KEN MOELIS for the Wall St Journal writes: On a typical Friday afternoon at Hong Kong International Airport, dozens of American businessmen wait in the Premier Lounge, exhausted by a week of marathon meetings and united by a single objective—to get home.
Across town at the Hong Kong Club, many of the executives they met are unwinding. Because they're already home they can share drinks with colleagues and friends and begin their weekend. Many are Chinese, but a disproportionately large contingent of British and Australian accents can be heard. Conspicuously absent are the American businessmen who will spend the next 20 hours traveling.
The Americans leave behind spreadsheets, PowerPoint presentations, insights and ideas, while their competitors from many other Western countries have relocated with their families and are putting down roots, developing relationships and building trust.
After more than 30 years in business, I know that the latter assets are invaluable. PowerPoint presentations are easily created but quickly forgotten. Relationships pay dividends for a lifetime. Every business person, regardless of national origin, is more likely to transact business with a colleague or counterpart he has worked and socialized with.
Why are Australians and British—whose home populations and GDPs combined are approximately one-fourth as large as America's—so often Hong Kong or Singapore residents, while most Americans are visitors?
Considering a top income-tax rate of 15% in Hong Kong and 20% in Singapore, my bet is on one of the best motivators of all: money—and the tax policies that let you keep more of it.
British expats who work abroad for more than one full tax year generally don't pay income tax at home. Instead, they pay income tax at the local, usually lower, rate. For example, a British national living a full year in Hong Kong would pay the standard effective rate of 15%—nothing more.
His American counterpart, if he earned more than U.S. $400,000, would have to pay the top U.S. marginal rate of 39.6% on his income—15% to Hong Kong and the surplus 24.6% to Uncle Sam. (Americans living overseas do get a $97,600 income-tax deduction, which helps, but not enough to make up for the lopsided tax burden on all income above that threshold.)
That financial disincentive may be the difference between establishing a real beachhead and working relationships in overseas economies or trying to make due with short-timers and business tourists.
This uneven playing field has hurt Americans in Asia over generations of rapid growth, and there is no way to get those lost decades back. But as global economic competition shifts to Africa, home to 16 of the world's fastest-growing economies, we have an opportunity to avoid making the same mistake.
Congress should borrow from U.K. policy and provide an immediate tax holiday to any American citizen who takes up residence and works in Africa for more than one full year. The incentive of paying a maximum local tax rate of, for example, 15% in Mauritius may be just the motivation needed to get our most ambitious and forward-thinking Americans to put down roots in one of the world's most important regions.
There is no doubt that Africa will be the next commercial frontier. I was in Beijing during President Xi Jinping's first overseas trip in March, which included stops in Tanzania, the Republic of Congo and South Africa. Newspaper headlines emphasized China's "shared destiny" with Africa.
Similarly, in early July, President Obama completed a weeklong tour of the continent, including visits to Senegal, South Africa and Tanzania. The president called for "a new model" for U.S.-Africa relations "based not just on aid and assistance, but on trade and partnership."
One way to achieve that goal is to create sensible market incentives, including a lower tax burden for Americans who choose to work there. As the Obama administration seems to understand, it is not only good economic policy to lead in Africa. It is sound foreign policy.
A move now will boost American employment, and ensure access to the African continent's rich commodity resources and potentially large export markets. Only by living and working and building careers in a community can Americans help instill values of transparency, ethical conduct and innovation while forging lasting relationships with Africa's corporate and political leaders.
If there are real market incentives to entice American business leaders to the next great land of business opportunity, the long-term payoff to the U.S. economy will vastly outweigh the cost of lower tax revenues today. If we fail to act, the long-term consequences of not being competitive in Africa will be irreversible.