Something’s Wrong in Hong Kong

--Angry Hong Kong protesters are a couple blocks away from my Airbnb window. Their demands? “Release Hong Kong Booksellers Now!

Angry Hong Kong Civilians

More on that, though, in a moment.

As I mentioned in passing yesterday, I’m in the Pearl of the Orient.

The day I arrived, I was told, a wild boar had gotten loose and was terrorizing the financial district.

But after many attempts to catch it with “shields and nets,” according to South China Morning Post (SCMP), a cop shot it with a dart. And now everything’s back to normal.

If, that is, 270 people showing up with their dogs for “doga” — dog yoga — is normal, then, yeah, nothing weird’s happening here.

Hong Kong Civilians with Pets

Given the hustle and bustle of the city, it’s easy to feel as if, in certain areas, you’re walking the streets of New York.

Until, of course, you catch a glimpse of a bumper sticker you can’t seem to decipher (in more ways than one)…

Hong Kong Signs

Or you are forced to sidestep the ubiquitous wildlife…

Monkeys

Or you notice that absolutely everyone has their heads buried in their phones…

Hong Kong Civilians

(Oh, wait. What am I saying? That last one is no different from New York. A city that’s trying to ban walking while texting due to a surge in head-on collisions.)

--All of its quirks aside, Hong Kong has, according to the Heritage Foundation, the freest economy in the world.

And this is the 21st time in a row HK has earned the title.

The Economic Freedom Index 2015

“As the economic and financial gateway to China,” the foundation’s report reads, “and with an efficient regulatory framework, low and simple taxation, and sophisticated capital markets, the territory continues to offer the most convenient platform for international companies doing business on the mainland.”

But, it says, its economic freedom is beginning to wane a bit.

“Although Hong Kong maintains the features of an economically free society, economic decision-making has become somewhat more bureaucratic and politicized, and the government’s administrative scope and reach have expanded.”

Many Hong Kongers blame this on China’s recent tightening of the reins.

As you know, Britain handed HK to China in 1997. As an assurance to the people of Hong Kong, the Chinese Communist Party (CCP) promised to allow the country to retain its autonomy. But many Hong Kongers, you may not be surprised to hear, say the CCP has failed to stay true to its promise.

--The latest example is why angry protesters were posted up only blocks away from where I’m holed up. And it has to do with the shrinking freedom of the press in Hong Kong.

While everyone here knows there are very few publishing houses not owned by Chinese interests, few have seen outright censoring of locally-owned houses. Even if they are incredibly critical of the CCP.

In mainland China, in contrast, it’s quite common that critics of the CCP disappear overnight. But in Hong Kong, the CCP’s critics have been, as far as anyone can see on the surface, allowed to speak freely.

Beyond the purview of the average onlooker, though, China has been slowly, quietly and methodically chipping away at Hong Kong’s freedom to say what it pleases for years.

Until now. Now, it seems, it’s becoming a bit more blatant in its methodology.

Here’s the quick-and-dirty…

Near where I’m staying, a bookstore called Causeway Bay Books has been shut down. Not directly, though. Curiously, everyone who used to work there has gone missing.

The bookstore, I’m told, carried mostly gossipy books about President Xi Jinping and the embarrassingly incompetent inner-workings of CCP. The books, says one Hong Konger, sold like hotcakes to mainland tourists who were thirsty for dirt on their seemingly-omnipotent rulers. In the mainland, you can imagine, with their squeaky scrubbed newsreels, such grime is difficult to detect.

One bookseller, named Gui Min, disappeared last year for three months while visiting Thailand. Now he’s resurfaced in a bizarre confession video where he’s claiming he turned himself into Chinese authorities for a drunk driving accident that happened over a decade ago. (This video might seem plausible if it weren’t for all of his colleagues going AWOL at the same time. Probably not, though.)

Shortly after Min disappeared, three of his colleagues went missing while visiting the mainland. And another bookseller was abducted while running errands close to his home in Hong Kong.

Coincidentally (we’re sure), at around the same time of the first kidnapping, bookstores all over the country began pulling books banned in China off the shelves. Something that’s never happened before.

“We were told to take all politically sensitive books off the shelves in late November,” a bookseller from a prominent retailer, Book One, told a reporter from South China Morning Post. “The manager did not tell us the reason, but said Page One would no longer sell banned books ever again.”

--Our takeaway? Just like with everywhere else, there are trade-offs.

Heh.

In Hong Kong, one of them is, unfortunately, you always have China breathing down your neck. Which, to some, might be a pretty big con.

Hong Kong, I’m told, is still an excellent place to buy and privately store gold. And it’s still relatively easy to open up a bank account and store cash overseas in stabl(er) banks. It’s also one of the best (and easiest) places in the world to incorporate your business. And there are no shortage of expat entrepreneurs here, looking to ride the Rise of the East.

On the other hand, it’s an expensive place to live. And, just like in New York, you’ll pay an arm and a leg to live in a shoe-box.

Hong Kong is the last place on my travel list for Asia.

And as my time in the Far East quickly comes to a close, I want to give you a quick recap of many of the places we’ve been — and some we haven’t.

Below, from Reid Kirchenbauer of Nomad Capitalist, you’ll find an overview of the ten members of Association of Southeast Asian Nations (ASEAN). And where, given the current landscape, might be best to park your money in this constantly-shifting corner of the world.

[If you see any nations we haven’t talked about, but would like to hear more, drop us a line: Chris@lfb.org.]

Enjoy…

An overview of ASEAN and investing in Southeast Asia

By Reid Kirchenbauer

Let’s get back to basics today. While Nomad Capitalist has covered a lot of opportunities and investments here in Southeast Asia, I figured it would be helpful to review the entire ASEAN region that makes up this part of the world, and give you an introductory, bird’s eye view at each country and what to make of it.

Looking out the window of my hotel room in Hanoi, I realize how quickly things change in this part of the world. Even though this is the same building I stayed at no more than five years ago, the capital of Vietnam feels and looks like a completely different city, complete with venture capital outfits and go-go business.

Things are changing fast here in Southeast Asia and as the balance of power shifts from West to East, there is perhaps no greater place to do business in and learn about.

However, Southeast Asia cannot be lumped together and generalized as a single place. There are ten diverse countries that each have their own strengths, weaknesses, and quirks that must be kept in mind.

It’s almost needless to say that a comprehensive outline of ten countries cannot be done in a single article – but here are some quick facts about all of the ten members of ASEAN, or the Association of Southeast Asian Nations, which itself consists of all countries in the region.

Analysts have been speaking highly of this region for years, and it remains an excellent outpost for expat entrepreneurs as well as investors.

Investing in the ASEAN region

Singapore. The de-facto financial hub of Southeast Asia, Singapore is one of the most capitalistic societies in the world. One out of every six residents of the city-state is a millionaire and its stable banking system, low taxes, and immigration-friendly policies have led investors and entrepreneurs alike to its shores.

With that said, immigration has become harder in the past decade or so. Wealth has brought the ability to be selective and while a multi-millionaire can move to Singapore rather easily, it’s far more difficult for most others.

Indonesia. Southeast Asia’s largest country, and the world’s fourth most populous with over 240 million inhabitants. The sheer size of the Indonesian market means that there are a huge amount of opportunities – but compared to China and India, it is still underexploited by international investors and businessmen.

The country’s infrastructure is still rather poor. A lack of efficient public transportation and the fact that Indonesia is made up of about 18,000 islands makes getting around, both for people and products, difficult.

Brunei. Only around 400,000 people live in Brunei, but this oil-rich nation located on the island of Borneo beats out even Singapore by wealth on a per capita basis. Brunei has zero debt, and the government is focused diversifying its economy away from the oil and gas industry for long-term sustainability.

Brunei is ruled by a Sultan who is in the process of converting the nation’s legal system to one based on Sharia law. It is unclear what repercussions, if any, this may have for its broader economy in the future. The oil and wealth will probably stay, though.

The Philippines. This country has something that with the exception of India, is unique in Asia – a huge amount of skilled, English speaking workers that are willing to work for cheap. The Philippines has an unusually large services sector for an emerging market, and is ideal for outsourcing and doing business in without having to worry about a language barrier.

However, the Philippines is infamous for its bureaucracy and corruption. Those who want to ship products through should be wary – for now.

Laos. This landlocked country is the only in Southeast Asia that shares borders with five others, giving it many opportunities. A high-speed rail project is already underway that will link the Southern Chinese city of Nanjing with Bangkok while passing through Laos, and the potential for being a transportation hub is enormous.

While quickly changing, Laos is still undeveloped compared to most others in Asia. Superhighways and rail lines are still under construction, and the non-adventurous might consider waiting awhile.

Myanmar. Unless North Korea decides to open for business, Myanmar is Southeast Asia’s final frontier. The nation was once one of Asia’s richest, but was been ruled by a military junta for several decades since the 1960s. [ED. NOTE: This just goes to show how times change, and why you must go where you are treated best.] This has changed, and the result is a country of over 60 million people that are optimistic about their newfound freedom, but need basic services.

The entrepreneurship opportunities would be endless, if it weren’t for extreme difficulty of doing business in Myanmar. Many investment and foreign business laws are either vague, or haven’t even been implemented yet. The more cautious may want to wait a few more years.

Vietnam. With wages and factory upkeep costs in China rising as the nation shifts its economy to one based on consumption and services, a lot of jobs have moved to Vietnam. Companies such as Nike, Samsung, Intel, and more have built multi-billion dollar factories to benefit from Vietnam’s skilled manufacturing workforce.

Inflation has historically been a problem in Vietnam, though. The country suffered hyperinflation from 1987 to 1992, and inflation was over 10% from 2008 to 2011.

Thailand. The largest car manufacturer in Southeast Asia, the largest rice exporter in the world, and a capital that was more visited than another country by international tourists in 2013. The Thai economy has some of everything. The country is the second largest investor in the emerging economies of Laos and Myanmar (behind China) and will likely reap the rewards.

Coups are “a thing” in Thailand and while there have been 17 in the past hundred years, the country seems to always bounce back. Free elections are usually held a year or two after one, but underlying political tensions have not gone away.

Cambodia. A nation that has suffered a lot under the Khmer Rouge, Cambodia is poorer than any other country in Southeast Asia on average – however, this may not be the case for long. It’s common to see economic growth of over 10% a year in Cambodia, and there has not been a single year with negative GDP growth since Pol Pot left power.

As typical with all of Southeast Asia’s less developed nations, Cambodia suffers from corruption and inefficiency. But this hasn’t stopped plenty of people from making money off the country’s many opportunities.

[ED. NOTE: Cambodia remains one of our favorite places to invest on earth despite its frontier market status.]

Malaysia. The Malaysian economy benefits greatly from its multiculturalism. There is a large population of Muslims, Chinese, and Indians — which equates to many rich Middle-Easterners, Chinese, and Indians bringing their money in because of a sense of familiarity.

Malaysia’s capital of Kuala Lumpur is the world’s largest Islamic finance center.

Tensions still exist, however. The ethnic Malay majority have implemented policies that favor themselves. Housing discounts, employment preferences, and even Malay-only mutual funds have created resentment among the Indian and Chinese minorities.

Southeast Asia’s growth is enormous, and there are possibilities for every kind of investor or entrepreneur. A stock trader, manufacturer, property flipper, or outsourcer will each find a place to suit their style. Kuala Lumpur is a very westernized place to live, too.

Whichever way you want to do business, it’s better to do it here than in the western world. The developed countries operate with a high amount of efficiency, the emerging markets are an entrepreneur’s playground, and almost everywhere has low taxes.

But it’s best to act now. In five years, Myanmar might already have a successful pizza chain.

Sincerely,

Reid Kirchenbauer
Contributor, Nomad Capitalist

The post Something’s Wrong in Hong Kong appeared first on Laissez Faire.