On July 15, 2020, students from the Belt and Road Initiative (BRI) Executive MBA Program at Tsinghua PBCSF engaged in a cross-cohort discussion on the outlook for the Greater Bay Area and the development of unicorn companies in the Covid-19 new normal. After Kan Cai, Associate Director of the Center for Finance EMBA at Tsinghua PBCSF, presented opening remarks, Joseph Chee, Chairman of Summer Capital, hosted the session.
This convening is the first cross-cohort sharing session of Tsinghua PBCSF’s BRI EMBA Program since the Covid-19 outbreak. Christopher Hui, Secretary for Financial Services and the Treasury of Hong Kong SAR, delivered a keynote presentation on Global Financial Citizenship and Development of the Greater Bay Area. Four students from the BRI EMBA Program – Justin Chen, Senior Vice President of Alibaba Group, Patrick Cao, President of Tokopedia, Robin Lo, Chief Executive Officer of J&T Express Indonesia, and Pandu Sjahrir, Managing Partner of Indies Capital – each gave a thematic presentation in relation to the Covid-19 pandemic. Through a series of discussions and exchanges, students broadened their perspective on the fast-changing competitive dynamics and exemplary drivers in the market, acquiring new knowledge that will be helpful both in business and in life.
Global Financial Citizenship and Development of the Greater Bay Area
Much has happened in Hong Kong, and yet more is happening. Christopher Hui is in an important position from which he's leading some of Hong Kong’s key efforts in the financial frontline. Au courant with both the market and the corporate sector, Hui spoke on the Hong Kong government’s efforts in the Greater Bay Area as well as its incoming engagement with many of its Asian counterparts.
With a healthy and strong pipeline of mainland listed companies now moving from the US to Hong Kong, there have also been many other new developments in the Greater Bay Area (GBA), which Hui deems as a place featuring all the key elements of the top international bay areas in New York (finance), California (technology), and Tokyo (advanced manufacturing).
GBA opportunities are cross-sectoral and will benefit all market participants. According to Hui, first, individuals can enjoy better financial facilities including cross-boundary mobile payment services, remote account openings, and cross-boundary motor vehicle insurance products. Second, financial institutions can gain more business such as with Wealth Management Connect (“WMC”). Establishing post-sale servicing centres for Hong Kong insurance companies and cross-boundary regulatory “sandbox” are also new possibilities for financial institutions. Third, enterprises can access new financing channels and more diverse range of financial services. For example, Hong Kong private equity funds can provide financing for new economy companies in the GBA. Fourth, market infrastructure will see higher levels of interconnection, which can enhance Stock Connect, Southbound Bond Connect, as well as development in FinTech.
With respect to exporting financial services to other countries, Hui mentioned two countries in particular. Demand for infrastructure financing and bonds and corporate syndicate loans has been rising in countries like Indonesia and Malaysia. These countries also have a strong FinTech culture that Hong Kong can serve with close to a thousand FinTech companies at home developing services such as robo-advisory. “Finance is not just about benefitting the rich,” Hui commented, “at the same time, we are trying to bridge the gap between Wall Street and Main Street such that the benefits of financial services can be disseminated and trickle down the new economy.”
In bridging the gap between financiers and the working population, Hui talked about Hong Kong’s eMPF, a project that will move the paper-based Mandatory Provident Fund (MPF) scheme into an eMPF centralized platform by 2022. This platform will host all of the information of the Hong Kong working population in terms of salary, contribution to pension, and working profile, and will dramatically reduce the cost of the pension system.
Another key government initiative has been to consolidate Hong Kong as a leader in Environmental, Social, and Governance (ESG). The Hong Kong government will issue close to HK$60 of green bonds in the next five years, and will create its own standards of green products. On top of that, it has been attracting more companies to issue green bonds through its platform.
Alibaba Underlines Digitization
Justin Chen, Senior Vice President of Alibaba Group, discussed the impact of Covid-19 and new business opportunities that have emerged subsequently. So far, China has successfully contained the Covid-19 pandemic and its economy is on path to recovery. The world now is racing to launch a Covid-19 vaccine by early next year. However, with uncertainty surrounding vaccine effectiveness, it’s likely that the virus is here to stay.
In China, Covid-19 has accelerated digitization for both the consumer and the enterprise. Consumers are turning their eye to online shopping, short videos, live e-commerce, and gaming, while enterprises are looking more into telecommuting, online education, internet hospital, and online open house. New infrastructure investment has become the key method for China to boost the economy, for which the government has budgeted more than 40 trillion RMB in the next couple of years.
In Chen’s update on Alibaba, he talked about the trends seen in different lines of its business. For Taobao, there has been a growing range of offline merchants going online and increased adoption by existing merchants of new ways to engage with and sell to consumers. For Freshippo/Taoxianda, there has been strong demand for food and grocery business, as customers adopt the habit of buying groceries online. For AlibabaCloud, public cloud grew rapidly driven by increased consumption of video contents and adoption of remote work and learning. For DingTalk, in the month of March, its daily active users on workdays reached 155 million, showing significant penetration in the education sector.
How Tokopedia Navigated the Pandemic
Patrick Cao, President of Tokopedia, shared his insights on the pandemic from a business and operations perspective. “One of the beautiful things about the BRI EMBA Program is that it brings together a lot of world-class partners and shareholders whom we’ve been fortunate to make friends with and do business with,” opened Cao. Alibaba Group, SoftBank, Sequoia Capital, and Grab are some of Tokopedia’s long-term shareholders and partners.
The world has changed significantly since the Covid-19 outbreak, which hit Indonesia in March. Cao commented that the trend tracks quite closely to the dip, the category shifts, as well as the recovery in China. In March, its business unit of health and wellness topped the charts, and discretionary categories such as fashion and beauty fell. But came May, the categories saw a shift as people began spending more time at home, with FMCG, F&B, grocery, home & living, sports & hobbies picking up significantly.
One of the big things that has helped Tokopedia maintain sustainability through the pandemic has been the partnership model. It’s difficult to scale and adjust for the new normal without partners that can share China’s best practice in areas such as safety and health protocol for couriers, and how to protect customers during delivery. On the FinTech payments side, Tokopedia has continuously obtained helpful advice from its partners which has allowed the company to not only anticipate the road ahead, but also pass on valuable information to its own clients. This has enabled Tokopedia to outperform in the technology category in the last six months.
Operation Headwinds for J&T Express
Robin Lo is the Chief Executive Officer of J&T Express Indonesia, a logistics business that handles e-commerce shipments. Started in 2015, the company has already successfully expanded to Vietnam, Malaysia, the Philippines, Thailand, Singapore, Cambodia, and China, ranking first among its competitors in many of these countries. As people around the world experienced large-scale social restrictions, the amount of e-commerce transactions in FMCG, F&B, medical supplies, home & living rose significantly. Lo spoke on how his company has dealt with the changing business environment.
The pandemic posed quite a number of obstacles for the logistics industry. “Whenever a negative thing happens in the world, there will always be a positive,” said Lo, “You can take that opportunity and turn it into success.” Lo discussed problems such as employee safety and health care, road closures and restrictions, as well as airline limitations. However, with challenges there also emerged opportunities, and not just in Indonesia, but across Southeast Asia. For example, Covid-19 has accelerated e-commerce growth even faster than before. Airlines are presenting more options because they can transport cargo in vacant seats in order to make up for loss of passenger business. In addition, new routing options have sprung up, such as sea freight and land routes, as client base has also expanded greatly.
Indonesia: Southeast Asia’s Next Biggest Stock Market
Pandu Sjahrir, Managing Partner of Indies Capital, presented an overview of the Indonesian capital market. Rendering as much as 88% for the last 10 years in long-term investments, Indonesia’s capital market ranks top 20 in major global exchanges when it comes to investment return. On top of that, the country also provides a tax-friendly environment for listed companies, with a 20%-25% corporate income tax rate that is expected to drop even further in the coming years. Its abundant resources, strategic diplomatic position and impressive economic outlook make Indonesia the 3rd top destination for attracting global investors.
Sjahrir said that over the years, despite Indonesia underwent two major economic crises, its economy has managed to continuously advance. Back in 2009, the number of listed companies in the country stood at a tad below 400. Today, it’s at 692. The number of equity and bond investors also shot up significantly, increasing from 408,000 to 1.4 million today. Sjahrir illustrated that the steady rise in average daily trading volume in the market and a growing number of total investors all point to a sound financial market that presents great potential for further economic growth.
During the Q&A session, students actively shared their views on topics including corporate tax incentives in Hong Kong, the new national security law, Hong Kong government’s financial support for tech companies, currency outlook, impact of geopolitics on business, live e-commerce trends, as well as financial inclusivity in Indonesia.
Over 100 students participated in this e-conference. The virtual sharing sessions of the BRI EMBA Program will continue to be a place for students to share ideas during this special time. With almost 70% of the students enrolled in the Program based overseas, remote learning and online class meetings have benefited students in terms of time and location flexibility. The Center of Finance EMBA has also been providing the students with a number of other online offerings for the students via its EMBA Program in Chinese.
Since its inception in May 2017, the BRI EMBA Program has attracted more than 180 high-level enterprise decision-makers from 22 countries and regions, including Singapore, Indonesia, Malaysia, Thailand, the United States, Canada, Kyrgyzstan, Kazakhstan. A number of students from Southeast Asian Countries hold Tan Sri, Dato' Sri, Dato’, Tengku and other honorary titles. Nearly 40% of the students graduated from world-renowned universities such as MIT, Stanford, Harvard, Yale, Cornell, Oxford, Cambridge and Imperial College London.
