Goldland utilises Macao’s Advantage as a Platform to Grasp Business Opportunities in Portuguese-speaking Countries
As Macao is an economic and trade service platform between China and Portuguese-speaking countries, the SAR government launched a number relevant policies and services to help enterprises to find market opportunities in Portuguese-speaking countries. Goldland MCO Ltd (hereinafter referred to as Goldland) is an example.
Goldland Macao was established in 2004, mainly acting as agent to deal with products made in China, such as ethnic minority garments, environment-friendly batteries and motorcycles. It exports products from domestic ports, such as Qingdao, Shanghai and Tianjin, to various Portuguese-speaking countries in East and West Africa.
Preferential Treatment for Investors in the Offshore Service Industry
Mr. Raymond Chan, Chairman of Goldland, indicates that he was attracted by Macao’s trade policies when he decided to develop his business in the city. He says, “Macao has a very reasonable policy for offshore service companies and offers preferential treatment to overseas companies that solely deal with overseas business and have nothing to do with transactions or sales in local currency.”
Macao published a decree-law on Offshore Regime in 1999. According to the law, offshore companies registered in Macao are entitled to preferential treatment, such as exemption of profi ts tax, business registration tax and stamp duty.
But offshore companies in Macao have to meet three conditions: transactions and settlements are done only in non-Macao currency (MOP), targeted customers are not Macao SAR residents and target markets do not include Macao SAR.
With these conditions in place, Macao is still a very attractive investment destination for companies as it is a free port with no foreign exchange restrictions and with preferential treatment for the offshore service industry.
Mr. Chan says, “As my company mainly does business in US dollars and Euros, or in the past, African francs, the timely measures taken by Macao government are just what we want.” As was advised by several professional accounting fi rms, Mr. Chan made up his mind to come to Macao and establish Goldland.
Serving Africa from the Macao Base
Members of the founding Mr. Raymond Chan, Chairman of Goldland. team of Goldland are mostly from Hong Kong. When looking back upon hardships they have undergone since they came to Macao 5 years ago, Mr. Chan says, they knew nobody and were unfamiliar with the local community. Thanks to help from IPIM, they got an offi ce free of charge and used it as a liaison offi ce to start the business.
The parent company of Goldland was established in Hong Kong in 1987. It has been doing business with French and English speaking African countries since it started. Their presence in Macao greatly helped to expand its contacts and business with Portuguese-speaking countries.
Mr. Chan says, “We joined the IPIM delegation to visit Angola in 2006. IPIM staff was with us and they helped to provide translation services and arranged meetings with local government offi cials. We also attended an exhibition in Luanda, Angola, which helped to expand our customer base.”
Roughly half of Goldland’s business nowadays is exporting ethnic minority garments made in China to African countries. Mr. Chan says, “In Africa, nearly more than half of the population wear these garments, especially local women. Our company can provide nearly 10,000 kinds of garments.”
According to unofficial statistics, if one container holds 120,000 metres of textiles, then approximately four to five thousand containers of garments are exported to Africa from China each year. Before the global financial crisis, Goldland exported, on average, four to five hundred containers of textiles each year.
Fight against Crisis with Customer Base Expansion
As is said, “To start a business from scratch is difficult, but to make a business sustainable is even more difficult.” The company encountered the financial crisis when it just set foot in Macao last year. Mr. Chan admits that the company was greatly affected, due to the global financial crisis; the world’s demand for raw material from Africa dropped sharply, which hurt African economies. The purchasing power dropped by 50% in October 2008, the market unfortunately did not show any sign of recovery until April and May 2009. But the performance of Goldland is still 25% worse than it was before the financial crisis.
Facing such an adverse situation, Raymond Chan decided to take a positive stance and is trying to change the crisis into an opportunity with support from IPIM. Raymond Chan has attended MIF since 2004. He says, “IPIM launched a lot of promotional activities after the fi nancial crisis and we became acquainted with many business partners from Angola during the recent MIF. We signed contracts worth more than US$1 million to sell textiles and motorcycles.”
Huge Demand for Motor-vehicles in Africa
In the past 5 or 6 years, a large number of motorcycles made in China have been exported to Africa. Mr. Chan smiles and says, “If you go to Africa today, you will be surprised to see motorcycles that have been made in China are on every street.” Although motorcycles made by other countries have been there for several decades, these made in China have successfully taken the largest market share in Africa in recent years because they are cheaper. When talking about foreign competitors with their technology and fi nancial backing, Mr. Chan believes that there is still room for improvement in the quality of parts and maintenance of Chinese motorcycles.
Mr. Chan predicts, “As China continuously improves its mechanical manufacturing technology, motors will become more durable and more powerful. After motorcycles there will be private cars as well as cargo and fourwheel- drive vehicles. With so much foreign aid in Africa, these vehicles will be widely used in infrastructure construction sites.” What is more, Mr. Chan has sets his sights on South American countries such as Brazil. It would take more hands and time to study and inspect the South American market and to draw up work plans as both social and taxation systems there are different.
IPIM Provides all-round Business Services to Enterprises
Over the years IPIM has continuously provided investors with diverse business services. IPIM is responsible for the approval, licensing and supervision of the offshore nonfi nancial industry. It also provides “one-stop services” to potential investors in Macao, such as data checking, administrative procedural assistance and investment project assistance. At the same time, IPIM’s Macao Business Support Centre provides overseas investors with offi ces free of charge, business assistance and consultation services on Mainland business and trade. It helps enterprises to lower start-up costs and facilitate their investment process.
In order to fully utilise Macao’s role as a regional business service platform, IPIM has been proactively promoting foreign economic and trade communication, especially promoting co operation between the Mainland, Macao and Portuguese-speaking countries in order to fully develop Macao’s role as a economic and trade coperation platform between China and Portuguese-speaking countries. IPIM also organises delegations to visit various countries and regions, attend exhibitions and conferences and hold fact fi nding tours with the aim of promoting closer regional co-operation. This will fi nd business opportunities for Macao, Mainland China and foreign enterprises.
The Largest Mainland Independent Software Developer Comes to Macao
Talking about the local enterprises direction of development, Mr. Guo Baochun, General-manager of UFIDA (Macao) said, “To grow further, enterprises in Macao need to improve various aspects of their competitiveness. Enterprise Resource Planning (ERP) system is an important part of it.”
As the largest independent mainland software developer, UFIDA Software Co. Ltd. has over 70 branches in countries and regions including mainland China, Hong Kong, Japan, Thailand and Singapore. It opened a branch in Macao in September 2009.
Improving ERP Systems
Mr. Guo indicated that they came to Macao because of the great potential in the local market. He said, “When we came on a fact fi nding expedition to Macao, I realized that the standard of management models of some mainland enterprises were better than those in Macao in many ways.”
With the rapid economic development in Macao, major local industries such as gaming, tourism, hotel and real estate face the common challenge of upgrading their ERP systems so as to catch up with their global operations.
Some large gaming companies have gone public to raise capital. Mr. Guo pointed out that post-listing fi nancial regulations will get stricter than before. Not all the ERP systems of the over 30 casinos in Macao are the most advanced products, so the whole gaming sector still needs to improve their fi nancial and operations management models to cope
with new developments and challenges.
For the hotel industry, front-offi ce and back-offi ce management systems are extremely important. Some local hotel groups operate multiple hotels in Macao. Mr. Guo found out that most of the local hotels still use out-dated management software, which is of low effi ciency and poor compatibility with other software.
As for the real estate sector, Mr. Guo indicated that the concept of the “Greater Pearl River Delta” proposed by the central government was expected to lead to an economic boom in the region and an infl ux of more and more people, stimulating demand for real estate. Mr. Guo stressed, “The more rapidly the real estate sector grows, the higher demand there will be for real estate ERP system.” A “multi-language, multi-currency and multi-location” ERP system which can be updated real-time is a must to enable crossregional real estate cost-management, sales and property-management.
Increasing Market Share
Although industries are yet to fully recover from the fi nancial crisis, Mr. Guo believes that this would give enterprises more incentive to invest in upgrading their management models. He went on to say, “Generally speaking, when profi ts are easy, companies are too busy expanding without attention to internal management. In times of crisis, companies will turn to internal management to lower costs, increase effi ciency and optimise processes.”
Now UFIDA has about 30 clients in Macao. UFIDA plans to take up 30% of Macao’s market in 3 to 5 years, thus helping local enterprises improve their management models.
Furniture Brands Expand their Operations in Macao and Target Mid to High-end Markets
Household furnishings are closely related to life, its development is closely correlated with the local economy. When the economy is booming, people naturally wish to improve their quality of life, leading to the expansion of the household furnishings market.
Macao has maintained double-digit growth over the past few years. From 2000 to 2008 its GDP grew annually on average by 14%. Its per capita GDP reached US$ 39,000 in 2008. In the fi rst three quarters of 2009 its total retail sales grew by 13% over the same period last year to MOP15.69billion. Three local furniture brands, namely Area, WH Furniture and City Square took the opportunities generated by the stable economic growth and set up branded furnishing stores in Macao targeting the emerging middle class and expatriates.
“Area” Proceeds from Life
“Area” has ten-year- history in Macao and its products are mainly stylish and simple furniture which enjoy a local reputation. The precedent of “Area” was a Hong Kong-owned furniture shop dedicated to sofas and curtains. At the beginning its shop was in an industrial building and had a limited variety of products and small clientele bass. In 2003 the brand of “Area” was launched, which was based upon the concept of life and household furnishings so as to develop a more diverse line of goods and tap into more business opportunities. Mr. Ronnie Chan, Director of “Area” said, “Everybody wants to have a comfortable home to go to after hard day’s work. With rising incomes, citizens demand for a better quality of life and thus quality household furnishings. By creating ‘Area’, we hope to go beyond sofas and curtains and provide a diverse array of products so as to meet customers’ demands.” “Area” is confi dent about the Mainland market and will open a store in Zhuhai.
WH-“Living with Creativity”
WH Furniture is a well established local brand that was dedicated to selling traditional furniture in the past. After taking over the business, the second-generation owners repackaged the brand with the concept of “Living with Creativity” and opened new stores with “WH Furniture” as the brand. They target mid-to-high markets and make successful forays into the new market brought about by the emerging local middle class.
Ms. Kelly Sou, the second-generation owner mentioned that over the past 20 years they mainly sold antique reproduction furniture, which was mainly imported from mainland China. However, their new brand WH Furniture purchases its products from across Asia and focuses on Mix and Match by combining fashionable and traditional styles to create a unique household furnishing style. Thanks to their years of experience in Macao and their good relationships with decoration suppliers and construction operators, WH Furniture often provides free design advice to their customers and resolves decoration problems for them. They quickly win customers’ confi dence with their thoughtful services.
WH Furniture has worked with local designers and will launch locally-designed furniture. Ms. Sou said, “We hope to have our own design of furniture so that consumers can have more choices. With its development Macao presents many business opportunities, but the biggest problem is limited storage space for displaying products. We are now looking for larger shops so as to expand our operations.”
City Square – Unique Source of Supply
When City Square opened in 2002, it was a gift store of only about 900 square feet. As Macao’s economy grew, City Square has been expanding and looking for new sources of supply so as to meet the market demand. With its new expansion this year, the store space grew to 12,000 square feet, ten times the size when it opened. It is a large outlet now, selling a broader range of products including mid and high-end household furniture and ornaments. Mr. David Fong, Director of City Square mentioned that in the past there were only discount stores or boutique stores in the household furnishing market and no large stores, so City Square quickly built its reputation.
Mr. Fong indicated that City Square it’s in the market for seven years, it would have to offer unique things and fi nd unique supplies so as to have a distinctive market positioning.“Looking for supplies is the most diffi cult because we look for quality made goods that nobody else has. The fi rst four years were the hardest during which we spent a lot of time and money searching for good supplies. We often travelled to different countries looking for them; however, those investments generated a good return for our future. Now our products come from the Middle East, Australia, the US, India and Southeast Asia.”
Thanks to its rich and unique supply of goods, City Square has made inroads into the mid to high-end household furnishing markets and built brand recognition. Mr. Fong mentioned that they worked successfully with developers this year and contracted interior decorators for a newlydeveloped property.
Rising Local Consumption Power
Expatriates account for 30% of “Area’s” customers, 40% of WH Furniture customers are from overseas, giving testimony to the catalytic role played by foreign capital in the household furnishing market. Executives of both companies mentioned that the demand of expatriate customers would not take the lion’s share of total demand; local customers with their rising spending power and a higher demand for a better quality of life are their most important customers.
In the fi rst few years most of City Square’s customers were expatriates, but they have been overtaken by local customers, there are now more mainland customers. Mr. Fong mentioned that their products were closely related to life, but not life necessities, so their business depended upon economic growth as naturally booming economy would motivate people into improving their quality of life quality.
Despite the smallness of the furnishing marketin Macao, three local furniture brands, namely Area, WH Furniture and City Square that have won market recognition thanks to the opportunities generated by economic growth, clearly-defi ned target customers and markets and their measures to meet customers needs through expansion or opening new shops. Their experience refl ects positively upon Macao businesses’ ability to take opportunities and to be proactive in a competitive market.