Despite increasing pessimism among locals in Hong Kong, it still holds considerable appeal for foreign companies looking to set up regional operations in the SAR, according to the results of the Census and Statistics Department's 2001 annual survey of regional offices representing overseas companies.

The survey says that on June 1, there were a total of 3,237 regional operations, a 7% increase on the 3,001 recorded at the same point last year and also a record high since the survey was first conducted eleven years ago.

Of the total, the number of regional headquarters rose from 855 to 944, also the highest ever.

Mike Rowse, director-general of investment promotion at InvestHK û the government department established last year with the mission of attracting foreign investment û says the figures are indicative of Hong Kong's standing in the international business community.

"Over the last year, we have seen constant interest and continuing interest in overseas companies wishing to move regional operations to Hong Kong," comments Rowse. "I expect this to continue, especially given China's accession to the World Trade Organization and as it reflects Hong Kong's strengths over other countries."

As to those strengths, the relatively low tax regime remains uppermost in the minds of foreign companies with operations in Hong Kong. Some 76% of respondents to the survey highlighted this as the major attraction, while free flows of information; political stability and infrastructure also got the thumbs up.

Most people who have lived in Hong Kong at some point will testify that the main bone of contention for foreign companies is the staggering cost and availability of residential accommodation. Some 49% consider this to be the least favourable aspect of establishing offices there.

Another figure to concern those with a vested in interest in the SAR's future, is that 32% believe the business environment has deteriorated in the last 12 months. Only 6% thought it had improved.

Rowse puts the fall in sentiment down to the gloomy global economic picture, rather than domestic factors. "I think everyone thinks that the environment is not as good as it was last year and this is a worldwide view," he asserts.

"We will study very closely any other factors that may have contributed to that figure, to see what we can do. We know that we have to continue to work hard to retain Hong Kong's attractiveness as a place to do business. But I am still finding that the foreign business community remains interested in Hong Kong as a long-term commitment."