(dramatic music)
- [Narrator] Hong Kong-based entrepreneur, Ben Cheng,
is packing up.
- The plan is some designers,
developer, relocate later this year.
- [Narrator] His company, Oursky,
has created apps for major finance
and fashion companies around the world.
- This is a product we developed.
It is a stylus for iPad.
- [Narrator] Like the vast majority
of companies in Hong Kong,
Cheng says the city's quality of life,
widespread use of English
and business-friendly regulations
have created the ideal place to build his business.
In the past decade,
Oursky has grown from just three developers
to more than 60 employees.
- This is one of our client's product.
It is tracking my face
and if I move,
the camera move with me.
- [Narrator] But now he says a sweeping
National Security Law
that was passed after a year of pro-democracy protests
is threatening his business.
It broadly criminalizes secession, subversion,
terrorism, and collusion with foreign governments
with up to life in prison.
And the new law is pushing companies
like Cheng's to reconsider their future in the city.
- Singapore, Taipei and Tokyo,
we do consider like different cities.
- [Narrator] In August, a poll by the American Chamber
of Commerce in Hong Kong found
that 39% of its members who were surveyed said
they have plans to move capital,
assets or operations out of the city
because of the National Security Law.
Several countries in the region
are making moves to sway businesses in Hong Kong.
So what can these places offer companies
like Cheng's and which will he choose?
- What you need to do
from a site selection perspective
is you need to look at, first of all,
what are those factors both critical and important
that drive the success of a business?
- [Narrator] For nearly 30 years, John Evans
and his firm Tractus Asia,
have been advising companies like Kellogg's,
Boeing and MetLife
where to set up offices in the region.
He says the most important factor companies
have historically looked at first
is the cost of operating in a city,
which includes real estate, salaries and utilities.
Companies have gravitated to Hong Kong
or Singapore because of corporate taxes,
which are far lower than Australia and Japan.
Next up, the city's connectivity to other places.
This is everything from how easy it is
to get to the airport
to how long you have to sit on a plane
until you meet your client.
Before the pandemic,
airports in Seoul and Hong Kong
have the most number of destinations,
with Singapore, Tokyo and Taipei not far behind.
Companies need to be able to rely
on an independent and efficient legal system
so if they ever go to court,
they can be assured that they'll be given a fair trial.
South Korea and Japan
are often held up as Asian democracies
with effective judiciaries.
And finally, an increasingly important factor is risk.
- The Fukushima nuclear disaster,
that's when C suites started
to think about risk more important.
Then with the rising costs of China
and the US-China trade war,
followed very closely by COVID,
risk has really become I think that important factor.
- [Narrator] Evans says Hong Kong's National Security Law
chips away at the city's rule of law
and increases the political risk companies can face.
And that's a cost Ben Cheng says his company can't afford.
- We start getting some letter
from the legal department of our clients,
asking about like where our data stored.
The recent National Security Law make them wary
about if they should continue using our service.
- [Narrator] For some clients,
Cheng has had to comply
with strict European Union data protection
and privacy regulations
but now he says he could be held liable
for violating those if Hong Kong police
use the National Security Law
during an investigation to collect data
or order it deleted online.
- This law will not undermine human rights and freedoms.
- [Narrator] But Hong Kong government
has said the law won't affect people's basic freedoms
and that only time and facts will tell
that the law will not undermine human rights.
But Cheng says this promise doesn't reassure him.
And realizes he can't store his clients' data
in Hong Kong and guarantee them
that it will be safe.
So he's chosen to move part of his staff out
of the city.
His decision is based on two factors.
Being in a democratic country
where he can guarantee the protection
of his clients' data
and a city with a good quality of life
so he can attract talent.
- So in the next phase,
we are going to do is to set up a new office in UK, London,
especially for storing data for our Western clients.
And also, we will have office in both Taipei
and in Japan.
These two location are just very popular.
So to retain our talent,
we have to open office there.
- [Narrator] There is one wildcard
that Cheng and other companies could consider.
In a bid to lure businesses,
countries in the region are planning special incentives.
Japan is discussing plans
to make it easier for people in finance to get visas.
Taiwan opened a dedicated government office
to help companies move.
And one Australian lawmaker is pushing
to lower the corporate tax rate.
- Your location decision should never be driven
by incentives, be they tax or non-tax incentives.
Incentives are the icing on the cake.
It's the sweetener that allows you to make a decision.
- [Narrator] So which cities have John Evans' clients
inquired about the most recently?
- If China is the market you're pursuing,
you might as well set up in a place like Shanghai.
If you're concerned about risks
that come with doing business in China,
then Singapore by far is the easiest
and most effective location to quickly relocate out
of Hong Kong.
- [Narrator] For now, only a handful
of companies have publicly announced
their Hong Kong departure.
The New York Times said it would move part
of its staff to Seoul
because the National Security Law has created uncertainty
about the newspaper's operations.
And noted difficulties obtaining visas
for some Hong Kong-based staffers.
While South Korean tech company, Naver,
announced it had moved its data backup center to Singapore
according to a statement provided to local media.
Ben Cheng says it's just a matter of time
before other businesses follow their lead out of Hong Kong.
- We used to have an advantage here in Hong Kong.
We are in the middle of East and West.
So a lot of companies setting up office here
would enjoy both the culture of the Western market.
At the same time, they can also go into China
but now, people realize that they have to rethink Hong Kong
in the future.
(dramatic music)