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Following is the speech delivered by the Financial Secretary, Mr John C Tsang, at the Joint Business Community Luncheon this afternoon (March 20):
Thank you very much, Stanley (Lau), distinguished guests, ladies and gentlemen,
Good afternoon.
It's indeed my great pleasure to join you all for today's Luncheon. I would like to thank the Hong Kong General Chamber of Commerce, the Chinese General Chamber of Commerce, the Federation of Hong Kong Industries and the Chinese Manufacturers' Association of Hong Kong as well as the International Chambers for jointly organising this traditional post-Budget gathering.
It seems like a long time ago, but actually just three weeks have passed since I delivered the 2014-15 Budget at the Legislative Council.
It was my seventh Budget Speech. Running about 95 minutes, it was my shortest in recent years! I was told by my colleagues that this year's Budget received more media coverage than in the past. I mention this because it echoes, in a light-hearted way, one of my principles for achieving competitiveness through efficiency; that is, to do more with less. Or, if you prefer, get a bigger bang for your buck, which is something that businesses in Hong Kong have always been rather good at.
You may be aware that much of the Budget debate in the last three weeks has not been focused on the increase in the recurrent expenditure, or the sustained massive capital development programme or the initiatives to enhance business competitiveness. The public discussion has been about whether the projections of the Working Group on Long Term Fiscal Planning are reliable or not, and whether the warning that the risk of structural deficit is genuine or not. In fact, I noticed that the same points have been repeated over and over again.
I do not intend to repeat the warning again today because I am sure you are already quite tired of that, and I shall not bore you once more. Moreover, any objective mind would know that we would get into trouble if our expenditure grows faster than our income. It is so obvious that a renowned local economist said in his column that that was tantamount to suggesting that "mothers are women". I agree, and I have promised to see to it that a structural deficit will not surface.
Today, I shall turn to a less discussed topic of the Budget Speech. Looking around the room, we can see a corporate "who's who" of companies that have helped make Hong Kong the city that it is today.
Some of your companies have been operating here since the dawn of Hong Kong's modern development. Others are more recent arrivals. But you are all pioneers of our city's development in one way or another.
Your companies, your organisations and business chambers have helped transform Hong Kong into a highly efficient, well-connected, caring and fun city in which to live and to work.
More importantly, your enterprises, particularly the small and medium-size enterprises, represent the future of Hong Kong as the centre for trade, finance and innovation in Asia.
Strengthening Hong Kong's competitiveness is the overriding theme of this year's Budget. I am talking about the competitiveness of our business sector, the competitiveness of our labour force, and the competitiveness of our overall economy.
Neither the Government, nor the business community can work effectively in isolation. It requires a team effort from Government, from business and from the entire community pitching in for Hong Kong with our famous can-do spirit.
International studies consistently show that Hong Kong is already a highly competitive and appealing place to live and to work. The same studies also highlight that economies around us are becoming more competitive as well. In virtually all government budgets around the world, whether national or provincial, federal or state, the goal is the same, and that is, to boost economic competitiveness.
So we must ask ourselves: What does Hong Kong do best, and how can we do it better and smarter?
Connectivity underpins Hong Kong's position and status as an international hub, with long and deep links to the Mainland and a broad international network that connects us to global markets.
Entrepreneurs have long been attracted by Hong Kong's prime location in Asia on the south-eastern tip of China.
In the next few years, we shall experience unprecedented change in our infrastructural connectivity with the Mainland. With the completion next year of the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link, the XRL, our city will, for the first time, be plugged into the 16 000-kilometre high-speed rail network spanning the Mainland.
Then, in late 2016, the much-anticipated Hong Kong-Zhuhai-Macao Bridge will come into operation. The Big Bridge, stretching a total of 29.6 kilometres, will reduce the travel time and the cost of doing business across the boundary and help open up new markets in the western Pearl River Delta (PRD) region and beyond.
All this activity is expected to bring Lantau Island more firmly into Hong Kong's economic mix with the potential for a vibrant "bridgehead economy" at the cross-section between western PRD, Shenzhen and Hong Kong.
The Big Bridge and the XRL are the largest external transport infrastructure projects since our airport opened in 1998. Today, the Government is working with the Airport Authority in planning for a third runway to expand the airport's capacity in line with anticipated demand in the decades to come. If all goes to plan, the third runway should be operational by 2023, and that will be the essential infrastructure that will maintain our international connectivity in the future.
While cross-boundary infrastructure development is critical for our city's economic growth, boosting Hong Kong's economic capacity is not just about planes, trains and automobiles.
We also need to beef up our soft infrastructure commensurate with our strength as a highly innovative international city. Developing innovation and technology industries is a focus area for Hong Kong this year.
I have no doubt that e-commerce and electronic activities over the Internet will continue to become even more ubiquitous. Building on our highly efficient and stable financial system, the Government is upgrading platforms for conducting electronic transactions, such as electronic payment systems and the Near Field Communication (NFC) Mobile Payment system. The Hong Kong Association of Banks, in consultation with the Hong Kong Monetary Authority, recently issued a code of practice for NFC Mobile Payments.
Perhaps our friends in financial services and those of you having lunch today at the Octopus Card table have more new ideas up your sleeves on how to fully utilise technology. Please let us know what more the Government can do to facilitate the development of this, and other, new technologies in Hong Kong.
In its World Competitiveness Yearbook, the International Institute for Management Development has ranked Hong Kong first in technological infrastructure for the past two years. The most sophisticated and advanced ICT infrastructure enables a wide range of innovations and services to become available at affordable prices.
Our digital strategy is a living one that grows and evolves continuously in line with global trends and the aspirations of our tech-savvy community. With the fourth update under the theme "Smarter Hong Kong, Smarter Living", we shall build on our strengths to deliver integrated e-services to the public and foster a highly competitive ICT industry.
We shall double the number of Wi-Fi hotspots across the city and further digitise government operations to facilitate data sharing with the business sector and the public. We are studying options for providing digital identity to all Hong Kong citizens to achieve a common, shared and safe platform for delivery of e-services in the future.
The Government remains committed to the principle of a free market economy. We shall uphold our traditional values of the rule of law, an independent judiciary, clean and efficient government, unfettered media and free flow of information. These core values have provided, and will continue to provide, the cornerstone for maintaining Hong Kong's status as an international financial and commercial centre. This is our strongest competitive edge.
Although Hong Kong is a relatively small place, we add value to our economy by maintaining an open marketplace and a level playing field for all companies, local, Mainland and International.
Under the "One Country, Two Systems" formula, Hong Kong has maintained its ranking as the world's freest economy for an unbroken run spanning two decades. The Heritage Foundation in the US recently ranked Hong Kong number one in its Index of Economic Freedom for the 20th time in as many years. This is a clear indication that both the SAR Government and the Central Government are firmly committed to Hong Kong's economic development under the powerful drivers of our tried and trusted systems. This, I can assure you, will not change.
We maintain our own low and simple tax regime which imposes a light burden on companies and individuals. Salaries tax is capped at 15 per cent and profits tax is no more than 16.5 per cent. Some 90 per cent of our companies don't have to pay any tax at all. We have no inheritance tax, no capital gains tax, no GST or VAT. And as you well know, we don't even have a tax on wine. Our low and simple tax system is almost unrivalled among advanced economies. In terms of total tax, we are among the lowest, if not the lowest, in the world.
We continue to support our business community through difficult times, including the recent global financial crisis and the Asian financial crisis before that. The prospects for the global recovery this year appear somewhat brighter than in recent times. I have forecast GDP growth of between 3 and 4 per cent for Hong Kong this year, the fastest pace since 2011.
Nevertheless, the overall economic picture remains fairly uncertain. Key macroeconomic downside factors include the US Federal Reserve Board's unwinding of its bond-buying programme. Also, the uneven recovery and lingering debt concerns in the Eurozone continue to affect world market sentiment.
We shall continue to pay particular attention to the needs of our SMEs, the backbone of our economy. They comprise over 90 per cent of the companies in Hong Kong and employ some 1.3 million people.
Government support for SMEs is reflected in the Budget. It includes tax relief for profits tax, the extension of the SME Financing Guarantee Scheme and enhanced financial incentives for IT upgrading and research and development.
The Government will continue to promote external business links through bilateral and multi-lateral trade, investment and taxation agreements, as well as overseas promotions. We shall continue to lead trade delegations to major cities to help identify further our firms' business opportunities. And we shall work with our counterparts in Beijing to further expand and improve the implementation of CEPA, our unique free trade agreement.
Through CEPA and with support from the Central Government, we aim to achieve basically full liberalisation of trade in services next year. We are also working with our counterparts just across the boundary in Guangdong for early implementation of this arrangement before the end of this year.
To maintain Hong Kong's competitiveness in the long term, we must also win the battle against two major constraints, the supply of land and the supply of labour.
There is no silver bullet. We must focus on what can be done, and work together to achieve it.
The Government is taking a lead in making sure these constraints do not hold back Hong Kong's economic development. There will be difficult choices ahead and Government alone cannot resolve the issues. We need your help.
On manpower supply, I have set aside funds to support proposals in the Budget as well as initiatives announced in the Policy Address in January.
These include a major new public-private sector collaboration to promote vocational training as an effective vehicle to launch the careers of our young people and meet the needs of industries with a keen demand for labour.
The Vocational Training Council (VTC) will launch a pilot training and support scheme to attract new talent to various industries. Under the scheme, some 2,000 apprentices will receive an allowance from Government and the industries. These industries will find jobs for the trainees after their apprenticeship. This is a practical scheme, and I encourage your companies to play an active part.
I have also allocated in the Budget $130 million to enhance productivity of the retail industry. The VTC will help strengthen its related vocational, education and training initiatives.
To promote the IT sector, we shall introduce elite training programmes at selected secondary schools with strong expertise in IT education. This will help identify and nurture young IT talents and entrepreneurs at an early age.
We also strive to provide an enabling environment for more women to join the workforce or remain in employment. This includes extending or introducing new initiatives to support working mothers, such as child care services, and to promote more flexible family-friendly working hours.
I have also urged the employers and the employees to come together and find a mutually acceptable solution to the importation of much-needed labour in sectors where shortage has led to impairment.
Turning to land supply for commercial use. The Government's 2014-15 Land Sale Programme, announced last month, includes seven sites designated for commercial/business use and another hotel site.
We are also exploring the possibility of developing a "hotel belt", adjacent to the Kai Tak Cruise Terminal. This will include six harbour-facing sites for upmarket hotels with the aim of creating a leisure cluster and promoting high-end tourism.
The "hotel belt" will also complement the overall development of Kowloon East. Under the Energizing Kowloon East initiative, the area has the potential to supply more than 5 million square metres of office space, which is about double the amount of office space available in our central business district.
We also see great potential for developing an East Lantau Metropolis by leveraging on the opportunities brought by major infrastructure projects, including the Big Bridge and related developments.
The Government will continue to explore every opportunity to make available more space for commercial use. This includes revitalising industrial buildings, reviewing land uses and rezoning sites and converting "Government, Institution or Community", the so-called "GIC" sites, in core business districts for commercial use.
Overcoming the city's manpower and land constraints will not be easy. Tough choices will have to be made along the way. Maintaining our city's competitiveness during challenging times will require concerted effort from Government, the business sector and the entire community.
We count on you, our captains of industry, for your continued support and advice on ways to improve Hong Kong's competitiveness and overcome obstacles to growth.
Ladies and gentlemen, some of your companies have a long history in Hong Kong, dating back to the city's "barren rock" era of the mid-19th century. We don't have to look far to see what Hong Kong has achieved since then, despite the many challenges along the way. Today, the future of Hong Kong is in our hands. Let us work together, let us seize the opportunities before us, let us break the constraints around us, and let us make our next generation proud and prosperous.
Thank you very much.
Ends/Thursday, March 20, 2014
Issued at HKT 14:53
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