Hong Kong has come up with ambitious ideas to maintain the competitive edge of its financial industry, focusing on talent acquisition and infrastructure enhancement.
Paul Chan, financial secretary of the SAR, has asked the Hong Kong Monetary Authority (HKMA) to study how to bring together different stakeholders in the industry to set up an “academy of finance” that would promote cross-sector expertise sharing.
HKMA has commissioned an expert group, which will advise and assess the proposal. The group consists of several heavyweights in the financial industry, including former chairman of the Securities and Futures Commission, Anthony Neoh, current SFC chair Carlson Tong, Insurance Authority’s Moses Cheng, and HSBC’s retired chairman David Eldon.
By mid-2018, the expert group is expected to conclude a feasibility study.
Norman Chan, chief executive at HKMA, said in a statement that Hong Kong will have to improve in professional talent acquisition and sustainable development to survive in fierce competition among international financial centres.
He believes the academy could gather the strength of universities, the industry, professional training institutes and the regulatory community. “The ability to expand and upgrade one’s professional talent pool and enhance soft power in a sustainable manner will differentiate the true winners,” he added.
Prior to the proposal, HKMA partnered with the Private Wealth Management Association to roll out a pilot apprenticeship programme for 20 full-time students. The programme involves two rounds of paid summer internships (six weeks in 2017 and eight weeks in 2018) at wealth management institutions. In December 2016, HKMA together with the Technology Research Institute rolled out a programme that provides fintech internships for undergraduate and postgraduate students.
As part of the proposed budget, the SAR’s treasury will set aside a provision of HK$500m ($63.88m) for providing support for bond market development, fintech, green finance, human resources training and other aspects in the coming five years, according to the budget report.
“The HKSAR government has for the past years announced initiatives to increase (or defend) Hong Kong’s competitiveness in asset and wealth management,” wrote Arjan de Boer, head of markets and investment solutions in Asia at Indosuez Wealth Management, in a note to clients.
“This year, however, the initiatives are of a more concrete and forward looking nature than before, which shows that a realisation is kicking in that in order to further develop (and protect) Hong Kong as a leading financial centre, one cannot be complacent, something which Hong Kong has been accused of in the past, most notably vis-a-vis Singapore.”
He singled out “initiatives for developing bond markets and green finance”, as key opportunities for Hong Kong.
In related moves, the government plans to put the open-ended fund company (OFC) structure in operation later this year, according to the financial budget. It is an arrangement intended to develop Hong Kong as a preferred fund domicile for local and global asset managers. The authority also suggested a profit tax exemption for the private OFC.
If enacted, incorporation of an OFC will be subject to the Securities and Futures Ordinance, instead of the relatively inflexible Companies Ordinance.
The fund houses under Companies Ordinance will have to seek approval from the shareholders whenever an increase or reduction in capital or payment of dividends is proposed.
Moreover, the competition may be more intense in the region as Hong Kong’s rivals prepare to launch similar new company structures in 2018.
Australia will deploy Collective Investment Vehicles (CIV) scheme this year while Singapore will launch the Singapore Variable Capital Company (S-VACC) and the Corporate Collective Investment Vehicles (CCIVs).
In addition to tax arrangements for the new framework, Hong Kong authorities will review the tax scheme for the fund industry in a broader sense so as to keep up with international requirements on tax co-operation.