Monday, January 21, 2013

Entrepreneural Spirit

It is sad how the local property market has sapped the entrepreneurial spirit in a city famous for sprouting out businesses. Hong Kong people’s reputation for taking risks and starting business is global.  Every corner of the world, there are Hong Kong businessmen from all eras who set up their own businesses and worked diligently to provide for their families in their newly adopted land. If one is willing to take a risk and work hard, there is nothing that cannot be achieved.
That is why it is such a pity to see that the spirit has been extinguished from these entrepreneurs’ homeland.  Nowadays, everyone shuns the idea of starting your own business. Even if you have a grand idea and manage to make a profit, the majority of that profit will be used to pay the rent of your shop. The rent increase (which will eventually come—the only question is by how much) will dry up all profits that you have and eventually leave you in the red.
Landlords take advantage of your business’s profitability.  If they see that business is good, they will increase you even more to try to play on your reluctance to move because they know you will not quit a profitable business. It is a vicious cycle and at a time where rising costs and inflation is omnipresent, it is a losing battle. Why bother put your life’s savings into something which will ultimately founder.
All businesses require time for its product and reputation to mature. Starting a business is a long term plan, but due to the normal 2 year contract system that is prevalent in the Hong Kong property market, businesses simply do not have the time to develop and mature.  Even if you decide to continue your business after the first rental increase, you may not survive the second or third increase. Some choose to move shop, but again a new location requires time for the business to be developed. Once the new location’s contract is due and a rent increase is looming, business owners are again faced with the decision to close down or relocate.
Buying your own property is out of the question for most aspiring entrepreneurs. The selling costs are astronomical; and even if you have that kind of resource, it would be more prudent to rent out the property rather than use it to start a business. It's just a safer bet.
Businesses that have been established for a long time have the luxury of an established reputation and thus die-hard, loyal customers. Famous local restaurants are a good example. Because of their reputation, customers do not mind paying that extra sum just to say they’ve been to that restaurant and tried their famous dish. As a result, we have fifty dollar wonton noodles or five hundred dollar barbecue goose. These businesses have the luxury of charging more to customers, but new businesses – not a chance.  
I am not a big fan of blaming the government. I don’t believe the government is solely responsible for the high property price problem in Hong Kong; there are many outside factors such as growing mainland wealth and hot money from overseas. However, this problem is the source to almost all Hong Kong’s economic and social problems. It is stifling Hong Kong’s economic growth and depressing the spirit of would-be entrepreneurs. If we can somehow free this spirit once again, Hong Kong will see better days ahead.



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