Introduction

The nature of philanthropy in Hong Kong is changing.

Family philanthropy has a long history in Asia, and recently families have become more strategic in their approach. Social enterprises are a newer phenomenon of significant interest to both philanthropists and the Hong Kong government, and their popularity is growing.  

Strategic philanthropy

Professionalisation of family foundations

Family philanthropy has a long history in Asia, and particularly in Hong Kong where a number of family businesses have established foundations.

Traditionally, family foundations have focused on the act of giving, but now there appears to be a shift towards high impact and more professionally-organised philanthropy. Examples include hiring professional non-family managers, funding education programmes to develop the skills, competencies and abilities of key staff, and providing long-term funding for certain projects. We have also seen an increasing desire by donors to provide intellectual capital and connections as well as financial support.

Such changes are demonstrated through a number of our case studies. For instance, Dr Tin Ka Ping, founder of the Tin Ka Ping Foundation, invited senior officials from all nine universities in Hong Kong and experienced executives from the private and public sectors to sit on his advisory board. While the Tin family is represented on the board of directors, it holds only two votes out of seven. In addition to supporting infrastructure projects for schools, the Foundation runs and funds conferences, workshops and training courses to improve teaching skills.

Similarly, the Swire Group Charitable Trust is managed by a team of professionals. One of the areas the Trust is focused on is capacity building, such as supporting the training of leaders of non-governmental organisations (NGOs) to help them become more effective. The Trust has also used long-term funding since the 1990s to support marine research aimed at understanding areas such as the impact of changing environmental conditions on marine organisms.

Social enterprise

Growing focus on social returns

Million dollar donors appear to be taking a greater interest in supporting social enterprises, which are a growing phenomenon in Hong Kong.

Although social enterprises take a variety of forms, in general they are businesses that aim to achieve social goals.[1] Profits earned are not distributed to shareholders but instead are used to fund social services.

In Hong Kong, many social enterprises have focused on areas such as poverty alleviation and providing employment opportunities for the disabled and socially disadvantaged. However, they can address a much wider range of opportunities such as education, nutrition, environment and transport. The government has also been supportive of social enterprises in the past decade,[2] providing a combination of publicity and financial support.

There are two main ways million dollar donors are contributing to the development of social enterprises. The direct engagement of individual donors and family foundations offers financial, social and human capital to such organisations, as shown in the case studies we published in our 2013 report. Other donors, such as the Hong Kong Jockey Club Charities Trust, offer support through capital expenditure including, for example, the venue renovation required for existing charities to introduce a new social enterprise arm.

Although the report’s data on million dollar charitable gifts does not cover support for social enterprises, we anticipate that funding for these endeavours will attract the attention of more entrepreneurial donors looking for ways to marry their economic and philanthropic goals.

History

What is the history of philanthropy in Hong Kong?

Philanthropy in Hong Kong has its roots in the rich cultural heritage of Chinese philosophy and religion.

According to these cultural traditions, there is the expectation that people give to serve those in need within their communities and networks. The culture’s emphasis on the family unit also means that philanthropists in Hong Kong tend to give to specific local causes rather than universal ones. The person who gives should not expect any reward, and is expected to follow a higher ethical standard of complete altruism. This may help to explain why many philanthropists (both in mainland China and Hong Kong) keep a low profile and prefer to give anonymously.

The British colonial government, which steered the development of Hong Kong from 1842 to 1997, relied on churches and other volunteer organisations to provide fundamental social services for the needy. These were mostly new immigrants who supplied cheap labour to fuel the economic growth of Hong Kong.[3]

In recent years, the philanthropic sector in Hong Kong has grown dramatically. The number of registered tax-exempt charitable organisations jumped from 3,435 in 2000/01 to 7,592 in 2012/13, an increase of over 120%[4]. Hong Kong experienced a number of crises and economic downturns during this time, yet in spite of these obstacles, the total amount of approved charitable donations receiving tax exemption more than tripled.[5]

Today, Hong Kong is home to a large number of charitable organisations which can take various legal forms. More than 70% of registered charities are considered corporations, and a smaller proportion is classified either as a society (12%) or as a trust (8%). Each legal structure requires a different set of registration procedures in Hong Kong, and is subject to different regulations. As a result, there are growing calls to change the current system and create a unified approach to charitable organisations.[6]

While there are many charities in Hong Kong, the distribution of donations is very concentrated, with 82% of charitable donations going to just 5% of these organisations.[7]

The charities sector in Hong Kong is well established, and watchdog groups such as WiseGiving and iDonate have been created to rate them. These groups push for transparency among charities; for example, by disclosure of their financial reports.[8] Million dollar donors can use these resources, as well as their own philanthropic or financial advisers, to ensure that they are giving to reputable organisations.

The government of Hong Kong plays a major role in providing for its citizens in terms of education, health care and social welfare. Hong Kong is not viewed as a welfare state in the same way that countries such as the UK are, but it does stand out among its Asian counterparts because the government finances and provides a number of services instead of simply regulating them.[9] Government spending in these areas comprises approximately 44% of the total government budget for 2013/14. The government channels much of this social welfare spending through NGOs, which then deliver services on its behalf.[10] The total value of one-off relief payments by the government in response to the public’s desire for social welfare provision has grown significantly from $2.2bn in 2009 to $10.3bn in 2013. [11]

Another way in which the Hong Kong government has impacted philanthropy in the area is to adjust the legislation governing trusts. Trusts are typically established by the very wealthy to preserve and distribute their wealth after their death. Between 2007 and 2012, the number of charitable trusts in Hong Kong decreased by 33%, from 406 to 270.[12] In a bid to address this, the government initiated a reform of regulations governing trusts in 2009 with the aim of modernising them (passing a bill in July 2013), although the practical results may take some time to appear.

Tax savings are not likely to be a major consideration for philanthropists in Hong Kong, due in large part to its relatively low tax regime (capped at 17% on salaries or personal tax and 16.5% on corporations in 2013/14). There are also no investment income or capital gains taxes, which means there is potentially more disposable income available to be directed towards charitable causes.[3]

[1] http://www.social-enterprises.gov.hk/en/support/

[2] KL Tang et al., Social Enterprises in Hong Kong: Toward a Conceptual Model, 2008.

[3] UBS-INSEAD Study on Family Philanthropy in Asia, 2011.

[4] Section 88 of the Inland Revenue Ordinance, Hong Kong Inland Revenue Department Annual Report, 2013.

[5] Hong Kong Inland Revenue Department Annual Report, 2013.

[6] Hong Kong Law Reform Commission Charities Sub-Committee, Consultation Paper on Charities, 2011,

[7] http://www.theidonate.com/en/

[8] KM Chan and T Yuen, China Charity Development Report, Social Sciences Academic Press, Beijing,2011.

[9] EWY Lee, The Politics of Welfare Developmentalism in Hong Kong, United Nations Research Institute for Social development (UNRISD), 2005.

[10] T Yuen, Strengthening Philanthropy in the Asia Pacific: An Agenda for Action, 2001.

[11] P Alto and PM Wong, Adopting the London Principles: Policy Considerations to Grow Impact Investing in Hong Kong, Asia Community Ventures, Hong Kong, 2014.

[12] Trust Laws for the 21st Century, Hong Kong Trustees’ Association and Society for Trustees and Estate Practitioners, 2007.