About HKTDC | Media Room | Contact HKTDC | Wish List Wish List () | My HKTDC |
Save As PDF Print this page

New Accounting Rules In Pipeline For SMEs (HKTDC Hong Kong Trade Services, Vol 01,2003)

Vol 1, 2003

Professional, Training & Others

New Accounting Rules In Pipeline For SMEs

Mainland Accounting Standards Bear Constant Scrutiny

Care Needed In Mainland Retail Market

Careful Planning Trims Mainland Taxes

Learn The Language Of Success

Prevention Is Better Than Cure


New Accounting Rules In Pipeline For SMEs

Help is on the way: Small GAAP accounting standards for SMEs should be introduced soon

Help is on the way for the thousands of businesses registered in the Hong Kong Special Administrative Region (SAR) that are facing accounting problems.

The Hong Kong Society of Accountants (HKSA) is formulating new proposals to deal with the challenges many SMEs face when compiling financial records based on the international accounting standards (IASs) issued by the International Accounting Standards Board (IASB).

Paul Chan, who chairs the HKSA committee on small and medium-sized accounting practices, explains that IASs are often complex and difficult for SMEs to follow.

"They are based on the needs of multinational companies with complex business transactions and cross-border listing issues," he says. "These companies need to follow detailed accounting standards, but small companies shouldn't."

The first area where IASs cause problems is valuation. Instead of using historic cost accounting, where an asset is included in the accounts at its purchase price, IASs are moving towards fair value accounting.

This means companies have to revalue many of their assets at the end of their financial year. "While the concept is sound in theory, in practice it's often impossible for SMEs to comply given the cost and calculations involved," Chan explains.

The other headache is caused by the amount of information companies need to disclose. This is driven again by the complexity of transactions and by a push towards better corporate governance, both not so relevant to privately owned SMEs.

The HKSA started looking into the problem in 2000, when it produced a report proposing developing a set of generally accepted accounting principles, or Small GAAP, for SME use.

However, since then international standard setters have become interested in this issue. "Support has been mobilised for global recognition of, and a worldwide solution to, this problem," says Chan.

He believes an international solution to the problem is necessary, despite the fact that small enterprises do not have the global reach of multinationals.

"The IASB now sets most countries' accounting standards," Chan explains. "Their work is authoritative, well-regarded, and represents international best practice."

He points out that SME reporting is a common problem affecting the lifeblood of many economies - even the UN is assessing the best way of dealing with it.

"It's better for everyone if the IASB can come up with a blueprint for Small GAAP that can be adapted and used by different jurisdictions as a ready reference," he says. The IASB will be meeting twice during 2003 to discuss Small GAAP, and is expected to have mapped out its strategy by the end of the year.

There are two approaches to Small GAAP, the first of which is to prepare a separate omnibus Small GAAP standard that should be written in clear English and at a technical level that can be used by business owners and their bookkeepers.

The second idea is to take an integrated approach, looking at each of the "normal" accounting standards and deleting the parts that do not apply to small companies. While this approach would be quicker and easier for standard setters to adopt, it would probably only deal with the disclosure issue, so that companies would still need to adopt fair value accounting.

The IASB currently seems to be favouring the integrated path, and in July 2002 the HKSA recommended this approach to its members, who felt it did not go far enough.

As a result, Chan says the HKSA is currently looking into extending existing legislative rules for minimum disclosure for certain small private companies called section 141D companies (named after that section in the Companies Ordinance).

"At the moment, if section 141D companies receive unanimous shareholder consent, they only need to prepare a balance sheet and make certain disclosures," says Chan.

"Our current thinking is that we should add some size criteria and say these companies cannot be public interest entities or part of a listed group, then expand their reporting requirements to be in line with social expectations."
Proposals are that companies should meet two of the following three criteria:

  • employ less than 50 people
  • have turnover of less than HK$50m
  • have total assets of less than a set amount, probably also HK$50m

Although reporting details have not been finalised, Chan says current thinking is that eligible companies should be able to use historic cost accounting and prepare a normal set of accounts with less onerous disclosure requirements - in effect the same as having a stand-alone Small GAAP standard within the legislation.

HKSA president David Sun says these accounts should also give enough information for third parties such as banks or creditors, noting that banks have been used to receiving the reduced accounts prepared under section 141D for years.

"Most if not all the disclosures that third parties need should be included," he says, adding that banks can and do ask borrowers for any more information as they require it.

The HKSA should finalise its proposals during the second half of 2003. If it follows through with the idea of extending section 141D, the law would need to be changed, which could be a long process.

"The proposed basis should make it easier for small companies to prepare their accounts, and it should cost them less in time and both internal and external resources," Chan maintains. "The accounts would be prepared on more of a stewardship than investor basis, which is far more suitable for Hong Kong SMEs."

Chan says that businessmen's responses to the proposal have been very encouraging. "Our second round of consultations should come out in the second half of 2003," he adds.

"We would like the business community to come out and support this, as legislative changes will be involved and we want to show the government that our suggestion meets business needs."

Sun thinks that if Small GAAP is properly implemented, it should reduce SME's compliance costs substantially. "It will also make the whole accounting and audit process much more efficient," he says.


Mainland Accounting Standards Bear Constant Scrutiny

by Desmond Yuen (Partner and Head of China Services) and
Esmond Leung (Senior Manager) of Grant Thornton

Closing the gap: the mainland's Ministry of Finance has issued 16 accounting standards that are applicable to various industries and sectors

The Chinese mainland's successful drive to become part of the World Trade Organization (WTO) has seen it progressively speed up the pace of reform of its accounting systems in order to meet the needs of potential investors, creditors and the public for more transparent and reliable accounting information.

With their very close ties with the mainland geographically and economically, Hong Kong business owners have to keep their eyes on the mainland's rapid changes - especially its macro economic conditions on one hand, as well as the practical reform of accounting rules on the other.

Up to now, the Ministry of Finance (MOF) has issued 16 accounting standards that are applicable to various industries and sectors. Also, with the release of the Accounting System for Insurance Companies in 1999 and the Accounting System for Securities Companies in 2000, the accounting profession on the mainland has attracted much attention from public and foreign investors.

In the past few years, Chinese mainland authorities have eliminated, as far as possible, the gap between mainland accounting standards and International Accounting Standards (IAS).

Both standards require accounting statements to reflect the characteristics of "Understanding", "Relevance", "Comparability" and "Reliability".

Both standards stipulate that a company's balance sheet is to be broken down by the same categories (ie current assets, long-term investments, fixed assets [or property, plant and equipment], intangible assets, deferred expenses, other assets, current liabilities, long-term liabilities and owners' equity). Also, the presentation requirement of both standards includes an income statement, a cash flow statement and notes to the financial statements. Finally, both standards adopt the fundamental concepts for accounting of consistency, accruals and prudence.

The following PRC accounting standards have no major differences when compared with the relevant IAS. They are:

  • disclosure of related party relationships and transactions
  • events occurring after the balance sheet date
  • construction contracts
  • revenue
  • contingencies
  • lease
  • borrowing costs
  • fixed assets
  • inventory.

On the other hand, there are still several major areas of differences between mainland accounting standards and the comparable IAS.

So far the mainland still lacks the principle to guide the formulation of the standards, whereas an accounting principle does exist in IAS. In some areas, such as merger, amalgamation of accounting reports, financial means, earning taxes, etc, there are no such specific standards to regulate the accounting system. Further, there is no public requirement on the disclosure of some important issues, eg the agreed value of financial means, the departments with suspending operation, etc.

When it comes to accounting forms there is a significant difference between the two standards. The forms both provide a framework for the preparation of financial and accounting statements: however the content required by the IAS is much more detailed than for mainland accounting standards.

The mainland accounting standards were formulated by the MOF. The China Accounting Standards Commission acts as a consulting organisation, and has limited responsibilities during the formulation process of the standards.

However, the formulation of IAS was discussed thoroughly, and the consensus reached, by all Accounting Commission members. Its fair and transparent procedures ensure that the standards stand for all kinds of enterprises and individuals.

In particular, the following mainland accounting standards differ from those stipulated by the IAS:

  • cash flow statements
  • investments
  • changes in accounting policies and accounting estimates and corrections of accounting errors
  • non-monetary transactions
  • intangible assets.

Typical examples of the differences that we experience are:

  • Investments

Under mainland accounting standards, investment is valued based on whether it is short-term or long-term. However, the valuation method in IAS depends on the feature of each investment, ie whether it is a trading investment, a maturity investment or an investment of some other nature.

  • Intangible assets

Under mainland accounting standards, the maximum amortisation period for intangible assets is 10 years, whereas under IAS it can be extended to a maximum of 20 years.

Often there are very few differences between the mainland accounting standards and the comparable IAS. However, some of these discrepancies can result in significantly different outcomes on financial statements.

Interestingly, IAS does not have a similar accounting standard for debt restructuring. Nevertheless, this standard is promulgated on the mainland as the guideline for enterprises undergoing debt restructuring. The formulation of this standard obviously reflects the specific economic and social environments on the mainland.

Since the mainland began its economic reform 20 years ago, the Chinese government has been pursuing the goal of enhancing its accounting systems. The focus of the qualitative characteristics is in line with the evolution of its market economy, economic reform and the opening-up of its market.

Hopefully, following the accession into the WTO and with more effort from the accounting profession, the mainland will be able to formulate a set of completed accounting standards, in the next few years. These should correspond closely to the IAS and at the same time reflect the unique features of the mainland's economic and social environments.

In view of the changes in the mainland's accounting standards, Hong Kong entrepreneurs who are interested in setting up, investing or expanding their businesses on the mainland should better understand the requirements of maintenance of accounting books and records for foreign investment enterprises (FIE). This becomes much more urgent following Hong Kong's ongoing integration with the Pearl River Delta.

Care Needed In Mainland Retail Market

by Wilfred Tsui
Solicitor, Gallant Y.T. Ho & Co

A bright future: foreign investors can hold majority shares in joint venture enterprises in all provincial cities as well as Chongqing and Ningpo

The mainland retail market has been slow in opening to the world. Joint venture enterprise programmes for retail sales were implemented in six major cities and five special economic zones on the mainland in 1992, but it was not until 1999 when Foreign Investment and Commercial Enterprise Implementation Measures legislation was introduced that foreign investors were allowed to set up local retail businesses after meeting relatively stringent requirements.

To establish a foreign trading joint venture enterprise, approval must be obtained from the Ministry of Foreign Trade and Economic Cooperation (MOFTEC). More often than not, however, investors took the risk of commencing business once approval from the provincial or municipal authorities had been obtained - without full approval from the Central authorities.

As a result, clearance orders were issued in July 1998 and June 2001 by the State Economic and Trade Commission and the State Administration for Industry and Commerce against these joint venture enterprises for non-compliance of the requirements regarding application and approval. Ultimately the enterprises in question had to be turned "local" or even shut down.

It is therefore of the utmost importance that investors make themselves fully aware and acquainted with the various requirements regarding these foreign investors' enterprises, particularly those relating to foreign investors participating in local retail businesses. The penalty for being carefree can be far-reaching: both in terms of the money at stake and the possible penal consequences.

Developments post-WTO entry

The Guide to Foreign Investments that took effect from April 1, 2002 categorises the retail business of daily products, as "encouraged" business, which means there should be no restrictions on foreign investment.

However, there are still mild restrictions on this type of investment according to the Exemption List of the protocol to the Admission of China into the WTO. Foreign investors will be allowed to hold majority shares in joint venture enterprises in all provincial cities as well as the cities of Chongqing and Ningpo in the first two years after joining the WTO.

Furthermore, in the first three years of joining the WTO, all checks on share-holding, form of business, geographic location and quantities on these joint venture enterprises will be removed.

The reality

The truth remains that it will still be some time before the mainland market is fully open to the world insofar as retail business is concerned as uncertainty still clouds the issue on the minimum investment requirements.

Under these circumstances, some Hong Kong investors might want to take the risky course of opening up the market by themselves. Many of them may try to accomplish their mainland retail dream by authorising and instructing their mainland acquaintances (friends, relatives) to establish retail enterprises, with the local resident as the licence holder and themselves running the business and being responsible for all capital investment and management.

To safeguard their position, Hong Kong investors usually require their mainland counterparts to sign formal contracts governing their rights and liabilities stipulating clearly that the mainland appointee is merely acting on behalf of, and on the instruction of, the Hong Kong investor who is the ultimate beneficial owner of the business.

Others may stipulate that the Hong Kong investor is merely making a loan to the local licence holder, which would then prove that the Hong Kong investor financed the business.

Potential risks

According to the firmly established notion of "trust" under Hong Kong law, it is possible to impose a trust on a third party or to require that third party to hold the shareholdings in a company in trust for the original "settlor".

The essence of this trustee-beneficiary relationship is that the trustee acts on the instructions of the beneficiary and hence merely represents the interest of the beneficiary. In this way the status of the real owner of the shareholding is fully recognised and protected.

However, according to mainland law, "trust" generally means and refers to the relationship established between a state-owned trust company that is merely responsible for investment activities undertaken on behalf of individual citizens as well as the state.

This is an entirely distinct concept from the "trustee-beneficiary" relationship common under the Hong Kong legal system. The ramification is that documents prepared and signed according to Hong Kong law may not receive full recognition in mainland courts.

The China Trust Law was only enacted in April 2001. Although there are specific provisions recognising and governing the relationship between "trustee" and "beneficiary", the formalities required to establish such a relationship or the means and mechanism of enforcement of rights of the parties to this relationship remain unclear.

In addition, since this sort of relationship invariably involves a foreign investor establishing and maintaining a local enterprise, all documents signed between the parties in establishing the "trust" relationship have to be approved by MOFTEC; failing which these documents will not receive full legal recognition and enforcement in mainland courts in the event of disputes.

Precautionary measures

Hong Kong investors should take appropriate precautionary measures before committing to a mainland retail venture.
For example, they should:

  • try to sign contracts - despite the fact that it is still doubtful if these contracts will receive full recognition in the courts
  • if possible, try to remit funds into the local enterprise in the name of the Hong Kong enterprise so that this remains a clear record and useful evidence of the source of funds
  • try to run the business themselves and be responsible for all management matters. If necessary, they should ask the local party to sign appropriate documents of authorisation to facilitate the Hong Kong partner taking full control of the daily running of the business
  • ask the local party to sign bank authorisation documents with a view to authorising the Hong Kong investor to operate the business bank accounts (Despite this, it remains a cardinal rule that the less money in the accounts the better)
  • ask the local party to sign blank forms of share transfer documents, resignation letters etc to be kept by the Hong Kong party
  • keep abreast of developments regarding the relaxation or removal of restrictions on foreign investments. Ask the local party to transfer all interests once it is ascertained that these restrictions no longer stand.

Ultimately, however, Hong Kong investors should seek independent mainland legal advice to ensure that their legal position is fully safeguarded.

Careful Planning Trims Mainland Taxes

A licence to profit: Hong Kong companies need to obtain a new licence to sell goods produced on the mainland in the domestic market

Every SME contemplating Chinese mainland operations should be aware of the tax implications of manufacturing and/or selling in the mainland, and the advantages or disadvantages that may result. Value-added tax (VAT), differences in personal income tax and corporate profits tax, and the structuring of mainland operations for tax purposes all present challenges for Hong Kong SMEs, according to Danny Po, partner, China tax services, at PricewaterhouseCoopers.

"The most difficult tax for SMEs to deal with and comply with is VAT because no such tax exists in Hong Kong," Po explains. It is essentially a simple sales tax: for example each purchaser along the supply chain pays VAT at the flat rate of 17% on top of the purchase price to the supplier (the input credit). When the purchaser sells the goods to its customer, another VAT at the same rate of 17% will be charged on the selling price and collected from the customer (the output VAT payable). The purchaser's obligation to pay VAT to the Chinese tax authorities is calculated by deducting the input credit from the output VAT payable. Eventually, the purchaser has no VAT cost at all, but is simply a VAT collection agent.

The good news about VAT is that exporting companies are exempt from having to pay VAT on goods that are destined for overseas markets. They also have the right to a refund on any tax paid early in the manufacturing process, such as for purchasing raw materials, and can avoid paying import duties or VAT entirely by opting for bonded goods.

"Hong Kong companies that import their raw materials can talk to the Chinese customs authorities to request importation on a bonded basis," says Po. "This means that they guarantee that anything they import into the mainland will be re-exported in the form of finished goods and will not be sold locally."

To make life easier for companies that have to deal with VAT, the mainland recently introduced its Golden Tax Project, a computerised system that focuses on VAT record keeping, collection and tracking. "The Pearl River Delta is one of the trial locations, so companies that are registered as VAT payers and those that receive VAT refunds have to buy it at a price of RMB14,000-16,000," he adds.

Enterprise income tax is another trap for careless players. The enterprise income tax is the equivalent of a profits tax. Currently, the standard rate for this tax on the mainland is a hefty 33%, while Hong Kong's profits tax is just 16%. But tax holidays can help reduce the burden. "If you set up a factory on the mainland and you guarantee that you will operate for at least 10 years, you can get a 'two-plus-three' tax holiday," Po reports.

"For the first two years that you make a net profit, you have a full tax exemption; you pay zero. For the next three years, the rate is 16.5%, so the tax rate is reduced by half. In the sixth year, you're back to 33%."

The tax rate is 24% for foreign-invested factories in most locations in the Pearl River Delta, although in the Shenzhen and Zhuhai Special Economic Zones (SEZ), the standard profits tax rate stands at only 15%.

Again, companies receive a full tax exemption for the first two profit-making years, but for the next three years, the tax rate in an SEZ is only 7.5% - half of 15%. Start-up time and production refinements can add two to three years to the process before profitability kicks in, so the total tax holiday can, in reality, stretch out to as much as eight years.

One way that companies can try to lengthen their tax holiday is through transfer pricing. For instance, a Hong Kong company decides to charge its mainland factory subsidiary a lower price for raw materials, which creates a lower price for the finished goods. "The idea is to keep profits at a minimum," Po says.

If mainland tax authorities suspect transfer pricing is occurring at below-market prices, they will adjust the profit to make up the difference. In some corporate set-ups though, where the factory merely serves as a processing centre, a lower transfer price can be legitimately substantiated on a commercial basis. "You have to support the reasonableness of transfer pricing and explain it to the Chinese tax bureau," Po adds.

The Hong Kong government also gives Hong Kong companies 50% off their profits tax bills if they operate a processing factory on the mainland or elsewhere outside the SAR. But a complication arises if the Hong Kong company decides to sell its finished goods on the mainland instead of re-exporting them overseas.

"If the goods are sold on the mainland they will not be taxed in Hong Kong. But they will be taxed on the mainland," Po says. To sell there, the Hong Kong company needs to obtain a new licence (which Chinese authorities can be reluctant to grant for a host of reasons) on top of the toll processing licence it already must possess for processing goods for export.

Another consequence of selling on the mainland is that Hong Kong companies may face losing their 50% profits tax exemption in Hong Kong. "A company can only sell what it owns. If the factory on the mainland is selling the goods it makes, it owns the merchandise. The profit that goes to the Hong Kong company is not considered as manufacturing income, but as trading income, which is taxed at 100% [of the 16% Hong Kong profits tax]," he says.

Po argues that the exemption should still apply to Hong Kong companies which both sell in the mainland and re-export their mainland-made products overseas. "Most of the manufacturing operation is still controlled by the Hong Kong company but the Hong Kong tax authorities are quite rigid about this," he sighs. "It's very discouraging for Hong Kong SMEs."

Individual income tax is another source of discouragement for local SMEs. Hong Kong's personal income tax rate is set at a maximum of 15%, while on the mainland it ranges from 5-45%. "If someone in Hong Kong earns HK$50,000 a month, the tax rate for that amount on the mainland would be around 20-30%. If a company wants to second a middle manager to the mainland, that person would not want to go unless the extra tax is paid by the employer. [The higher tax rate] increases the operating costs of SMEs and discourages SME employees from working there," Po says.

The solution? "Wait for the mainland to lower the tax rate - this is going to happen, probably within the next two years. The Chinese government realises it has to be more attractive to foreign expatriates working on the mainland," he maintains.

Local government levies are also a financial burden. The mainland's plethora of fees for everything from flood prevention to educational fund surcharges are assessed against a company's turnover and help subsidise local mainland governments.

There are so many different kinds of fees that some Hong Kong companies with operations on the mainland have complained that they pay more fees than taxes. "The central government is asking local governments to stop collecting fees. They must convert the fees into taxes so they can be easier to administer and perhaps could be shared with the central government. I think this is a very good direction to take," says Po.

The mainland government is considering a number of tax reforms that would streamline tax systems or provide relief in cases where taxes are out of alignment with other norms.

One proposal is aimed at reforming the VAT from a production-based to a consumption-based system. Currently, if a company purchases equipment for its factory on the mainland, the company is considered the end user and is thus subject to a non-refundable 17% VAT. If the system becomes consumption-based, VAT paid on fixed assets will be creditable against payments on sales of goods.

Other plans call for unifying the country's separate foreign and domestic corporate tax laws to eliminate the preferential treatment (tax holidays, etc) accorded foreign investment enterprises, and reducing the mainland's high personal income tax rates.

If the government takes action, says Po, the beginning of 2005 would be the earliest that these reforms could be instituted so Hong Kong SMEs could consider setting up their factories on the mainland as soon as possible. A grace period would likely be allowed for those early birds to retain tax incentives after the introduction of the new income tax law. In the interim, proper transfer pricing planning would help mitigate the extra mainland tax costs and avoid unnecessary tax investigation.


Top tips to reduce mainland tax

Acompany decides to shift its manufacturing operations from Hong Kong to the Chinese mainland to cut costs. By relocating, not only will the company save on labour and land costs, it also saves 50% on the profits tax it pays in Hong Kong on goods re-exported from the mainland to markets overseas.

"This has been a typical arrangement for Hong Kong exporters for more than 10 years," says Danny Po, partner, China tax services, at PricewaterhouseCoopers.

The factory qualifies for a five-year "two-plus-three" tax holiday if it promises to remain in operation for at least 10 years. It pays no income taxes until its first profit-making year, after which a two-year full tax exemption is granted, with a 50% reduction in the applicable tax rate allowed for the following three years.

The factory next enters into a bonded goods arrangement in order to avoid paying the 17% VAT and import duty on importation of raw materials for producing export goods. Again, the export sales are exempt from VAT. "The factory is only a production line so profits are kept at a lower level via transfer pricing arrangement and the income tax paid on the mainland is minimised," says Po.

Seeing the sales potential, the company would like to make its products available on the mainland. To do so, it must apply for a second licence - for domestic sales - which is often difficult to obtain. Mainland sales can also lead to the loss of the 50% reduction in Hong Kong profits tax.

"Companies that have dual licences have to handle the customs, VAT and transfer pricing issues very carefully, and they face challenges by the authorities," he says. "It can be a painful exercise. Although SMEs are very creative and can find ways to get around regulatory hurdles (such as having two separate factories), selling on the mainland may end up increasing their tax costs. However, this is not insurmountable; the tax costs could be minimised with tax planning well in advance."


Learn The Language Of Success

Hitting the right note: popular singer Kelly Chen has helped promote the Workplace English Campaign to the Hong Kong youngsters that are the main target audience

Language proficiency and the ability to communicate effectively with your clients and markets worldwide are essential skills in the modern workplace.

It is vital for the success of any business operation, particularly small and medium-sized enterprises with limited manpower resources and is, therefore, highly valued by both employers and employees alike.

With the current global economic downturn, for SMEs in particular it is vital that their employees can communicate effectively with overseas suppliers and customers through the use of English - the acknowledged language of international commerce.

Conversely, if the SME workforce in Hong Kong does not have the desired level of proficiency in Putonghua, it will be unable to communicate with manufacturers on the Chinese mainland.

The Chinese mainland's accession to the World Trade Organization, and the continuing development of mainland cities like Shanghai, means Hong Kong's workforce can ill afford to lag behind in language proficiency in either English or Putonghua.

Recognising this reality, the government has played a key role in promoting the use of both languages by setting up the Standing Committee on Language Education and Research.

Thus, the English in the Workplace Campaign was launched in 2000 by the government in cooperation with both industry and educational institutions.

The aim was simple: to heighten public awareness of the importance of English in the workplace and to motivate the workforce to raise its standard of English.

The major elements of the campaign include: an Incentive Grants Scheme, under which employees are provided a subsidy for upgrading their English and sitting for prescribed international tests; and the promotion of workplace English competency benchmarks.

The campaign has established benchmarks for the following jobs: clerks; executives/administrators/ associate professionals; frontline service personnel; receptionists/ telephone operators; and secretaries.

These benchmarks have been designed to help employees gain a clear understanding of employers' expectations of their English standards and to establish a self-improvement target for career development.

One of the organisations playing a leading role in improving English standards in the SAR is the British Council Hong Kong.

"The Council runs hugely popular English for Work courses that continue to improve the use of English in the workplace," according to student services manager Shirley Hui.

"Regardless of your job or career objectives, you can plan to improve your use of English by finding an appropriate English for Work course," Hui says. "The students who take these courses are mostly single and working adults, with the majority holding clerical positions."

The students must first take a placement test to determine their level out of a total of nine, which range from the very beginner to advanced levels. The strength of a typical class will be about 20-25, depending on the type of course, Hui notes.

"The British Council adopts a distinctly different approach from other schools in that we emphasise more on developing communication skills. The students get plenty of opportunities to talk with the teachers rather than merely listening to them. As for the teachers, they are all native English speakers with recognised qualifications and teaching expertise."

The Council holds its English for Work nine-week evening courses at centres based in Admiralty, Yau Ma Tei, Sha Tin and Kwai Hing. "Adult students can also now enjoy free access to the Council's state-of-the-art multimedia study centre, and also use many online learning materials outside the classrooms," Hui adds.

If a student's aim is to improve speaking, writing, listening and reading skills for work, the Communicating at Work course is tailor-made to improve the use of English through a wide variety of work-related tasks.

Communicating at Work can be taken by students placed between Levels 3-6, with fees of HK$2,400 for a nine-week term.

The Writing at Work course helps with styles and requirements for the written word like memos, emails, letters, faxes and reports. For Levels 5-6, the course consists of two modules while Level 7 offers a single module. The fee is HK$2,400 per module.

The Council also offers Focus on Work courses to develop skills for higher-level work situations like meetings and negotiations, work presentations and social English for work. Fees for these Level 7 courses are also HK$2,400 per module.

Similarly, the University of Hong Kong's School of Professional and Continuing Education (SPACE) has been conducting courses since 2001 that prepare candidates for the University of Cambridge's Business Language Testing Services or BULATS tests.

"Typically, about 20-30 students from varying backgrounds join these courses to acquire English competency and efficient knowledge of communication skills used in the workplace," says Karen Ngeow, the SPACE programme leader for Business English courses.

The 30-hour courses - Spoken English for the Workplace and Written English for the Workplace (HK$2,000 each) and Effective Presentations (HK$2,300) - prepare candidates for two BULATS tests: Speaking and Writing. All fees include textbooks but exclude the cost of the BULATS tests.

Two other workplace English programmes offered by SPACE are the Certificate in Business English and the Diploma in Business English, which also ready students for the BULATS tests.

These programmes require candidates to take a written entry test to ensure that students come into the programme at a proficiency level that allows them to use the language to meet their communication needs.

The BULATS Speaking Test consists of an interview, a presentation and a discussion with an examiner. Here, candidates are tested on language skills such as fluency, accuracy, pronunciation and the degree to which they can participate in oral activities.

The BULATS Writing Test assesses a candidate's writing skills in the workplace. In the test students have to accomplish two tasks: write a short reply to a letter, memo or message; and write a short report by following brief instructions. Candidates are assessed on accurate use of language, organisation, expression and the effectiveness of their writing skills.

Yet another recognised programme is run by the Federation of Hong Kong Industries. These are the English Language Skills Assessment (ELSA) Tests, which have been developed by the London Chamber of Commerce and the Industry Examinations Board and are designed to meet the needs of both employers and individuals for measuring proficiency in business English.

The ELSA tests assess a candidate's proficiency in four main areas: speaking; writing; listening; and reading. They also offer a grading scale to accurately measure an individual's level of English competency.

Further, employers have the flexibility of running in-house English courses before candidates sit for the ELSA test.

The tests include:

  • Listening/Reading, 200 multiple-choice questions (HK$350);
  • Writing I, 60 multiple-choice questions (HK$250);
  • Writing II, essay format (HK$400);
  • Speaking, an audio-administered test (HK$450).

These courses particularly appeal to students as well as resource-strapped SMEs, as those attending most of the above courses conducted by the various institutions may be eligible for a partial refund of their fees under the Workplace English Campaign.

Leading business firms and organisations have already pledged their support for the Workplace English Campaign and Benchmarks. The numbers of these corporate backers, already more than 100, is fast growing.

Meanwhile, to meet the growing need for Putonghua education in the SAR, the Hong Kong Putonghua Education and Assessment Centre (HKPEAC) was set up in April 1996 by the Faculty of Education of the University of Hong Kong.

The HKPEAC, which underlines the Hong Kong government's commitment to promoting Putonghua language skills, has been conducting training programmes for the Standing Committee On Language Education and Research (of the Education and Manpower Bureau) and the Civil Service Training and Development Institute.

The HKPEAC's acknowledged mission is to offer a wide range of Putonghua courses for native and non-native speakers, and to promote the two national language proficiency tests - Putonghua Shuiping Ceshi (National Putonghua Proficiency Test) and Hanyu Shuiping Kaoshi (Chinese Proficiency Test) - in both written and spoken Chinese, according to centre manager Flora Lam.

"HKPEAC is the first centre of its kind to be established in Hong Kong and has taken a leading role in providing Putonghua education courses and assessment services," she adds.

It conducts Putonghua Proficiency Courses for the Hong Kong civil service; Immersion Courses for in-service and pre-service teachers of Putonghua and Chinese language; and Putonghua Education Courses for teachers who conduct Putonghua classes in primary and secondary schools in Hong Kong.

The HKPEAC maintains strong links with many academic and professional institutions on both the Chinese mainland and Taiwan. It conducts joint research, academic personnel exchanges and visits with these institutions in order to further promote Putonghua education and assessment, Lam says.

To cope with the demand for Putonghua education and assessment needs, HKPEAC has set up seven teaching centres across Hong Kong. All its classrooms are equipped with multimedia facilities, and the centre has also installed a multimedia language laboratory where it conducts part of the lessons to enable teachers to attend to the individual needs of students and to allow them to learn at their own pace.

Prevention Is Better Than Cure

Be transparent: implement corruption resistant systems and commit to ethical practices

More than half of the corruption complaints received by the Independent Commission Against Corruption (ICAC) during the past decade involved the private sector. During 2002 alone, 2,403 or approximately 55% of the 4,371 corruption complaints received concerned companies operating in the private sector.

The problems indicated by the complaints include solicitation of illegal commissions, splitting of inflated prices during procurement, disclosure of privileged information for personal gain, theft of company property, falsifying accounting records and abuse of authority.

All these problems can be avoided by improving business operations through enhancing internal controls. In order for a business to survive, if not to thrive, the importance of the adoption of corruption resistant systems and commitment to ethical practices has become even more pressing.

The Advisory Services Group of the Corruption Prevention Department of the ICAC provides tailor-made corruption prevention advice to private companies, in particular those companies which have become "victims of corruption", on how to tighten up controls in areas of weakness.

Following are some examples providing an insight into many common situations that may be encountered during work, though they are by no means exhaustive.

Disclosing tenders

During a tender exercise for the supply of frozen food, the chief chef of a restaurant group disclosed the tender prices of other tenderers to one of the bidders in return for monetary gain.

The restaurant group was advised to step up its tender collection procedures to ensure the security and confidentiality of the tenders received.

The restaurant group was also advised to draw up a code of conduct for compliance by staff in which the company's policy on acceptance of advantages and confidentiality of information were clearly stated.

Tenders received should be opened simultaneously by a tender-opening team comprising at least two people. Tenders should also be systematically assessed to ensure value for money as well as to avoid favouritism.

Pocketing supplier discounts

A merchandiser of the local office of an international buying company took advantage of his company's practice that repeat orders would be placed with the previous supplier for quality assurance by pocketing the price reduction discount offered by the supplier.

The company was advised to put in place basic safeguards including:

  • establishing a set of procurement guidelines specifying the minimum number of quotations to be obtained for different values and categories of products available in the market

  • specifying a period of time during which quoted prices will be valid and establishing a regular liaison channel with its suppliers with a view to maintaining good business relationships and uncovering any irregularities.

Falsifying stock records

A senior purchasing staff member of a department store, in collusion with the warehouse keeper, falsified stock records to steal valuable items.

The company was advised to set up an inventory control system covering receipt of goods and disposal of old stock and damaged goods.

Random stock checks should also be conducted by an independent third party in addition to routine stocktakes by the warehouse staff.

These cases indicate that corruption and malpractice will not only lead to an increase in operating costs resulting in loss of profit for a company but also tarnish its reputation and image.

To remain competitive and to reap the benefits of every business opportunity, local businesses should seriously consider whether they have adequate systems and controls in place to guard against abuse and malpractice.

They should also ensure that their employees maintain high ethical standards by requiring them to comply with a company code of conduct - a written statement of the standards of behaviour expected by a company of its employees.

Employees should also be provided with appropriate training in corruption prevention and in the pitfalls of corruption as well as the anti-corruption laws.

Consultancy Service on Corruption and Fraud Prevention / Advisory Services Group

The Advisory Services Group has extensive experience in providing corruption prevention advice on system controls.

Since its establishment in 1985, the Group has advised more than 3,000 companies covering a variety of businesses. The advice given by the Group is tailor-made, free of charge and in strict confidence. The company also has full discretion to decide whether to take the Group's advice.

Please call 2526 6363, fax 2522 0505 or email us at asgicac@netvigator.com for more information about the services of the Group. We pledge to respond to requests within two working days.


bullet9.jpg (1215 bytes) Advertising Enquiry bullet9.jpg (1215 bytes) Hong Kong Subscription Form bullet9.jpg (1215 bytes) Overseas Buyers Request Form bullet9.jpg (1215 bytes) More Publications