodia Laos Vietnam Papua New Guinea Bangladesh Bhutan Nepal Seychelles

55.33 50.45 43.53 39.79 36.02 35.47 35.35 34.56 30.83 30.70 30.63 29.55 29.39 27.90 25.91 24.00 22.42 18.21 17.56 15.93 15.68 13.66 13.01 11.64 9.08

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

96.00 92.00 88.00 84.00 80.00 76.00 72.00 68.00 64.00 60.00 56.00 52.00 48.00 44.00 40.00 36.00 32.00 28.00 24.00 20.00 16.00 12.00 8.00 4.00 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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©2007 Icon Group International, Inc.

Financial Indicators

93

Pretax Margin (%) Countries

Value

Rank

Percentile

New Zealand Turkey Mexico Israel Hong Kong Philippines Greece India Czech Republic Portugal Singapore Indonesia Thailand Australia China Argentina Pakistan USA Spain Germany South Korea Malaysia Denmark Japan Russia the United Kingdom Taiwan France Italy Poland Switzerland Netherlands Finland Brazil South Africa Chile Sweden Ireland Canada Belgium Norway Peru Hungary Luxembourg Austria

55.18 34.67 34.58 25.27 22.35 21.85 20.54 17.89 16.43 16.14 15.60 15.51 15.02 14.14 12.67 12.16 10.64 9.69 9.69 9.27 9.21 8.79 8.52 8.34 8.30 7.13 6.87 6.76 6.60 6.53 5.69 5.62 5.60 5.41 5.24 5.15 4.51 4.21 4.21 3.65 3.47 2.21 1.22 0.54 0.08

1 2 3 5 6 7 8 10 11 12 13 14 15 17 18 20 23 24 25 26 27 28 29 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 51 52 53

98.11 96.23 94.34 90.57 88.68 86.79 84.91 81.13 79.25 77.36 75.47 73.58 71.70 67.92 66.04 62.26 56.60 54.72 52.83 50.94 49.06 47.17 45.28 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 11.32 9.43 7.55 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Oceana the Middle East Latin America the Middle East Asia Asia Europe Asia Europe Europe Asia Asia Asia Oceana Asia Latin America the Middle East North America Europe Europe Asia Asia Europe Asia Europe Europe Asia Europe Europe Europe Europe Europe Europe Latin America Africa Latin America Europe Europe North America Europe Europe Latin America Europe Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

94

Pretax Margin (%) (Prepackaged Software) Countries in Asia

Value

Rank

Percentile

Hong Kong Burma Philippines India Singapore Indonesia Thailand Maldives Cambodia Mongolia Laos China Macau Vietnam Sri Lanka Bangladesh Bhutan South Korea Malaysia Nepal Japan Taiwan Brunei North Korea Papua New Guinea Seychelles

22.35 21.93 21.85 17.89 15.60 15.51 15.02 14.14 13.57 13.40 13.09 12.67 11.98 11.88 11.15 10.18 9.70 9.21 8.79 8.68 8.34 6.87 5.14 2.14 1.50 1.26

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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©2007 Icon Group International, Inc.

Financial Indicators

95

Quick Ratio Countries

Value

Rank

Percentile

New Zealand Denmark Germany Israel Hong Kong Ireland Japan Indonesia Canada Malaysia South Korea USA Singapore India Philippines Russia Italy Czech Republic Netherlands China Sweden Poland Norway Greece Australia Thailand Finland the United Kingdom Belgium Switzerland Hungary France Portugal Luxembourg South Africa Austria Spain Argentina Taiwan Brazil Turkey Mexico Chile Peru

10.37 4.86 4.34 4.17 3.39 3.22 3.10 3.07 2.99 2.99 2.86 2.76 2.72 2.64 2.61 2.57 2.34 2.23 2.09 1.92 1.92 1.87 1.81 1.81 1.77 1.60 1.59 1.57 1.47 1.47 1.45 1.44 1.29 1.26 1.25 1.11 1.04 1.04 0.94 0.92 0.91 0.91 0.88 0.44

1 2 3 4 5 6 7 8 9 10 12 13 14 15 17 18 19 20 23 24 25 26 27 28 29 30 31 32 33 34 35 36 38 39 40 42 43 44 45 46 47 48 49 51

98.08 96.15 94.23 92.31 90.38 88.46 86.54 84.62 82.69 80.77 76.92 75.00 73.08 71.15 67.31 65.38 63.46 61.54 55.77 53.85 51.92 50.00 48.08 46.15 44.23 42.31 40.38 38.46 36.54 34.62 32.69 30.77 26.92 25.00 23.08 19.23 17.31 15.38 13.46 11.54 9.62 7.69 5.77 1.92

Region

_________________________________________________________________________________________________________

Oceana Europe Europe the Middle East Asia Europe Asia Asia North America Asia Asia North America Asia Asia Asia Europe Europe Europe Europe Asia Europe Europe Europe Europe Oceana Asia Europe Europe Europe Europe Europe Europe Europe Europe Africa Europe Europe Latin America Asia Latin America the Middle East Latin America Latin America Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Financial Indicators

96

Quick Ratio (Prepackaged Software) Countries in Asia

Value

Rank

Percentile

Hong Kong Japan Indonesia Malaysia South Korea Maldives Singapore India Burma Philippines Sri Lanka Cambodia Laos China Vietnam Thailand Seychelles Bangladesh Bhutan Mongolia Brunei Nepal Macau Taiwan North Korea Papua New Guinea

3.39 3.10 3.07 2.99 2.86 2.80 2.72 2.64 2.62 2.61 2.21 2.00 1.93 1.92 1.75 1.60 1.51 1.50 1.43 1.43 1.32 1.28 1.03 0.94 0.43 0.30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

97

Current Ratio Countries

Value

Rank

Percentile

New Zealand Denmark Germany Israel Hong Kong Indonesia Ireland South Korea Japan Malaysia Canada Switzerland Russia USA India Philippines Singapore Finland Italy China Netherlands Czech Republic Sweden Poland Norway Greece Australia Hungary Thailand the United Kingdom Belgium France South Africa Portugal Turkey Mexico Brazil Luxembourg Chile Peru Taiwan Austria Spain Argentina

10.37 5.08 4.92 4.22 3.65 3.58 3.51 3.47 3.41 3.40 3.38 3.19 3.13 3.08 2.99 2.98 2.96 2.54 2.41 2.41 2.33 2.33 2.15 2.08 2.00 1.99 1.96 1.90 1.85 1.83 1.64 1.61 1.51 1.47 1.46 1.46 1.41 1.37 1.34 1.31 1.28 1.28 1.22 1.13

1 2 3 4 5 6 7 8 9 10 11 13 15 16 17 18 19 21 23 24 25 26 27 28 29 30 31 32 33 34 35 36 38 39 40 41 43 44 46 47 48 49 50 51

98.08 96.15 94.23 92.31 90.38 88.46 86.54 84.62 82.69 80.77 78.85 75.00 71.15 69.23 67.31 65.38 63.46 59.62 55.77 53.85 51.92 50.00 48.08 46.15 44.23 42.31 40.38 38.46 36.54 34.62 32.69 30.77 26.92 25.00 23.08 21.15 17.31 15.38 11.54 9.62 7.69 5.77 3.85 1.92

Region

_________________________________________________________________________________________________________

Oceana Europe Europe the Middle East Asia Asia Europe Asia Asia Asia North America Europe Europe North America Asia Asia Asia Europe Europe Asia Europe Europe Europe Europe Europe Europe Oceana Europe Asia Europe Europe Europe Africa Europe the Middle East Latin America Latin America Europe Latin America Latin America Asia Europe Europe Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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98

Current Ratio (Prepackaged Software) Countries in Asia

Value

Rank

Percentile

Hong Kong Indonesia South Korea Japan Malaysia Maldives Burma India Philippines Singapore Brunei Sri Lanka China Cambodia Laos Vietnam Seychelles Thailand Bangladesh Mongolia Bhutan Nepal Taiwan North Korea Macau Papua New Guinea

3.65 3.58 3.47 3.41 3.40 3.26 2.99 2.99 2.98 2.96 2.88 2.58 2.41 2.27 2.18 1.98 1.98 1.85 1.70 1.65 1.62 1.45 1.28 1.27 1.11 0.89

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

99

Inventories % Total Current Assets Countries

Value

Rank

Percentile

Peru Brazil Chile Philippines Switzerland South Africa Indonesia Thailand China South Korea Hungary Spain Russia Norway Taiwan Singapore Greece Hong Kong Malaysia Belgium Germany Netherlands Portugal Denmark Japan France Canada the United Kingdom Argentina Italy Sweden Poland Austria USA Australia Czech Republic India Luxembourg Israel Finland Ireland

64.97 33.17 31.56 19.77 16.33 16.11 16.09 16.07 15.98 13.24 13.11 12.64 11.93 10.99 10.85 10.58 9.68 9.09 9.05 8.99 8.85 8.35 8.00 7.97 7.92 7.68 7.52 7.48 6.82 6.74 6.68 6.37 6.26 5.35 4.93 2.11 1.47 1.36 0.81 0.61 0.05

1 3 4 5 7 8 9 10 11 14 15 16 19 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

97.92 93.75 91.67 89.58 85.42 83.33 81.25 79.17 77.08 70.83 68.75 66.67 60.42 56.25 54.17 52.08 50.00 47.92 45.83 43.75 41.67 39.58 37.50 35.42 33.33 31.25 29.17 27.08 25.00 22.92 20.83 18.75 16.67 14.58 12.50 10.42 8.33 6.25 4.17 2.08 0.00

Region

_________________________________________________________________________________________________________

Latin America Latin America Latin America Asia Europe Africa Asia Asia Asia Asia Europe Europe Europe Europe Asia Asia Europe Asia Asia Europe Europe Europe Europe Europe Asia Europe North America Europe Latin America Europe Europe Europe Europe North America Oceana Europe Asia Europe the Middle East Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

100

Inventories % Total Current Assets (Prepackaged Software) Countries in Asia

Value

Rank

Percentile

North Korea Papua New Guinea Burma Philippines Indonesia Thailand China Brunei Maldives Mongolia Seychelles South Korea Sri Lanka Taiwan Singapore Hong Kong Malaysia Japan Macau India Cambodia Laos Vietnam Bangladesh Bhutan Nepal

63.07 44.10 19.84 19.77 16.09 16.07 15.98 14.75 14.67 14.33 13.62 13.24 11.57 10.85 10.58 9.09 9.05 7.92 6.72 1.47 1.12 1.08 0.98 0.84 0.80 0.71

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

101

Accounts Receivables Days Countries

Value

Rank

Percentile

Thailand Finland Portugal Italy Greece Spain Malaysia Poland Israel Argentina Hong Kong Singapore France New Zealand Hungary Norway Germany South Korea Belgium Netherlands India Russia Czech Republic Ireland Austria China the United Kingdom Philippines Canada Taiwan Denmark USA Sweden Indonesia Australia South Africa Japan Switzerland Peru Luxembourg Brazil Chile

238.82 197.13 196.64 183.90 169.78 163.41 154.47 142.01 129.47 125.41 123.21 119.38 118.07 111.65 110.76 106.09 105.62 104.49 103.53 96.44 95.72 94.16 92.99 91.93 90.81 89.52 85.71 83.73 80.73 79.71 78.40 78.39 77.55 76.03 74.92 73.32 71.30 69.17 63.57 58.41 47.02 44.74

1 3 4 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 41 43 44 45 48 49

97.96 93.88 91.84 87.76 85.71 83.67 81.63 79.59 77.55 75.51 73.47 71.43 69.39 67.35 65.31 63.27 61.22 59.18 57.14 55.10 51.02 48.98 46.94 44.90 42.86 40.82 38.78 36.73 34.69 32.65 30.61 28.57 26.53 24.49 22.45 20.41 16.33 12.24 10.20 8.16 2.04 0.00

Region

_________________________________________________________________________________________________________

Asia Europe Europe Europe Europe Europe Asia Europe the Middle East Latin America Asia Asia Europe Oceana Europe Europe Europe Asia Europe Europe Asia Europe Europe Europe Europe Asia Europe Asia North America Asia Europe North America Europe Asia Oceana Africa Asia Europe Latin America Europe Latin America Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

102

Accounts Receivables Days (Prepackaged Software) Countries in Asia

Value

Rank

Percentile

Thailand Mongolia Malaysia Macau Hong Kong Singapore Seychelles South Korea India China Burma Philippines Taiwan Indonesia Cambodia Japan Laos Maldives Vietnam Brunei North Korea Sri Lanka Bangladesh Bhutan Nepal Papua New Guinea

238.82 213.06 154.47 123.57 123.21 119.38 115.05 104.49 95.72 89.52 84.02 83.73 79.71 76.03 72.63 71.30 70.04 69.32 63.55 62.46 61.70 54.67 54.48 51.88 46.43 43.14

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

103

Inventories (# of Days) Held Countries

Value

Rank

Percentile

Indonesia Peru Philippines Hong Kong Canada China Brazil Chile Malaysia South Korea Russia USA Greece Singapore Spain Thailand Italy Netherlands South Africa Israel Germany the United Kingdom Switzerland Hungary Australia Poland Japan Sweden Taiwan Argentina Portugal Belgium France Norway Denmark India Austria Czech Republic Finland Luxembourg Ireland

302.82 226.31 108.44 98.85 80.05 76.67 75.75 72.08 68.93 57.06 51.42 47.13 45.88 44.69 43.99 40.94 39.08 38.63 38.10 36.28 35.26 34.17 33.57 30.88 29.55 28.73 27.98 26.26 24.23 22.59 21.44 20.91 19.83 18.54 15.73 13.01 11.50 9.38 5.42 2.19 0.47

1 3 6 7 9 10 11 12 13 14 16 17 18 19 20 21 22 23 24 25 26 28 29 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

97.92 93.75 87.50 85.42 81.25 79.17 77.08 75.00 72.92 70.83 66.67 64.58 62.50 60.42 58.33 56.25 54.17 52.08 50.00 47.92 45.83 41.67 39.58 35.42 33.33 31.25 29.17 27.08 25.00 22.92 20.83 18.75 16.67 14.58 12.50 10.42 8.33 6.25 4.17 2.08 0.00

Region

_________________________________________________________________________________________________________

Asia Latin America Asia Asia North America Asia Latin America Latin America Asia Asia Europe North America Europe Asia Europe Asia Europe Europe Africa the Middle East Europe Europe Europe Europe Oceana Europe Asia Europe Asia Latin America Europe Europe Europe Europe Europe Asia Europe Europe Europe Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

104

Inventories (# of Days) Held (Prepackaged Software) Countries in Asia

Value

Rank

Percentile

Indonesia Maldives North Korea Sri Lanka Papua New Guinea Burma Philippines Hong Kong China Malaysia South Korea Singapore Thailand Mongolia Seychelles Brunei Japan Taiwan Macau India Cambodia Laos Vietnam Bangladesh Bhutan Nepal

302.82 276.10 219.67 217.76 153.60 108.82 108.44 98.85 76.67 68.93 57.06 44.69 40.94 36.52 32.07 30.31 27.98 24.23 22.25 13.01 9.87 9.52 8.64 7.40 7.05 6.31

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.6 3.6.1

105

PRODUCTIVITY IN HONG KONG: ASSET-LABOR RATIOS Overview

In this chapter, we consider numerous asset-labor ratios for prepackaged software in Hong Kong benchmarked against global averages. Productivity and utilization ratios are presented for companies oprating in Hong Kong and the average global benchmarks for prepackaged software. For ratios where there are large deviations between Hong Kong and the benchmarks, graphics are provided (sometimes referred to as a “gap” analysis). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain asset-labor ratios are highlighted across countries in the comparison group. In the case of asset-labor ratios, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. We then report the larger asset-labor ratio gaps for prepackaged software that Hong Kong has vis-à-vis the worldwide average. Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.6.2

106

Asset to Labor: Outlook

The following tables and graphs are prepared using the methodology described at the beginning of this section. All units are in thousands of US dollars per employee. All figures are current-year projections for prepackaged software in Hong Kong based on latest financial results available. Labor-asset Ratios ($k/employee) Hong Kong Asia World Avg. _________________________________________________________________________________________________________

Cash & Short Term Investments Cash Short Term Investments Receivables (Net) Total Inventories Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Investments in Unconsolidated Subsidiaries Other Investments Property Plant and Equipment - Net Property Plant and Equipment - Gross Buildings Machinery & Equipment Transportation Equipment Other Property Plant & Equipment Property Plant & Equipment Under Capitalized Leases Accumulated Depreciation - Total Accumulated Depreciation - Buildings Accumulated Depreciation -Machinery & Equipment Accumulated Depreciation - Transportation Equipment Accumulated Depreciation - Other Prop & Equip Accumulated Depreciation - PP&E Under Capitalized Leases Other Assets Deferred Charges Tangible Other Assets Intangible Other Assets Total Assets

132.33 69.32 87.06 68.79 7.98 1.25 0.23 2.12 4.73 14.78 1.42 189.82 2.10 10.61 4.00 243.70 409.60 2.65 43.56 2.08 462.26 15.99 158.32 0.08 11.81 1.00 183.10 2.39 47.10 14.62 16.20 23.03 517.66

29.67 15.48 17.95 39.79 13.28 4.09 2.60 4.53 3.55 1.66 9.43 89.01 2.19 7.17 8.14 51.90 96.77 10.39 25.52 1.89 33.90 7.14 44.51 2.42 11.26 1.14 13.17 1.71 19.81 1.31 4.10 9.94 180.85

43.32 20.78 19.42 50.67 14.02 3.35 2.25 3.80 2.84 1.39 13.57 107.54 2.60 24.03 8.65 118.23 235.10 17.43 143.89 17.20 14.59 2.64 99.39 1.93 4.73 0.66 3.95 0.51 29.10 0.81 3.09 13.99 302.73

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.6.3

107

Asset to Labor: International Gaps

The following graphics summarize for prepackaged software the large labor-asset gaps between firms operating in Hong Kong and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Cash & Short Term Investments ($k/employee) 150

132.33 89.01

100 50

29.67

43.32

0 Hong Kong

Asia

World Average

Gap

Gap: Cash ($k/employee) 80

69.32

60

48.54

40 15.48

20

20.78

0 Hong Kong

Asia

World Average

Gap

Gap: Short Term Investments ($k/employee) 100

87.06

80

67.64

60 40

17.95

20

19.42

0 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

108

Gap: Current Assets - Total ($k/employee) 200

189.82

150 89.01

100

107.54 82.28

50 0 Hong Kong

Asia

World Average

Gap

Gap: Property Plant and Equipment - Net ($k/employee) 250

243.7

200 150

118.23

100

125.47

51.9

50 0 Hong Kong

Asia

World Average

Gap

Gap: Property Plant and Equipment - Gross ($k/employee) 500

409.6

400 300

235.1 174.5

200

96.77

100 0 Hong Kong

Asia

World Average

Gap

Gap: Machinery & Equipment ($k/employee) 143.89

150 100 50

43.56

25.52

0 -50 -100

-100.33

-150 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

109

Gap: Other Property Plant & Equipment ($k/employee) 500

462.26

447.67

400 300 200 100

33.9

14.59

0 Hong Kong

Asia

World Average

Gap

Gap: Accumulated Depreciation - Total ($k/employee) 200

158.32

150 99.39

100

58.93

44.51

50 0 Hong Kong

Asia

World Average

Gap

Gap: Accumulated Depreciation - Other Prop & Equip ($k/employee) 200

183.1

179.15

150 100 50

13.17

3.95

0 Hong Kong

Asia

World Average

Gap

Gap: Total Assets ($k/employee) 600

517.66

500 400

302.73

300

214.93

180.85

200 100 0 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

3.6.4

110

Key Percentiles and Rankings

We now consider the distribution of asset-labor ratios using ranks and percentiles across . What percent of countries have a productivity indicator lower or higher than Hong Kong (what is the indicator's rank or percentile)? The table below answers this question with respect to asset-labor structure. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance or productivity. After the summary table below, a few key asset-labor ratios are highlighted in additional tables. Asset Structure ($k/employee)

Hong Kong

Rank of Total

Percentile

132.33 69.32 87.06 68.79 7.98 1.25 0.23 2.12 4.73 14.78 1.42 189.82 2.10 10.61 4.00 243.70 409.60 2.65 43.56 2.08 462.26 15.99 158.32 0.08 11.81 1.00 183.10 2.39 47.10 14.62 16.20 23.03 517.66

9 of 53 11 of 50 2 of 48 19 of 53 24 of 49 28 of 37 30 of 35 26 of 33 4 of 36 1 of 39 36 of 47 12 of 52 22 of 41 14 of 43 17 of 40 7 of 53 7 of 50 40 of 47 8 of 45 20 of 41 1 of 50 4 of 21 7 of 48 37 of 40 15 of 39 20 of 35 1 of 44 5 of 19 14 of 53 2 of 34 8 of 37 18 of 44 14 of 53

83.02 78.00 95.83 64.15 51.02 24.32 14.29 21.21 88.89 97.44 23.40 76.92 46.34 67.44 57.50 86.79 86.00 14.89 82.22 51.22 98.00 80.95 85.42 7.50 61.54 42.86 97.73 73.68 73.58 94.12 78.38 59.09 73.58

_________________________________________________________________________________________________________

Cash & Short Term Investments Cash Short Term Investments Receivables (Net) Total Inventories Raw Materials Work in Process Finished Goods Progress Payments & Other Prepaid Expenses Other Current Assets Current Assets - Total Long Term Receivables Investments in Unconsolidated Subsidiaries Other Investments Property Plant and Equipment - Net Property Plant and Equipment - Gross Buildings Machinery & Equipment Transportation Equipment Other Property Plant & Equipment Property Plant & Equipment Under Capitalized Leases Accumulated Depreciation - Total Accumulated Depreciation - Buildings Accumulated Depreciation -Machinery & Equipment Accumulated Depreciation - Transportation Equipment Accumulated Depreciation - Other Prop & Equip Accumulated Depreciation - P P & E Under Capitalized Leases Other Assets Deferred Charges Tangible Other Assets Intangible Other Assets Total Assets

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

111

Cash & Short Term Investments Countries

Value ($K/employee)

Rank

Percentile

237.80 192.95 167.17 150.64 146.05 145.65 132.33 121.10 104.43 88.19 83.57 83.47 75.89 67.28 62.64 62.51 51.20 39.57 37.67 32.95 29.94 28.43 25.22 24.24 23.05 20.60 19.66 18.96 17.76 17.48 16.71 16.18 16.11 15.60 14.85 13.65 13.17 12.88 11.95 9.84 9.33 8.53 8.51 6.85 1.86

1 2 3 5 6 7 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 30 31 33 34 35 36 37 38 39 41 42 43 45 46 48 49 50 52 53

98.11 96.23 94.34 90.57 88.68 86.79 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 43.40 41.51 37.74 35.85 33.96 32.08 30.19 28.30 26.42 22.64 20.75 18.87 15.09 13.21 9.43 7.55 5.66 1.89 0.00

Region

_________________________________________________________________________________________________________

Israel Denmark South Korea Russia Turkey Mexico Hong Kong Japan Italy New Zealand USA Canada France Germany Greece China Sweden Singapore the United Kingdom Norway Australia Switzerland Czech Republic Thailand Belgium Ireland Pakistan Finland Malaysia Poland Taiwan Hungary Philippines Brazil Chile Indonesia South Africa Netherlands Austria Portugal Peru India Luxembourg Spain Argentina

the Middle East Europe Asia Europe the Middle East Latin America Asia Asia Europe Oceana North America North America Europe Europe Europe Asia Europe Asia Europe Europe Oceana Europe Europe Asia Europe Europe the Middle East Europe Asia Europe Asia Europe Asia Latin America Latin America Asia Africa Europe Europe Europe Latin America Asia Europe Europe Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

112

Cash & Short Term Investments (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

South Korea Hong Kong Japan China Singapore Brunei Thailand Mongolia Malaysia Seychelles Taiwan Burma Philippines Indonesia Maldives Sri Lanka North Korea India Cambodia Papua New Guinea Laos Vietnam Bangladesh Bhutan Nepal Macau

167.17 132.33 121.10 62.51 39.57 25.67 24.24 21.63 17.76 16.81 16.71 16.17 16.11 13.65 12.45 9.82 9.05 8.53 6.48 6.33 6.24 5.67 4.86 4.63 4.14 1.84

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

113

Receivables (Net) Countries

Value ($K/employee)

Rank

Percentile

2971.78 335.59 192.56 192.03 181.46 173.99 161.26 135.14 121.77 116.46 101.46 90.98 81.45 81.30 73.52 69.32 68.79 67.26 63.57 61.75 56.67 53.72 53.20 50.78 50.30 50.13 49.51 49.40 44.27 43.21 42.07 41.17 32.64 32.59 31.63 28.53 26.29 23.62 19.04 17.38 12.71 12.69 9.92 9.44 9.00

1 2 3 4 5 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 34 35 37 38 39 40 41 42 44 45 46 47 49 50 51

98.11 96.23 94.34 92.45 90.57 86.79 84.91 83.02 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 35.85 33.96 30.19 28.30 26.42 24.53 22.64 20.75 16.98 15.09 13.21 11.32 7.55 5.66 3.77

Region

_________________________________________________________________________________________________________

Portugal Ireland Turkey Mexico Taiwan Denmark Greece South Korea Russia Italy Germany Finland Japan Pakistan Israel Argentina Hong Kong Spain Belgium France Hungary China the United Kingdom Australia Thailand USA Singapore Malaysia Switzerland Canada Austria Norway Poland Sweden Netherlands New Zealand Peru South Africa Luxembourg Czech Republic India Philippines Brazil Chile Indonesia

Europe Europe the Middle East Latin America Asia Europe Europe Asia Europe Europe Europe Europe Asia the Middle East the Middle East Latin America Asia Europe Europe Europe Europe Asia Europe Oceana Asia North America Asia Asia Europe North America Europe Europe Europe Europe Europe Oceana Latin America Africa Europe Europe Asia Asia Latin America Latin America Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

114

Receivables (Net) (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Taiwan South Korea Japan Hong Kong Macau Seychelles China Thailand Singapore Malaysia Mongolia Brunei North Korea Papua New Guinea Burma India Philippines Cambodia Laos Indonesia Vietnam Maldives Bangladesh Bhutan Sri Lanka Nepal

181.46 135.14 81.45 68.79 68.30 58.86 53.72 50.30 49.51 49.40 44.88 39.97 25.52 17.84 12.74 12.71 12.69 9.64 9.30 9.00 8.44 8.21 7.23 6.89 6.47 6.16

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

115

Total Inventories Countries

Value ($K/employee)

Rank

Percentile

68.36 52.09 46.94 32.32 32.17 29.38 16.02 15.13 12.98 12.92 12.66 12.50 12.30 11.95 11.35 9.93 9.88 9.58 9.13 8.11 7.98 7.93 7.91 6.73 6.09 6.02 5.94 5.50 5.48 5.36 5.26 4.57 4.35 4.12 3.78 3.35 1.83 1.51 1.13 0.83 0.52 0.47

1 2 5 6 7 8 9 10 11 12 13 14 15 16 17 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 37 39 41 42 44 45 46 47 48 49

97.96 95.92 89.80 87.76 85.71 83.67 81.63 79.59 77.55 75.51 73.47 71.43 69.39 67.35 65.31 61.22 59.18 57.14 55.10 53.06 51.02 48.98 46.94 44.90 42.86 40.82 38.78 36.73 34.69 32.65 30.61 28.57 24.49 20.41 16.33 14.29 10.20 8.16 6.12 4.08 2.04 0.00

Region

_________________________________________________________________________________________________________

Peru South Korea Russia Greece China Taiwan Switzerland Japan Spain Brazil Philippines Hungary Chile Canada Germany Italy Singapore Norway France Belgium Hong Kong Sweden South Africa Portugal Austria USA Netherlands the United Kingdom Denmark Thailand Argentina Australia Indonesia Malaysia Poland Pakistan Finland Ireland Israel Czech Republic Luxembourg India

Latin America Asia Europe Europe Asia Asia Europe Asia Europe Latin America Asia Europe Latin America North America Europe Europe Asia Europe Europe Europe Asia Europe Africa Europe Europe North America Europe Europe Europe Asia Latin America Oceana Asia Asia Europe the Middle East Europe Europe the Middle East Europe Europe Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

116

Total Inventories (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

North Korea South Korea Papua New Guinea China Taiwan Japan Brunei Seychelles Burma Philippines Singapore Hong Kong Thailand Macau Mongolia Indonesia Malaysia Maldives Sri Lanka India Cambodia Laos Vietnam Bangladesh Bhutan Nepal

66.35 52.09 46.39 32.17 29.38 15.13 14.46 12.99 12.71 12.66 9.88 7.98 5.36 5.19 4.78 4.35 4.12 3.97 3.13 0.47 0.35 0.34 0.31 0.27 0.25 0.23

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

117

Current Assets - Total Countries

Value ($K/employee)

Rank

Percentile

449.65 405.19 369.25 368.25 313.31 270.84 234.10 233.84 207.13 189.82 160.04 156.38 148.20 147.59 143.65 136.40 124.34 116.72 105.21 103.14 101.83 100.50 98.58 96.82 95.34 88.65 88.64 88.18 85.78 77.21 72.34 67.42 66.70 59.99 55.89 52.05 45.08 44.94 44.68 38.96 37.07 29.55 27.43 24.66

1 3 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 33 34 35 36 37 38 39 42 43 44 45 47 48 49 51

98.08 94.23 92.31 90.38 86.54 84.62 82.69 80.77 78.85 76.92 75.00 73.08 71.15 69.23 67.31 65.38 63.46 61.54 59.62 57.69 55.77 53.85 51.92 50.00 48.08 46.15 44.23 42.31 40.38 36.54 34.62 32.69 30.77 28.85 26.92 25.00 19.23 17.31 15.38 13.46 9.62 7.69 5.77 1.92

Region

_________________________________________________________________________________________________________

South Korea Russia Turkey Mexico Israel Taiwan Italy Greece Japan Hong Kong Denmark China USA France Canada Germany Switzerland New Zealand Peru Finland the United Kingdom Singapore Sweden Belgium Hungary Australia Spain Norway Malaysia Argentina Portugal Ireland Austria Thailand Poland Netherlands Philippines South Africa Czech Republic Brazil Chile Luxembourg Indonesia India

Asia Europe the Middle East Latin America the Middle East Asia Europe Europe Asia Asia Europe Asia North America Europe North America Europe Europe Oceana Latin America Europe Europe Asia Europe Europe Europe Oceana Europe Europe Asia Latin America Europe Europe Europe Asia Europe Europe Asia Africa Europe Latin America Latin America Europe Asia Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

118

Current Assets - Total (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

South Korea Taiwan Japan Hong Kong China Brunei North Korea Singapore Seychelles Malaysia Macau Papua New Guinea Thailand Mongolia Burma Philippines Indonesia Maldives India Sri Lanka Cambodia Laos Vietnam Bangladesh Bhutan Nepal

449.65 270.84 207.13 189.82 156.38 112.28 102.12 100.50 99.03 85.78 76.08 71.41 59.99 53.52 45.23 45.08 27.43 25.01 24.66 19.73 18.71 18.04 16.37 14.03 13.36 11.96

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

119

Property Plant and Equipment - Net Countries

Value ($K/employee)

Rank

Percentile

1679.34 1280.12 1276.63 752.97 621.85 243.70 242.25 140.28 119.37 92.24 87.46 80.58 69.72 64.55 54.07 51.64 47.38 45.65 44.20 44.19 41.27 39.83 38.55 36.33 35.95 35.66 34.79 26.75 26.16 25.88 24.67 23.82 23.79 19.11 17.82 17.64 16.60 11.51 11.23 10.80 10.22 9.65 9.18 7.77 7.51

1 2 3 5 6 7 8 9 10 11 12 13 16 17 18 19 21 22 23 24 25 27 28 29 30 31 32 34 35 36 37 38 39 40 41 42 44 46 47 48 49 50 51 52 53

98.11 96.23 94.34 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 69.81 67.92 66.04 64.15 60.38 58.49 56.60 54.72 52.83 49.06 47.17 45.28 43.40 41.51 39.62 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 16.98 13.21 11.32 9.43 7.55 5.66 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Italy Turkey Mexico Greece Pakistan Hong Kong Japan France Taiwan Thailand Australia USA Peru Argentina the United Kingdom China Switzerland Germany South Korea Denmark Czech Republic Russia Finland Philippines Singapore New Zealand Ireland Norway Portugal Canada Israel Malaysia Hungary Luxembourg Belgium Indonesia Spain Sweden Poland Netherlands India Brazil Chile South Africa Austria

Europe the Middle East Latin America Europe the Middle East Asia Asia Europe Asia Asia Oceana North America Latin America Latin America Europe Asia Europe Europe Asia Europe Europe Europe Europe Asia Asia Oceana Europe Europe Europe North America the Middle East Asia Europe Europe Europe Asia Europe Europe Europe Europe Asia Latin America Latin America Africa Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

120

Property Plant and Equipment - Net (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Hong Kong Japan Taiwan Thailand Mongolia North Korea Macau China Papua New Guinea South Korea Brunei Burma Philippines Singapore Seychelles Malaysia Indonesia Maldives Sri Lanka India Cambodia Laos Vietnam Bangladesh Bhutan Nepal

243.70 242.25 119.37 92.24 82.29 67.68 63.60 51.64 47.32 44.20 42.79 36.46 36.33 35.95 24.71 23.82 17.64 16.09 12.69 10.22 7.75 7.48 6.78 5.81 5.54 4.96

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

121

Accumulated Depreciation - Total Countries

Value ($K/employee)

Rank

Percentile

1191.48 1061.43 1058.54 599.21 411.73 158.32 66.34 57.93 46.38 43.16 41.83 41.73 37.79 34.17 33.56 30.24 29.47 25.38 24.26 22.86 21.72 20.41 20.14 20.01 18.36 17.30 16.95 16.46 14.44 14.24 14.19 12.03 11.80 10.55 9.45 8.99 8.87 7.18 5.84 4.47

1 2 3 5 6 7 8 9 10 11 12 13 15 17 18 21 22 23 25 26 27 28 29 30 32 33 34 35 36 38 39 40 41 42 43 44 45 46 47 48

97.92 95.83 93.75 89.58 87.50 85.42 83.33 81.25 79.17 77.08 75.00 72.92 68.75 64.58 62.50 56.25 54.17 52.08 47.92 45.83 43.75 41.67 39.58 37.50 33.33 31.25 29.17 27.08 25.00 20.83 18.75 16.67 14.58 12.50 10.42 8.33 6.25 4.17 2.08 0.00

Region

_________________________________________________________________________________________________________

Pakistan Turkey Mexico Greece Japan Hong Kong Switzerland France Thailand Czech Republic Peru Finland USA Italy South Korea Russia Philippines China the United Kingdom Germany Canada Singapore Belgium Indonesia Malaysia Spain Australia New Zealand Sweden Israel Netherlands Ireland Norway Denmark Brazil Chile Portugal Poland India South Africa

the Middle East the Middle East Latin America Europe Asia Asia Europe Europe Asia Europe Latin America Europe North America Europe Asia Europe Asia Asia Europe Europe North America Asia Europe Asia Asia Europe Oceana Oceana Europe the Middle East Europe Europe Europe Europe Latin America Latin America Europe Europe Asia Africa

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

122

Accumulated Depreciation - Total (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Japan Hong Kong Brunei Thailand Mongolia North Korea South Korea Burma Philippines Papua New Guinea China Singapore Indonesia Malaysia Maldives Sri Lanka India Cambodia Laos Vietnam Bangladesh Bhutan Nepal

411.73 158.32 59.90 46.38 41.38 40.61 33.56 29.58 29.47 28.39 25.38 20.41 20.01 18.36 18.24 14.39 5.84 4.43 4.27 3.88 3.32 3.16 2.83

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

95.65 91.30 86.96 82.61 78.26 73.91 69.57 65.22 60.87 56.52 52.17 47.83 43.48 39.13 34.78 30.43 26.09 21.74 17.39 13.04 8.70 4.35 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

123

Intangible Other Assets Countries

Value ($K/employee)

Rank

Percentile

76.43 64.44 54.03 47.98 43.66 42.26 38.82 38.08 37.01 32.99 29.70 28.25 27.55 26.65 25.44 25.44 23.03 22.87 21.09 19.03 18.81 15.02 14.31 14.17 11.69 11.19 11.01 8.08 7.44 7.32 5.63 5.48 5.43 4.93 3.80 0.90 0.88 0.76 0.76

1 2 3 4 5 6 7 9 10 11 12 13 14 15 16 17 18 19 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41

97.73 95.45 93.18 90.91 88.64 86.36 84.09 79.55 77.27 75.00 72.73 70.45 68.18 65.91 63.64 61.36 59.09 56.82 52.27 50.00 47.73 45.45 43.18 40.91 38.64 36.36 34.09 31.82 29.55 27.27 25.00 22.73 20.45 18.18 15.91 13.64 11.36 9.09 6.82

Region

_________________________________________________________________________________________________________

Canada Israel Belgium USA the United Kingdom South Korea Australia Russia Italy Argentina Germany Ireland France Japan Spain Philippines Hong Kong Sweden Luxembourg China Norway Finland Austria Switzerland Portugal Netherlands Hungary Poland Denmark Singapore Greece New Zealand India Malaysia South Africa Thailand Czech Republic Turkey Mexico

North America the Middle East Europe North America Europe Asia Oceana Europe Europe Latin America Europe Europe Europe Asia Europe Asia Asia Europe Europe Asia Europe Europe Europe Europe Europe Europe Europe Europe Europe Asia Europe Oceana Asia Asia Africa Asia Europe the Middle East Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

124

Intangible Other Assets (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

42.26 32.51 26.65 25.52 25.44 23.03 19.03 12.80 11.43 7.32 5.43 4.93 4.12 3.98 3.61 3.09 2.95 2.64 0.90 0.80

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

95.00 90.00 85.00 80.00 75.00 70.00 65.00 60.00 55.00 50.00 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00

_________________________________________________________________________________________________________

South Korea Macau Japan Burma Philippines Hong Kong China Brunei Seychelles Singapore India Malaysia Cambodia Laos Vietnam Bangladesh Bhutan Nepal Thailand Mongolia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.7 3.7.1

125

PRODUCTIVITY IN HONG KONG: LIABILITY-LABOR RATIOS Overview

In this chapter we consider the liability-labor ratios of companies operating in Hong Kong benchmarked against global averages for prepackaged software. For ratios where there are large deviations between Hong Kong and the benchmarks, graphics are provided (sometimes referred to as a “gap” analysis). Then the distribution of productivity ratios is presented in the form of ranks and percentiles. Certain key liability-labor ratios are highlighted for prepackaged software across countries in the comparison group. Definitions of liability statement terms are given in Chapter 3. In the case of liability-labor ratios, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. I then report the larger liability-labor ratio gaps for prepackaged software that Hong Kong has vis-à-vis the worldwide average. Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.7.2

126

Liability to Labor: Outlook

The following tables and graphs are prepared using the methodology described at the beginning of this section. All units are in thousands of US dollars per employee. All figures are current-year projections for prepackaged software in Hong Kong based on latest financial results available. Labor-liability Ratios ($k/employee) Hong Kong Asia World Avg. _________________________________________________________________________________________________________

Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Deferred Income Deferred Taxes Deferred Taxes - Credit Deferred Taxes - Debit Other Liabilities Total Liabilities Minority Interest Common Equity Common Stock Capital Surplus Revaluation Reserves Other Appropriated Reserves Unappropriated Reserves Retained Earnings Unrealized Foreign Exchange Gain/Loss Total Liabilities & Shareholders Equity

15.67 26.31 0.21 5.26 26.68 67.78 3.58 3.44 0.16 16.48 13.71 284.44 29.53 18.44 109.29 2.61 405.87 28.82 139.80 0.46 14.25 0.51 290.98 0.03 517.66

16.03 34.13 0.94 2.58 15.91 50.73 14.01 13.74 0.27 2.70 0.04 22.26 6.06 3.95 82.70 4.51 93.24 36.81 33.58 -0.20 2.68 11.72 23.57 -0.23 180.85

15.22 61.14 1.80 2.24 27.40 64.32 53.27 52.46 0.83 1.19 -0.10 3.52 2.65 19.63 175.73 9.66 116.84 50.88 49.00 0.80 8.23 8.63 16.79 -0.07 302.73

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.7.3

127

Liability and Equity to Labor: International Gaps

The following graphics summarize for prepackaged software the large labor-liability gaps between firms operating in Hong Kong and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Short Term Debt & Current Portion of Long Term Debt ($k/employee) 80

61.14

60 40

34.13

26.31

20 0 -20

-34.83

-40 Hong Kong

Asia

World Average

Gap

Gap: Long Term Debt ($k/employee) 53.27

60 40 20

3.58

14.01

0 -20 -40

-49.69

-60 Hong Kong

Asia

World Average

Gap

Gap: Long Term Debt Excluding Capitalized Leases ($k/employee) 52.46

60 40 20

3.44

13.74

0 -20 -40

-49.02

-60 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

128

Gap: Deferred Taxes - Credit ($k/employee) 300

284.44

280.92

250 200 150 100 22.26

50

3.52

0 Hong Kong

Asia

World Average

Gap

Gap: Deferred Taxes - Debit ($k/employee) 30

29.53

26.88

25 20 15 10

6.06

5

2.65

0 Hong Kong

Asia

World Average

Gap

Gap: Total Liabilities ($k/employee) 175.73

200 150

109.29

100

82.7

50 0 -50

-66.44

-100 Hong Kong

Asia

World Average

Gap

Gap: Common Equity ($k/employee) 500 400

405.87 289.03

300 200

93.24

100

116.84

0 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

129

Gap: Common Stock ($k/employee) 50.88

60 40

36.81

28.82

20 0 -20

-22.06

-40 Hong Kong

Asia

World Average

Gap

Gap: Capital Surplus ($k/employee) 150

139.8 90.8

100 50

33.58

49

0 Hong Kong

Asia

World Average

Gap

Gap: Retained Earnings ($k/employee) 300

290.98

274.19

250 200 150 100 23.57

50

16.79

0 Hong Kong

Asia

World Average

Gap

Gap: Total Liabilities & Shareholders Equity ($k/employee) 600

517.66

500 400

302.73

300

214.93

180.85

200 100 0 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

3.7.4

130

Key Percentiles and Rankings

We now consider the distribution of liability-labor ratios using ranks and percentiles across . What percent of countries have a value lower or higher than Hong Kong (what is the indicator's rank or percentile)? The table below answers this question with respect to liability-labor ratios. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance or productivity. After the summary table below, a few key liabilitylabor ratios are highlighted in additional tables. Liability Structure ($k/employee)

Hong Kong

Rank of Total

Percentile

15.67 26.31 0.21 5.26 26.68 67.78 3.58 3.44 0.16 16.48 13.71 284.44 29.53 18.44 109.29 2.61 405.87 28.82 139.80 0.46 14.25 0.51 290.98 0.03 517.66

27 of 47 24 of 52 24 of 26 10 of 41 22 of 52 19 of 52 48 of 52 48 of 52 19 of 30 3 of 21 1 of 44 1 of 23 1 of 27 13 of 48 22 of 53 13 of 45 7 of 53 31 of 50 8 of 44 14 of 27 17 of 50 25 of 33 1 of 51 4 of 29 14 of 53

42.55 53.85 7.69 75.61 57.69 63.46 7.69 7.69 36.67 85.71 97.73 95.65 96.30 72.92 58.49 71.11 86.79 38.00 81.82 48.15 66.00 24.24 98.04 86.21 73.58

_________________________________________________________________________________________________________

Accounts Payable Short Term Debt & Current Portion of Long Term Debt Accrued Payroll Income Taxes Payable Other Current Liabilities Current Liabilities - Total Long Term Debt Long Term Debt Excluding Capitalized Leases Capitalized Lease Obligations Deferred Income Deferred Taxes Deferred Taxes - Credit Deferred Taxes - Debit Other Liabilities Total Liabilities Minority Interest Common Equity Common Stock Capital Surplus Revaluation Reserves Other Appropriated Reserves Unappropriated Reserves Retained Earnings Unrealized Foreign Exchange Gain/Loss Total Liabilities & Shareholders Equity

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

131

Accounts Payable Countries

Value ($K/employee)

Rank

Percentile

79.99 72.08 54.50 48.59 48.46 39.34 30.41 29.76 29.51 26.12 23.91 23.78 22.69 22.08 22.02 20.84 20.83 20.29 19.36 17.97 17.83 17.38 16.89 15.67 14.51 13.53 13.27 12.97 9.57 9.44 9.42 7.83 7.03 6.99 6.76 4.55 3.22 3.07 2.79 1.42

1 3 4 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 26 27 28 29 30 31 34 35 36 37 38 39 40 41 42 43 44 45

97.87 93.62 91.49 89.36 87.23 82.98 80.85 78.72 76.60 74.47 72.34 70.21 68.09 65.96 63.83 61.70 59.57 57.45 55.32 53.19 51.06 48.94 44.68 42.55 40.43 38.30 36.17 34.04 27.66 25.53 23.40 21.28 19.15 17.02 14.89 12.77 10.64 8.51 6.38 4.26

Region

_________________________________________________________________________________________________________

South Korea Russia Italy Turkey Mexico Japan Argentina Switzerland Hungary Greece Singapore Belgium Canada Malaysia South Africa France Spain Philippines the United Kingdom Australia Portugal China Poland Hong Kong Germany Luxembourg Thailand USA Denmark New Zealand Ireland Israel Norway Netherlands Sweden Finland Brazil Chile India Indonesia

Asia Europe Europe the Middle East Latin America Asia Latin America Europe Europe Europe Asia Europe North America Asia Africa Europe Europe Asia Europe Oceana Europe Asia Europe Asia Europe Europe Asia North America Europe Oceana Europe the Middle East Europe Europe Europe Europe Latin America Latin America Asia Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

132

Accounts Payable (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

79.99 39.34 30.65 29.96 26.87 23.91 22.08 20.36 20.29 17.38 15.67 13.27 11.84 2.79 2.12 2.05 1.86 1.59 1.51 1.42 1.36 1.29 1.02

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

95.65 91.30 86.96 82.61 78.26 73.91 69.57 65.22 60.87 56.52 52.17 47.83 43.48 39.13 34.78 30.43 26.09 21.74 17.39 13.04 8.70 4.35 0.00

_________________________________________________________________________________________________________

South Korea Japan Seychelles Macau Brunei Singapore Malaysia Burma Philippines China Hong Kong Thailand Mongolia India Cambodia Laos Vietnam Bangladesh Bhutan Indonesia Nepal Maldives Sri Lanka

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

133

Current Liabilities - Total Countries

Value ($K/employee)

Rank

Percentile

256.43 253.01 252.32 231.07 210.91 147.37 110.01 97.29 89.81 80.58 80.51 80.36 72.71 70.33 68.35 67.81 67.78 63.86 61.07 59.36 52.32 51.76 50.07 47.69 47.16 47.08 45.62 43.91 43.56 42.94 36.77 34.19 34.19 30.73 29.80 27.71 27.60 27.32 26.80 26.36 23.86 11.25 9.07 8.27

1 2 3 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 26 27 28 29 30 31 32 33 34 35 36 38 39 41 42 43 44 45 46 48 49 50

98.08 96.15 94.23 88.46 86.54 84.62 82.69 80.77 78.85 76.92 75.00 73.08 71.15 69.23 67.31 65.38 63.46 61.54 59.62 55.77 53.85 51.92 50.00 48.08 46.15 44.23 42.31 40.38 38.46 36.54 34.62 32.69 30.77 26.92 25.00 21.15 19.23 17.31 15.38 13.46 11.54 7.69 5.77 3.85

Region

_________________________________________________________________________________________________________

South Korea Turkey Mexico Russia Taiwan Greece China Italy Japan France Israel Peru Spain Belgium Argentina the United Kingdom Hong Kong Finland USA Switzerland Portugal Austria Hungary Australia Sweden Canada Singapore Malaysia Germany Norway Thailand Denmark Poland South Africa Ireland Brazil Netherlands Philippines Czech Republic Chile Luxembourg New Zealand India Indonesia

Asia the Middle East Latin America Europe Asia Europe Asia Europe Asia Europe the Middle East Latin America Europe Europe Latin America Europe Asia Europe North America Europe Europe Europe Europe Oceana Europe North America Asia Asia Europe Europe Asia Europe Europe Africa Europe Latin America Europe Asia Europe Latin America Europe Oceana Asia Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

134

Current Liabilities - Total (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

South Korea Taiwan China Japan North Korea Hong Kong Macau Papua New Guinea Brunei Seychelles Singapore Malaysia Thailand Mongolia Burma Philippines India Indonesia Maldives Cambodia Laos Vietnam Sri Lanka Bangladesh Bhutan Nepal

256.43 210.91 110.01 89.81 78.00 67.78 67.34 54.54 53.61 52.00 45.62 43.91 36.77 32.80 27.41 27.32 9.07 8.27 7.54 6.88 6.64 6.02 5.94 5.16 4.91 4.40

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

135

Long Term Debt Countries

Value ($K/employee)

Rank

Percentile

1555.05 849.06 668.91 643.27 641.52 269.94 224.71 118.04 61.14 59.93 54.83 48.57 37.82 35.41 30.65 25.04 19.48 17.73 17.61 17.55 16.01 15.81 15.16 14.48 13.78 11.20 10.85 10.83 8.94 8.18 8.04 7.48 6.32 5.77 5.58 5.54 5.49 4.39 3.81 3.58 3.38 2.30 0.88 0.38

1 2 3 4 5 7 8 9 10 11 12 13 15 16 17 18 19 21 22 23 24 25 26 27 28 31 32 33 35 36 37 38 39 40 41 42 43 45 47 48 49 50 51 52

98.08 96.15 94.23 92.31 90.38 86.54 84.62 82.69 80.77 78.85 76.92 75.00 71.15 69.23 67.31 65.38 63.46 59.62 57.69 55.77 53.85 51.92 50.00 48.08 46.15 40.38 38.46 36.54 32.69 30.77 28.85 26.92 25.00 23.08 21.15 19.23 17.31 13.46 9.62 7.69 5.77 3.85 1.92 0.00

Region

_________________________________________________________________________________________________________

Portugal Denmark Italy Turkey Mexico Ireland Pakistan Japan USA France Peru Greece Australia the United Kingdom Germany Argentina South Korea New Zealand Norway Russia Thailand Poland Taiwan Spain Belgium Finland Switzerland Philippines Austria Canada China Luxembourg Netherlands Brazil South Africa Indonesia Chile Israel Sweden Hong Kong Singapore Malaysia Hungary India

Europe Europe Europe the Middle East Latin America Europe the Middle East Asia North America Europe Latin America Europe Oceana Europe Europe Latin America Asia Oceana Europe Europe Asia Europe Asia Europe Europe Europe Europe Asia Europe North America Asia Europe Europe Latin America Africa Asia Latin America the Middle East Europe Asia Asia Asia Europe Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

136

Long Term Debt (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Japan North Korea Papua New Guinea Macau South Korea Thailand Taiwan Mongolia Burma Philippines Brunei China Indonesia Maldives Sri Lanka Hong Kong Singapore Malaysia Seychelles India Cambodia Laos Vietnam Bangladesh Bhutan Nepal

118.04 53.22 37.21 24.68 19.48 16.01 15.16 14.28 10.86 10.83 9.80 8.04 5.54 5.05 3.99 3.58 3.38 2.30 0.91 0.38 0.28 0.27 0.25 0.21 0.20 0.18

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

137

Total Liabilities Countries

Value ($K/employee)

Rank

Percentile

3388.16 2074.26 1427.76 1423.87 1074.20 659.02 471.27 461.41 342.82 283.29 255.28 233.01 207.99 144.42 135.91 122.90 120.03 118.49 118.03 109.29 95.51 93.87 93.10 87.79 87.32 76.82 76.23 61.37 60.28 58.33 56.40 54.11 50.95 48.48 48.46 39.21 36.74 36.67 36.14 35.46 33.98 33.74 30.88 14.41 9.44

1 2 3 4 6 7 8 9 10 11 13 14 15 16 17 18 19 20 21 22 25 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 49 50 53

98.11 96.23 94.34 92.45 88.68 86.79 84.91 83.02 81.13 79.25 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 52.83 49.06 47.17 45.28 43.40 41.51 39.62 37.74 35.85 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 13.21 11.32 7.55 5.66 0.00

Region

_________________________________________________________________________________________________________

Portugal Italy Turkey Mexico Denmark Pakistan Japan Greece Ireland South Korea Russia Taiwan France USA Peru Thailand the United Kingdom China Germany Hong Kong Spain Argentina Belgium Australia Israel Finland Switzerland Norway Austria Canada Sweden Singapore Hungary Poland Malaysia Philippines Luxembourg Netherlands South Africa Brazil Czech Republic Chile New Zealand Indonesia India

Europe Europe the Middle East Latin America Europe the Middle East Asia Europe Europe Asia Europe Asia Europe North America Latin America Asia Europe Asia Europe Asia Europe Latin America Europe Oceana the Middle East Europe Europe Europe Europe North America Europe Asia Europe Europe Asia Asia Europe Europe Africa Latin America Europe Latin America Oceana Asia Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

138

Total Liabilities (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Japan South Korea Taiwan North Korea Thailand China Mongolia Hong Kong Macau Papua New Guinea Brunei Singapore Seychelles Malaysia Burma Philippines Indonesia Maldives Sri Lanka India Cambodia Laos Vietnam Bangladesh Bhutan Nepal

471.27 283.29 233.01 131.93 122.90 118.49 109.64 109.29 92.49 92.25 68.84 54.11 52.92 48.46 39.35 39.21 14.41 13.14 10.36 9.44 7.17 6.91 6.27 5.37 5.12 4.58

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

139

Common Equity Countries

Value ($K/employee)

Rank

Percentile

565.29 509.32 460.40 459.14 446.53 405.87 367.83 331.46 275.05 271.02 231.33 206.12 191.46 191.23 169.36 161.58 148.89 148.15 145.56 124.17 116.27 112.97 95.62 95.16 87.45 82.94 82.76 82.24 80.45 77.78 70.09 69.00 66.63 61.33 58.13 46.57 38.56 38.10 37.13 37.12 34.14 28.96 22.37 17.50 16.65

1 2 3 4 5 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 34 35 37 38 40 41 43 44 45 46 48 49 51 52 53

98.11 96.23 94.34 92.45 90.57 86.79 84.91 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 43.40 41.51 39.62 35.85 33.96 30.19 28.30 24.53 22.64 18.87 16.98 15.09 13.21 9.43 7.55 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Greece Portugal Turkey Mexico Israel Hong Kong South Korea Russia Denmark Pakistan Italy Taiwan Canada Japan USA Australia New Zealand Germany China France Ireland Switzerland the United Kingdom Singapore Thailand Malaysia Belgium Finland Sweden Hungary Philippines Norway Argentina Peru Czech Republic Spain Netherlands Poland India Indonesia Luxembourg Austria South Africa Brazil Chile

Europe Europe the Middle East Latin America the Middle East Asia Asia Europe Europe the Middle East Europe Asia North America Asia North America Oceana Oceana Europe Asia Europe Europe Europe Europe Asia Asia Asia Europe Europe Europe Europe Asia Europe Latin America Latin America Europe Europe Europe Europe Asia Asia Europe Europe Africa Latin America Latin America

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

140

Common Equity (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Hong Kong South Korea Taiwan Japan China Brunei Singapore Thailand Malaysia Seychelles Mongolia Burma Philippines Macau North Korea Papua New Guinea India Indonesia Maldives Cambodia Laos Sri Lanka Vietnam Bangladesh Bhutan Nepal

405.87 367.83 206.12 191.23 145.56 102.02 95.16 87.45 82.94 80.79 78.02 70.34 70.09 65.65 59.53 41.63 37.13 37.12 33.85 28.18 27.17 26.69 24.65 21.13 20.13 18.01

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

141

Retained Earnings Countries

Value ($K/employee)

Rank

Percentile

290.98 240.17 122.69 122.35 75.52 68.22 62.95 57.10 51.44 45.59 43.69 36.55 35.38 31.48 30.05 28.12 27.08 27.03 26.98 26.90 26.49 25.96 22.81 18.97 17.67 15.64 15.12 13.04 11.71 11.24 10.63 10.22 9.99 9.56 8.76 7.60 6.59 6.36 6.30 2.54 1.35 0.54 0.01

1 2 3 4 6 7 8 9 10 11 12 13 14 15 16 17 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 38 40 42 43 44 47 48 49 51

98.04 96.08 94.12 92.16 88.24 86.27 84.31 82.35 80.39 78.43 76.47 74.51 72.55 70.59 68.63 66.67 62.75 60.78 58.82 56.86 54.90 52.94 50.98 49.02 47.06 45.10 43.14 41.18 39.22 37.25 35.29 33.33 31.37 29.41 25.49 21.57 17.65 15.69 13.73 7.84 5.88 3.92 0.00

Region

_________________________________________________________________________________________________________

Hong Kong Israel Turkey Mexico Portugal Japan USA Denmark France Canada Switzerland Taiwan Finland New Zealand South Korea the United Kingdom Russia Norway Italy Germany Singapore Ireland Belgium Netherlands Australia Malaysia Spain South Africa Sweden Czech Republic Thailand Argentina Poland Greece Philippines India Austria Indonesia Luxembourg Hungary China Peru Pakistan

Asia the Middle East the Middle East Latin America Europe Asia North America Europe Europe North America Europe Asia Europe Oceana Asia Europe Europe Europe Europe Europe Asia Europe Europe Europe Oceana Asia Europe Africa Europe Europe Asia Latin America Europe Europe Asia Asia Europe Asia Europe Europe Asia Latin America the Middle East

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

142

Retained Earnings (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Hong Kong Japan Brunei Taiwan South Korea Singapore Malaysia Thailand Macau Mongolia Burma Philippines India Indonesia Maldives Cambodia Laos Vietnam Sri Lanka Bangladesh Bhutan Nepal Seychelles China North Korea Papua New Guinea

290.98 68.22 39.45 36.55 30.05 26.49 15.64 10.63 10.07 9.48 8.79 8.76 7.60 6.36 5.80 5.77 5.56 5.05 4.58 4.33 4.12 3.69 2.64 1.35 0.52 0.36

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.8 3.8.1

143

PRODUCTIVITY IN HONG KONG: INCOME-LABOR RATIOS Overview

In this chapter we consider the income-labor ratios for prepackaged software in Hong Kong benchmarked against global averages. For ratios where there are large deviations between the average firm operating in Hong Kong and the benchmarks, graphics are provided (sometimes referred to as a “gap” analysis). Then the distribution of ratios is presented in the form of ranks and percentiles. Certain key income-labor ratios are highlighted across countries in the comparison group. In the case of income-labor ratios, this report maintains comparability over time and across countries by using a common currency (the US dollar) and relates each measure to a “per employee basis”. Ratios are projected using raw financial statistics and, as ratios, are therefore comparable. Given a country’s human resource ratios, the resulting figures are benchmarked across regional and global averages. We then report the larger income-labor ratio gaps for prepackaged software that Hong Kong has vis-à-vis the worldwide average. Again, a gap need not be a bad sign. Rather, it is simply a substantial difference that might merit further attention or signal a firm’s relative incentive to invest locally. All figures are projections, so due caution is required.

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.8.2

144

Income to Labor: Outlook

The following tables and graphs are prepared using the methodology described at the beginning of this section. All units are in thousands of US dollars per employee. All figures are current-year projections for prepackaged software in Hong Kong based on latest financial results available. Labor-income Ratios ($k/employee) Hong Kong Asia World Avg. _________________________________________________________________________________________________________

Net Sales or Revenues Cost of Goods Sold (Excluding Depreciation) Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Other Operating Expenses Operating Expenses - Total Operating Income Extraordinary Charge - Pretax Non-Operating Interest Income Pretax Equity In Earnings Other Income/Expense Net Earnings Before Interest and Taxes (EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Current Domestic Income Tax Current Foreign Income Tax Deferred Domestic Income Tax Deferred Foreign Income Tax Income Tax Credits Minority Interest Equity in Earnings Net Income Before Extra Items/Prefer Dividends Net Income Before Preferred Dividends Net Income Available to Common

238.67 101.62 17.87 113.05 32.25 139.86 7.97 77.80 0.11 2.67 -0.89 1.65 80.61 1.33 0.75 79.83 8.58 10.66 3.52 0.88 0.00 -0.05 1.27 0.12 70.46 70.46 70.46

136.61 76.78 10.45 32.25 19.77 104.30 3.86 12.42 0.56 1.56 0.00 2.85 16.35 2.61 0.04 14.00 3.19 3.49 0.38 -0.08 0.05 0.00 0.38 0.04 10.55 10.40 10.55

166.86 73.37 37.39 57.43 27.51 146.51 3.30 20.94 0.94 1.96 0.00 1.93 32.89 12.09 0.00 21.05 5.46 2.70 0.14 -0.06 0.04 0.00 1.07 0.00 14.59 14.51 14.58

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

3.8.3

145

Income to Labor: Gaps

The following graphics summarize for prepackaged software the large labor-income gaps between firms operating in Hong Kong and the world average. A gap cannot necessarily be interpreted as a positive or negative reflection on performance. Gaps may signal areas of specialization, market focus, or expertise. More contextual information is required to fully interpret these gaps. The gaps highlighted here are simply those that are large.

Gap: Net Sales or Revenues ($k/employee) 250

238.67

200 136.61

150

166.86

100

71.81

50 0 Hong Kong

Asia

World Average

Gap

Gap: Cost of Goods Sold (Excluding Depreciation) ($k/employee) 120

101.62

100

76.78

80

73.37

60 28.25

40 20 0 Hong Kong

Asia

World Average

Gap

Gap: Depreciation, Depletion & Amortization ($k/employee) 37.39

40 30 20

17.87 10.45

10 0 -10 -20 Hong Kong

www.icongrouponline.com

Asia

World Average

-19.52 Gap

©2007 Icon Group International, Inc.

Financial Indicators

146

Gap: Gross Income ($k/employee) 120

113.05

100 80

57.43

60

55.62

32.25

40 20 0 Hong Kong

Asia

World Average

Gap

Gap: Operating Income ($k/employee) 80

77.8 56.86

60 40 12.42

20

20.94

0 Hong Kong

Asia

World Average

Gap

Gap: Earnings Before Interest and Taxes (EBIT) ($k/employee) 100 80

80.61

60

47.72 32.89

40 16.35

20 0 Hong Kong

Asia

World Average

Gap

Gap: Interest Expense on Debt ($k/employee) 12.09

15 10 5

1.33

2.61

0 -5 -10

-10.76

-15 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

147

Gap: Pretax Income ($k/employee) 80

79.83 58.78

60 40 14

20

21.05

0 Hong Kong

Asia

World Average

Gap

Gap: Net Income Before Extra Items/Prefer Dividends ($k/employee) 80

70.46 55.87

60 40 20

10.55

14.59

0 Hong Kong

Asia

World Average

Gap

Gap: Net Income Before Preferred Dividends ($k/employee) 80

70.46 55.95

60 40 20

10.4

14.51

0 Hong Kong

Asia

World Average

Gap

Gap: Net Income Available to Common ($k/employee) 80

70.46 55.88

60 40 20

10.55

14.58

0 Hong Kong

www.icongrouponline.com

Asia

World Average

Gap

©2007 Icon Group International, Inc.

Financial Indicators

3.8.4

148

Key Percentiles and Rankings

We now consider the distribution of income-labor ratios using ranks and percentiles across . What percent of countries have a value lower or higher than Hong Kong (what is the ratio's rank or percentile)? The table below answers this question with respect to income-labor ratios. The ranks and percentiles indicate, from highest to lowest, where a value falls within the distribution of all countries considered in the global benchmark (the number of countries in the benchmark per line item may vary, as indicated in the Rank). Again, a high or low figure does not necessarily indicate good or bad performance or productivity. After the summary table below, a few key incomelabor ratios are highlighted in additional tables. Income Structure ($k/employee)

Hong Kong

Rank of Total

Percentile

238.67 101.62 17.87 113.05 32.25 139.86 7.97 77.80 0.11 2.67 -0.89 1.65 80.61 1.33 0.75 79.83 8.58 10.66 3.52 0.88 0.00 -0.05 1.27 0.12 70.46 70.46 70.46

19 of 53 20 of 48 11 of 53 11 of 51 21 of 44 24 of 50 13 of 43 4 of 53 30 of 32 19 of 48 27 of 27 26 of 53 8 of 53 36 of 53 1 of 6 4 of 53 10 of 53 7 of 41 1 of 14 2 of 37 4 of 9 6 of 7 4 of 42 3 of 21 4 of 53 4 of 53 4 of 53

64.15 58.33 79.25 78.43 52.27 52.00 69.77 92.45 6.25 60.42 0.00 50.94 84.91 32.08 83.33 92.45 81.13 82.93 92.86 94.59 55.56 14.29 90.48 85.71 92.45 92.45 92.45

_________________________________________________________________________________________________________

Net Sales or Revenues Cost of Goods Sold (Excluding Depreciation) Depreciation, Depletion & Amortization Gross Income Selling, General & Administrative Expenses Other Operating Expenses Operating Expenses - Total Operating Income Extraordinary Charge - Pretax Non-Operating Interest Income Pretax Equity In Earnings Other Income/Expense Net Earnings Before Interest and Taxes (EBIT) Interest Expense on Debt Interest Capitalized Pretax Income Income Taxes Current Domestic Income Tax Current Foreign Income Tax Deferred Domestic Income Tax Deferred Foreign Income Tax Income Tax Credits Minority Interest Equity in Earnings Net Income Before Extra Items/Prefer Dividends Net Income Before Preferred Dividends Net Income Available to Common

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

149

Cost of Goods Sold (Excluding Depreciation) Countries

Value ($K/employee)

Rank

Percentile

333.99 300.97 277.10 226.57 218.63 207.39 191.60 175.10 170.92 162.56 131.29 123.34 122.60 120.25 115.22 112.21 110.62 105.23 101.62 96.96 95.65 93.20 89.75 89.66 89.37 86.64 83.56 81.12 64.46 54.96 52.30 51.68 50.06 42.32 39.30 33.76 31.36 29.23 24.90 20.58 18.51

1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 43 45 46

97.92 93.75 91.67 89.58 87.50 85.42 83.33 81.25 79.17 77.08 75.00 72.92 70.83 68.75 66.67 64.58 62.50 60.42 58.33 56.25 54.17 52.08 47.92 45.83 43.75 41.67 39.58 37.50 35.42 33.33 31.25 29.17 27.08 25.00 22.92 20.83 18.75 16.67 10.42 6.25 4.17

Region

_________________________________________________________________________________________________________

South Korea Russia Switzerland Japan Ireland France Belgium Denmark Hungary Germany the United Kingdom Peru Luxembourg USA Canada Sweden Australia South Africa Hong Kong Italy Argentina Greece Norway Netherlands Singapore Spain Portugal China Finland Brazil Chile Poland Malaysia Czech Republic New Zealand Thailand India Pakistan Philippines Israel Indonesia

Asia Europe Europe Asia Europe Europe Europe Europe Europe Europe Europe Latin America Europe North America North America Europe Oceana Africa Asia Europe Latin America Europe Europe Europe Asia Europe Europe Asia Europe Latin America Latin America Europe Asia Europe Oceana Asia Asia the Middle East Asia the Middle East Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

150

Cost of Goods Sold (Excluding Depreciation) (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

South Korea Brunei Japan Seychelles North Korea Hong Kong Macau Singapore Papua New Guinea China Malaysia Thailand India Mongolia Burma Philippines Cambodia Laos Vietnam Indonesia Bangladesh Bhutan Maldives Nepal Sri Lanka

333.99 250.23 226.57 177.52 119.72 101.62 94.24 89.37 83.71 81.12 50.06 33.76 31.36 30.12 24.98 24.90 23.79 22.94 20.82 18.51 17.84 16.99 16.88 15.21 13.31

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

96.00 92.00 88.00 84.00 80.00 76.00 72.00 68.00 64.00 60.00 56.00 52.00 48.00 44.00 40.00 36.00 32.00 28.00 24.00 20.00 16.00 12.00 8.00 4.00 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

151

Selling, General & Administrative Expenses Countries

Value ($K/employee)

Rank

Percentile

132.01 131.65 118.50 105.94 99.59 98.95 80.81 79.79 68.68 67.64 60.64 56.49 55.54 50.91 44.11 39.55 38.31 32.97 32.25 26.71 24.99 24.75 24.04 23.13 21.54 19.77 19.01 18.54 18.47 18.29 15.02 12.59 11.68 11.12 11.07 3.74

1 2 4 5 6 7 8 9 10 11 12 13 14 16 17 18 19 20 21 22 23 24 25 26 27 28 30 32 34 35 37 39 40 41 42 43

97.73 95.45 90.91 88.64 86.36 84.09 81.82 79.55 77.27 75.00 72.73 70.45 68.18 63.64 61.36 59.09 56.82 54.55 52.27 50.00 47.73 45.45 43.18 40.91 38.64 36.36 31.82 27.27 22.73 20.45 15.91 11.36 9.09 6.82 4.55 2.27

Region

_________________________________________________________________________________________________________

Turkey Mexico Italy Denmark Israel Belgium France USA Canada Ireland Japan South Korea the United Kingdom Russia Australia Germany Netherlands Switzerland Hong Kong Greece Peru Singapore Argentina Thailand Poland Indonesia South Africa China Sweden Norway India Malaysia Brazil Chile Luxembourg Philippines

the Middle East Latin America Europe Europe the Middle East Europe Europe North America North America Europe Asia Asia Europe Europe Oceana Europe Europe Europe Asia Europe Latin America Asia Latin America Asia Europe Asia Africa Asia Europe Europe Asia Asia Latin America Latin America Europe Asia

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

152

Selling, General & Administrative Expenses (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Japan South Korea Hong Kong Brunei Singapore North Korea Macau Thailand Mongolia Indonesia China Maldives Papua New Guinea India Sri Lanka Malaysia Cambodia Laos Vietnam Bangladesh Bhutan Nepal Burma Philippines

60.64 56.49 32.25 29.77 24.75 24.26 23.69 23.13 20.64 19.77 18.54 18.02 16.96 15.02 14.22 12.59 11.40 10.99 9.97 8.55 8.14 7.29 3.75 3.74

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

95.83 91.67 87.50 83.33 79.17 75.00 70.83 66.67 62.50 58.33 54.17 50.00 45.83 41.67 37.50 33.33 29.17 25.00 20.83 16.67 12.50 8.33 4.17 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

153

Operating Expenses - Total Countries

Value ($K/employee)

Rank

Percentile

62.42 61.09 36.19 31.82 31.41 22.12 21.56 18.20 15.50 12.30 10.01 7.97 7.61 6.65 6.04 5.50 4.85 4.29 3.15 2.88 2.59 2.33 2.24 1.41 1.18 1.18 1.14 0.88 0.72 0.71 0.47 0.36 0.35 0.20 0.12 -0.16 -0.27 -5.19

1 2 3 4 5 6 7 8 9 10 11 13 14 15 16 17 18 19 21 22 23 25 26 27 29 30 31 33 34 35 36 37 38 39 40 41 42 43

97.67 95.35 93.02 90.70 88.37 86.05 83.72 81.40 79.07 76.74 74.42 69.77 67.44 65.12 62.79 60.47 58.14 55.81 51.16 48.84 46.51 41.86 39.53 37.21 32.56 30.23 27.91 23.26 20.93 18.60 16.28 13.95 11.63 9.30 6.98 4.65 2.33 0.00

Region

_________________________________________________________________________________________________________

Germany France Switzerland Australia Finland Portugal Ireland Spain Norway Netherlands Philippines Hong Kong the United Kingdom Singapore Sweden Peru Denmark South Africa USA Malaysia South Korea Russia Italy Indonesia Poland Belgium India Argentina Luxembourg China Pakistan Brazil Chile Israel Japan Greece Canada Czech Republic

Europe Europe Europe Oceana Europe Europe Europe Europe Europe Europe Asia Asia Europe Asia Europe Latin America Europe Africa North America Asia Asia Europe Europe Asia Europe Europe Asia Latin America Europe Asia the Middle East Latin America Latin America the Middle East Asia Europe North America Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

154

Operating Expenses - Total (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Brunei Burma Philippines Hong Kong Singapore North Korea Papua New Guinea Malaysia South Korea Indonesia Maldives India Sri Lanka Macau Cambodia Laos Vietnam China Bangladesh Bhutan Nepal Japan

32.68 10.05 10.01 7.97 6.65 5.34 3.74 2.88 2.59 1.41 1.29 1.14 1.01 0.87 0.86 0.83 0.75 0.71 0.65 0.62 0.55 0.12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

95.45 90.91 86.36 81.82 77.27 72.73 68.18 63.64 59.09 54.55 50.00 45.45 40.91 36.36 31.82 27.27 22.73 18.18 13.64 9.09 4.55 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

155

Operating Income Countries

Value ($K/employee)

Rank

Percentile

194.13 193.60 77.80 68.12 63.89 62.57 57.84 49.47 34.00 32.15 26.70 26.06 22.69 22.63 21.33 21.15 20.62 20.45 17.43 17.27 16.06 14.66 13.64 12.83 11.78 10.89 10.43 9.48 8.31 7.96 7.91 7.55 7.35 7.11 6.14 6.08 5.44 5.34 5.12 5.08 4.93 3.46 0.13 -0.14 -7.97

1 2 4 5 6 7 8 9 10 11 12 13 14 15 16 17 19 20 21 22 23 24 25 26 27 28 29 31 32 33 34 35 36 37 40 41 43 44 45 46 47 50 51 52 53

98.11 96.23 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 41.51 39.62 37.74 35.85 33.96 32.08 30.19 24.53 22.64 18.87 16.98 15.09 13.21 11.32 5.66 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Turkey Mexico Hong Kong France Greece Israel Portugal Pakistan New Zealand Japan Argentina USA South Korea Taiwan Australia Denmark China Russia Singapore Spain Ireland Canada the United Kingdom Germany Philippines Belgium Switzerland Peru Czech Republic Sweden Italy Thailand Netherlands Poland India Malaysia South Africa Brazil Indonesia Chile Finland Norway Austria Luxembourg Hungary

the Middle East Latin America Asia Europe Europe the Middle East Europe the Middle East Oceana Asia Latin America North America Asia Asia Oceana Europe Asia Europe Asia Europe Europe North America Europe Europe Asia Europe Europe Latin America Europe Europe Europe Asia Europe Europe Asia Asia Africa Latin America Asia Latin America Europe Europe Europe Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

156

Operating Income (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Hong Kong Japan Macau South Korea Taiwan China Singapore Burma Philippines Brunei North Korea Thailand Mongolia Papua New Guinea India Malaysia Indonesia Maldives Cambodia Laos Vietnam Sri Lanka Bangladesh Bhutan Nepal Seychelles

77.80 32.15 26.31 22.69 22.63 20.62 17.43 11.82 11.78 9.42 9.21 7.55 6.74 6.44 6.14 6.08 5.12 4.67 4.66 4.49 4.07 3.68 3.49 3.33 2.98 -8.28

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

157

Earnings Before Interest and Taxes (EBIT) Countries

Value ($K/employee)

Rank

Percentile

372.02 371.01 193.10 116.63 108.87 94.41 80.61 77.04 76.77 70.26 69.13 48.23 43.41 31.77 30.81 30.50 28.65 27.17 24.49 23.51 22.00 19.55 18.71 18.21 15.81 15.38 13.41 13.05 12.41 12.35 12.04 10.12 9.31 8.93 8.87 8.74 8.59 7.94 7.86 7.41 6.63 5.99 2.98 1.28 1.10

1 2 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 21 22 23 24 25 26 27 29 31 32 33 34 35 38 39 40 41 42 43 44 45 47 48 49 51 52 53

98.11 96.23 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 67.92 66.04 64.15 60.38 58.49 56.60 54.72 52.83 50.94 49.06 45.28 41.51 39.62 37.74 35.85 33.96 28.30 26.42 24.53 22.64 20.75 18.87 16.98 15.09 11.32 9.43 7.55 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Turkey Mexico Portugal Denmark Pakistan Italy Hong Kong Israel France Ireland Greece Taiwan New Zealand Japan Argentina Australia USA South Korea Russia Germany China Singapore Thailand Spain Peru the United Kingdom Switzerland Brazil Chile Philippines Czech Republic Belgium Finland Canada Netherlands Poland Sweden Indonesia Malaysia India South Africa Norway Hungary Austria Luxembourg

the Middle East Latin America Europe Europe the Middle East Europe Asia the Middle East Europe Europe Europe Asia Oceana Asia Latin America Oceana North America Asia Europe Europe Asia Asia Asia Europe Latin America Europe Europe Latin America Latin America Asia Europe Europe Europe North America Europe Europe Europe Asia Asia Asia Africa Europe Europe Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

www.icongrouponline.com

©2007 Icon Group International, Inc.

Financial Indicators

158

Earnings Before Interest and Taxes (EBIT) (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Hong Kong Taiwan Japan Macau South Korea China Singapore Thailand Mongolia North Korea Burma Philippines Brunei Papua New Guinea Indonesia Malaysia India Maldives Sri Lanka Cambodia Laos Vietnam Bangladesh Bhutan Nepal Seychelles

80.61 48.23 31.77 30.36 27.17 22.00 19.55 18.71 16.69 15.35 12.40 12.35 12.11 10.73 7.94 7.86 7.41 7.24 5.71 5.62 5.42 4.92 4.22 4.02 3.59 3.10

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Pretax Income Countries

Value ($K/employee)

Rank

Percentile

188.49 187.98 79.83 76.03 70.35 62.51 55.50 51.51 42.51 40.67 28.95 26.97 25.74 25.55 25.44 24.37 24.30 20.94 20.60 18.86 18.74 17.53 16.26 13.66 11.72 11.60 11.57 11.37 8.08 7.77 7.30 7.26 7.23 7.22 6.65 6.57 6.38 4.38 4.38 4.09 3.89 3.82 2.39 0.28 0.21

1 2 4 5 6 7 8 9 10 11 12 13 14 15 16 18 19 20 21 22 23 24 25 26 27 28 29 31 34 35 36 37 38 39 41 42 43 45 46 47 48 49 51 52 53

98.11 96.23 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 69.81 66.04 64.15 62.26 60.38 58.49 56.60 54.72 52.83 50.94 49.06 47.17 45.28 41.51 35.85 33.96 32.08 30.19 28.30 26.42 22.64 20.75 18.87 15.09 13.21 11.32 9.43 7.55 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Turkey Mexico Hong Kong Israel Portugal France Greece Pakistan New Zealand Taiwan Japan South Korea Italy Australia Denmark USA Russia Argentina Ireland Singapore China Germany Spain Thailand Switzerland Philippines the United Kingdom Czech Republic Belgium Sweden India Finland Malaysia Indonesia Netherlands Canada Poland South Africa Norway Brazil Chile Peru Hungary Luxembourg Austria

the Middle East Latin America Asia the Middle East Europe Europe Europe the Middle East Oceana Asia Asia Asia Europe Oceana Europe North America Europe Latin America Europe Asia Asia Europe Europe Asia Europe Asia Europe Europe Europe Europe Asia Europe Asia Asia Europe North America Europe Africa Europe Latin America Latin America Latin America Europe Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Pretax Income (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Hong Kong Taiwan Japan South Korea Macau Singapore China Thailand Mongolia Burma Philippines Brunei India Malaysia Indonesia Maldives Cambodia Laos Sri Lanka Vietnam Bangladesh Bhutan North Korea Nepal Papua New Guinea Seychelles

79.83 40.67 28.95 26.97 20.63 18.86 18.74 13.66 12.19 11.64 11.60 10.59 7.30 7.23 7.22 6.58 5.54 5.34 5.19 4.85 4.15 3.96 3.71 3.54 2.59 2.48

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Income Taxes Countries

Value ($K/employee)

Rank

Percentile

65.80 65.63 37.02 13.61 13.00 11.94 11.69 10.91 8.58 7.69 7.25 7.11 6.65 6.37 6.00 5.74 5.23 5.22 5.15 5.12 4.84 4.80 3.91 3.66 3.63 3.57 3.56 3.45 3.35 2.82 2.69 2.67 2.32 2.17 1.97 1.94 1.94 1.65 1.16 1.11 1.06 1.02 1.01 0.34 -0.30

1 2 4 5 6 7 8 9 10 11 12 13 14 15 17 18 19 20 21 22 23 24 26 28 29 30 31 32 33 35 36 37 38 39 40 41 42 44 47 48 49 50 51 52 53

98.11 96.23 92.45 90.57 88.68 86.79 84.91 83.02 81.13 79.25 77.36 75.47 73.58 71.70 67.92 66.04 64.15 62.26 60.38 58.49 56.60 54.72 50.94 47.17 45.28 43.40 41.51 39.62 37.74 33.96 32.08 30.19 28.30 26.42 24.53 22.64 20.75 16.98 11.32 9.43 7.55 5.66 3.77 1.89 0.00

Region

_________________________________________________________________________________________________________

Turkey Mexico Greece Japan Portugal Italy Israel New Zealand Hong Kong USA Germany Argentina South Korea Denmark Russia Australia Ireland Czech Republic Belgium Taiwan France Thailand the United Kingdom Spain Philippines Sweden Switzerland Canada Singapore Finland Pakistan China Netherlands Poland Malaysia Indonesia South Africa Peru India Hungary Brazil Norway Chile Austria Luxembourg

the Middle East Latin America Europe Asia Europe Europe the Middle East Oceana Asia North America Europe Latin America Asia Europe Europe Oceana Europe Europe Europe Asia Europe Asia Europe Europe Asia Europe Europe North America Asia Europe the Middle East Asia Europe Europe Asia Asia Africa Latin America Asia Europe Latin America Europe Latin America Europe Europe

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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Income Taxes (Prepackaged Software) Countries in Asia

Value ($K/employee)

Rank

Percentile

Japan Hong Kong Macau South Korea Taiwan Thailand Mongolia Burma Philippines Singapore Brunei China Malaysia Indonesia Maldives North Korea Sri Lanka India Seychelles Papua New Guinea Cambodia Laos Vietnam Bangladesh Bhutan Nepal

13.61 8.58 7.00 6.65 5.12 4.80 4.28 3.64 3.63 3.35 3.22 2.67 1.97 1.94 1.77 1.61 1.40 1.16 1.15 1.12 0.88 0.85 0.77 0.66 0.63 0.56

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

96.15 92.31 88.46 84.62 80.77 76.92 73.08 69.23 65.38 61.54 57.69 53.85 50.00 46.15 42.31 38.46 34.62 30.77 26.92 23.08 19.23 15.38 11.54 7.69 3.85 0.00

_________________________________________________________________________________________________________

_________________________________________________________________________________________________________

Source: Philip M. Parker, Professor, INSEAD, copyright 2007

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4 4.1

MACRO-ACCESSIBILITY IN HONG KONG EXECUTIVE SUMMARY

The keys to Hong Kong's economic success - its free-market philosophy, entrepreneurial drive, absence of trade barriers, well-established rule of law, low and predictable taxes, transparent regulations, free flow of information, and complete freedom of capital movement - remain strong. The rise in unemployment has eased wage pressure and dampened the high turnover that most companies faced here in the past as a result of the extremely low unemployment rates that had traditionally prevailed. There has been intense public debate over the government's proposal to enact national security legislation under Article 23 of Hong Kong's constitution. The government's draft bill is pending the Legislative Council's action. Since China's accession to the World Trade Organization (WTO) Hong Kong has been well positioned to play a key role for U.S. firms wishing to expand exports to one of the world's fastest-growing markets. Hong Kong is a trading hub for China and the region: its trading firms are experts at promoting U.S. products and services in China. Similarities in linguistic and cultural traditions have enabled Hong Kong traders to maximize opportunities for U.S. firms, and in particular for small and medium-sized enterprises and first-time exporters. With a per-capita GDP of about US$24,000 and as the gateway port for china's richest regions, Hong Kong's market offers outstanding prospects for a full range of U.S. products and services. The Hong Kong government's focus on the environment and its continued spending on infrastructure projects also provide opportunities for U.S. firms. Other attractive sectors for U.S. firms include the medical and pharmaceutical sectors, information technology and telecommunication products, high-value food and consumer goods and safety products.

4.1.1

Government Intervention Risks

The Hong Kong government pursues a generally non-interventionist approach to economic policy that stresses the predominant role of the private sector. Prior to the high-tech downturn, the government became somewhat more proactive in support of high technology development. The Hong Kong government describes its economic policy as, "big market, small government," and says the government should act as a "proactive market enabler." This means reducing government expenditure, investing in human resources, providing infrastructure that the private sector will not invest in, and securing foreign market access for local exports. The government has also said it will facilitate the movement of Hong Kong firms up the value-added chain in the financial services, logistics, tourism, and producer and professional services sectors. In addition, it seeks to leverage Hong Kong's traditional ties to the mainland by encouraging greater flows of people, goods, information, and services. Hong Kong has consistently supported an open multilateral trading system. The government is an active member of the World Trade Organization (WTO) and the Asia Pacific Economic Cooperation Forum (APEC). Hong Kong maintains no anti-dumping laws, countervailing duty laws, import quotas or tariffs. There are consumption taxes on a few items that apply equally to imports and local products. Hong Kong urges similar open trade policies for its trading partners. Hong Kong is a separate customs territory. The tax system in Hong Kong is simple and tax rates are low. The business profits tax is payable only on net profits arising in Hong Kong or derived from business performed in Hong Kong. There are no taxes on capital gains, dividends, or interest. Other government revenue sources include a stamp duty on property and stock market transactions, betting duties, an estate duty and a hotel accommodation tax. Under the Sino-British Joint Declaration and China's Basic Law on Hong Kong, Beijing cannot tax Hong Kong or otherwise extract revenue from the Hong Kong government. Beijing also plays no role in formulating Hong Kong's budget and fiscal policies.

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Infrastructure Situation

Hong Kong's modern and efficient infrastructure supports Hong Kong's role as a trade entrepot and regional financial and services center. Rapid growth has placed severe demands on that infrastructure, requiring major new investments, particularly for transportation and shipping facilities.

Airport Sixty-five international airlines operated some 3,900 scheduled flights per week between Hong Kong and 130 cities around the world. Hong Kong is a major gateway to China. There are direct flights from Hong Kong to nearly 40 mainland cities. The demand for services to China is growing. The Hong Kong airport is in the world's top ranks in terms of passenger and cargo throughput. With 24-hour operations, two all-weather runways, an ability to cater to all types of commercial aircraft, and highspeed transport links from the terminal to the city, the airport is well positioned to meet Hong Kong's aviation needs in the coming decades. The airport has a multi-modal marine cargo terminal that provides vessel services between 16 ports in the Pearl River Delta and the airport. The Airport Authority has awarded contracts for new logistics and air express cargo centers. It has plans for other commercial developments to boost revenues, including an international exhibition center, an office and retail complex and a cross-boundary passenger ferry terminal. The Hong Kong Civil Aviation Department is in the early stages of a complete upgrade of its air traffic control system.

Roads and Railroads Hong Kong's roads have one of the highest vehicle densities in the world. High vehicle density, combined with difficult terrain and high density building development, poses a constant challenge to transport planning, road construction and maintenance. Hong Kong is serviced by three major railway systems. The Mass Transit Railway Corporation (MTRC) operates a five-line metro system, including the 34km Airport Express. The Kowloon-Canton Railway Corporation (KCRC) operates a 34km line that services the new towns in the Northeastern New Territories and also provides border crossing and freight service into China. In addition, KCRC also operates a Light Rail Transit System in the Northwestern New Territories.

Environment The Hong Kong government has been developing tighter vehicle emission standards as well as encouraging the use of cleaner fuel to improve the city's air quality. With the provision of government grants, more than 93 percent of all taxis have switched to liquefied petroleum gas (LPG). The Government is also working with the Guangdong Provincial Government in an attempt to combat regional air pollution. The Waste Reduction Framework Plan (WRFP), sets out the various waste reduction and recycling initiatives the government has put in place. On a daily basis, Hong Kong generates more than 16,800 tons of municipal waste. At this rate, Hong Kong's three existing landfills will be full within the next 10 to 15 years. The Government is now embarking on an intensive program to provide recycling facilities, but Hong Kong will eventually need new waste treatment or disposal facilities.

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Macau Economic Scene

Macau is a thirteen square mile territory of approximately 450,000 persons. It became a Special Administrative Region of the People's Republic of China on December 20, 1999. U.S. business interests in Macau are modest but growing significantly. There are approximately 600 Americans residing in Macau, engaged in business, academic and missionary work. The United States is Macau's most important foreign market, taking nearly 46.2 percent of Macau's total exports. Imports from the United States amount to 4.1 percent of Macau's total imports. Macau's most important industries are textiles, gaming, and tourism. The Macau government awarded gambling concessions to two companies with U.S. interests in February 2002, thereby ending a 40-year gambling monopoly held by a local Macau company. This opening of the gaming sector is expected to lead to significant new investment in casinos, hotels, and related facilities. It should dramatically raise the U.S. business profile in Macau and is the centerpiece of the government's efforts to transform Macau into a Las Vegas-style gaming, convention, and familyoriented holiday destination. Macau also hopes to leverage its well-developed infrastructure, relatively low rents, and warehouse capacity to become a gateway to China.

4.1.4

Pearl River Delta - Hong Kong's Hinterland

Located in the southern part of Guangdong Province, the Pearl River Delta (PRD) covers an area of 42,821 sq. km and is home to 47.8 million people. The PRD is China's largest export base, especially in consumer goods. To many foreign companies, setting up production bases in the PRD is part of their strategy for penetrating the domestic market of China. For the past decade, the eight mainland cities that form the core of the PRD have absorbed China's largest share of FDI. What is unusual about this region versus other economically vibrant regions in the mainland is that its growth has been fueled mainly by the private sector, not government expenditures. Hong Kong has been a big part of this boom. Since the early 1980's, much of Hong Kong's manufacturing base has moved to the PRD in search of lower-cost land and labor. As a result, 63,000 Hong Kong enterprises now own and manage a far-reaching network of activities in the area employing nearly 11 million people (58 times the size of Hong Kong's own manufacturing workforce). Most of these companies are SMEs that are able to adapt quickly to market changes but do not command the access or leverage larger entities have with local authorities. The majority of Hong Kong investment that flows into China continues to be directed at the PRD. The relationship is a win-win situation. The assembly of goods takes place in the PRD but the high value-added elements, such as management, design, quality control, and finance, remain in Hong Kong. Shifting its manufacturing base has also allowed Hong Kong's economy to focus on the service sector, which brings with it higher paying jobs. Products formerly known around the world as "Made in Hong Kong" could now rightly be marked "Made by Hong Kong." The PRD's Cantonese speaking population is heavily influenced in forming its tastes and fashions by Hong Kong's Cantonese language media. According to Hong Kong public relations agencies, at least 20 percent of Hong Kong broadcast advertising is directed towards mainland consumers. This trend in targeting the mainland customer shows that Hong Kong-based companies look to the PRD not only as a low cost manufacturing base, but also more and more as a market in and of itself. For example, the Hong Kong office of the convenience store 7-11 has finalized plans to open 300 outlets throughout Guangdong Province. Other leading Hong Kong restaurants and clothing chains are also looking at opening up branches. The PRD's infrastructure is constantly changing. At the top of the list of priorities is infrastructure that will better integrate Hong Kong and the region including: the construction of the Shenzhen Western Corridor; a 5.1 km bridge from Tuen Mun to Dongjiaotou; a new logistic center for the Shenzhen airport; and a light rail to run from Shenzhen to Guangzhou. In addition, Guangdong province's telecom infrastructure is the pride of the nation with more than 24

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million mobile subscribers, 16 percent of China's total and over 10 percent of China's 34 million Internet users. All of this rapid development provides opportunities for U.S. companies. The synergy between the PRD and Hong Kong will substantially benefit the economic development of the region. The signing of the Closer Economic Partnership Agreement (CEPA) on June 29, 2003 between Hong Kong and the mainland will spur this development. On the one hand, Hong Kong and the PRD will together further develop into a production base in the global supply chain. On the other hand, Hong Kong and the PRD can well serve as the operational center for foreign companies targeting China's domestic market. Despite this complementary economic relationship, China's cumbersome and non-transparent regulatory system continues to hamper some areas of cooperation. With several competing jurisdictions, resource allocation is often not as efficient as it could be. This is one of the main reasons U.S. companies, particularly SMEs, have been successful in the region by linking up with Hong Kong SMEs to market their products and services to this dynamic PRD region.

4.2 4.2.1

POLITICAL RISKS Nature of Political Relationship with the United States

The United States and Hong Kong maintain close and cooperative relations. Hong Kong is our fifteenth largest trading partner overall. The United States maintains a wide number of cultural and educational exchanges with Hong Kong, and enjoys excellent cooperation in the international effort against global terrorism and in law enforcement matters. As many as 50,000 American citizens reside in Hong Kong and about 1,100 U.S. companies have offices there. U.S. Navy ships make regular port calls to Hong Kong.

4.2.2

Major Political Issues Affecting the Business Climate

Hong Kong became a "Special Administrative Region" (HKSAR) of the People's Republic of China on July 1, 1997. The Sino-British Joint Declaration, signed in 1984, and the Basic Law of the HKSAR, passed by China's National People's Congress in 1990, form the legal basis for China's "One Country, Two Systems" guarantees for Hong Kong. The HKSAR has a high degree of autonomy, and enjoys independent executive, legislative and judicial power. The HKSAR Government negotiates its own bilateral agreements and makes major economic decisions. The central government in Beijing is responsible for the foreign affairs and defense of the HKSAR. Since reversion, the HKSAR has maintained its capitalist system, retained the status of a free port and international financial center and continued a free trade policy with free movement of goods and capital. It formulates its own monetary and financial policies and safeguards the free operation of business and financial markets. The Basic Law states that the HKSAR will maintain its own currency and use revenues exclusively for its own purposes. The Hong Kong Dollar continues to be freely convertible and foreign exchange, gold and securities markets operate as before. Hong Kong's 1997 reversion did not change Hong Kong's economic regulatory and supervisory framework. Hong Kong has separate membership in international organizations such as the World Trade Organization, APEC and the World Customs Organization.

4.2.3

The Political System

When Hong Kong became a Special Administrative Region of China in July 1997, the Basic Law guaranteed for 50 years the continuation of the rights and freedoms that Hong Kong residents already enjoyed: in essence, the

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continued rule of law and the life-style of the Hong Kong people. Hong Kong's legal system, including the independence of the judiciary and the obligation of the executive authorities to abide by the law, has also continued. Hong Kong is a free society with legally protected rights. Hong Kong's human rights record is excellent. The police force is under civilian control. A Chinese People's Liberation Army garrison remains a largely unseen and symbolic pressure in Hong Kong. The Hong Kong government has a layer of politically-appointed "ministers" between the Chief Executive and the Civil Service. Its Executive Council, which is similar to the U.S. Cabinet, includes all the Secretaries of policy bureaus. The judiciary is an independent body, which operates according to the precepts of the Common Law, with certain variations. The Basic Law (Article 8) stipulates that the laws in force in Hong Kong before reversion, except for any which contravene the Basic Law, remain in force. The Court of Final Appeal (CFA) is the final adjudicator of cases brought in Hong Kong courts. Under the Basic Law, the power of interpretation of the Basic Law is vested in China's National People's Congress Standing Committee, but Hong Kong courts are authorized to interpret, on their own, provisions of the Basic Law that are within the limits of the autonomy of the HKSAR.

4.2.4

Macau Political Scene

Under the principle of "one country, two systems" specified in the 1987 Sino-Portuguese Joint Declaration, the Macau Special Administrative Region (SAR) enjoys a high degree of autonomy except in foreign affairs and defense. The Joint Declaration and Basic Law (the Special Administrative Region's mini-constitution) specify that Macau's economy and way of life will remain unchanged for 50 years. After the 1999 handover, laws in force continued to apply. New laws were passed to provide for a new judicial system, including the establishment of a Court of Final Appeal. Macau's judiciary is independent. Macau's human rights record is good. The police force is under civilian control. A Chinese People's Liberation Army garrison in Macau serves primarily as a symbolic presence to underscore Chinese sovereignty. The government has made dealing with crime and corruption a priority, and its efforts, coupled with a clampdown on organized-crime activity on the Chinese side of the border, have resulted in a sharp decrease in organized-crime violence.

4.3

MARKETING PRODUCTS AND SERVICES

For many American products and services, initial market penetration in Hong Kong does not require an expensive investment. Given that Hong Kong is a "free port" with virtually no duties or tariffs and that it has a wide-ranging network of agents and distributors, a well-managed market penetration program with a moderate investment in market development is generally all that is required initially. Due to its open nature, however, Hong Kong is among the most competitive and price sensitive markets in the world. Companies considering entering this market should be aware that the Hong Kong business climate is extremely fast-paced. Decisions are made quickly, and companies need to be able to respond to inquiries immediately or they risk losing the market to faster moving suppliers. Numerous American products and services can be found in Hong Kong, and throughout China. Many excellent agents and distributors for China are located in Hong Kong, although given China's size and diversity, it is sometimes advisable to work with different agents for different regions of China. Hong Kong companies are eager to talk to potential exporters and have a strong interest in representing good quality, competitively-priced U.S. products from companies committed to the market. Commitment to the market is demonstrated in various ways but should include: quoting in metric, providing Chinese language material, responding quickly to inquiries, meeting relevant standards, and visiting the market for first-hand understanding and relationship building.

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Distribution and Sales Channels

One of the best ways to sell products in Hong Kong is through the use of agents or distributors. It is also an excellent way of minimizing the initial investment in the market. There is a wide range of companies that can serve as agents or distributors for U.S. firms. Other options for pursuing Hong Kong's market are establishing an office or partnering. Companies that are looking to sell equipment needing long-term maintenance, technical support or installation, or are seeking to become involved in infrastructure projects, frequently seek to partner with local companies.

4.3.2

Use of Agents and Distributors/Finding a Partner

Working with agents and distributors in Hong Kong is very much like working with an agent in the United States. An agent takes orders in the supplier's name. Distributors act in their own name and may stock products purchased from the manufacturer for resale. The choice depends on the relationship with which the manufacturer/supplier is most comfortable and the nature of the business. Hong Kong has no special legislation regarding agents and distributors. Virtually anything which both sides can agree to and put into a written contract is acceptable and enforceable, including restrictions on territory and a grace period for termination of the agreement. While not required by Hong Kong law, the more complex the contract, the more helpful legal counsel can be in drafting the text. Items that are often in the contract include: •

Discussion of exclusivity and sales territories (always a sensitive issue; business people should be careful about granting an exclusive agency too soon or in too large a territory if the agent is to have coverage beyond Hong Kong.)

•

Discussion of proprietary information (local law prohibits theft of intellectual property, but prevention of piracy is always less expensive and more effective than post-facto legal action.)

•

Levels of sales activity - set specific targets and goals to qualify for maintaining or renewing the agreement

•

Duration

•

Payment terms

•

Quality control - inspection - verification

•

Rule of law - jurisdiction in the United States vs. Hong Kong (it is generally Hong Kong, but another location may be specified - usually for arbitration.)

•

Covenants restricting activity following cancellation of the contract.

There are many types of agents and distributors in Hong Kong, ranging from those who simply stock retail stores with standard items to agents who provide sales, engineering and technical support for complex systems. It is common for a single company to deal in a wide variety of products in a particular sector. Agents and trading companies may be less specialized than companies in a large economy like the United States, but the best ones are focused and have contacts in a general line of business.

4.3.3

Franchising

The concept of franchising has been catching on in Hong Kong for the past decade, in line with Hong Kong consumers becoming more affluent. Nearly 80 percent of the franchise operations in Hong Kong are of U.S. origin. Home-grown franchises have also developed, especially in catering and fashion wear. Many have expanded their franchises to southeast Asia and China. www.icongrouponline.com

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Direct Sales

Hong Kong has a well-developed network of retail outlets. Supermarkets, department stores, convenience stores and modern shopping malls have become increasingly popular, because of their easy access, convenient location and seven-day availability. Consumers prefer buying products from retail outlets to buying products sales through mail order and person-to-person selling, as they consider retail shopping a leisure activity. Direct sales account for less than one percent of total retail sales though it has increased in popularity following the economic slowdown in 1998. Many who lost their jobs turned to direct selling while others who suffered pay cuts joined direct selling companies to augment their incomes. Direct sales surged between five percent and 10 percent over the past few years. Many local companies, particularly Chinese herbal supplement distributors, have adopted direct sales.

4.3.5

Joint Ventures/Licensing

Joint ventures or strategic alliances can be very helpful in entering the market, and are particularly important in competing for major projects. Licensing is increasingly common in the field of brand-name product manufacturing and marketing.

4.3.6

Steps to Establishing an Office

Foreign companies are allowed to incorporate their operations freely in Hong Kong, to register branches, or to set up representative offices. There is no restriction on the ownership of such operations. Company directors need not be citizens of, or reside in, Hong Kong. Reporting requirements are straightforward and not onerous. There is no distinction in law or practice between investment by foreign-controlled companies and those controlled by local interests. There are no disincentives to foreign investment such as limitations on the use or transfer of foreign currency, or any system of quotas, performance requirements, bonds, deposits, or other similar regulations. High labor and rental costs are the major disincentives to establishing a presence in Hong Kong. To incorporate or register an overseas company, the company should first file statutory declarations with the Registrar of Companies. It should then submit necessary documents to the Administration Section of the Companies Registry. Specific information on establishing an office in Hong Kong is available at: Overseas Companies Section Companies Registry 29/F, Queensway Government Offices 66 Queensway Hong Kong Tel: (852) 2867-4655 Fax: (852) 2523-5629 E-mail: [email protected] Web site: http://www.info.gov.hk/cr Another reference publication is "Establishing an Office in Hong Kong" an annual "how to" handbook with reviews of business services as varied as freight forwarding, law, and consulting, published by The American Chamber of Commerce in Hong Kong.

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Selling Factors/Techniques

The major selling factors are the same as in the United States: price, quality, timeliness in delivery, and service. Initial sales require more face-to-face contact as Asians generally place a premium on developing personal connections.

4.3.8

Advertising and Trade Promotion

U.S. companies can use a variety of promotional vehicles to introduce and raise the visibility of their products and services in the Hong Kong market. These include: •

Special trade fairs and exhibitions

•

Advertising in the media and other public relations activities

•

Seminars

•

In-store promotions

•

Joint promotions with wholesale and retail outlets

Hong Kong is a major conference and exhibition center. Hundreds of international exhibitions are held annually. The Hong Kong Convention and Exhibition Centre (operated by the quasi-governmental Hong Kong Trade Development Council), has approximately 500,000 square feet of exhibition space, including 300,000 square feet added in a major expansion completed in the summer of 1997. For more information please contact: Hong Kong Convention & Exhibition Centre No. 1 Expo Drive Wan Chai, Hong Kong Venue Booking Hotline (852) 2582-1111 Tel: (852) 2582-8888 Fax: (852) 2802-7284 E-mail: [email protected] Web site: www.hkcec.com Television is a widely used medium with an estimated daily audience of 2.25 million households out of a population of nearly 6.8 million people. Hong Kong Television also reaches much of neighboring Guangdong Province in China, where it is very popular. As one of the largest centers in the world for Chinese language publications, the territory produces more than 760 publications, including 53 newspapers (25 are Chinese, 10 English, five bilingual, five in other languages and other news agency bulletins), a number of electronic newspapers, and 709 periodicals. Advertising agencies, including many of international standing, offer a full range of services in Hong Kong. Suppliers should provide technical catalogs in English, and preferably in Chinese as well, for distribution to agents and firms. Company brochures are particularly useful when visiting Hong Kong for the first time. English-Chinese business cards are also helpful.

Newspapers South China Morning Post

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South China Morning Post Publishers Limited 29/F, Dorset House, Taikoo Place 979 King's Road Quarry Bay, Hong Kong Tel: (852) 2565-2333 Fax: (852) 2833-0067 E-mail: [email protected] Web site: www.scmp.com The Standard Sing Tao Holdings Ltd. 3/F, Sing Tao Building 1 Wang Kwong Road Kowloon Bay Kowloon, Hong Kong Tel: (852) 2798-2798 Fax: (852) 2795-3009 Web site: www.thestandard.com.hk

Chinese Newspapers Apple Daily 8, Chun Ying Street Tseung Kwan O Industrial Estate West Tseung Kwan O, N.T. Hong Kong Tel: (852) 2990-8388 Fax: (852) 2741-0830 Web site: www.appledaily.atnext.com Hong Kong Economic Journal 4/F, North Point Industrial Building 499 King's Road, North Point Hong Kong Tel: (852) 2856-7502 Fax: (852) 2597-5822 Hong Kong Economic Times 6-7/F, Kodak House II 321 Java Road, North Point Hong Kong Tel: (852) 2565-4288 Fax: (852) 2811-1926 Ming Pao Daily News Ming Pao Newspapers Limited 15/F, Block A, Ming Pao Industrial Centre 18 Ka Yip Street, Chai Wan Hong Kong Tel: (852) 2595-3111 Fax: (852) 2898-3783 Web site: www.mingpao.com

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Oriental Daily News Oriental Press Centre Wang Tai Road Kowloon Bay, Kowloon Hong Kong Tel: (852) 2795-1111 Fax: (852) 2795-2299 E-mail: [email protected] Web site: www.orientaldaily.com.hk Sing Tao Daily Sing Tao Limited 3/F, Tower B, Sing Tao Building 1 Wang Kwong Road Kowloon Bay, Kowloon Hong Kong Tel: (852) 2798-2323 Fax: (852) 2795-3022 E-mail: [email protected] Web site: www.singtao.com

Trade Journals AmCham (Monthly) American Chamber of Commerce in Hong Kong 1904 Bank of America Tower Central, Hong Kong Tel: (852) 2526-0165 Fax: (852) 2537-1682 E-mail: [email protected] Web site: www.amcham.org.hk Asia Computer Weekly (ACW) CMP Asia Ltd. 17/F, China Resources Building 26 Harbour Road Wanchai, Hong Kong Tel: (852) 2827-6211 Fax: (852) 2805-5696 Web site: www.asiacomputerweekly.com Building Journal Construction & Contract News (Monthly) China Trend Building Press Ltd. Room 901, C.C. Wu Building 302 Hennessy Road Wan Chai, Hong Kong Tel: (852) 2802-6299 Fax: (852) 2802-6458 E-mail: [email protected] Web site: www.building.com.hk Far Eastern Economic Review (Weekly) www.icongrouponline.com

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Review Publishing Company Limited 25/F, Citicorp Center 18 Whitfield Road Causeway Bay, Hong Kong Tel: (852) 2508-4300 Fax: (852) 2503-1537 E-mail: [email protected] Web site: www.feer.com Fortune CCI Asia-Pacific Ltd. 23/F, Tianjin Building 167 Connaught Road West Hong Kong Tel: (852) 2858-0789 Fax: (852) 2857-6309 E-mail: [email protected] Web site: www.cci.com.hk Hong Kong Entrepreneur (monthly) The Chinese Manufacturers' Association of Hong Kong PR & Publications Division 3/F, CMA Building 64 Connaught Road Central Hong Kong Tel: (852) 2545-6166 Fax: (852) 2541-4541 E-mail: [email protected] Web site: www.cma.org.hk Hong Kong Industrialist (Monthly) Federation of Hong Kong Industries 4/F, Hankow Center 5-15 Hankow Road Tsimshatsui, Kowloon Hong Kong Tel: (852) 2732-3188 Fax: (852) 2721-3494 E-mail: [email protected] Web site: fhki.org.hk Logistics HK (Monthly) Hong Kong Productivity Council HKPC Building 78 Tat Chee Avenue Yau Yat Chuen, Kowloon Tong Kowloon, Hong Kong Tel: (852) 2788-5678 Fax: (852) 2788-5900 E-mail: [email protected] Web site: www.hkpc.org Machinery & Materials www.icongrouponline.com

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B & I Publication Co. Ltd. Unit 902, 9/F, Edward Wong Tower 910 Cheung Sha Wan Road Kowloon Hong Kong Tel: (852) 2785-6622 Fax: (852) 2866-7732 E-mail: [email protected] Web site: www.hkmachine.com.hk

4.3.9

Pricing Product

If possible, quote in metric, on a deliverable basis to Hong Kong (i.e. CIF or C&F rather than FOB). Hong Kong companies have many options, so American companies must make it as easy as possible to buy American.

4.3.10

Sales Service/Customer Support

Some sort of local presence, whether it is a branch office or an agent or distributor, is very important in getting established in the market. Business in Hong Kong (and elsewhere in Asia) requires relationships that can only be developed with some kind of local presence. Prompt after-sales service is also crucial to succeeding in this very competitive market.

4.3.11

Selling to the Government

The Government Supplies Department (GSD) is the central purchasing, storage and supply organization for the Government of the Hong Kong Special Administrative Region, serving over 80 government departments and certain non-government organizations. The GSD normally purchases by open tender, with decisions based on compliance with tender specifications, competitiveness in price, back-up service and delivery. The GSD gives no preference to any particular source of supply from any country or organization. Tenders are now covered by the Agreement on Government Procurement of the World Trade Organization (WTO GPA), and a Review Body on Bid Challenges has been set up by the Government to handle challenges made against alleged breaches of the WTO GPA. Invitations to open tender are published in the Government of the Hong Kong Special Administrative Region Gazette and in selected Hong Kong newspapers. Tender notices are also published on the Internet in the GSD Home Page (http://www.info.gov.hk/gsd/index.htm). Tenderers usually have at least three weeks to prepare their offers. For procurement covered by the WTO GPA, the time allowed for bid submission is 40 days. Tenders normally have a 90day validity period unless otherwise indicated. Payment to overseas suppliers is usually effected by telegraphic transfer, bank draft or letter of credit upon acceptance of the goods. Contract awards with the names of successful tenderers and contract sums are published monthly in the Government Gazette and on the Internet. For information about a subscription to the Government of the Hong Kong Special Administrative Region Gazette contact: Information Officer Publications Sales Section Information Services Department Room 402, Murray Building Garden Road

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Central, Hong Kong Tel: (852) 2842-8839 Fax: (852) 2598-7482 E-mail: [email protected] The GSD maintains lists of registered suppliers for issuing tender invitations. Any company not currently registered with the GSD wishing to be considered for inclusion in these lists may apply in writing to the Director of Government Supplies. Companies are required to provide basic information about their organizations and the goods they offer, such as the business registration certificate, company profile, annual report and product catalogues. The GSD evaluates this information and those companies that are found acceptable will be included on the lists. The GSD offers the Electronic Tendering System (ETS) for firms interested in obtaining and submitting tender documents online. GSD-registered suppliers can download tender documents, submit tender offers, and related questions. To access ETS, firms need to subscribe. Details are available in GSD-ETS's Web site at http://www.ets.com.hk/. The U.S. Commercial Service at the U.S. Consulate General in Hong Kong regularly reports on government tenders. These reports are available via the Web site: www.export.gov. Companies seeking more information on the GSD are encouraged to contact: The Director of Government Supplies Government Supplies Department 10/F, North Point Government Offices 333 Java Road North Point, Hong Kong Tel: (852) 2231-5100 Fax: (852) 2510-7904 http://www.info.gov.hk/gsd/index.htm

4.3.12

Protecting Your Product from IPR Infringement

The best protection for an American company is to aggressively market in Hong Kong. By using a good local agent, American manufacturers or suppliers can make their product legally available. Dealers have a strong incentive to stop any piracy, and with good local connections, have a better chance of making that happen than an American company which is not actively participating in the market. The chief law enforcement body for Intellectual Property Rights (IPR) is the Hong Kong Customs and Excise Department. However, protecting copyrights or trademarks takes vigilance, and even with the U.S. Government vigorously pressing Hong Kong on this issue, enforcement is still dependent on reporting incidents of product piracy to the authorities and, in some cases, providing evidence in court.

4.3.13

Need for a Local Attorney

Hong Kong follows the Common Law System and disputes which cannot be resolved between the interested parties are commonly pursued through the court system. Attorneys are needed for most court proceedings and are extremely expensive.

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TRADE ISSUES

The Hong Kong Government levies no import tariffs. However, domestic consumption taxes (referred to as duties in Hong Kong) are imposed on certain goods, such as tobacco (including cigarettes), alcoholic beverages, methyl alcohol and some fuels. These taxes are levied equally on local manufactures and imports. In addition, a steep tax, called a "First Registration Tax," which ranges from 35-100 percent of the price, is levied on new car purchases. Useful contact for inquiring about specific products: Customs and Excise Department 8/F, Harbour Building, 38 Pier Road Central, Hong Kong Tel: (852) 2852-3324 Fax: (852) 2542-3334 (Dutiable Commodities Division) Web site: www.info.gov.hk/customs

4.4.1

Customs Valuation

Customs valuation is only an issue for the taxable items listed above. The tax on tobacco is by quantity, HK$804 for each 1,000 cigarettes, and HK$1,035/kg for cigars. The tax on distilled spirits is 100 percent, wine 80 percent, and beer 40 percent. The tax on petroleum products is by both volume and value. The value is based on the bill of lading as long as it represents a reasonable market value. The tax on automobiles is based on both retail price and engine size. For more information about Hong Kong customs regulations, please check the Hong Kong Customs Department's Web site at http://www.info.gov.hk/customs. Hong Kong Customs Customs and Excise Department 8/F, Harbour Building 38 Pier Road Central, Hong Kong Tel: (852) 2852-3185 Fax: (852) 2542-3334 U.S. Customs maintains an office in Hong Kong. They can be contacted at: U.S. Customs Service American Consulate General 26 Garden Road Central, Hong Kong Tel: (852) 2524-1136 Fax: (852) 2810-6550

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Trade Regulations and Standards

Import Licenses Textiles are subject to import and export licensing because of Hong Kong's obligations under agreements with the United States and other countries. Importers of rice and frozen meat must obtain an importer's license before they can import these commodities. Frozen/chilled meat imports must be accompanied by appropriate health certificates issued by a recognized authority of the country of origin. Plant and animal imports must be accompanied by appropriate health certificates. Hong Kong imposes quarantine requirements for certain pets and breeding swine depending on country of origin. The Agriculture Fisheries and Conservation Department's Livestock Division contact is Tel: (852) 2150-7070 and Fax: (852) 2375-3563.

Export Controls The Hong Kong Government imposes restrictions on the import and export of high-technology products, mirroring the control lists of the multilateral export control regimes (Wassenaar, MTCR, Australia Group). This includes restrictions on unlicensed re-exports to the People's Republic of China. Textiles are subject to import and export licensing because of Hong Kong's obligations under agreements with the United States and other countries. Hong Kong's export control system has not changed as a result of Hong Kong's July 1, 1997 reversion to Chinese sovereignty. Additionally, Hong Kong's status with regard to access to controlled U.S. technologies has not been altered as a result of reversion.

Import/Export Documentation U.S. standard trade documentation is acceptable.

Temporary Entry There are no problems for most products which are not subject to any Hong Kong duties or taxes. For alcohol, cigarettes and fuel, companies must fill out a duty waiver form which can be obtained from Hong Kong Customs at the address above.

Labeling and Marking Requirements Non-tariff barriers such as labeling requirements, standards, etc. are minimal.

Prohibited Imports The import of munitions, firearms and fireworks is strictly forbidden.

Standards Few product safety standards are required for the domestic Hong Kong market. What few there are relate to fire control (gas and electricity) in the city's high rise buildings. Other standards of quality and safety control imposed on domestic manufacturers are for goods made for export or re-export outside Hong Kong. Currently, building materials and electrical/mechanical supplies have to meet British standards. However, Hong Kong is gradually recognizing other standards so U.S. companies seeking to export to Hong Kong should check with potential agents and customers to determine exact standards required.

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Another guideline to use regarding quality control is the "ISO 9000" series, published by the International Organization for Standardization (ISO). These standards, now in the process of being adopted in Hong Kong via the Hong Kong Quality Assurance Agency, provide a framework for all types of manufacturing industries. The Hong Kong Housing Authority has also adopted ISO 9000 for all of its consultants/contractors, and the Works Branch has extended ISO 9000 to engineering and architectural consultants as of April 1, 1996. The Airport Authority also requires suppliers and contractors to conform to ISO 9000. As of June, 2003, 17 government departments have been certified with a total of 47 ISO 9000 certificates issued.

Free Trade Zones and Warehouses There are no special zones since the whole territory is basically a free trade zone.

Special Import Provisions None

4.4.3

Membership in Free Trade Arrangements

Hong Kong is a founding member of the World Trade Organization (WTO) as well as a member of APEC. With China's accession to the WTO, Hong Kong is well positioned to play a key role for U.S. firms wishing to expand exports to one of the world's fastest-growing markets. Hong Kong is a trading hub for China and the region: its trading firms are experts at promoting U.S. products and services in China. Similarities in linguistic and cultural traditions have enabled Hong Kong traders to maximize opportunities fro U.S. firms, and in particular for small and medium-sized enterprises and first-time exporters.

4.5 4.5.1

INVESTMENT CLIMATE Openness to Foreign Investment

Hong Kong pursues a free market philosophy, and there is minimum government interference in the economy. The government welcomes foreign investment. It offers no special incentives nor does it impose disincentives for foreign investors. Hong Kong's well-established rule of law is applied consistently and without discrimination. There is no distinction in law or practice between investments by foreign-controlled companies and those controlled by local interests. Hong Kong is a member of the World Trade Organization in its own right and a separate customs territory. Hong Kong is a duty free port, except for a small number of tariffs on products such as cigarettes and alcohol. There are no quotas or dumping laws. Foreign firms and individuals are allowed freely to incorporate their operations in Hong Kong, to register branches of foreign operations, and to set up representative offices without discrimination or undue regulation. There is no restriction on the ownership of such operations. Company directors are not required to be citizens of, or resident in Hong Kong. Reporting requirements are straightforward and not onerous. Hong Kong's extensive body of commercial and company law generally follows that of the United Kingdom, including the common law and rules of equity. Most statutory law is made locally. The local court system provides for effective enforcement of contracts, dispute settlement and protection of rights. Formalities are minimal for company incorporation and business registration. Foreign and domestic companies register under the same rules and are subject to the same set of business regulations. The Hong Kong Government's Invest Hong Kong encourages inward investment as a means of introducing new or improved products, processes, designs and management www.icongrouponline.com

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techniques. U.S. and other foreign firms can participate in government financed and subsidized research and development programs on a national treatment basis. There is no capital gains tax, nor are there withholding taxes on dividends and royalties. Profits can be freely converted and remitted. Foreign-owned and domestically owned firms are taxed at the same rate, 17.5 percent of profits. There are no preferential or discriminatory export and import policies that affect foreign investors. There are no direct subsidies to domestic industries. In recent years, the government became somewhat more proactive in support of high technology development. This included efforts to encourage applied research and development in the industrial park-like "Cyberport" and "Science Park" projects. With government support, these two projects, which were open to foreign and domestic companies on an equal basis, were intended to offer lower than market prices for office rental space. There are no disincentives to foreign investment such as quotas, bonds, deposits, or other similar regulations. The Hong Kong Code on Takeovers and Mergers (1981) sets out general principles for acceptable standards of commercial behavior. The government defines regional operations as: regional headquarters which control the operation of other branches in the region without frequent referrals to the parent company outside Hong Kong; and regional offices as offices which coordinate operations elsewhere in the region with frequent referrals to the parent company outside Hong Kong or a regional headquarters. The U.S. has the largest number of regional headquarters and offices in Hong Kong (670 companies), followed by Japan (630 companies) and China (266 companies). The major lines of business of the regional headquarters included wholesale/retail, import/export, finance and banking, manufacturing, and transport and related services. The Hong Kong Government owns all land, granting long-term leases without transferring title. Local and foreign leaseholders are treated equally. The government plays a significant role in the housing market: about 50 percent of homes in Hong Kong are rented from the government or purchased with government assistance at below market rates. With few exceptions, the Hong Kong Government does not attempt to limit the activities of foreign investors either in specified projects or sectors. Foreign investment in Hong Kong flows freely into the industrial sector as well as into services, franchises, restaurants, the entertainment industry, and the ownership of property, both residential and commercial. The telecommunications services market has been fully liberalized since January 1, 2003. The exceptions to the Hong Kong government's open foreign investment policy are: •

Broadcasting - Voting control of free-to-air television stations by non-residents is limited to 49 percent. There are also residency requirements for the directors of broadcasting companies.

•

Legal Services - Foreign lawyers are able to practice foreign and international law in Hong Kong. Foreign lawyers can apply to take the Hong Kong Bar Examination and, if successful, practice Hong Kong law. Foreign law firms may not hire local lawyers to advise on Hong Kong law, but may themselves become "local" firms after satisfying certain residency and other requirements. They may thereafter hire local attorneys, but must do so on a 1:1 basis with the foreign lawyers. They also can form associations with local law firms.

4.5.2

Conversion and Transfer Policies

There are no restrictions on conversion and inward or outward transfer of funds for any purpose. The HK dollar is a freely convertible currency that, since late 1983, has been linked to the U.S. dollar at an exchange rate of HK$7.8 = US$1. Government authorities are committed to exchange rate stability through maintenance of the linked rate. There is no allocation of foreign exchange.

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Expropriation and Compensation

The U.S. Consulate General is not aware of any expropriation actions in the recent past. However, expropriation of private property may occur if it is clearly in the public interest, but only for well-defined purposes such as implementation of public works projects. If this is the case, expropriations are to be conducted through negotiations, in a non-discriminatory manner in accordance with established principles of international law. Due process and transparency are to be observed. Investors in and lenders to expropriated entities are to receive prompt, adequate, and effective compensation. Property may be acquired under the State Land Resumption Ordinance, the Land Acquisition Ordinance, the Mass Transit Railway (Land Resumption and Related Provisions) Ordinance or the Roads Ordinance. These ordinances provide for payment of compensation. If agreement cannot be reached on the amount payable, either party can refer the claim to the Land Tribunal.

4.5.4

Dispute Settlement

The U.S. Consulate General is not aware of any investor-state disputes in recent years involving U.S. or other foreign investors or contractors and the Hong Kong Government. The Hong Kong Department of Justice is also not aware of any such disputes. Private investment disputes are normally handled in the courts or via private negotiation. Alternatively, disputes may be referred to the Hong Kong International Arbitration Center. The Hong Kong Government accepts international arbitration of investment disputes between itself and investors. Following reversion to Chinese sovereignty on July 1, 1997, Hong Kong applies provisions of the International Center for the Settlement of Investment Disputes (ICSID), known as the Washington Convention, and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Hong Kong has also adopted the United Nations Commission on International Trade Law (UNCITRAL) model law for international commercial arbitration. Hong Kong and China signed a Memorandum of Understanding (MoU) in June 1999 on an arrangement parallel to the New York Convention for the reciprocal enforcement of arbitral awards, since the New York Convention, being an international agreement, is no longer applicable to the enforcement of arbitral awards between Hong Kong and China. Hong Kong's legal system is firmly based on the rule of law and the independence of the judiciary. Courts of justice in Hong Kong include the Court of Final Appeal, the High Court (composed of the Court of Appeal and the Court of First Instance), the District Court, the Magistrate's Courts, the Coroner's Court, and the Juvenile Court. There are also a Lands Tribunal, Labor Tribunal, and other statutory tribunals.

4.5.5

Performance Requirements and Incentives

Consistent with its non-interventionist economic philosophy, Hong Kong imposes no export performance or local content requirements as a condition for establishing, maintaining or expanding a foreign investment. Hong Kong offers no special privileges to attract foreign investment. There are no requirements that Hong Kong residents own shares, that foreign equity be reduced over time, or that technology be transferred on certain terms. All of Hong Kong is a duty-free zone. Subject to non-discriminatory application of excise taxes and restricted entry in some sectors, as noted above, local and foreign firms are free to take advantage of investment opportunities as they arise.

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Right to Private Ownership and Establishment

Hong Kong law and regulations provide for the right of foreign and domestic private entities to establish, own and to dispose of interests of business enterprises. Foreign investors are allowed, except for the sectors noted above, to engage in all lawful forms of remunerative activity. The Hong Kong government does not generally engage directly in business activity via public enterprises. Business privileges, franchises and land development rights are granted on the basis of competitive equality.

4.5.7

Protection of Property Rights

Hong Kong's commercial and company laws provide for effective enforcement of contracts and protection of corporate rights. Hong Kong has filed its notice of compliance with the trade-related intellectual property requirements of the World Trade Organization. The Intellectual Property Department, which includes the Trademarks and Patents Registries, is the focal point for the development of Hong Kong's intellectual property regime. The Customs and Excise Department is the principal enforcement agency for intellectual property rights (IPR). Hong Kong has acceded to the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, and the Geneva and Paris Universal Copyright Conventions. Hong Kong also continues to participate in the World Intellectual Property Organization, as part of China's delegation. The Hong Kong government devotes significant attention to IPR enforcement. Implementation of laws passed in recent years, including aggressive raids at the retail level, has significantly reduced illegal production and retail sales of copyrighted products. The Hong Kong courts have imposed longer jail terms for violations of Hong Kong's copyright ordinance. The Hong Kong government has conducted public education efforts to encourage respect for intellectual property rights. Nevertheless, pirated products remain available at the retail level throughout Hong Kong. Hong Kong's recent efforts to increase liaison with mainland copyright licensing officials should help in the protection of IPR in Hong Kong.

Copyright Ordinance The Copyright Ordinance protects any original copyright work created or published by any person anywhere in the world. It provides for rental rights for sound recordings and computer programs but not films. It provides for enhanced penalty provisions against copyright piracy and additional legal tools to facilitate enforcement. It decriminalizes parallel imports of copyrighted products one year after their release anywhere in the world, but maintains civil penalties.

Patent Ordinance The Patent Ordinance allows for granting of an independent patent in Hong Kong based on the patents granted by the UK and the Chinese Patent Offices. The patent granted in Hong Kong is independent and capable of being tested for validity, rectified, amended, revoked and enforced in Hong Kong courts.

Registered Design Ordinance The Registered Design Ordinance is modeled on the EU design registration system, with certain modifications. To be registered, a design must be new. The system requires no substantive examination. Protection is for an initial period of five years, and may be extended for four periods of five years each, up to a maximum of 25 years.

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Trademarks Hong Kong's trademark law is TRIPS-compatible and allows for registration of trademarks relating to services. All trademark registrations originally filed in Hong Kong are valid for seven years and renewable for 14-year periods. Proprietors of trademarks registered elsewhere must apply anew and satisfy all requirements of Hong Kong law. When evidence of use is required, such use must have been in Hong Kong. Hong Kong has no specific ordinance to cover trade secrets. Under the Trade Description Ordinance, however, the government has the duty to protect information being disclosed to other parties. The Trade Description Ordinance prohibits false trade descriptions, forged trademarks and misstatements in respect of goods supplied in the course of trade.

4.6

TRANSPARENCY OF THE REGULATORY SYSTEM

Hong Kong's body of law and regulation recognizes the value of competition in economic endeavor. Tax, labor, health and safety and other laws and policies avoid distortions or impediments to the efficient mobilization and allocation of investment. Bureaucratic procedures and "red tape" are held to a minimum and are equally transparent to local and foreign investors. Hong Kong does not have an anti-trust law. The Hong Kong government does not support competition legislation. It states that an all-embracing law would not be able to take into account the specific requirements of individual sectors. Instead of a Competition Authority, the government has established a Competition Policy Advisory Group (COMPAG), chaired by the Financial Secretary, to review competition issues that have substantial policy or systemic implications. Certain sectors of the economy are dominated by monopolies or cartels, not all of which are regulated by the Hong Kong government. These entities do not discriminate against U.S. goods or services, but they can use their market position to block effective competition.

4.6.1

Efficient Capital Markets and Portfolio Investment

There are no impediments to the free flow of financial resources. Non-interventionist economic policies, complete freedom of capital movement and a well-understood regulatory and legal environment have greatly facilitated Hong Kong's role as a regional and international financial center. Hong Kong has a three-tier system of deposit-taking institutions: licensed banks, restricted license banks, and deposit-taking companies. Only licensed banks can offer current (checking) or savings accounts. The Hong Kong & Shanghai Banking Corporation (HSBC) is Hong Kong's largest banking group. With its majority-owned subsidiary Hang Seng Bank, and 262 branches, the group controls more than 39 percent of Hong Kong dollar deposits. The Bank of China (Hong Kong) is the second-largest banking group (249 branches), and controls 18 percent of Hong Kong dollar deposits. Twenty-nine American "authorized financial institutions" operate in Hong Kong. Most banks in Hong Kong maintain U.S. correspondent relationships.

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Hong Kong's five largest banks, in terms of total assets (2002), are as follows: Total Assets (US$ Billion)

Rank

Institution

1

Hong Kong & Shanghai Banking Corporation (HSBC) 239.5

2

Bank of China (Hong Kong)

94.3

3

Hang Seng Bank Ltd.

60.8

4

Standard Chartered Bank, Hong Kong Branch

36.5

5

Bank of East Asia, Ltd.

23.7

Sources: Companies' annual reports Credit in Hong Kong is allocated strictly on market terms and is available to foreign investors on a nondiscriminatory basis. The private sector has access to the full spectrum of credit instruments as provided by Hong Kong's banking and financial system. Legal, regulatory, and accounting systems are transparent and consistent with international norms. The Hong Kong Monetary Authority (HKMA) functions as a de facto central bank. It is responsible for maintaining the stability of the banking system and managing the Exchange Fund backing Hong Kong's currency. The HKMA, with the assistance of the banking sector, has upgraded Hong Kong's financial market infrastructure. Real Time Gross Settlement helps minimize risks in the payment system and brings Hong Kong in line with international standards. The Hong Kong Mortgage Corporation (HKMC) promotes the development of the secondary mortgage market in Hong Kong. The HKMC is 100 percent owned by the government through the Exchange Fund. The HKMC purchases residential mortgage loans for its own retained portfolio and also repackages mortgages into mortgage-backed securities for sale. Under the Insurance Companies Ordinance, insurance companies are authorized by the Insurance Authority to transact business in Hong Kong. Hong Kong has the highest number of authorized insurance companies in Asia. A number of the world's top insurance companies in terms of assets have branch offices or subsidiaries in Hong Kong. Hong Kong Exchanges and Clearing Limited (HKEx), a listed company, operates the stock and futures exchanges. The Securities and Futures Commission, an independent statutory body outside the civil service, has licensing and supervisory powers to ensure the integrity of markets and to protect investors. In April 2003, the government implemented a major modernization of the legal framework for Hong Kong's securities market designed to upgrade transparency and corporate governance, boost regulators' enforcement powers, and improve investor protections. To enhance market competitiveness, HKEx in the same month removed the rule on minimum brokerage commission rates for stock and futures transactions. There are no discriminatory legal constraints to foreign securities firms establishing in Hong Kong via branching, acquisition, or subsidiaries. In practice, foreign firms typically establish in Hong Kong as subsidiaries. Rules governing operations are the same, irrespective of ownership. Portfolio investment decisions are left to the private sector. There are no laws or regulations that specifically authorize private firms to adopt articles of incorporation/association that limit or prohibit foreign investment, participation, or control. The stock exchange plays a significant role in raising capital for Chinese state-owned enterprises. Chinese state enterprises raise equity (through the issuance of so-called "H" shares) in Hong Kong provided they meet Hong Kong regulatory and accounting requirements. These "H" shares are denominated in Renminbi, but must be purchased in Hong Kong dollars.

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Hong Kong has made a concerted effort to develop a local debt market with the Exchange Fund bills and notes program. Maturities now extend to ten years. Regional infrastructure financing requirements and increasing investor demand are projected to stimulate further development of the local debt market. The Hong Kong government requires workers and employers to contribute to retirement funds under the Mandatory Provident Fund (MPF) scheme. The Exchange Fund Investment Limited (EFIL), established by the government to dispose of the stock portfolio it purchased during the Asian Financial Crisis, completed its operations in January 2003. EFIL disposed of the stocks in the form of a mutual fund, the Tracker Fund of Hong Kong (TraHK). The government decided to retain a portion of the stocks (worth about US$410 million) as a long-term investment. The HKMA is responsible for the management of these stocks. TraHK is traded on the stock exchange.

4.6.2

Political Violence

Hong Kong is politically stable and secure. The U.S. Consulate General is not aware of any incidents involving politically motivated damage to projects or installations.

4.6.3

Corruption

Hong Kong has an excellent track record in combating corruption. Many governments study Hong Kong's anticorruption practices each year. U.S. firms have not identified corruption as an obstacle to foreign direct investment. The well-known Independent Commission Against Corruption (ICAC) is responsible for combating corruption. The ICAC is independent of the public service and the ICAC Commissioner is responsible directly to the Chief Executive. A bribe to a foreign official is a criminal act, as is the giving or accepting of bribes, for both private individuals and government employees. Penalties are stiff. For example, a civil servant who solicits or accepts any advantage without special permission of the government can receive one year's imprisonment and a HK$100,000 fine if convicted. Individuals in both the private and public sector can receive up to 7 years imprisonment and a HK$500,000 fine for offering, soliciting or accepting a benefit for performance or non-performance of an official duty.

4.6.4

Bilateral Investment Agreements

Hong Kong is negotiating a series of bilateral investment agreements -- the Hong Kong Government calls them "Investment Promotion and Protection Agreements" -- with major foreign investors. To date, Hong Kong has signed agreements with Australia, Austria, Belgo-Luxembourg Economic Union, Denmark, France, Germany, Italy, Japan, Korea, the Netherlands, New Zealand, Sweden, Switzerland and the United Kingdom. The Hong Kong Government has initialed agreements with Canada and Vietnam. It is negotiating agreements with Singapore and Thailand. All such agreements are based on a model text approved by China through the Sino-British Joint Liaison Group. The United States and Hong Kong held talks on a bilateral investment agreement in the late 1990s, but certain differences could not be resolved and negotiations were suspended.

4.6.5

OPIC and Other Investment Insurance Programs

Overseas Private Investment Corporation (OPIC) coverage is not available in Hong Kong. Hong Kong is a member of the World Bank Group's Multilateral Investment Guarantee Agency (MIGA). www.icongrouponline.com

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Labor

The average number of days lost due to industrial conflicts is one of the lowest in the world. Hong Kong has implemented 40 conventions of the International Labor Organization in full and 18 others with modifications. Local law provides for the right of association and the right of workers to establish and join organizations of their own choosing. The government does not discourage or impede the formation of unions. Workers who allege antiunion discrimination have the right to have their cases heard by the Labor Relations Tribunal. Although there is no legislative prohibition of strikes, in practice most workers must sign employment contracts that state that walking off the job is a breach of contract and can lead to summary dismissal. Collective bargaining is legal in Hong Kong, but there is no obligation on employers to engage in it. In practice, collective bargaining is not widely used. For more information on labor regulations in Hong Kong, please check the following website: www.justice.gov.hk/home.htm (click on Chapter 57 "Employment Ordinance").

4.6.7

Foreign Trade Zones/Free Ports

Hong Kong is a free port without foreign trade zones.

4.6.8

Major Foreign Investor Firms

United States: •

American International Group

•

AT&T

•

Bank of America

•

Caltex

•

Citibank

•

Coca-Cola

•

Compaq Computer

•

CSX

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Disney

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Exxon

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Federal Express

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Goldman Sachs

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IBM

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JP Morgan Chase

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Kodak

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Merrill Lynch

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Morgan Stanley

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Motorola

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Pacific Waste Management

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Pepsi

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Japan: •

C. Itoh

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Citizen Watches

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Daido Concrete

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Hitachi

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Jusco

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Mitsubishi

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NEC

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Nishimatsu

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Nomura

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Olympus

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Uny

United Kingdom: •

HSBC

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Inchcape Pacific

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Jardine Matheson

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Lloyds

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P & O Shipping

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Standard Chartered Bank

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Swire Pacific Group

West Europe: •

Carlsberg

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Hong Kong Petrochemicals (Italian/Korean/Chinese joint venture)

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Siemens

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Heraeus

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Philips

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Bouygues/Dragages

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Bachy-Soletanches

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Banque National de Paris

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Banque Indosuez

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Chanel

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Cartier

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Christian Dior

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Remy

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Ericsson

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Asea Brown Boveri

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Tetrapak

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Electrolux

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China: •

Bank of China (Hong Kong)

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Beijing Enterprises

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China Everbright

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China Investment and Trust Corporation (CITIC)

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China Merchants

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China Mobile

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China National Offshore Oil Corporation (CNOOC)

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China National Petroleum Corporation

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China Ocean Shipping Co (COSCO)

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China Overseas Construction

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China Resources

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China Travel Services

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China Unicom

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Guangdong Enterprises

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Legend Holdings

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Petro China

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Shanghai Industrial

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Yue Xiu Enterprises

Asia: •

San Miguel Brewery

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News Corp.

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Pioneer

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Shangri-la/Kerry Trading

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Park View Properties

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Lippo Group

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C.P. Pokphand

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LG

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First Pacific Group

4.7

188

TRADE AND PROJECT FINANCING

Hong Kong has an open financial system, with no controls on currency movement. The local currency, the Hong Kong Dollar (HK$), is freely convertible and there are no foreign exchange controls.

4.7.1

General Availability of Financing

Commercial trade financing is available in Hong Kong for qualified customers. All licensed banks are authorized to provide loans to residents and non-residents in the currency of their choice. Letters of credit and other financial instruments are widely used to protect participants in trade arrangements. All banks maintain close working relationships with correspondent banking institutions. The financial system is highly developed and efficient.

4.7.2

How to Finance Exports/Methods of Payment

The preferred method of quoting is "CIF" or "C and F" in HK$. The U.S. dollar and other freely convertible currencies may be accepted for bids and pro forma invoicing. Terms of payment depend on the relative negotiating strength of the buyers and sellers. U.S. suppliers should seek to obtain letters of credit or sight draft terms when dealing with buyers who are not well known to them. Asking for a letter of credit is a standard business practice, and your potential customer will not generally interpret this as a sign of mistrust. The importance of trade finance to Hong Kong has resulted in a high level of bank efficiency in providing import payment services. Letters of credit, document collection and international remittance are widely available. The risk of financing receivables can be readily evaluated via locally available credit information. Prospective exporters should make use of banking relationships to determine credit risk.

4.7.3

Types of Available Export Financing and Insurance

The U.S. EX-IM Bank offers both trade financing and insurance for U.S. exports. Commercial vendors are also readily available. The U.S. Exports-Import Bank, an independent agency of the U.S. government, seeks to increase the competitive position of U.S.-based exporters in overseas markets. By providing export insurance, loan guarantees, direct loans and other types of financing support EX-IM Bank supports the sales of U.S. exports and thereby creates U.S. jobs. www.icongrouponline.com

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The terms and conditions of standard financing are governed by the OECD Arrangement on export credits. Direct lending rates are set monthly and are called Commercial Interest Reference Rates (CIRRs). For more information concerning EX-IM Bank programs and application procedures contact EX-IM Bank in Washington, D.C. at (800) 565-EXIM or (202) 565-3946. Fee calculations and applications can be found on-line at the Web site www.exim.gov. Hong Kong and Macau are not recipients of official development assistance (i.e. OPIC, AID). Projects are financed on commercial terms. Hong Kong is also a major center for commercial project financing for China. The U.S. Trade and Development Agency programs are available for Hong Kong and Macau. U.S. Trade and Development Agency (USTDA) funds feasibility studies, orientation visits, specialized training grants, business workshops and technical assistance worldwide. USTDA is active in more than 60 countries and has recently opened its programs in China after a 12-year break. In order to be eligible for assistance, projects must have a procurement process open to U.S. firms, represent an opportunity for sales of U.S. goods and services and be a development priority of the country where the project is located. Contact Mr. Geoffrey Jackson, Regional Director for Asia/Pacific, at USTDA's Arlington, VA office. Tel: (703) 875-4357, Fax: (703) 875-4009. E-mail: [email protected]. Web site: http://www.tda.gov.

4.7.4

The Asian Development Bank

Asia's premier non-profit financial institution, the Asian Development Bank (ADB), is headquartered in Manila, Philippines. ADB was founded in 1966 and is owned by 61 member countries. The United States and Japan are the largest shareholders. The Bank's regional membership extends from the Far East to South Asia, through the Pacific Islands up to Central Asia. The newest member, Timor-Leste, joined in 2002. ADB's lending portfolio generates commercial opportunities in borrowing countries for consultants, equipment suppliers, contractors, banks and project sponsors from the bank's member countries. Aside from its public sector operations, ADB also lends directly to the private sector where its participation serves to mobilize further investments for projects that have a high developmental impact. ADB maintains resident offices in Bangladesh, Cambodia, China, India, Indonesia, Laos, Kyrgyz Republic, Nepal, Pakistan, Philippines, Sri Lanka, Vietnam, Vanuatu (for the South Pacific), Uzbekistan, Kazakhstan and Mongolia; a field office in Gujarat, India, and a country office in the Philippines. The bank also maintains three representative offices in Tokyo, Washington, D.C. and Frankfurt. The U.S. Department of Commerce maintains a Congressionally mandated Commercial Liaison Office for the ADB (CS ADB). The Office's mission is to help American firms access, enter and expand in Asian markets that benefit from ADB assistance. For example, the office provides counseling, advocacy, project information and conducts outreach programs in the region as well as in the United States to help U.S. firms take advantage of commercial opportunities in countries borrowing from the ADB. To perform its mandate, the office cooperates with the U.S. Director's Office at ADB and works closely with Commercial Service posts in the region. CS ADB's cooperation with CS Hong Kong has resulted in a number of project development efforts to help U.S. consortia and their affiliates better access ADB's private sector window. An American Senior Commercial Officer, Frank Foster, heads the office. CS/ADB invites American firms to work with it in pursuing ADB commercial and infrastructure project development opportunities. The office's contact information: The U.S. Commercial Liaison Office for ADB (CS ADB) American Business Center 25th Floor, Ayala Life-FGU Building www.icongrouponline.com

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6811 Ayala Avenue Makati City, Philippines 1226 U.S. mailing address: PSC 500 Box 33 FPO AP 96515-1000 E-mail: [email protected] Telephones: (632) 887-1345(-6) Fax: (632) 887-1164

4.8

TRAVEL ISSUES

Over the years, Hong Kong has developed as a unique society based on a blend of Chinese tradition and western technology. Most people who are familiar with Hong Kong know that Hong Kong means business. Above all, it is a society that emphasizes hard work and success. Americans encounter few if any cultural problems when conducting business in Hong Kong. Americans should be aware that Hong Kong people tend to be more formal than many Americans. Business acquaintances are addressed as Mr. or Ms. unless they state that their first name should be used. Business cards are exchanged frequently and the exchange should be fairly formal: the card should be accepted with both hands and a moment taken to read it carefully. "Face" is very important, and problems or areas of disagreement are handled indirectly to avoid loss of "face." While a study of local customs and practices may be helpful, most people in Hong Kong are sufficiently familiar with Western customs that they are tolerant of cultural differences. Business contacts should be treated the same as a formal business relationship in the United States. Western business attire (suit and tie for men, business suits for women) is appropriate.

4.8.1

Travel Advisory and Visas

Visas allowing residence and local employment for expatriates are granted on the basis of simple, comprehensible procedures, are handled in a timely manner and managed in a way that is consistent with the interests of employees. There are no quotas, bonds, or guarantees required. All residents are equal under the law, enjoy freedom of movement, access to public education, and basic civil freedoms. Visiting Americans generally fit in well. Most Hong Kong business executives speak English, and are accustomed to dealing with Westerners.

4.8.2

Business Infrastructure

Housing, food, telecommunications, transportation and healthcare are all available at levels comparable to major American cities. Most people live in apartments in high-rise buildings. Rents for housing are very high. Hong Kong has many different types of restaurants, offering a wide variety of international foods. Grocery stores are also stocked with an international selection of items. Communications facilities are excellent. Long distance telephone and facsimile services can be easily arranged with telecommunications companies, and are available in hotels and business centers. Hong Kong also has a very good public transportation system. Major modes of transportation include buses, the Mass Transit Railway (underground subway system), trams, ferries, the Kowloon-Canton Railway

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and taxis. In addition, almost all major airlines service Hong Kong. Healthcare facilities are also excellent, and Hong Kong's private hospitals and private physicians are of international standards. Your business partners will often speak English, and will negotiate on a very business-like basis. It should be noted however, that as companies from China continue to expand their business activities in Hong Kong, more business is being conducted in Mandarin. When conducting business with these companies, U.S. business people may be well advised to bring along a Mandarin-English interpreter to avoid any misunderstandings.

4.8.3

Temporary Entry of Goods

Hong Kong Customs does not restrict the temporary import of goods into Hong Kong, such as laptop computers, software and general exhibit materials, for business purposes so long as the goods are not restricted items which normally require an import license. The temporary import of supercomputers, which is a controlled item, or of any exhibit materials which are also controlled items, would require a license even if the commodity is being shipped in only for exhibit purposes. General and country-specific travel information can be retrieved from the Department of State's Web site at http://travel.state.gov. Business travelers to Hong Kong seeking appointments with U.S. Consulate General Hong Kong officials should contact the Commercial Section in advance. The Commercial Section can be reached by telephone at (852) 2521-1467, fax at (852) 2845-9800, or email at [email protected] or visit U.S. Consulate General Web site at: http://hongkong.usconsulate.gov.

4.8.4

Country Data

•

Population: 6.82 million (End-2002)

•

Population Growth Rate: 0.8%

•

Religions: Buddhism, Taoism, Christianity (all denominations), Confucianism, small numbers of Moslems, Hindus, Jews, and Sikhs.

•

Government System: Reverted to Chinese sovereignty and became a Special Administrative Region of China on July 1, 1997 with a high degree of autonomy until 2047.

•

Languages: English and Cantonese are the languages of administration and commerce. Mandarin Chinese is becoming more common.

•

Workweek: Business hours are 9 to 5, Monday through Friday. Many companies now have a 5-day workweek.

4.9 4.9.1

KEY CONTACTS U.S. Consulate General Trade-Related Contacts

U.S. Consulate General, Hong Kong 26 Garden Road Central, Hong Kong Tel: (852) 2523-9011 Fax: (852) 2845-1598 www.icongrouponline.com

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Web site: http://hongkong.usconsulate.gov Commercial Service -- Hong Kong Senior Commercial Officer: Barry Friedman Deputy Senior Commercial Officer: Sarah Kemp Commercial Officer: Dien Ly U.S. Consulate General 26 Garden Road Central, Hong Kong Tel: (852) 2521-1467 Fax: (852) 2845-9800 E-mail: [email protected] Web site: www.buyusa.gov/hongkong Economic/Political Section -- Hong Kong Chief: Simon Schuchat U.S. Consulate General 26 Garden Road Central, Hong Kong Tel: (852) 2841-2101 Fax: (852) 2526-7382 Foreign Agricultural Service -- Hong Kong Agricultural Trade Officer: Lloyd Harbert Asst. Agricultural Trade Officer: David Wolf U.S. Consulate General 26 Garden Road Central, Hong Kong Tel: (852) 2841-2350 Fax: (852) 2845-0943 E-mail: [email protected] Web site: www.usfoods-hongkong.net Department of Commerce -- International Trade Administration Office of PRC and Hong Kong, Director: Cheryl McQueen Country Desk Officer: Zarema Arutyunova U.S. Department of Commerce Room 2317, Office of China, Hong Kong and Mongolia 14th & Constitution Ave, NW Washington, D.C. 20230 Tel: (202) 482-3932 Fax: (202) 482-1576 US&FCS Office of International Operations, Regional Director: Ann Bacher U.S. Department of Commerce Room 1229, Office of International Operations 14th & Constitution Ave, NW Washington, D.C. 20230 www.icongrouponline.com

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Tel: (202) 482-2422 Fax: (202) 501-6165 Department of State Director: Stephen M. Young U.S. Department of State Office for Chinese and Mongolian Affairs Room 4318, Main Building, Harry S. Truman Building 2201 C Street, NW Washington, D.C. 20520 Tel: (202) 647-6803 Fax: (202) 647-6820

4.9.2

U.S. Commercial Service Offices in China

Beijing U.S. Commercial Service 31st Floor, North Tower Beijing Kerry Center, No. 1 Guanghua Lu Beijing 100020, China Tel: (86-10) 8529-6655 Fax: (86-10) 8529-6558/9 E-mail: [email protected] Web site: www.buyusa.gov/china Chengdu U.S. Commercial Service 4 Lingshiguan Lu, Renmin Nanlu Section 4 Chengdu Sichuan 610041, China Tel: (86-28) 558-3992/9642 Fax: (86-28) 558-9221/3520 E-mail: [email protected] Guangzhou U.S. Commercial Service 14/F, China Hotel Office Tower, Room 1461 Liu Hua Road Guangzhou 510015, China Tel: (86-20) 8667-4011 Fax: (86-20) 8666-6409 E-mail: [email protected] Shanghai U.S. Commercial Service Shanghai Centre, Suite 631

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1376 Nanjing West Road Shanghai 200040, China Tel: (86-21) 6279-7630 Fax: (86-21) 6279-7639 E-mail: [email protected] Shenyang U.S. Commercial Service 52 Shi Si Wei Lu Shenyang Liaoning Province 110003, China Tel: (86-24) 2322-1198 ext. 189 Fax: (86-24) 2322-2206 E-mail: [email protected]

4.9.3

American Chamber of Commerce and U.S. China Business Council

American Chamber of Commerce in Hong Kong Frank G. Martin, President Room 1904, Bank of America Tower 12 Harcourt Road Central, Hong Kong Tel: (852) 2526-0165 Fax: (852) 2810-1289 E-mail: [email protected] Web site: http://www.amcham.org.hk U.S. China Business Council Suite 200, 1818 N. Street, NW Washington, D.C. 20036 Tel: (202) 429-0340 Fax: (202) 775-2476 E-mail: [email protected] Web site: http://www.uschina.org

4.9.4

Hong Kong Trade or Industry Associations in Key Sectors

Chinese General Chamber of Commerce, Hong Kong Dr. Robin Chan Yau-hing, Chairman 4th Floor, 24-25 Connaught Road Central, Hong Kong Tel: (852) 2525-6385 Fax: (852) 2845-2610

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E-mail: [email protected] Web site: http://www.cgcc.org.hk Chinese Manufacturers' Association of Hong Kong Mr. Chan Wing Kee, President CMA Building 64-66 Connaught Road Central, Hong Kong Tel: (852) 2542-8600 Fax: (852) 2541-4541 E-mail: [email protected] Web site: www.cma.org.hk The Cosmetic & Perfumery Association of Hong Kong Ltd. Mr. Jacky Choi Ho-Sang, President Room 308, Winning Commercial Building 46-48 Hillwood Road Tsimshatsui, Kowloon Hong Kong Tel: (852) 2366-8801 Fax: (852) 2312-0348 E-mail: [email protected] Web site: www.cosmetic-perfume.com Federation of Hong Kong Industries Mr. Victor Lo Chung-wing, Chairman 4th Floor, Hankow Center 5-15 Hankow Road, Tsimshatsui Kowloon, Hong Kong Tel: (852) 2732-3188 Fax: (852) 2721-3494 E-mail: [email protected] Web site: http://www.fhki.org.hk Graphic Arts Association of Hong Kong Ltd. Mr. Derek Yip Wai-chi, Chairman Room 2307, Billion Trade Centre 31 Hung To Road, Kwun Tong Kowloon, Hong Kong Tel: (852) 2856-9760 Fax: (852) 2856-9765 E-mail: [email protected] Web site: http://www.gaahk.org.hk Hong Kong Air Traffic Control Association Mr. Patrick Yam Kwok Ming, President Air Traffic Management Division

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Civil Aviation Department 1 Control Tower Road Hong Kong International Airport Lantau, Hong Kong Tel: (852) 2910-6461 Fax: (852) 2910-1177 Hong Kong Association for the Advancement of Science & Technology Dr. Lui Sun Wing, President Flat A, 2/F, Tak Lee Commercial Building 113-117 Wanchai Road Wan Chai, Hong Kong Tel: (852) 2891-3388 Fax: (852) 2838-1823 E-mail: [email protected] Hong Kong Association of Banks The Hongkong and Shanghai Banking Corporation Ltd., Chairman Room 525, Prince's Building Central, Hong Kong Tel: (852) 2521-1169 Fax: (852) 2868-5035 E-mail: [email protected] Web site: www.hkab.org.hk Hong Kong Association of Certification Laboratories Ltd. Mr. Nigel Cheung, Chairman 1/F, CMA Building 64-66 Connaught Road Central, Hong Kong Tel: (852) 2542-8620 Fax: (852) 2541-8154 E-mail: [email protected] Web site: www.hkacl.org Hong Kong Association of the Pharmaceutical Industry Mr. Stephen Leung, President Room A, 13/F, Trust Tower 68 Johnston Road Wan Chai, Hong Kong Tel: (852) 2528-3061 Fax: (852) 2865-6283 E-mail: [email protected] Hong Kong Aviation Club Ltd. Mr. Alex T. C. Yan, President 31 Sung Wong Toi Road

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Kowloon, Hong Kong Tel: (852) 2713-5171 Fax: (852) 2761-9511 E-mail: [email protected] Web site: www.hkaviationclub.com.hk Hong Kong-United States Business Council c/o Hong Kong Trade Development Council Miss Jenny Koo, Secretary 38th Floor, Office Tower, Convention Plaza 1 Harbour Road, Wan Chai Hong Kong Tel: (852) 2584-4313 Fax: (852) 2583-9275 E-mail: [email protected] Web site: www.tdctrade.com Hong Kong Chinese Enterprises Association Mr. Liu Jin Bao, Chairman Room 2104-6, Harbour Centre 25 Harbour Road, Wan Chai Hong Kong Tel: (852) 2827-2831 Fax: (852) 2827-2606 E-mail: [email protected] Web site: www.hkcea.com The Hong Kong Chinese Importers' & Exporters' Association Mr. Hui Cheung Ching, President 7-8th Floors, Champion Building 287-291 Des Voeux Road Central, Hong Kong Tel: (852) 2544-8474 Fax: (852) 2544-4677/2581-4979 E-mail: [email protected] Web site: www.hkciea.org.hk Hong Kong Computer Society Mr. Daniel Lai, President Room 1915, China Merchants Tower Shun Tak Centre, 168 Connaught Road Central Hong Kong Tel: (852) 2834-2228 Fax: (852) 2834-3003 E-mail: [email protected] Web site: www.hkcs.org.hk

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Hong Kong Construction Association, Ltd. Mr. Billy Wong, President 3/F, 180-182 Hennessy Road Wan Chai Hong Kong Tel: (852) 2572-4414 Fax: (852) 2572-7104 E-mail: [email protected] Web site: www.hkca.com.hk Hong Kong Economic and Trade Association Ltd. Dr. Eddy Li Sau-Hung, President 11/F, Kee Shing Centre 74-76 Kimberley Road Tsimshatsui, Kowloon Hong Kong Tel: (852) 2723-6223 Fax: (852) 2722-6705 E-mail: [email protected] Web site: www.hketa.org.hk The Hong Kong Electronics Industries Association Ltd. Mr. Samson Tam, Chairman Room 1201, 12/F, Harbour Crystal Centre 100 Granville Road, Tsimshatsui East Kowloon, Hong Kong Tel: (852) 2778-8328 Fax: (852) 2788-2200 E-mail: [email protected] Web site: www.hkeia.com The Hong Kong Federation of Insurers Mr. K. P. Cheng, Chairman 29/F, Sunshine Plaza 353 Lockhart Road, Wan Chai Hong Kong Tel: (852) 2520-1868 Fax: (852) 2520-1967 E-mail: [email protected] Web site: www.hkfi.org.hk Hong Kong Franchise Association Ms. Charlotte Chow, General Manager c/o Hong Kong General Chamber of Commerce 22/F, United Centre 95 Queensway, Admiralty Hong Kong

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Tel: (852) 2529-9229 Fax: (852) 2527-9843 E-mail: [email protected] Web site: www.franchise.org.hk The Hong Kong General Chamber of Commerce Mr. Anthony Nightingale, Chairman 22nd Floor, United Center 95 Queensway Hong Kong Tel: (852) 2529-9229 Fax: (852) 2527-9843 E-mail: [email protected] Web site: www.chamber.org.hk Hong Kong Institution of Engineers Mr. John Luk, President 9/F, Island Beverley No. 1 Great George Street Causeway Bay, Hong Kong Tel: (852) 2895-4446 Fax: (852) 2577-7791 The Hong Kong Medical Association Dr. Lo Wing Lok, President 5/F, Duke of Windsor Social Service Building 15 Hennessy Road, Wan Chai Hong Kong Tel: (852) 2527-8285 Fax: (852) 2865-0943 E-mail: [email protected] Web site: http://www.hkma.org Hong Kong PATA (Pacific Asia Travel Association) Chapter Mr. Edmund Tsang, Chairman Room 1003, Tung Ming Building 40 Des Voeux Road, Central Hong Kong Tel: (852) 2869-8600 Fax: (852) 2869-8632 E-mail: [email protected] Hong Kong Plastic Material Suppliers Association Ltd. Mr. Sho-Yung Chu, Chairman 12/F, Eader Center 39-41 Hankow Road Tsimshatsui, Kowloon

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Hong Kong Tel: (852) 2375-2686 Fax: (852) 2317-1129 Hong Kong Printers Association Mr. Ho Ka Hun, Chairman 1/F, 48-50 Johnston Road Wan Chai Hong Kong Tel: (852) 2527-5050 Fax: (852) 2861-0463 E-mail: [email protected] Web site: www.hkprinters.org Internet & Telecom Association of Hong Kong Mr. Tony Hau, Chairman G.P.O. Box 13461 Hong Kong Tel: (852) 2504-2732 Fax: (852) 2504-2752 E-mail: [email protected] Web site: www.itahk.org.hk Plastic Technology Center Mr. Samson Suen, Consultant LG/2, HKPC Building 78 Tat Chee Avenue Kowloon Tong, Kowloon Hong Kong Tel: (852) 2788-6168 Fax: (852) 2788-6169 E-mail: [email protected] Web site: www.hkpc.org/ptc Society of Builders Hong Kong Mr. Tong Yat Chu, President Rooms 801-802, On Lok Yuen Building 25 Des Voeux Road Central Central, Hong Kong Tel: (852) 2523-2081 Fax: (852) 2845-4749 Travel Industry Council of Hong Kong Mr. Ronnie Yuen, Chairman Rooms 1706-1709, Fortress Tower 250 King's Road, North Point Hong Kong Tel: (852) 2807-1199

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Fax: (852) 2510-9907 E-mail: [email protected] Web site: www.tichk.org

4.9.5

Hong Kong Government Offices Relating to Key Sectors and/or Significant Trade Related Activities

Agriculture, Fisheries and Conservation Department Mr. Thomas Chun-yuen Chan, Director 5/F, Cheung Sha Wan Government Offices 303 Cheung Sha Wan Road Kowloon, Hong Kong Tel: (852) 2708-8885, 2150-6666 Fax: (852) 2311-3731 E-mail: [email protected] Web site: http://www.info.gov.hk/afcd Airport Authority Hong Kong Dr. Victor Kwok-king Fung, Chairman Airport Authority Building 1 Cheong Yip Road Hong Kong International Airport Lantau, Hong Kong Tel: (852) 2188-7111 Fax: (852) 2824-0717 Web site: www.hkairport.com Buildings Department Mr. Marco Wu Moon-hoi, Director 18/F, Pioneer Centre 750 Nathan Road, Mongkok Kowloon, Hong Kong Tel: (852) 2626-1616 Fax: (852) 2840-0451 E-mail: [email protected] Web site: http://www.info.gov.hk/bd/ Census and Statistics Department Mr. Frederick Ho Wing-huen, Commissioner for Census and Statistics 21st Floor, Wanchai Tower 12 Harbour Road, Wan Chai Hong Kong Tel: (852) 2582-4807 Fax: (852) 2824-1003 E-mail: [email protected]

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Web site: http://www.info.gov.hk/censtatd/ Civil Aviation Department Mr. Albert Lam Kwong-yu, Director-General 46th Floor, Queensway Government Offices 66 Queensway Hong Kong Tel: (852) 2867-4332 Fax: (852) 2869-0093 E-mail: [email protected] Web site: http://www.info.gov.hk/cad Consumer Council Mrs. Pamela Chan, Chief Executive 22nd Floor, K. Wah Center 191 Java Road, North Point Hong Kong Tel: (852) 2856-3113 Fax: (852) 2856-3611 E-mail: [email protected] Web site: www.consumer.org.hk Customs and Excise Department Mr. Raymond Hung-Chiu Wong, Commissioner 9th Floor, Harbour Building 38 Pier Road, Central Hong Kong Tel: (852) 2815-7711 Fax: (852) 2542-3334 E-mail: [email protected] Web site: www.info.gov.hk/customs Department of Health Dr. Margaret Chan Fung Fu-chun, Director 17th & 21st Floors, Wu Chung House 213 Queen's Road East, Wan Chai Hong Kong Tel: (852) 2961-8989 Fax: (852) 2836-0071 E-mail: [email protected] Web site: http://www.info.gov.hk/dh Drainage Services Department Mr. Raymond Cheung Tat-kwing, Director 43rd Floor, Revenue Tower 5 Gloucester Road, Wan Chai Hong Kong

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Tel: (852) 2877-0660 Fax: (852) 2827-8605 E-mail: [email protected] Web site: www.info.gov.hk/dsd Electrical and Mechanical Services Department Mr. Roger Lai Sze-hoi, Director 98 Caroline Hill Road, Causeway Bay Hong Kong Tel: (852) 2882-8011 Fax: (852) 2890-7493 E-mail: [email protected] Web site: www.emsd.gov.hk Environmental Protection Department Mr. Robert J.S. Law, Director 24th-28th Floors, Southorn Centre 130 Hennessy Road, Wan Chai Hong Kong Tel: (852) 2835-1018 Fax: (852) 2838-2155 E-mail: [email protected] Web site: www.info.gov.hk/epd Food & Environmental Hygiene Department Mr. Gregory Leung Wing-lup, Director 42-45 Floors, Queensway Government Offices 66 Queensway Hong Kong Tel: (852) 2867-5578 Fax: (852) 2893-3547 E-mail: [email protected] Web site: www.fehd.gov.hk Government Supplies Department Mrs. Stella Hung Kwok Wai-ching, Director 10/F, North Point Government Offices 333 Java Road, North Point Hong Kong Tel: (852) 2231-5105 Fax: (852) 2887-6591 E-mail: [email protected] Web site: www.info.gov.hk/gsd Hong Kong Productivity Council Mr. Andrew Leung, Chairman HKPC Building

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78 Tat Chee Avenue Yau Yat Chuen, Kowloon Tong Kowloon, Hong Kong Tel: (852) 2788-5678 Fax: (852) 2788-5900 E-mail: [email protected] Web site: www.hkpc.org Hong Kong Tourism Board Miss Clara Ming-Wah Chong, Executive Director 9-11/F, Citicorp Centre 18 Whitfield Road, North Point Hong Kong Tel: (852) 2807-6543 Fax: (852) 2806-0303 E-mail: [email protected] Web site: www.discoverhongkong.com Hong Kong Trade Development Council Mr. Michael Sze, Executive Director 38th Floor, Office Tower, Convention Plaza 1 Harbour Road, Wan Chai Hong Kong Tel: (852) 2584-4333 Fax: (852) 2824-0249 E-mail: [email protected] Web site: www.tdctrade.com Hospital Authority Dr. C. H. Leung, Chairman Hospital Authority Building 147B Argyle Street Kowloon, Hong Kong Tel: (852) 2300-6555 Fax: (852) 2881-8058 E-mail: [email protected] Web site: www.ha.org.hk Information Technology Services Department Mr. Alan Wong, Director 14-16 & 25/F, Wanchai Tower 12 Harbour Road, Wan Chai Hong Kong Tel: (852) 2582-4520 Fax: (852) 2824-3208 E-mail: [email protected] Web site: www.itsd.gov.hk

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Innovation and Technology Commission Mr. Francis Ho, Commissioner 14th Floor, Ocean Center 5 Canton Road, Tsimshatsui Kowloon, Hong Kong Tel: (852) 2737-2208 Fax: (852) 2730-4633 E-mail: [email protected] Web site: www.info.gov.hk/itc Intellectual Property Department Mr. Stephen Selby, Director 24th & 25th Floor, Wu Chung House 213 Queen's Road East, Wan Chai Hong Kong Tel: (852) 2803-5860/2961-6901 Fax: (852) 2838-6276 E-mail: [email protected] Web site: www.info.gov.hk/ipd Office of the Commissioner of Insurance Mr. Benjamin Tang, Commissioner 21st Floor, Queensway Government Offices 66 Queensway, Central Hong Kong Tel: (852) 2867-2565 Fax: (852) 2869-0252 E-mail: [email protected] Web site: www.info.gov.hk/oci Office of the Telecommunications Authority Mr. Anthony Wong Sik-kei, Director General 29th Floor, Wu Chung House 213 Queen's Road East, Wan Chai Hong Kong Tel: (852) 2961-6333 Fax: (852) 2803-5110 E-mail: [email protected] Web site: www.ofta.gov.hk Trade and Industry Department Mr. Kevin Ho Chi-ming, Director-General Ground Floor, Trade and Industry Department Tower 700 Nathan Road, Mong Kok Kowloon, Hong Kong Tel: (852) 2398-5333

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Fax: (852) 2789-2491 E-mail: [email protected] Web site: www.tid.gov.hk

4.9.6

Hong Kong Market Research Firms

AC Nielsen Hong Kong Office 2/F, Warwick House, Taikoo Place 979 King's Road, Quarry Bay Hong Kong Tel: (852) 2563-9688 Fax: (852) 2516-6856 E-mail: [email protected] Web site: www.acnielsen.com.hk Boston Consulting Group, The34th Floor, Shell Tower Times Square, 1 Matheson Street Causeway Bay, Hong Kong Tel: (852) 2506-2111 Fax: (852) 2506-9084 Web site: www.bcghk.com.hk China Concept Consulting 27/F, Wyndham Place 44 Wyndham Street, Central Hong Kong Tel: (852) 2524-6788 Fax: (852) 2810-6764 Web site: www.chinaconcept.com Gartner Hong Kong Ltd. Suite 6808, 68/F., Central Plaza 18 Harbour Road, Wan Chai Hong Kong Tel: (852) 3402-0402 Fax: (852) 2824-6138 Web site: www.gartner.com Hong Kong Productivity Council Marketing Group HKPC Building, 78 Tat Chee Avenue Yau Yat Chuen, Kowloon Tong Kowloon, Hong Kong Tel: (852) 2788-5678 Fax: (852) 2788-5042 E-mail: [email protected] www.icongrouponline.com

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Web site: www.hkpc.org International Data Corporation Asia Pacific Ltd. 12/F, St. John's Building 33 Garden Road, Central Hong Kong Tel: (852) 2530-3831 Fax: (852) 2537-7347 Web site: www.idc.com Marketing & Management Solutions 16/F, New Hennessy Tower 263 Hennessy Road Wan Chai, Hong Kong Tel: (852) 2511-2021 Fax: (852) 2598-7378 E-mail: [email protected] NFO International 3/F, Sun Hung Kai Centre 30 Harbour Road, Wan Chai Hong Kong Tel: (852) 2811-9668 Fax: (852) 2811-9988 E-mail: [email protected] Web site: www.nfow.com.hk ORC International Holdings, Inc. 1602, Ming An Plaza 1 8 Sunning Road, Causeway Bay Hong Kong Tel: (852) 2882-3042 Fax: (852) 2882-4515 Web site: www.orcinternational.com/hongkong Pacific Rim Group Ltd. Suite 1901, Ruttonjee House 11 Duddell Street, Central Hong Kong Tel: (852) 2524-6078 Fax: (852) 2810-6265 E-mail: [email protected] Web site: www.pacificrimgroup.com PDI Global Research Consortia, Ltd. Suite 3705, 37/F, Lippo Centre, Tower II 89 Queensway, Central

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Hong Kong Tel: (852) 2572-2641 Fax: (852) 2572-2649 Web site: www.pdi-corp.com Research International Asia Ltd. Unit 3503, 35/F, Hong Kong Telecom Tower Taikoo Place, 979 King's Road Quarry Bay, Hong Kong Tel: (852) 2591-2591 Fax: (852) 2591-2599 Web site: www.research-int.com Ringe Marketing Services Ltd. 1306 Hermes Commercial Centre 4 Hillwood Road, Tsimshatsui Kowloon, Hong Kong Tel: (852) 2366-3089 Fax: (852) 2722-6300 E-mail: [email protected] WirthlinAsiaPacific Unit 2602, MLC Millennia Plaza 663 King's Road, North Point Hong Kong Tel: (852) 2832-9707 Fax: (852) 2591-9385 Web site: www.wirthlin.com

4.9.7

Licensed U.S. Commercial Banks in Hong Kong

American Express Bank Ltd. 36th Floor, One Pacific Place 88 Queensway Hong Kong Tel: (852) 2844-0688 Fax: (852) 2845-3637 Web site: www.americanexpress.com/hk/ Bank of America, N.A. 2/F, Bank of America Tower 12 Harcourt Road, Central Hong Kong Tel: (852) 2847-5333 Fax: (852) 2847-5410

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Bank of New York (HK Branch) 6th Floor, New Henry House 10 Ice House Street, Central Hong Kong Tel: (852) 2840-9888 Fax: (852) 2810-5279 Web site: www.bankofny.com Bank One 7/F, Jardine House 1 Connaught Place, Central Hong Kong Tel: (852) 2844-9222 Fax: (852) 2844-9318 Web site: www.bankone.com Citibank NA 40/F, Citibank Tower Citibank Plaza, 3 Garden Road Central, Hong Kong Tel: (852) 2868-8888 Fax: (852) 2306-8111 Web site: www.citibank.com.hk Fleet National Bank 33/F, Jardine House 1 Connaught Place, Central Hong Kong Tel: (852) 2526-4361 Fax: (852) 2845-9222 J. P. Morgan Chase & Co. 35/F, Tower I, Exchange Square 8 Connaught Place, Central Hong Kong Tel: (852) 2841-4321 Fax: (852) 2841-4396 Web site: www.chase.com.hk NBD Bank, NA Room 804, Tower 1, Lippo Center 89 Queensway Hong Kong Tel: (852) 2523-1816 Fax: (852) 2810-6582 State Street Bank and Trust Company

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32/F, Two Exchange Square 8 Connaught Place, Central Hong Kong Tel: (852) 2840-5388 Fax: (852) 2840-5453 Web site: www.statestreet.com Union Bank of California, N.A. 15th Floor, Asia Pacific Finance Tower Citibank Plaza, 3 Garden Road Central, Hong Kong Tel: (852) 2826-0600 Fax: (852) 2877-2666 Web site: www.uboc.com Wells Fargo Bank NA 27/F, Edinburgh Tower, Landmark 15 Queen's Road Central Central, Hong Kong Tel: (852) 2315-9500 Fax: (852) 2721-0033 Web site: www.wellsfargo.com Note: This list does not include U.S. restricted license banks, deposit taking companies, and representative offices.

4.9.8

U.S. Contacts in Washington

Trade Information Center (TIC) International Trade Administration U.S. Department of Commerce Tel: 1-800-USA-TRADE (1-800-872-2723) Fax: (202) 482-4473 http://www.export.gov/tic E-mail: [email protected] TIC specialists provide basic export counseling and information on export services and programs offered by 20 federal agencies of the Trade Promotion Coordinating Committee (TPCC). The annual report of the TPCC, "The National Export Strategy", designates "the Trade Information Center, situated in the U.S. Department of Commerce, as the single TPCC-wide information office that will coordinate specialized non-agricultural export information offices." U.S. Department of Agriculture Trade Assistance and Planning Officer (TAPO) C. Sloop USDA/FAS/TAPO Room 4939, South Building 1400 Independence Avenue SW Washington, D.C. 20250 www.icongrouponline.com

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Tel: (202) 720-7420 Fax: (202) 690-4374 E-mail: [email protected] Home Page Http://www.fas.usda.gov

4.9.9

U.S. Market Development Represented in Hong Kong

Cooperator

Organizations

ALASKA SEAFOOD MARKETING INSTITUTE CALIFORNIA PRUNE BOARD Trade Liaison China & Hong Kong Mr. Robin Wang 7B Yi Cui Court, Crest Garden 97 Song Lin Road, Pudong Shanghai 200120 P.R. China Tel: (8621) 6875-9971 Fax: (8621) 6875-9961 Internet Homepage: http://www.alaskaseafood.org E-Mail: [email protected] ALMOND BOARD OF CALIFORNIA CALIFORNIA CHERRY ADVISORY BOARD U.S. DAIRY EXPORT COUNCIL U.S. POTATO BOARD (Frozen / Dehydrated) USA RICE FEDERATION Mr. Daniel Chan / Ms. Syslvaine Siu Tel: (852) 2833-5977 Fax: (852) 2893-7538 E-Mail: [email protected] AMERICAN FOREST & PAPER ASSOCIATION, INC. AMERICAN HARDWOOD EXPORT COUNCIL Mr. John Chan, Director Room 528, New World Office Building AIA Tower, 20 Salisbury Road Tsimshatsui, Kowloon Hong Kong Tel: (852) 2724-0228 Fax: (852) 2366-8931 Internet Homepage: http://www.ahec-china.org E-Mail: [email protected] CALIFORNIA KIWI FRUIT COMMISSION

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CALIFORNIA PISTACHIO COMMISSION CALIFORNIA STRAWBERRY COMMISSION CALIFORNIA TABLE GRAPE COMMISSION FLORIDA DEPARTMENT OF CITRUS PEAR BUREAU NORTHWEST RAISIN ADMINISTRATIVE COMMITTEE Mr. Louis Ng Louis Ng & Associates Ltd. Suite B, 3/F, Luen Wai Commercial Building 93-97 Des Voeux Road West Hong Kong Tel: (852) 2858-2230 Fax: (852) 2559-5896 E-Mail: [email protected] COTTON COUNCIL INTERNATIONAL Mr. Jeff Coey, Director, China & South East Asia 20/F, Zoroastrian Building 101 Leighton Road, Causeway Bay Hong Kong Tel: (852) 2890-2755 Fax: (852) 2882-5463 E-Mail: [email protected] NATIONAL RENDERERS ASSOCIATION, INC. Dr. Yu Yu, Asia Regional Director Unit A, 22/F, Circle Tower 28 Tang Lung Street, Causeway Bay Hong Kong Tel: (852) 2890-2529 Fax: (852) 2576-8045 E-Mail: [email protected] SUNKIST GROWERS, INC. Ms. Maria Kwok SunKist (Far East) Promotion Limited Room 1303, Bank of America Tower 12 Harcourt Road, Central Hong Kong Tel: (852) 2524-9219 Fax: (852) 2845-3454 E-Mail: [email protected] U.S. POTATO BOARD (Fresh) CALIFORNIA TREE FRUIT AGREEMENT Mr. Michael Wong Michael Wong & Co. 7C Queen's Road Centre www.icongrouponline.com

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58-64 Queen's Road East, Wan Chai Hong Kong Tel: (852) 2891-3889 Fax: (852) 2891-3702 E-Mail: [email protected] U.S. WHEAT ASSOCIATES Mr. Matt Weimar, Far East Director 12/F, Zoroastrian Building 101 Leighton Road, Causeway Bay Hong Kong Tel: (852) 2890-2815 Fax: (852) 2576-2676 E-Mail: [email protected] U.S. MEAT EXPORT FEDERATION Mr. Joel Haggard 8th Floor, Zoroastrain Building 101 Leighton Road, Causeway Bay Hong Kong Tel: (852) 2890-7408 Fax: (852) 2576-7345 Internet Homepage: http://usmef.org E-Mail: [email protected] USA POULTRY & EGG EXPORT COUNCIL Ms. Sarah Li, Director of Market Development Room 2010, Hang Lung Center 2-20 Paterson Street, Causeway Bay Hong Kong Tel: (852) 2890-2908 Fax: (852) 2895-5546 E-Mail: [email protected] WASHINGTON STATE DEPARTMENT OF AGRICULTURE WASHINGTON APPLE COMMISSION NORTHWEST CHERRY GROWERS Mr. Philander Fan Marketing Plus Room 2102, Kingsfield Center 18-20 Shell Street, North Point Hong Kong Tel: (852) 2815-6773 Fax: (852) 2544-7858 E-Mail: [email protected] Mid-America International Agri-Trade Council (MIATCO) Mr. Phillip C. Holloway

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Ringe Marketing Service Limited 1306 Hermes Commercial Centre 4 Hillwood Road, Tsimshatsui Kowloon, Hong Kong Tel: (852) 2366-3089 Fax: (852) 2722-6300 E-Mail: [email protected]

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5 5.1

DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS DISCLAIMERS & SAFE HARBOR

Summary Disclaimer. This publication ("Report") does not constitute legal, valuation, tax, or financial consulting advice. Nor is it a statement on the performance, management capability or future potential (good or bad) of the company(ies), industry(ies), product(s), region(s), city(ies) or country(ies) discussed. It is offered as an information service to clients, associates, and academicians. Those interested in specific guidance for legal, strategic, and/or financial or accounting matters should seek competent professional assistance from their own advisors. Information was furnished to Icon Group International, Inc. ("Icon Group"), and its subsidiaries, by its internal researchers and/or extracted from public filings, or sources available within the public domain, including other information providers (e.g. EDGAR filings, national organizations and international organizations). Icon Group does not promise or warrant that we will obtain information from any particular independent source. Published regularly by Icon Group, this and similar reports provide analysis on cities, countries, industries, and/or foreign and domestic companies which may or may not be publicly traded. Icon Group reports are used by various companies and persons including consulting firms, investment officers, pension fund managers, registered representatives, and other financial service professionals. Any commentary, observations or discussion by Icon Group about a country, city, region, industry or company does not constitute a recommendation to buy or sell company shares or make investment decisions. Further, the financial condition or outlook for each industry, city, country, or company may change after the date of the publication, and Icon Group does not warrant, promise or represent that it will provide report users with notice of that change, nor will Icon Group promise updates on the information presented. Safe Harbor for Forward-Looking Statements. Icon Group reports, including the present report, make numerous forward-looking statements which should be treated as such. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995, and similar local laws. Forward-looking statements involve known and unknown risks and uncertainties, which may cause a company's, city's, country's or industry's actual results or outlook in future periods to differ materially from those forecasted. These risks and uncertainties include, among other things, product price volatility, exchange rate volatility, regulation volatility, product demand volatility, data inaccuracies, computer- or software-generated calculation inaccuracies, market competition, changes in management style, changes in corporate strategy, and risks inherent in international and corporate operations. Forward-looking statements can be identified in statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate,'' "estimate," "expect,'' "project,'' "intend,'' "plan,'' "feel", "think", "hear," "guess," "forecast," "believe," and other words and terms of similar meaning in connection with any discussion of future operating, economic or financial performance. This equally applies to all statements relating to an industry, city, country, region, economic variable, or company financial situation. Icon Group recommends that the reader follow the advice of Nancy M. Smith, Director of SEC's Office of Investor Education and Assistance, who has been quoted to say, "Never, ever, make an investment based solely on what you read in an online newsletter or Internet bulletin board, especially if the investment involves a small, thinly-traded company that isn't well known … Assume that the information about these companies is not trustworthy unless you can prove otherwise through your own independent research." Similar recommendations apply to decisions relating to industry studies, product category studies, corporate strategies discussions and country evaluations. In the case of Icon Group reports, many factors can affect the actual outcome of the period discussed, including exchange rate volatility, changes in accounting standards, the lack of oversight or comparability in accounting standards, changes in economic conditions, changes in competition, changes in the global economy, changes in source data quality, changes in reported data quality, changes in methodology and similar factors. Information Accuracy. Although the statements in this report are derived from or based upon various information sources and/or econometric models that Icon Group believes to be reliable, we do not guarantee their accuracy, reliability, quality, and any such information, or resulting analyses, may be incomplete, rounded, inaccurate or condensed. All estimates included in this report are subject to change without notice. This report is for informational purposes only and is not intended as a recommendation to invest in a city, country, industry or product area, or an offer or solicitation with respect to the purchase or sale of a security, stock, or financial instrument. This report does not take into account the investment

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objectives, financial situation or particular needs of any particular person or legal entity. With respect to any specific company, city, country, region, or industry that might be discussed in this report, investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the information in this report. Investing in either U.S. or non-U.S. securities or markets entails inherent risks. In addition, exchange rate movements may have an effect on the reliability of the estimates provided in this report. Icon Group is not a registered Investment Adviser or a Broker/Dealer.

5.2

ICON GROUP INTERNATIONAL, INC. USER AGREEMENT PROVISIONS

Ownership. User agrees that Icon Group International, Inc. ("Icon Group") and its subsidiaries retain all rights, title and interests, including copyright and other proprietary rights, in this report and all material, including but not limited to text, images, and other multimedia data, provided or made available as part of this report ("Report"). Restrictions on Use. User agrees that it will not copy nor license, sell, transfer, make available or otherwise distribute the Report to any entity or person, except that User may (a) make available to its employees electronic copies of Report, (b) allow its employees to store, manipulate, and reformat Report, and (c) allow its employees to make paper copies of Report, provided that such electronic and paper copies are used solely internally and are not distributed to any third parties. In all cases the User agrees to fully inform and distribute to other internal users all discussions covering the methodology of this Report and the disclaimers and caveats associated with this Report. User shall use its best efforts to stop any unauthorized copying or distribution immediately after such unauthorized use becomes known. The provisions of this paragraph are for the benefit of Icon Group and its information resellers, each of which shall have the right to enforce its rights hereunder directly and on its own behalf. No Warranty. The Report is provided on an "AS IS" basis. ICON GROUP DISCLAIMS ANY AND ALL WARRANTIES, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, RELATING TO THIS AGREEMENT, PERFORMANCE UNDER THIS AGREEMENT, THE REPORT. Icon Group makes no warranties regarding the completeness, accuracy or availability of the Report. Limitation of Liability. In no event shall Icon Group, its employees or its agent, resellers and distributors be liable to User or any other person or entity for any direct, indirect, special, exemplary, punitive, or consequential damages, including lost profits, based on breach of warranty, contract, negligence, strict liability or otherwise, arising from the use of the report or under this Agreement or any performance under this Agreement, whether or not they or it had any knowledge, actual or constructive, that such damages might be incurred. Indemnification. User shall indemnify and hold harmless Icon Group and its resellers, distributors and information providers against any claim, damages, loss, liability or expense arising out of User's use of the Report in any way contrary to this Agreement. © Icon Group International, Inc., 2007. All rights reserved. Any unauthorized use, duplication or disclosure is prohibited by law and will result in prosecution. Text, graphics, and HTML or other computer code are protected by U.S. and International Copyright Laws, and may not be copied, reprinted, published, translated, hosted, or otherwise distributed by any means without explicit permission. Permission is granted to quote small portions of this report with proper attribution. Media quotations with source attributions are encouraged. Reporters requesting additional information or editorial comments should contact Icon Group via email at [email protected]. Sources: This report was prepared from a variety of sources including excerpts from documents and official reports or databases published by the World Bank, the U.S. Department of Commerce, the U.S. State Department, various national agencies, the International Monetary Fund, the Central Intelligence Agency, and Icon Group International, Inc.

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END

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