Tycoons should recycle their wealth back into HK

Now that Hong Kong people’s focus is back on business, after months of political news, the business news they are confronted with is not encouraging because it is mostly bad. Business conditions and the environment in Hong Kong are steadily deteriorating.

The Nikkei Hong Kong Purchasing Managers Index, which tracks the business climate in the private sector, dropped to 48.2 in July, from 49.2 in June, representing the second deepest decline since October 2014 — at the height of the “Occupy Central” protest. As company total output and new orders fall, so does the axe on company employees. The future is looking even bleaker.

As a result, talented Hong Kong people who cannot get good paying jobs that enable them to buy “mosquito-sized” apartments move North to Shenzhen and other parts of the Pearl River Delta. There, large homes suitable for a family are affordable; schools are good and jobs are plentiful. And in a worst-case scenario, one can commute to work in Hong Kong within an hour to 90 minutes — quicker than getting from Central to Sai Kung on a weekend.

The improvement of transport links between Hong Kong and the Pearl River Delta as the two economies merge and integrate in the next few years will make cross-border living a serious lifestyle option. Why so?

Hong Kong’s tycoons are selling and merging assets, not only in Hong Kong but on the mainland, and moving their profits overseas. When they are not selling assets, they are donating hundreds of millions of US dollars, money earned in Hong Kong and the mainland, to US and other foreign universities — instead of reinvesting in Hong Kong and making donations to Hong Kong universities and other far more needy and deserving beneficiaries.

Let us take a look at what can possibly be done to reverse the flow of talent and wealth.

Why don’t tycoons reinvest a large portion of their assets back into Hong Kong the way they used to, donate to its universities, or set up an education philanthropy foundation that enables Hong Kong’s human capital to outsmart its global competitors? They could get world-class teachers from anywhere and everywhere, much like judges are brought to Hong Kong. Imagine if several of Hong Kong’s tycoons got together and pooled their resources to do so.

Swire Group is meeting this challenge with its long-term investment in an IT entrepreneur incubation center. Why aren’t all the tycoons doing so — together?

In addition, instead of building luxury developments, they could build affordable housing for Hong Kong people and foreign talent.

To keep local and foreign talent, and develop a new generation of entrepreneurs, tycoons should also consider spending a bigger share of their payroll on performance-based bonuses and get away from non-performance long-term salary increases. I have always believed in and built businesses on the “you eat what you kill” philosophy. So have most of Hong Kong’s tycoons. What better way to groom homegrown entrepreneurial talent?

More professionals in Hong Kong believe they would be better off if they were paid bonuses based on their performance, even though that would mean a lower base salary, which makes them stand out from their more “risk averse” Asian peers, according to a recent study by Hays, Hong Kong.

The Hays report went on to say 75 percent of employees in Hong Kong said they would rather take a cut in base pay for the opportunity to be rewarded with bountiful bonuses. Why not capitalize on this initiative and have employees work at peak efficiency and productivity?

Better yet, how about long-term paid vacations and maternity leave — for both parents? After all, that is what cutting-edge companies like Google, Facebook, Microsoft and Netflix do to attract top talent.

South China Morning Post columnist Peter Guy summed it up best. “While one cannot expect Hong Kong’s ruthlessly self-centered culture to give way to collective optimism, large-scale philanthropy is an important, long-term, sustainable mechanism for redistributing wealth and recycling capital back into the economy and society. At some point, vast family wealth must make its way back to greater society.”

Hong Kong’s tycoons must, if they want to perpetuate the cycle of growth and respect they inherited or initiated, move their wealth back home where it belongs. That is the primary economic catalyst needed to get Hong Kong people and international talent to flock back to Hong Kong and jump-start the local new world economy again.