Other than the mainland, Hong Kong's small and medium enterprises should consider exploring more business opportunities in emerging markets such as Indonesia, according to the city's trade development authority.

The booming ASEAN market embeds huge business potential seen from the city's buoyant exports to the country, due to its surging needs for electronic accessories and components, fashion products and toys, Benny Chui, an economist from the Hong Kong Trade Development Council (HKTDC), said during a seminar on Wednesday.

The city's exports to Indonesia surged 29 percent to $2.8 billion in 2010, official data shows. Exports of office machines and computers recorded the strongest growth, which surged by 114 percent and 77 percent respectively in the past year.

Indonesia is about one tenth the size of mainland's retail market. The growing middle class in Indonesia has also driven increasing demands for lifestyle products and the booming modern malls and chain stores in the country are also destinations for Hong Kong's brand building and consumer food services.

With its double-digit annual growth rate and the less competition from the mainland in the retail market, setting up production bases in Indonesia is also plausible as its location, improved logistics and public utilities, and the competitive wage levels in particular, offer a solid alternative for Hong Kong business manufacturers, said the council.

And wages in Indonesia - with the fourth largest population in the world - currently still range from $70 to $150 per month.

The mainland, on the contrary, aims to increase urban and rural per capita net income by more than 7 percent per year in real terms over the five years to 2015.

During the first quarter of 2011, 13 provinces on the mainland raised their minimum wages by an average 20.6 percent, and the highest statutory minimum wage in neighboring Shenzhen reached 1,320 yuan ($203) per month, the Ministry of Human Resources and Social Security said on its website last month, adding that the minimum wage is expected to grow by an average rate of at least 13 percent over the next five years.

Labor quality is good in general and hiring is easy in Indonesia, according to Chui, who added that locals there usually have a positive image of Hong Kong, which could be helpful for Hong Kong brands to open up the Indonesian market.

Indonesia is the largest economy among ASEAN countries with a population of approximately 235 million. It is located on the cross roads of two continents, namely Asia and Australia, as well as the Indian and Pacific oceans, which offer some comparative advantages to investors.

"Diverting some production lines to Southeast Asian countries was a hot topic in Hong Kong in the past years as the lower cost in countries like Vietnam and Indonesia could help those export-oriented manufactures save a bunch of money," said import & export functional constituency legislator Wong Ting-kwong.

"Due to the huge domestic demands in the market, most Hong Kong manufacturers may still keep to the mainland where they share the same roots and culture," Wong added.

The competitiveness of the mainland as a production base will not be weakened as its well-established industrial clusters, highly efficient and skilled labor force and infrastructure systems are able to offset the disadvantage of rising costs associated with wage increases, Pansy Yau, deputy chief economist of the HKTDC, told China Daily in an earlier interview.

litao@chinadailyhk.com

China Daily

(HK Edition 07/07/2011 page2)