Hong Kong firms see better prospects overseas

Emerging markets are definitely Hong Kong’s cup of tea but China remains its favourite flavor.

A survey conducted for Tata Communications Ltd, operator of India’s largest data center, revealed that 93% of Hong Kong’s business leaders look to emerging markets for growth and expect to increase their investments in these markets by 36% in 2013.

Emerging markets are nations with social or business activity in the process of rapid growth and industrialization. It is estimated there are some 40 emerging markets with China and India considered the largest.

Most Hong Kong firms associated emerging markets with significant opportunities for growth (52%) and cost effectiveness (39%).

Of the Hong Kong firms, 87% are actively engaging in emerging markets despite over half of them realizing political instability is a risk in these markets. As for growth centers, 82% of Hong Kong firms look to mainland China for growth.

Other favorite countries for expansion are India, Taiwan and the Philippines.

Of all respondents including those from Hong Kong, 51% said their companies are considering expanding into China. Other markets for expansion are India (selected by 39%) and Brazil (33%).

The main driver for moving into emerging markets is the potential to capitalise on growth opportunities with 57% of Hong Kong respondents saying this was their main reason.

A fourth of Hong Kong business leaders also cite a culture of innovation as being characteristic of an emerging market.

As for the challenges facing a move into emerging markets, Hong Kong firms said government regulation and entrenched competition were the most critical challenges they face when moving into new markets.

Other barriers to overseas expansion were political instability, cited by 57% of Hong Kong respondents and economic uncertainty, which concerned 35%.

Tata Communications CEO Vinod Kumar said that for companies to capitalise on that potential, they need to see greater levels of investment in essential infrastructure

“That will inevitably require more focus on developing talent and innovative thinking in markets that can have less educational investment in those areas,” he noted.

Talent was identified as a critical challenge by 37% of all those surveyed, with 44% of emerging market respondents stating that availability of talent is a reason they would call a market progressive.