Asian persuasion

Tracy Tjaden | Image: Michael McQueen/Jupiter Images | Published: February 01, 2008

There are days when Randy Heward envies his buddies back in Vancouver, the ones who shared his enthusiasm for business but weren’t plagued by the burning desire to launch a firm in a foreign land.

When North American toy makers began frantically yanking their Chinese-made products from store shelves this past fall? That was one of those days. But aside from the six weeks he and his family spend at their Kerrisdale home every summer, this hard-charging B.C. entrepreneur makes a living in the cauldron of capitalism that is the city of Hong Kong.

Heward, 47, has built a thriving business helping North American companies outsource their manufacturing to low-cost factories in Asia. “Our clients want to focus on what they’re good at: designing and marketing their product lines,” he says during an interview at his company’s Hong Kong headquarters.

“Some of the groups we work for don’t come over here at all. They don’t understand this part of the world and want to work with someone who does.”

Heward’s company, TMax Group Ltd., is an agent for about 20 American, Canadian and Australian
manufacturers. In 2007 it shipped US$150 million worth of toys, power tools, electronics, pet supplies and even condominium interiors from factories in China. And despite the toy setback, demand for Heward’s middleman services has never been stronger.

Countless other foreign-owned companies eyeing the massive market and manufacturing potential of China have established base camps in Hong Kong, unofficial window to the world’s largest
consumer market.

Hong Kong boasts one of the most sophisticated financial service sectors anywhere, a business-tax rate of 16 per cent and seven million residents. Bordering Guangdong province in the north and surrounded by the South China Sea, it has the world’s sixth-highest per-capita GDP, impressive considering the lack of any measurable resources or industry.

This former British colony, which began its economic life as a 19th-century trading port, is also home to more corporate HQs than any other Asian metropolis. All of these bona fides make it the “gateway” to the continent. As Steve Tait, head of HR Asia-Pacific for the Hongkong and Shanghai Banking Corp. Ltd. (HSBC) and former Tsawwassen resident, describes it, Hong Kong “touches everything that flows into the region and skims a bit off the top.”

When you’re the doorway to China, that’s no small bit.

Across town in Hong Kong’s bustling Sheung Wan district, Mick Verjee leans on a

large desk in a crammed corner office with an impressive view of Victoria Harbour. Sprinkled with ferries and sailboats and surrounded by mountains in the distance, the scene could pass for downtown Vancouver on a misty fall morning.

But it’s late afternoon in Hong Kong and that’s pollution, not fog, obscuring the view. The permanent haze and the sooty smell in the air don’t seem to faze the dynamic 46-year-old. Neither, apparently, does the fact that this late-afternoon interview with a journalist from his hometown is his sixth meeting in as many Asian cities (plus a trip to the Richmond office) that he’s crammed into the past week.

Verjee, a Vancouver furniture-maker who moved his company from Richmond to Hong Kong, exudes passion and presence. An Ismaili Muslim, Verjee is a Canadian citizen, born in Kenya, who spent his early school years in England, went to high school in Vancouver and then university at UBC. Since joining the family business in the early 1980s he’s turned the bankrupt Richmond-based Hamilton Spill Furniture Group his father picked up at an auction into a global conglomerate.

“Things are moving quickly and we’re here, we have an infrastructure here and ship a majority of our products from here direct to retailers,” Verjee says. He won’t disclose revenues, but the company now delivers 1,500 shipping containers of furniture a month to retailers such as Costco Wholesale Corp. and The Brick Warehouse LP. In the 1980s, it was moving just two.

Heward and Verjee both left Vancouver for Hong Kong more than two decades ago. By local standards – Hong Kong’s GDP is US$259 billion versus B.C.’s $180 billion, and it has 6.9-per-cent annual economic growth compared to B.C.’s projected 3.3-per-cent growth for 2008 – their intensity is hardly remarkable. No one punches out early to run the seawall here. People work until 8 p.m. then meet business colleagues for a drink in the Mandarin Oriental’s smoky lounge, where their lungs fare as well as they would in a jog in this smog.

Hong Kong’s business opportunities are as palpable as its ever-present pollution. It might be a wild ride, but there’s more than enough for anyone willing to climb aboard.

But besides Heward and Verjee and a cluster of Vancouver-bred entrepreneurs, where’s B.C. in this picture? Given the $13 billion in public and private funds already poured into B.C.’s Asia Pacific strategy, the province’s deep cultural ties with the region and Prince Rupert’s much-touted geographical advantage as the closest North American port to Asia, why aren’t we on the radar?

Stats that might reveal how much business B.C. companies do in Asia are heavily skewed by resource exports, but Hong Kong insiders say any corporate presence is negligible. According to a BCBusiness/IE Market Research survey conducted late last year, Vancouver trails four U.S. cities as Asia’s most viable gateway to North America. (See “Locked Out of the Gate,” p. 50.) If you ask David Armitage, a North Vancouver native who co-owns an IT consulting firm in Hong Kong, no presence at all might be better than the reputation our business crowd has earned. “Canadians here are seen as looky-loos – ‘Oh, that’s nice, very interesting, yes, we should talk’ – and then they never hear from them again,” says the spirited Armitage. “Name one B.C. company that is doing anything out here. Can you give me an example – just one?”

Verjee speculates that many of his B.C. peers are reluctant to make the leap because – for now, anyway – the U.S. market remains easy pickings. “The last thing they want to think about is going to Hong Kong and starting over,” he says. “They can barely keep up with the success at home.” It’s a short-sighted, dangerous view, Verjee warns, especially if the U.S. enters a recession. “I tell them all the time, ‘Guys, it’s not going to last forever.’ This is the time they should be thinking about expansion.”

Verjee still relies on American sales, but he predicts the balance will shift in five years. The company opened a Mumbai office in 2007, works with a partner in Australia and plans to sell into China by next year. “It’s a very competitive market and will be a huge animal to take on,” Verjee says of the latter.

Whether they’ve booked a flight or not, many B.C. execs must be – or should be – considering how to tap Asia’s potential. As Heward, Verjee and four other former B.C. entrepreneurs now working in Hong Kong will attest, the risks can yield great rewards. Some of these bold souls target niche markets while others have built businesses that bridge Asia and North America. They’ve lost money, watched deals go south and questioned their wanderlust more than once.