Will we all end up being considered has-beens…? – and how to avoid hiring a has-been…

Hong Kong island in blue/white

The younger generation is bright, without fear, full of optimism, with not much to lose and everything to gain, with plenty of energy and creativity, with a future not a history.

Should our age, our comfort, our experiences and skills be the shrouds of our careers? Or is this fake notion of work life balance which kills combativity and render the best us of slowly has-beens.

By choosing to live in Hong Kong I escaped de-facto to the notion of work life balance, the recent events (and the corresponding stress increase) plus the nature of the Hong Kong businesses are de-facto destroying what is considered in the West as a good work life balance.

So, I live in a city where we are not accustomed to comfort and where not taking into consideration change of business models and change of laws and regulations could simply erase years of efforts.

This is not the situation of many of my 50+ years old friends which I see with despair slowly becoming has-beens, they are enjoying their life but their clients are not anymore enjoying their combativity and creativity.

They are replacing “let’s try” by “it’s too dangerous”, they protect their business and cease to develop it, they have more excuses than solutions.

On the opposite some 50+ are incredibly temerarious, as if at 50+ they will not have to face the consequences of their actions, they are the most dangerous has-been as they are completely disconnected from reality and living a life as 30 years ago when circumstances were totally different.

Is there a secret to avoid being a has-been?

  • FEAR is a good tool, the fear to look alike the has-been persons we despair.

  • MIXITY is a good solution, when one of your business partners is a 24 years old African immigrant in Europe, he doesn’t know your cultural references and you must learn about his experiences.

  • CURIOSITY is a must so is continuous learning.

But my own preference is DIGITAL, most of the people involved in the digital economy are de facto obligated to continuously change, adapt or pivot their business models, governments are enacting news laws and regulations and the business owners and decisions makers should be agile.

If you want to hire the services of a lawyer, and advisor or consultant if this person is active in the digital economy, you are certain that the person will not refer immediately to a past situation, he/she managed as the evolution of practices and regulations could make it irrelevant.

Instead, the players in the digital economy are imagining what tomorrow’s new reality will be and possess this unique ability for A/B testing their thoughts and advice.

Hong Kong a playground for money launderers?

money launderers
The city has very strict AML controls, this doesn’t facilitate, less to say, the work of Financial Institutions and services providers. The compliance process to open and maintain an account is time consuming and the Hong Kong banks are showing low business & risks appetite.
Hong Kong in contrary to Singapore is not allowing bank account opening at distance and the impact after months of COVID is really bad.

Quarantine in Hong Kong is 21 days, the Chinese border is closed but in the same time next to my Sheung Wan office new foreign exchange shops are opening.

  • 65 million of visitors are not coming anymore to Hong Kong.
  • The possibility to travel to Hong Kong without 14 to 21 days quarantine is quasi-NIL for the next six months.
  • Existing foreign exchanges shops are empty.
  • The proposed services are very well rendered by Financial Institution and Fintech.
  • Because of the crazy Hong Kong property market this means that each shop has minimum monthly costs of 15,000 USD so the possibility to make it successful taking into consideration all the above constraints is very low.

In a city where you nearly need a DNA sample from your grandma to open a bank account how come that nobody is questioning these multiples openings ???

This leads to serious questions:

  1. Why Financial Institutions are accepting new Foreign Exchanges companies in the current economic environment, what about their risk management?
  2. Why financial Institutions are accepting high risks clients when in the same time they are rejecting lower risks clients? Why do they accept companies in direct competition with their services?
  3. Why Financial Institution are accepting that some of their clients are withdrawing cash to turn it to another currency and sometimes to remit to their suppliers and services providers?
  4. How everybody could justify the increase of monitoring impacted by low traceability of transfers?
  5. Last but not least every compliance officer with little to no training will understand that an operation should be logic, what is the logic behind all this?

I see two possibilities:

  1. it would consist of willful blindness from the regulators
  2. it would be a sting operation to identify in the clients of theses mysterious shops the criminals using their services.

Hong Kong – is the glass half-empty or half-full?

Hong Kong - half-empty or half-full

Hong Kong businesses are suffering from a mandatory quarantine of 21 days at hotel which is barring visitors to land in the city. The health situation is totally under control with ZERO Covid cases but the social and business impacts are great.

Confronted to months of protests followed by confinement and restrictions, with in addition divisive political decisions, the pressure is high to see better days.

Westerners living in the city are often obliged to explain and protect China decisions to their family, friends and business partners living abroad. As a matter of fact, the Asian approach is totally different from the rest of the world.

The health situation was very well managed by most of the Asian countries, social and business impacts were strong and difficult to deal with, but this was only for a relatively short period of time.

Today we see with envy from Hong Kong a western world with no or low travel restrictions, opening public spaces and abandoning face masks, while in the same time Asian countries are enforcing travel restriction and isolated confinements, for a zero-case goal.

This difference of approach isn’t a small detail, it’s symptomatic of a huge difference of values and of acceptance by the population of governmental decisions, as if in the span of few months only the world separated in two.

Hong Kong - half-empty or half-full

Short-term situation for Hong Kong?

It’s very unlikely that Asian countries will accept travels without strict quarantines, Hong Kong is hoping that Mainland Chinese’s will come back and spend time and money in the city and support the economy, with the understanding that visitors from western countries are still considered too dangerous.

The shared opinion in Hong Kong is that mainland Chinese would come back by the end of the year but that the attractivity of Hong Kong has been damaged by months of protests and (even with lower travel restrictions) visitors’ numbers will be low.

The multiples impact on restaurants, hotels, retail shops and to any activities linked to visitors have been (temporary?) managed, the unemployment is by western standards low and the economy is re-starting slowly.

 

Exodus of westerners?

Relocation agents are full of work, everybody knows someone living or intending to leave and this increase a sentiment of solitude for the ones having no such prospect.

The reasons justifying the departure of westerners are to be carefully understood, although many are making use of the recent political changes and the fears of changes in the education sector it’s unlikely that these reasons are the real ones.

Travel’s restrictions are harsh, this obviously impacted a lot more the ones having families abroad plus the common opinion is that this situation will perdure for quite a long time. On a small island like Hong Kong, one of the most expensive location in the world, the pressure is multiplied.

Because of the poor economy a drop of turnover and profitability is harder to manage in a city where everything is expensive, westerners confronted to this situation will have the tendency to blame other factors.

The short-term situation of Hong Kong is therefore likely to be difficult till we do understand if the western world is right to open everything and to allow free travels, if the western countries are doing right and if Asian countries are continuing, whatever the reasons, to restrict freedom to travel the burden will become for many unbearable and then a real exodus of westerners will happen.

If the western experiment fails, if because of Covid variants the overall health situation become out of control the world will face catastrophic consequences, but in the same time China and Hong Kong will, as a show of supremacy, allow more individual freedom.

 

Hong Kong on the long term

The city is a definitive winner, first because China is winning and also because the western countries are in such a situation that compared to what will happen to them in a few months it’s not difficult to do better.

Hong Kong will remain a showcase of Chinese success, mainland china money will pour in the city for economic and, let’s be straight forward, political reasons.

China putted to a halt the concept of foreign interference, Hong Kong is then de facto the perfect location to be showcased as an example of a strong and protective government leading to economic and social success.

The only question which remains is the willingness of the Hong Kong population to be used to expose differences in democratic values between East and West. Although Hong Kong is not the toy of US and Europe it’s also unlikely that the Chinese grip is totally welcomed.

Hong Kong will then have to adapt and to demonstrate to the motherland, by way of economic success with a real improvement of the wellbeing of its inhabitants, that a bit of western attitude is not that a big deal.

Hong Kong tycoons will surely be the victims of this long-term process, after having exploited to the limits the property market, they will be asked to contribute to the economy. The process will not go through taxes, this isn’t the DNA of Hong Kong ,but they will be obliged to contribute to social housing and to create the jobs the city needs.

This time it’s not the Hong Kong government to softly require some support, thanks to the mainland power the property tycoons will have limited choices.

 

Will a massive expatriation be the main result of digital economy and which countries are likely to benefit?

Today decision takers are in their forties and plus, they are investing in the digital economy although they often started their careers at a time when FAX was still existing. Obviously, you don’t need to be a young geek to understand, accept and accompany the digitalization of the economy.

The issue of an investor in the digital economy is basically his/her own environment, too often the possible Internationalization of the sales is well understood but applying fully a “cloud” environment by not renting office and having local employees is not yet in the DNA of an investor.

A digital business could be destined to the local market, but this shouldn’t justify an abandon of certain principles, the main one is to honestly questioning the need to locally hire and to rent office space.

Till COVID times it was easy to lie to ourselves, to mention COMMUNICATION issues, motivation, creativity meetings, local situation awareness etc.… to justify the need to rent an office and to hire local personalities.

The truth was certainly a mix of good reasons and some more unmentionable ones, we like to physically see our investments, we like to share a coffee with the team, we simply do it because we are not willing to work differently, as example to expatriate ourselves.

But what did we do for the last 18 months? We conducted business by renouncing to our comfort, we were forced to adapt and to accept to drastically change our way of working. This was possible but wasn’t FUN, this was even unbearable for some.

Expatriation

COVID 19 constraints are eyes openers for a generation of entrepreneurs and investors.

  1. A physical office is not an absolute necessity, at minima the office space could be reduced and social interaction could be maintained by having the team being present only few days a week.
  2. Most of the back-office tasks could be outsourced few thousand kilometers away, the staff wasn’t at office for the last few months and this basically changed nothing.
  3. A lot of talented individuals did seize the opportunity to change of location and a large number of important contributors are willing to work, at least partially, from home.
  4. Apart companies directly impacted by confinement (restaurants, hotels etc..) the companies suffered eventually from a decrease of demands but not from an absence of physical sales meetings.
  5. The importance of local teams in countries of exportation and importation is increasing, some traders which were under enormous commercial pressure to survive despite the Alibaba efficiency in China are now seeing large turnover increase because of their quality controls and leverage with factories.
  6. Quality of services and products is finally regaining some importance, with an absence of filters between a mistake made and its discovery by the senior management.
  7. Low efficiency team members are being caught by time and tasks trackers.

The digital economy will create waves of expatriations.

  1. When considering business opportunities and the scale-up of business it’s nearly impossible to avoid commercialization or purchasing in English speaking/working countries. Having employees or freelancers in multiples countries is becoming an obligation.
  2. A generation of talented employees has already left their poor sun and high tax countries, pushed away by insecurity and social issues. These freelancers or potential employees possess skills and expertise applied to specific countries; they just do not live IN the country.
  3. Business partners and investors are easier to meet outside of Europe, easier to approach and to convince.
  4. Most of the countries supported the economy by injecting billions of dollars, now they will tax more companies and successful individuals.
  5. By investing in marketing and organization instead of paying high taxes, by escaping administrative burden, the companies are using their resources to increase the business.  

Which countries are likely destined to host waves of entrepreneurs in the digital economy?

The process to select a country is reflecting the concerns of European candidates for expatriation: security and low pollution, ease to find private school, health system and insurances costs, visa system.

The tax environment is crucial, it’s really easy to find countries with lower taxes than Europe but every aspects of the tax regime should be analyzed carefully.

Hong Kong

  • Preferred location of many digital entrepreneurs for the setup of a Hong Kong company which will claim offshore profits (if the profits doesn’t derive from activities in Hong Kong) this could mean a ZERO tax bill
  • With activities in Hong Kong very low tax environment (8.25 till USD 250,000 of profits then 16.5 %) with no VAT and no capital gain.
  • Entrepreneur visa is difficult to obtain, life is expensive and the city is suffering from the aftermath of social unrest.
  • IDEAL solution for single operators in the digital marketing, with a company in Hong Kong they do benefit from credibility and stable environment while living in neighbour countries.

UAE

  • Very trendy as welcoming influencers in need of showing success and participating in parties, the Instagram city…
  • Very favourable tax environment if structured properly with local office and local employees, fake residents will get caught easily by their country of tax residence.
  • Poor commercial logic as definitive local absence of clients and suppliers, no business support.

Singapore

  • Same advantages as Hong Kong but with a reduced access to China when Covid constraints will be “over”.
  • Difficulties to bank outside of Singapore with a Singapore Company (when the company has the turnover of a SME) this situation creates tax risks for many entrepreneurs attracted by an offshore situation.
  • Beautiful city with less pollution and nicer standard of life than Hong Kong, still an expensive location.

Thailand

  • Not a good country to setup a company but a very nice one to live-in while having a Hong Kong offshore company.
  • Ever changing Visa and Tax environment, a local company should have at minimum four local employees for each expatriate under working contract.
  • Many solutions with nominee services to effectively own a company or a land but with high-risk exposure on the long term.

Philippines

  • THE location of the best freelancers available to support digital economy, from developers to graphic designers and content specialists. Very nice professionals with pleasant personalities.
  • Total burden to create a company, if not discouraged by the process you will abandon later when confronted to a complicated and expensive maintenance.
  • Insecurity in the main cities, outside of the cities great social & internet issues.

Mauritius

  • Low tax environment very attractive to French speaking entrepreneurs.
  • Easy banking but with regular issues with their correspondent banking, so clients should be prepared with T/T blocked/delayed and heavy compliance.
  • Fantastic Island for mature entrepreneurs, not really for start-ups
  • Ease to create and to maintain tax substance.

Indonesia

  • Few solutions with nominee services which are difficult to maintain without issues on the long term.
  • A nice alternative to Thailand with similar advantages but in an Islamic environment, so a different way of life.
  • Enormous local market with 270 million inhabitants.

A lot of countries, with low tax environment, pro-business governments and lower operational costs are welcoming the digital economy. The only whom to seems to realize the attractivity of such offers are the European governments.

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