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Hengqin-Lisbon connection via Macau

Frederick Ma Chi Ngai, Permanent President of the Macao Youth Association and Vice President of China Youth Entrepreneurs Association

The latest project of Frederick Ma Chi Ngai, Permanent President of the Macao Youth Association and Vice President of China Youth Entrepreneurs Association, seeks to provide space and opportunities in Hengqin for small and medium-sized enterprises dealing with products and services from Portuguese-speaking countries. The investor and developer spoke to Business Daily about the project, its integration within the Greater Bay, and connections to the Belt and Road office he established in Lisbon

When did the plans come about for developing the Sino-Portuguese Trade Centre in Hengqin, of which construction kicked off mid-July of this year?
That was quite a while ago. You first have to get in contact with IPIM [Macao Trade and Investment Promotion Institute]. I think it was in 2014 or 2015, when they shortlisted 33 companies to introduce them to the Hengqin government. Some of the projects are already under construction. There is one sport-related, one about culture, another one about Macau food. Our project is mainly focused on the China and Portuguese-speaking countries’ trading. We are one of the 33 companies introduced by IPIM to the Hengqin government. We set up the proposals, which were submitted to the evaluation committee, and so we passed for the first batch of 33 companies. I think that, in the end, only 17 companies have chosen to use the spot or the land location to build their projects.

What about the other 16 companies? Will they have to submit projects for tender again?
No, there is no need for tender, but they have to agree with the deal cost of the land. They are still negotiating it. From what I heard from the government, they have already appreciated the cost of the land.

What is the price for the whole development you are leading in Hengqin and does it include the land cost?
The land was about MOP300 million and the price for the whole investment is RMB1.7 billion, including the land. There are bigger projects though. There is one initiated by Ng Lap Seng, and it is much bigger. They are collaborating with China Resources, listed in Hong Kong.

What are the benefits for Macau SAR developers willing to invest in Hengqin?
There is a business cost for the land price. For the Macau projects, every piece of land in China [Hengqin] is granted through auction. One of the auction’s criteria is that for you to get the land to build on in China, you have to request an official introduction letter from IPIM [representing the local government], saying that the relevant project will be developed for a specific kind of activity. Once we get the letter, we show it to the land developers, and then we can bid. Other people who want to bid should also get this kind of letter and follow a similar procedure. That’s one of the criteria, in what relates to us, to make sure that that one piece of land is for the Sino-Portuguese trading. That’s why the cost of the land is lower than in a public auction. That’s one of the benefits given to the Macau community.

Are there any other benefits for investors from the Macau SAR?
At this moment, we have a joint meeting every month with all the 17 companies [granted rights to develop in Hengqin], together with the Hengqin government. It is what we call the government-enterprise face-to-face meeting. It is very good for us because, as for most of the 17 companies, it is the first time we have developed a real estate project in Hengqin or in China. Every month we meet and talk about other property details, such as the utilities, how to connect the buildings, about the location areas, and other settlements. IPIM also sends people to join the meeting, so if we have some kind of problem, they can represent the Macau government to have it resolved. It is very good, because if you just go there alone, sometimes you have to knock on the door of every department.

What does your project for the Sino-Portuguese Trade Centre consist of?
The project developed by our company, San Pak Ka [Investment Company Limited], is a mixed-use project. We have about one-third for retail, one-third is a hotel, and one-third of the space is for office use. The area of our land plot is about 13,000 square metres. The whole building is about 160-metres in height and we have a total gross floor area of some 110,000 square metres for the whole building, including the basement, which is a three-floor basement.

What will the office and retail space be dedicated to?
For the retail space, we have already set up with a brand called Liberdade, based on the main street of Lisbon. We divided it into four sectors, which represent the four continents for the Portuguese-speaking countries: Europe, Latin America, Asia, and Africa. That’s the design concept we have for the moment. On the top of the retail space, we have an open section to give some Portuguese-trading companies the opportunity to show their products, such as wine, food, etc. It is just a showcase, a sort of showroom, for what we call online cross-border trading. You go there to visit, and choose the products online later, so that they can go directly to your home. Online merchandise showcasing is now very popular in China.

Will products only be exhibited there, and not sold?
Exhibited, but of course you can sell some, in small quantities. But most people just go there to actually see the product but will buy it online, because it is much cheaper. We can arrange for some tax-free scheme and direct transfer to [the client], because they have a special tax for the online companies if the company is registered in Hengqin.

Do you already have prospective clients for the office space?
No, we are still working with a consultant, which is advising us. JLL [Jones Lang LaSalle], the international company, is the one working for us. For the office part, some of the office space will be sold out to cover the costs. But we have reserved at least two floors for the Sino-Portuguese offices. At this moment, we have signed three agreements with three different associations from Macau. In the future, they will help us to find tenants. Those offices are only dedicated for China and Portuguese-speaking countries’ business services. So, we have signed an agreement with the Macanese Youth Association, one agreement with the International Lusophone Markets Business Association, and one with the Association for the Promotion of Economic, Commercial, and Cultural Exchange between China and the Portuguese-speaking countries.

Will the floors dedicated to the Sino-Portuguese offices also cover or include products, or only business services?
No, products will be available in the retail part. We don’t have the final design yet, but one of the top floors of the offices will be set up to be dedicated to the Sino-Portuguese business service centre. We have translators, we already have some agreements with lawyers. Maybe in the future they will implement Chinese and Portuguese law services there. There are not yet plans for banking services.

As for the hotel part of the project, have you already signed an agreement with a company?
Yes, we have signed an agreement with the company, but we cannot announce which brand it is yet. We have a non-disclosure agreement for the time being. I can only say it is a top international brand, which has business in Macau.

Will it be easier for Macau residents to work there?
If you work there and live there, you can get tax exemption, for instance. You first pay the China tax, which is about 25 per cent or more, and at the end of the year you get the rebate when you apply. But for that, I think that you have to stay over there for a certain period of time, maybe a year or so. But the problem is, if you travel back and forth on a daily basis, I don’t think you are eligible [for such a scheme].

How are you raising the RMB1.7 billion to invest in the project and is it somehow connected to funding from the Belt and Road initiative?
The investment is a cross-border loan from Bank of China, Macau branch. It has no connection to other funding. In the business service centre, in the future, we plan to set up a direct Internet cable from Hengqin to connect with Lisbon. We have a two-floor office in Lisbon, the Belt and Road business service centre, at Marques de Pombal, which was also established with only private funding. Now we are refurbishing it.
In the future, this office in Hengqin will be connected digitally to Portugal. When the companies [in Hengqin] have some clients, we can invite them to the Belt and Road Office in Lisbon. So, they can talk directly there. Maybe in the future we will have to transit in Macau first, from Hengqin to Macau, and then we have a cable to Portugal. We are still thinking about how the infrastructure will be built. But our effort is to connect the offices.

Considering that the Forum for Economic and Trade Co-operation between China and the Portuguese-speaking countries [Forum Macao] promotes similar activities, such as exhibiting products from such countries and selling them online, isn’t there somewhat of an overlap between your project and the Forum?
There is no connection with the government, only with the associations. We don’t have a direct relationship with the Forum Macau, but of course we hope in the future, not only through the associations, but also through the platform, to introduce our services. The big difference is that they are in Macau, and we are in China.

Is the Sino-Portuguese Trade Centre going to be ready in 2019?
I think it is beyond that, because it is a much bigger project than [we first planned], because of the 160-metre height and the three floor levels underground. So it might take as much as four years from now to get it built. The underground will be connected to the light railway in the future, from Guangzhou. Now, there is the one from Guangzhou to Gongbei, and in Gongbei they have an extension line to Hengqin. The end of the station just leads to our basement floor. Once people get off the light railway, they will already be connected to the building in the basement. So the place is perfect.

Will the centre provide opportunities for small and medium-sized enterprises (SMEs)?
It’s been mainly created for SMEs. We will offer them a bargain price [to rent out the facilities]. The office spaces we are going to provide are going to be a kind of open-office space, so the space for each company is not very big. We can decide on the rent; maybe we can think about offering people to pay less in the first three years. Overall, what we are thinking about is to provide a big discount on the market price to benefit any SMEs, as long as they are doing Portuguese trade. It is one of the promises we made, and one of the benefits we give to the Macau community.

Are the centre in Hengqin and the office in Lisbon operated by the same company, or do you have different companies to carry out these projects?
The New Star [Company Limited] is the one that operates the Belt and Road Centre in Portugal. New Star is mainly for the Portugal side. We set up the company there a long time ago, more than ten years ago, as an investment company. San Pak Ka is also an old company. Both San Pak Ka and New Star are Special Purpose Vehicles (SPV). We do business by project. In Hengqin, we are investing under San Pak Ka. But in the future, if we have more real estate projects, we want to use the San Pak Ka brand name more.

What projects do you currently have in Macau?
There are currently none in Macau. We have finished most of the projects in Macau for the time being. The Green Island residential complex, which is a group of a few tall residential buildings in Green Island. Another one is the Bayview [residential complex]. So, recently, just these two [were completed].