I

ndonesia can seize a myriad business opportunities from closer economic relations with Hong Kong, the world’s 10th largest trading economy, including a boost in exports to mainland China, a trade
representative says.

Hong Kong, a special administrative region of China, could play a strategic role as a hub of both trade and investment for Indonesian business people, Hong Kong Trade Development Council (HKTDC) deputy executive director Margaret Fong said.

As Hong Kong has sealed a closer economic partnership arrangement with China, which eliminates import duty on a wider range of products than covered by the ASEAN-China free trade agreement (ACFTA), Indonesian manufacturers could enjoy more competitive pricing of their products through cost efficiency by exporting through the hub, she explained.

“Generally this can be done through value-added services in Hong Kong because if you create more value there and reach 30 percent as required by the rules of origin, you won’t pay any tariffs. That
means, many of your products that at this point don’t qualify, will qualify, if they come through Hong Kong,” Fong told reporters after a business seminar on Tuesday in Jakarta.

Business opportunities are abundant for Indonesian exporters to sell food and agricultural products, houseware, handicrafts, and other consumer goods with strong brands, Fong said, adding that Hong Kong companies might work on the re-packaging or distribution activities to allow products reach Chinese consumers.

Hong Kong’s domestic goods exports to Indonesia settled at HK$335 million (US$45.80 million) last year, comprised of textile yarn, fabrics, made-up articles, metal ores and scrap, essential oils, resinoids, perfume materials, toiletries, polishes and cleansing preparations.

Its re-export of goods valued at HK$22.9 billion in the past year, consisted of telecommunications and sound equipment, textile yarn, fabrics and made-up, office machines and automatic data processing machines.

Hong Kong imported HK$22.9 billion in goods and commodities from Indonesia during the year, mainly coal, coke and briquettes, edible products, electrical machinery, apparatus and
appliances, and electrical parts.

Apart from potentially becoming an export hub, Hong Kong is the ideal place for Indonesian firms wanting to set up its subsidiaries to target China, as they can control the majority stake in the firms, which cannot be done in China, according to Fong.

Coming through Hong Kong, logistics firms for instance can control 100 percent stakes and that will give you better control of your distribution channels to lower your logistics cost, she said.

Hong Kong is known as Asia’s central business district as it provides a transparent business environment and simple tax regime with low rates — income tax at 15 percent and corporate tax of 16.5 percent, the lowest in the region.

As of June last year, 17 local offices of Indonesia companies were established in Hong Kong.
James Budiono, the chairman of Hong Kong and Macau Committee of the Indonesian Chamber of Commerce and Industry believes that his association will soon facilitate local small and medium enterprises access China’s market through Hong Kong.

 “The Chinese market is good for Indonesian products. However, only a few firms understand how to enter the market,” he said, citing common problems of language and currency.

James said that if more local firms expanded their exports to China, it would help Indonesia to reduce trade gap with its biggest trading partner.

From January to September, Indonesian non-oil and gas exports stood at $15 billion, while  imports totalled $21.43 billion, causing a deficit of $6.43 billion, data from Central Statistics Agency shows. Many attribute the gap to the ACFTA that was implemented in January 2010.