QUESTION 1

Hong Kong is Asias financial, business and trading community. It is one of the
worlds leading international financial centres, characterised by low taxation and
free trade. The Hong Kong Government has traditionally played a mostly passive
role in the economy, with little by way of industrial policy and almost no import or
export controls. Market forces and the private sector were allowed to determine
practical development. Hong Kong is the world's eleventh largest trading entity,
with the total value of imports and exports exceeding its gross domestic product. It
is the world's largest re-export centre. Hong Kong's transportation network is highly
developed. Over 90% of daily travels (11 million) are on public transport, the
highest such percentage in the world. with an average annual growth rate of 0.8%
over the previous 5 years.
Hong Kong has population of around 7 million, meaning the size of market is
comparatively small compare to other country like Japan and China or Indonesia.
Since the market size is small, the selected entry mode is more suitable to the Hong
Kong market. To build new production plant in which uses local resources might not
be good idea due to the high capital cost and the ROI might require longer time
than it should.
I would choose export based as mode of entering market in Hong Kong to expand
Proton market.

car industry in HK, transportation culture/facilities,

Ownership attributes (O)
Competitive advantage of firm
Core competencies
Control of resources

Location attributes (L)

Factor endowments
Government regulations

Internalisation (I)
FDI of competitive advantage in foreign market

QUESTION 2
Communication is the most important element to success for doing business and
developing long-term relationships. This becomes more important when operating
internationally due to language barrier. Hong Kong is overwhelmingly populated by
Chinese and its population are primarily drawn upon the five major groups of
Southern China: The Cantonese, The Fukkien, Hainan, The Chui Chow and The
Hakka. Cantonese and English are the two languages of use on the island. Although
English is commonly used in Hong Kong business culture, be respectful of Chinese
business partners by practicing or try to learn Cantonese may help to build personal
network and strong relationship with business partners, suppliers and clients. This
can be done by practicing a bit of small talk or a few polite phrases to show an
effort to learn the local language. This helps to integrate with the local community
and demonstrates interest in the new country. Apart from that, do research on the
style of communication or body language of Hong Kongers and understand it. For
instance, Hong Kong business people use direct yet non-verbal cues, such as
silence, as a form of communication. Silence often indicates disagreement or careful
consideration. Its recommended to remain quiet and respect the pause.
Conduct research before launching a marketing campaign to become aware of the
target audience since customer demand, decision making, gender views and
ideologies greatly vary in cultures. Being aware of basic customer needs or
customers cultural background is an important aspect as this will give the
advantage of conveying the message. This will help to be able to adopt better and
more suitable advertising methods. Presenting a campaign that is not in line with
specific cultural norms can insult the target audience and greatly hinder the
campaign. Being aware of cultural norms can also help company narrow down the
target audience.
Hong Kongs business culture emphasizes personal reputation. Managing reputation
is therefore one of the most important success factors when doing business in Hong
Kong. Political influences, both past and present, can potentially affect the way a
company does business. To avoid conflict, it is best to avoid discussing any political
matter that does not directly pertain to the business at hand. This is also true for
inter-office interactions. Some cultures have a very strong sense of nationalism and
government pride, and therefore, are more comfortable and willing to purchase
from companies with some sort of government backing.
Interest, understanding, outlook, mindset and expectation collision is a common
issue in multicultural business perspective. Business people in Hong Kong avoid
direct confrontation. Be aware of this during negotiations, as they may not overtly
say no to avoid embarrassment. Therefore flexibility is one of the most crucial
qualities in international encounters. Be flexible means has to view things from
multiple directions rather than developing a tunnel vision.
Malaysia and Hong Kong are from the same Eastern cultures, however the
differences are existed. Despite these differences, the business can be done

successfully. Culture synergy may help this. The concept of cultural synergy is a
unique organizational approach that considers cultural diversity as a resource. Each
culture has some uniqueness and in a multicultural perspective those uniqueness
may yield new solutions to existing problems. Therefore, steps may be undertaken
to use the best parts of other cultures for solving business problems.

QUESTION 3

Hong Kong adopts the territorial source principle in charging tax. Meaning that
income is only taxed if it arises in or is derived from Hong Kong through a trade,
business or profession carried on in Hong Kong. Hong Kong has a scheduler income
tax system. There are 3 types of tax:
Profits tax tax on profits derived from Hong Kong from carrying on a trade,
business or profession in Hong Kong. The profits tax rates are 16.5% for
corporations and 15% for unincorporated businesses for the year of assessment
2012-13, which are amongst the lowest in the region. Capital receipts are not
subject to tax and dividends from local companies chargeable to tax are exempt
whereas dividends from overseas companies are generally offshore in nature and
not subject to tax. Certain exemptions are available, e.g. certain interest income
derived by non-financial institutions, income of offshore or non-resident investment
funds or exemptions for mutual funds/unit trusts/ qualifying debt instruments etc.
Salaries tax tax on income derived from Hong Kong from an office, an
employment or a pension. For the year of assessment 2012-13, the progressive
rates range from 2% to 17% (with a marginal tax band of HK$40,000) and the
standard rate is 15%. This includes but is not limited to: salaries and wages
leave pay fees commissions bonuses gratuities perquisites pensions. For
non-Hong Kong employments, only income derived from services rendered in Hong
Kong is taxable.

Property tax tax on income derived from a real property in Hong Kong. Property
tax is levied on the owner of any land or buildings in Hong Kong at the standard
rate of 15% (for the year of assessment 2012-13) on income derived from the
right to use such land or buildings (i.e. rental income). If income from property
chargeable to property tax is included in a corporation's profits for profits tax
purposes, the amount of property tax paid is set-off against the profits tax
assessed. A corporation which pays profits tax on the profits derived from a
property can alternatively claim exemption from property tax. Property tax is not
assessed when the property is used as a residence by the owner because there
is no consideration for the use of the property.

Apart from income tax, stamp duty is payable on chargeable instruments executing
certain transactions. The principal governing law for direct taxes is the Inland

Revenue Ordinance, which is administered by the Commissioner of Inland Revenue.

A dispute between taxpayers and the Commissioner on a question of law may be
resolved through the court system. There is no capital gains tax in Hong Kong. Hong
Kong does not impose any turnover tax.
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Hong Kong incorporated companies are required to prepare financial statements
that give a true and fair view. Such financial statements must be prepared and
presented in accordance with Hong Kong Financial Reporting Standards (HKFRSs)
issued by the Hong Kong Institute of Certified Public Accountants (HKICPA), which
are fully aligned with International Financial Reporting Standards. HKFRSs comprise
all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and
Hong Kong Interpretations approved by the Council of the HKICPA. Under the Hong
Kong Companies Ordinance, the directors of every company must lay before the
shareholders in the annual general meeting audited financial statements. The
Companies Ordinance specifies that every company incorporated in Hong Kong
must appoint one or more independent auditors. An auditor must be a member of
the HKICPA and hold a practicing certificate issued by the Institute. Under the
Companies Ordinance the auditor is required to report to the shareholders on the
financial statements under Hong Kong Standards on Auditing issued by HKICPA and
laid before the company in the annual general meeting during their tenure of office.
A Hong Kong branch of a foreign corporation is not subject to statutory audit
requirement under the Companies Ordinance. However, if the branch is doing
business in Hong Kong, it is required to file a profits tax return annually, and the
Inland Revenue Department may require audited accounts of the foreign
corporation to support its profits tax return.
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Employment in Hong Kong is mainly governed by the Employment Ordinance,
Mandatory Provident Fund (MPF) Schemes Ordinance, Employees Compensation
Ordinance, Occupational Safety and Health Ordinance and four ordinances
implemented by the Equal Opportunities Commission. The Employment Ordinance
governs employee rights, such as the payment of wages, termination of
employment contracts, sickness allowance, maternity protection, rest days, paid
annual leave, protection against anti-union discrimination and long-service
payments or severance payments. The Employment Ordinance is applicable to all
employees except for certain very limited categories of persons as defined under
the Ordinance. Employees who have been employed continuously by the same
employer for four weeks or more, with at least 18 hours worked in each week, are
regarded as being employed under a continuous contract. Such employees are
further entitled to benefits such as rest days, paid annual leave, sickness allowance,
severance payment and longservice payment. Employees who are not employed
under a continuous contract are not entitled to the above benefits but are still
entitled to the rest of the basic protection under the Employment Ordinance such as
payment of wages, restrictions on wages deductions, granting of statutory holidays,
etc.

The average hourly wage of employee in respect of any wage period should not be
less than the statutory minimum wage rate of HK $28 per hour. This is applicable to
all employees except for persons to whom the Employment Ordinance does not
apply (e.g. student interns). Unless specified, wages include all remuneration,
earnings and allowances. The calculation of minimum wage excludes the hours not
worked (such as rest day pay, holiday pay, annual leave pay, maternity leave pay,
sickness allowance, etc).
Under Hong Kongs employment legislation, there is no provision governing the
maximum number of working hours for an employee. Non-Hong Kong residents who
are not non-local graduates but possess special skills, knowledge or experience of
value to and not readily available in Hong Kong may apply to come to work under
the General Employment Policy (GEP). The Hong Kong Immigration Department will
consider the following in approving an employment visa: whether the business
being undertaken is beneficial to the economy, industry and trade of Hong Kong;
whether the employment of the applicant is essential to the business; and
whether the position can easily be filled by a local individual.
The Basic Law guarantees that Hong Kong residents have freedom of association
and the freedom to form and join trade unions. The Employment Ordinance provides
that every employee has the rights to be a member/an officer of a trade union
registered under the Trade Unions Ordinance. Upon termination of employment, the
employee will be entitled to the termination payment within seven days of the
termination date. Such payment includes: outstanding wages; wages in lieu of
notice etc.
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The Hong Kong Government has adopted a policy of minimum intervention towards
the regulation of the territorys business and industry, and this policy has
contributed to the territorys attractiveness to foreign investors. Every business in
Hong Kong, whether carried on by an individual, a partnership or a corporation and
whether locally or foreign-owned, must be registered under the Business
Registration Ordinance, which is administered by the Inland Revenue Department.
There are no other significant regulations or restrictions imposed on conducting
business in Hong Kong, except in situations where there is a genuine need to fulfil
obligations undertaken by Hong Kong to its trading partners, or to meet public
health, safety or internal security needs.
Hong Kong does not have any foreign exchange control. There is no restriction on
entry or repatriation of capital or remittance of profits from investments. Funds can
be freely remitted outside Hong Kong by various means such as dividends, interest,
royalties, service fees and branch profits, etc. There is no government or other
guarantees against inconvertibility.
The Hong Kong Government is firmly committed to free trade and free enterprise.
Hong Kong is a free port imposing no customs duties (import tariffs) on imported
goods. Excise duties are levied only on tobacco, hard liquor, methyl alcohol and
hydrocarbon oil, whether imported or locally manufactured. Other taxes may also

apply to items such as automotives, on which a first registration tax is charged.

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Hong Kong is a leader in Asia in the protection and enforcement of intellectual
property rights. Stringent laws regulate patents, copyrights, trade marks and
registered designs. The Intellectual Property Department monitors the Intellectual
Property regime and ensures the enforcement of the relevant laws and regulations.
The Department is also responsible for investigating complaints against
infringements and has extensive powers of search and seizure. Registration and
protection of patents, copyrights, trade marks and registered designs are each
governed by a separate ordinance.