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Following is the speech by the Chief Secretary for Administration, Mrs Carrie Lam, at the Singapore Business Luncheon in Singapore today (July 24):
Mr Teo Ser Luck (Minister of State for Trade & Industry, Singapore), Dr Jonathan Choi (Permanent Honorary President, Hong Kong Chinese General Chamber of Commerce), the Honourable Bernard Chan, distinguished guests, ladies and gentlemen,
Good afternoon. It's a great pleasure to be here with you today and to be back in Singapore. It has been two years to the month since I last visited. They have been a notable two years for our respective economies and our peoples. For Singapore, as well as for Hong Kong, there has been much to celebrate and to take pride in, and also much to reflect on.
Certainly, the 50th anniversary of Singapore's independence, its birth as a nation, is a joyous time and indeed, a year-long celebration. I am happy to be here to congratulate Singapore and to appreciate, first-hand, the bright pulse of your nation and the people, on this extraordinary occasion.
At the other end of life's continuum, the passing of Mr Lee Kuan Yew, the founding father of Singapore, still reverberates here in Singapore, as it does in Hong Kong and around the world. As our Chief Executive, Mr C Y Leung, said at the time, "Mr Lee's integrity, tenacity, vision and drive laid the most solid foundation possible for the impressive economic development, prosperity and social harmony that epitomises Singapore today."
Hong Kong is aware of Singapore's achievements, the great and the small, anyone, anywhere, for good reason. Every Singaporean success creates an equal measure of delight and apprehension in Hong Kong.
Delight in the global triumphs of an economy built on limited space, a modest population and few natural resources beyond a splendid harbour and the will of its remarkable people.
Apprehension as every Singaporean accomplishment raises the bar for Hong Kong -- an economy equally built on limited space, a modest population and few natural resources beyond a brilliant harbour and the will of its people.
So, yes, we have much in common, much to be thankful for. And that includes the world-class competition we insist on offering each other, day in, day out. The best competition, to be sure, inspires cooperation. And Hong Kong and Singapore have long been steadfast business partners.
Indeed, Singapore's first Commissioner to Hong Kong arrived in Hong Kong just two years after the birth of Singapore. The Commissioner, Mr Lim Kee Chin, described the future of Singapore's trade with Hong Kong as "very bright". This was proven to be very true.
Bilateral trade between us over the past five years has grown, on average, three per cent a year. Last year, trade rose five per cent. Last year, as well, we were each other's fifth-largest trading partners.
In addition to trading, we also invest in each other's economies. At the end of 2013, Singapore was the seventh-largest source of Hong Kong's inward direct investment, boasting an IDI stock of more than US$29 billion. In turn, Singapore was the eighth-largest destination of outward direct investment from Hong Kong at the end of 2013, with an ODI stock totalling US$10.3 billion.
We trade with each other and we also invest in each other's future, because we trust each other. Because we make it easy for each other to do business. After all, Singapore and Hong Kong are both blessed with legal systems based on English common law. Our communications and logistics networks are of the highest international standards, and the people who make them run are multilingual and multi-talented.
Both cities are major international financial centres. The latest Global Financial Centres Index, announced in March, rated Hong Kong behind only New York and London, and just ahead of Singapore as a global financial centre. Not bad for our two economies, for two cities that began as a scattering of fishing villages and, even today, count a combined population of less than 13 million people.
According to the World Investment Report 2015 published last month by the United Nations Conference on Trade and Development, Hong Kong ranked number two in global FDI inflows (US$103 billion), second only to the Mainland of China, and ahead of the US (US$92 billion), the UK (US$72 billion) and Singapore (US$68 billion).
What makes Hong Kong an attractive place for investing and doing business should be obvious to many of you in the audience. First, Hong Kong is a free and competitive economy. We follow the common law legal system and adopt internationally recognised codes of practice in business and commerce. We have a low and simple tax system with no GST (goods and services tax) or VAT (value-added tax). We have no inheritance tax and no capital gains tax. We have a clean and efficient government and a level playing field for all companies. Information and capital flow freely in Hong Kong. Indeed, it is these combined strengths that Hong Kong was named the world's freest economy for the 21st consecutive year by the Washington-based Heritage Foundation earlier this year. In second place, right behind us and closing the gap is of course Singapore.
Despite being the runner-up, Singapore scores higher than Hong Kong on a number of economic freedoms, such as management of government spending, monetary freedom and labour freedom, in the 2015 Index. This reminds us that we cannot afford to be complacent. To strengthen Hong Kong's competitiveness, there are a couple of bottlenecks that we need to resolve ¡ª namely labour and land, what the economists refer to as "factors of production". And I must admit that Singapore is doing better than we do in these two important areas.
Hong Kong and Singapore are facing similar population challenges such as a shrinking workforce, ageing population and low fertility rate. In terms of attracting talents from around the world and importing supplementary labour to support the economic development of your nation, Singapore has indeed done an excellent job. During my official visit to Singapore two years ago, I took the opportunity to meet with the Deputy Prime Minister, Mr Teo Chee Hean, as well as the Permanent Secretary of the National Population and Talent Division of the Prime Minister's Office, Mr Niam Chiang Meng, to better understand the co-ordination and implementation of various population policies in Singapore.
Singapore's experience serves as a relevant example for Hong Kong to formulate plans and policies to respond to our demographic challenges. On this, the Steering Committee on Population Policy which I chair has come up earlier this year with measures to unleash the potential of our local labour force and enhance the quality of home-grown talent. At the same time, we also launched a pilot admission scheme aiming to attract the second generation of Chinese Hong Kong permanent residents who have emigrated overseas to return to Hong Kong. Extension of stay rules for people admitted have been relaxed while arrangements under various talent admission schemes have been enhanced to attract talent with excellent educational background or international work experience to come and stay in Hong Kong. In terms of admitting people who want to invest and do business in Hong Kong, we are no longer just looking for big dollars and numerous jobs, but are giving special attention to business start-ups supported through the various incubation programmes.
Land supply is another major issue that the current-term Hong Kong SAR Government is tackling in full steam. Tight supply of developable land stifles the growth of a city, running the risk of preventing it from scaling new heights. It would also be difficult to improve the living standard of the general public through the provision of more affordable housing. Hong Kong, with a total area of over 1 100 square kilometres, is actually larger than Singapore. However, due to a housing repositioning policy adopted after the Asian financial crisis, our land production programme has been somewhat stalled. By comparison, the land reserve built up by the Singapore Government through extensive reclamation in the early days has addressed a key resource constraint for its economic and social progress. There is a lot of catching up for us to do.
Under the personal steer of the Chief Executive, relevant government bureaux and departments are working hard to provide housing land and increase flat production in the short to medium term through land use reviews and increasing development intensity. In the medium to long term, we are expeditiously taking forward the various New Development Areas and new town extension. Such efforts are beginning to bear fruit. The completion of private domestic units next year is estimated to be a record high for 10 years, and is higher than the average annual production of the past 10 years by about 70 per cent. We are leaving no stones unturned : reclamation outside of the Victoria Harbour and use of underground space are measures on our drawing board.
Ladies and gentlemen, despite the challenges I have outlined to you, Hong Kong has one great advantage which offers tremendous opportunities. This is our unique positioning under "one country, two systems". This constitutional status, guaranteed under the Basic Law, has given Hong Kong her singular role as the "super-connector" between Mainland China and the rest of the world. It brings us business and financial advantages that no other economy can match.
To name a few, the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), our free-trade arrangement with the Mainland, allows Hong Kong products and services to enjoy preferential treatment in Mainland markets. Nationality neutral, CEPA gives the same preferential access to companies from around the world, including Singapore and other ASEAN countries. You only need to establish a base for your company in Hong Kong or partner with a Hong Kong company to enjoy that. The CEPA advantage is a major reason why nearly 7 600 companies from around the world maintain offices in Hong Kong.
Still with CEPA, Hong Kong recently signed a basic liberalisation of trade in services pact with Guangdong Province. The agreement, which took effect in March, has become the model for trade services liberalisation throughout the Mainland, an agreement we hope to realise before the end of this year. That will bring huge new opportunities to Hong Kong services providers. It can also mean significant opportunity for the economies and companies that work with Hong Kong.
When it comes to trade liberalisation, you may be aware that the ASEAN - Hong Kong Free Trade Agreement has been under negotiation since last July. In fact, the fourth round of negotiation has just concluded yesterday. I understand that the negotiations have been smooth and fruitful and I look forward to a successful conclusion in the coming year. The FTA will undoubtedly create a win-win result for businesses in Hong Kong and ASEAN, including Singapore of course.
Beyond trade, Hong Kong has become increasingly important as a hub for investment flowing in and out of Mainland China. Indeed, Hong Kong is the largest source of overseas direct investment in the Mainland. Last year, nearly 70 per cent of inward direct investment to the Mainland originated in Hong Kong. About 60 per cent of the Mainland's outward direct investment is destined to or routed through Hong Kong.
No less important, Hong Kong enjoys first mover status when it comes to the Mainland's continuing financial liberalisation. That singular distinction goes back more than a decade, beginning with Renminbi trade. Today, Hong Kong is the world's largest offshore Renminbi centre.
In March, Hong Kong's financial system maintained about RMB 1 trillion in deposits. In April, the amount of outstanding Renminbi bonds issued in Hong Kong exceeded RMB 350 billion. Our Renminbi Real Time Gross Settlement system links the Mainland, Hong Kong and major financial centres, helping over 200 banks from all over the world make real-time Renminbi payments. We can help companies from ASEAN realise Renminbi opportunities in international trade settlement and investment.
Then there's the Shanghai-Hong Kong Stock Connect, launched just last November. Thanks to the programme, investors from ASEAN and all over the world, can now trade in some 570 Shanghai-listed shares, directly, through the Hong Kong Stock Exchange. Up next is the Shenzhen-Hong Kong Stock Connect, which will certainly enhance our bridging role.
Our latest financial tie-in with the Mainland allows qualified Mainland and Hong Kong funds to be offered directly to retail investors in each other's markets. In effect only since July 1, the arrangement is sure to deepen mutual access between us. It will also drive fund-product diversification in Hong Kong, providing investment alternatives to offshore Renminbi funds. In short, Hong Kong is China's international financial capital, creating opportunity for China, and a world of investors.
And there is so much more to be realised, thanks to the new Silk Road Economic Belt and 21st Century Maritime Silk Road programmes. Collectively, the "Belt and Road" initiatives offer unlimited growth prospects, boosting the Mainland's global connectivity, while promoting economic, political and cultural development among countries on three continents.
The backbone of the Belt-Road is infrastructure investment. That will demand substantial project financing, backed by a stable monetary, investment and credit system. The emerging Asia Infrastructure Investment Bank (AIIB), with all the 10 ASEAN member states as founding members, will be part of the solution.
The AIIB will require expertise in project financing, investment, financial management and foreign-exchange management. At the same time, Mainland enterprises "go global," they will also need international investment, cross-border trade settlement, bond issuances and asset and risk management services in Renminbi.
The "Belt and Road" Initiative is an ambitious project with a long-range vision. Successful implementation of the initiative hinges on the participation and concerted efforts of all parties along the "Belt and Road". Hong Kong and Singapore were part of the ancient Maritime Silk Road. I believe that both places will become an integral part of the modern Maritime Silk Road as well. The opportunities are huge. Working together, I'm confident that the professional and financial services sectors of Hong Kong and Singapore as well as other ASEAN countries have much to contribute and much to gain.
Lastly, I would like to extend my thanks to our organisers today, the Chinese General Chamber of Commerce, the Hong Kong Economic and Trade Office in Singapore and the China Council for the Promotion of International Trade. They are supported by the Hong Kong Singapore Business Association, the Singapore Chinese Chamber of Commerce and Industry and the Hong Kong Trade Development Council.
It is business events like today's and broad bilateral cooperation like this that drive our economic development, which will help assure the continuing progress of the Asian region, in this century of promise and opportunity.
Thank you very much.
Ends/Friday, July 24, 2015
Issued at HKT 14:16
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