TNAG-1482-FCO40-2036-Economic-and-commercial-value-of-Hong-Kong-to-the-UK-1986 — Page 26

UK Economic Involvement in Hong Kong Industrial Investment

The degree of the UK's economic involvement in Hong Kong is most frequently expressed in terms of the UK's shares of:

a)

b)

Hong Kong's import market (4.2%)

overseas industrial investment (6.9%).

Both figures are bandied about freely and frequently misunderstood. As regards UK exports to Hong Kong it can be

shewn easily that these are above the UK's world average and some three times better relatively than her like competitors, West Germany, France and Italy (see paras 5 and 6 and Table 5 of appendix A). To put industrial investment into true perspective is not so easy, as there are no comparable international statistics available.

2.

;

!

Industrial investment is the only type of investment monitored by HKG. The most common misunderstanding is to regard it as a proxy for overall investment. But HKG has no policy for promoting overall investment, which is left to market forces. It is only on industrial investment that HKG engages in promotion (in order to compete with similar activities in other countries in the region), not to attract additional finance per se but rather the benefit of the technology and management skills that overseas industrial investment brings with it to stimulate the upgrading of Hong Kong manufacturing industry.

3.

The monitoring of overseas industrial investment is by survey.

Normally the common denominator for comparing unlike investments is value, but in this instance this is subject to differing accounting conventions apart from normal statistical errors. Other, more concrete, measures can be used for comparison (see paras 2 and 3 of Appendix B). Using the average of all available measures, the UK's industrial investment in Hong Kong is that of the USA and that of Japan. The question that remains is whether this is higher or lower than might be expected.

4.

Hong Kong is often classified as one of four Asian NICs, with South Korea, Taiwan and Singapore. UK industrial investment in the first two is negligible, but in Singapore it is estimated at 15.7% of the total (which is in any case much higher than in Hong Kong) on a value basis, i.e. twice as high a share as in Hong Kong. Also the USA share is only twice the UK's rather than four times in Hong Kong. Historical factors may well contribute to this higher UK performance in Singapore, but this still leaves the UK industrial involvement in Hong Kong disappointing (particularly when so much of it is accounted for British-American Tobacco).

5.

It is understandable that Hong Kong should point to this when promoting investment by UK manufacturing

companies..... /-