Although Hong Kong has cutting-edge proprietary sustainability technologies, local enterprises still need to gain the long-term trust of their business partners in Association of Southeast Asian Nations (ASEAN) and the Middle East by understanding their religion, culture, languages and business practices. Oswald Chan reports from Hong Kong.
Editor’s note: Hong Kong has strategically expanded its focus to include the thriving economies of Southeast Asia and the Middle East, a tactic that has generated a wave of opportunities for the city’s business community. In the second of a three-part series, we explore how Hong Kong sustainability solutions can be tailored to satisfy the environmental conditions in these two economic regions.
Hong Kong-listed Unity Group Holdings International Ltd was established in 2008 and listed as the first energy service company on the Hong Kong Stock Exchange in 2016, focusing on providing energy solutions to help enterprises in over 20 countries reduce carbon emissions and save costs.
The company has gradually expanded its operations to Southeast Asian nations like Indonesia and Malaysia, and to South Africa.
READ MORE: Rising to the challenge
“Hong Kong has developed cutting-edge proprietary technologies, while Hong Kong-based engineers and other proprietary technology professionals have cultivated international perspectives in line with international standards,” Mansfield Wong Man-fai, chairman and CEO of Unity Group, tells China Daily.
Win-win cooperation
Southeast Asian countries, with a tropical climate, will have great demand for the company’s energy-saving solutions for air-conditioning systems, says Wong, as this market bloc is less competitive than that of the Chinese mainland, with correspondingly lower property technology standards. “These countries also face soaring utility prices due to increasing demand for electricity, and Southeast Asian governments’ green technology investments that require raising utility bills to fund such investments.”
Unity Group operates in Indonesia and Malaysia. The latter is the large revenue generator. The group aims to expand into the Philippines and Vietnam. “These countries have huge populations and their utility tariffs are projected to have an annual growth rate of at least 7 to 8 percent annually. In the Philippines, tariff bills are expected to be the highest in Asia, excluding Japan,” says Wong.
Unity Group is seeking suitable business partners in countries that belong to the 10-member ASEAN. The company also has to consider Vietnam’s currency restrictions before deciding whether to tap that market.
The Hong Kong company provides lighting solutions to 300 department stores and hypermarkets owned by Lippo Group in Indonesia, and 2,000 stores owned by Shoprite Holdings in South Africa. The 484-meter-tall International Commerce Centre — the tallest building in the Hong Kong Special Administrative Region — and Singapore’s Changi Airport are among Unity Group’s clients. The group conducts extensive business in Malaysian shopping malls, hospitals, government buildings and condominiums, and has set its sights on countries in the Middle East, with the United Arab Emirates as its first choice.
In September last year, Unity Group signed a memorandum of understanding with the UAE’s Lead International Investments to cooperate in a joint venture to offer energy-saving solutions to 700 commercial, residential and corporation buildings in the UAE’s capital city, Abu Dhabi; procure and offer private-label equipment for solar projects in the UAE valued at $15 billion by 2030; and establish a carbon emission reduction platform.
“Recognizing the unique energy management needs of the Middle East, Unity Group sees a significant opportunity to share its energy-saving solutions with the region. While the current energy protocols in the Middle East are tailored to local conditions, Unity Group will leverage the business experience gained in the Hong Kong market to offer innovative approaches for enhancing energy efficiency and sustainability,” says Wong.
“The group will also launch agricultural technology projects in Malaysia and the UAE by providing tailor-made agricultural technology to mimic the photosynthesis effect 24 hours, seven days a week and maximize the steady output growth of selected crops indoors. We will work with property developers in the UAE and manufacturers in Malaysia.”
According to Wong, the demand for agritech is tremendous in the Middle East because almost all vegetables are imported, so they are expensive. So customers are willing to pay for high-quality vegetables.
Unity Group is prioritizing developing the UAE market and may enter into joint ventures in Saudi Arabia and Qatar. It is also eyeing other markets in the region, like Egypt and Jordan, where the business environment is similar to that of Indonesia and Malaysia. The company hopes to use its business experience gained in ASEAN to develop the Egyptian and Jordanian markets.
Wong stresses that a localization strategy is needed to build up the ASEAN and Middle East markets. “In the ASEAN states, political developments will have a bearing on the business environment. Another factor we need to consider is the currency risk. For the Middle East, as well as Indonesia and Malaysia, we have to exhibit a strong learning curve to acquiesce to the Muslim religion, culture and business practices to win long-term trust from our business partners in these countries. There is a significant opportunity for us to share and integrate the dynamic business ethos of Hong Kong with our international counterparts, paving the way for a reciprocal exchange of business insights and practices.”
Wong said he hopes the HKSAR government can make its business environment friendlier to Middle Eastern investors and organize more programs to promote bilateral understanding of Muslim and Chinese cultures, thereby achieving mutual benefits and strengthening business and cultural bonds.
Localization strategy
Jack Lau, a Hong Kong-based techno-entrepreneur and engineering professor who is the first non-Qatari to be appointed to run Qatar Science and Technology Park, suggests that Hong Kong businesspeople acquire a deep understanding of Middle Eastern countries. These countries, with their vast size, sparsely populated areas and hot climate, should be interested in robotics technology. But Hong Kong technology service providers need to do more in technology solution localization before venturing into the Middle Eastern market.
“What exactly is robotics? Why do I (Middle East clients) need to use yours (Hong Kong companies’ technologies)? What does the customer need? Is it good enough for robotics technology to be presented in Arabic or English? And what is your (Hong Kong companies’) pricing strategy? If robotic machines were to be used in the desert, how can they be charged?
“As for solar panels, their efficiency will decrease during a sandstorm in the Middle East. This does not occur in other cities like Hong Kong. So what should be done with the rainfall levels and air problems added up?” asks Lau.
Thomas Pang Pui-yin, acting CEO of Neuron Digital Group, agrees that the problem of business localization is acute.
NDG is a joint venture between United Kingdom-based global environment consulting firm Arup and Hong Kong-based technology company Venturous Group. The startup develops its proprietary technology solution, Neuron Digital, for conducting energy optimization, operating system visualization, carbon footprint reduction and sustainable environmental, social and governance reporting.
Currently, NDG has about 60 clients, mainly major property developers and conglomerates in Hong Kong. About 150 buildings in the SAR have adopted the company’s smart building technologies. NDG has developed modules tailored to benefit old buildings. With the city’s real-estate market having slowed down, the company expects to cover many more old buildings in the next few years. Hong Kong accounts for more than 90 percent of the company’s revenues, with the rest coming from the Chinese mainland and ASEAN.
NDG, based at Hong Kong Science Park, has made a symbolic gesture to enter the Middle East and ASEAN markets. “I would describe our business strategy in the Middle East as opportunistic. We will rely on suitable business partners there to promote our products and services when they are fully conversed with our technologies and can provide the manpower to manage projects,” says Pang.
According to an agreement signed between NDG and Dubai-based smart city technology company Geoloc Star, the latter will recommend UAE-based property developers to be Neuron’s clients and refer NDG’s technology solutions to other customers on a sales commission basis.
Pang sees Middle Eastern clients as having strong demand for Hong Kong’s property technology solutions. “Property developers and conglomerates in the Middle East want to import smart building technologies from the world to improve the business performance of real-estate assets. Besides, they appreciate that these technology solutions can be applied to old buildings in the UAE, where the number of such buildings is on the rise.”
NDG is launching two projects in the UAE. The first project will see the monitoring of temperature levels of natural gas cylinders through suitable sensors and systems installed in buildings. The other project features the installation of closed-circuit televisions for performing logistics functions in warehouses.
Two smart building projects in Saudi Arabia are expected to be implemented this year.
For ASEAN, Pang believes the regional grouping’s market potential in terms of smart-city technology is even greater than that of the Middle East, but market competition is very stiff. “It is difficult for us to tap the ASEAN region as there are already ASEAN home-grown smart city technology companies there.”
Initially, NDG aims to strengthen collaboration with its Singaporean partners to better understand the needs of potential customers in Indonesia and Malaysia. Pang is confident that Hong Kong’s smart-city technologies will be in demand in the ASEAN and Middle Eastern markets.
“Hong Kong has a well-developed and thriving property sector. If we can satisfy local customers’ needs, we can leverage and replicate the business experience gained in Hong Kong, standardize our products and sell those solutions to other markets of the Chinese mainland, ASEAN and the Middle East,” says Pang. “Moreover, Hong Kong can combine its niches in software technology solutions and the mainland’s manufacturing prowess in hardware technology products to provide a full suite of smart building technology products and solutions.”
In his view, the SAR government can do more branding promotion work for startup companies through its links with governments and property developers in ASEAN and the Middle East.
ALSO READ: HK's gateway advantage for Middle East explored in listing webinar
“The Chinese mainland’s practice of prioritizing policy implementation creates rapid market standardization and uniformity. Hong Kong should take a leaf from the mainland by promoting Hong Kong-based smart technology solutions based on standardization of market infrastructure,” says Pang. “The government has to promote the idea of a centralized data platform to property developers and construction companies as private enterprises lack the incentive or capability to do so. The government has to take the lead.”
Legislator Tan Yueheng, who represents the Election Committee in the Legislative Council, says Hong Kong enterprises still have a lot of homework to do. “In undertaking projects and providing corresponding services, Hong Kong’s construction engineering companies and property management service providers must do research and development work to provide targeted solutions to satisfy the demands of an environment with a tropical desert climate in the Middle East. They have to match local cultural customs and customer preferences,” he says.
Companies also need to conduct risk assessments before entering into and developing markets and should be prepared to respond to regional geopolitical and local government changes.
Tan, who chairs BOCOM International Holdings Co Ltd, suggests the SAR government can provide more opportunities and platforms for local companies to connect with the Middle Eastern and ASEAN markets, and expand enrolment quotas in Arabic and Malay languages at colleges and universities, and enable more companies to hire foreign professionals skilled in these languages.
Contact the writer at oswald@chinadailyhk.com
