Budget Speech by the Financial Secretary (5)

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Consolidating Pillar Industries

69. Situated at a strategic location and with world-class infrastructural facilities, Hong Kong boasts a free economic system that is highly flexible and efficient. We have the unique advantage of "one country, two systems", a low and simple tax regime and a highly open market enabling free flows of people, capital and goods. We embrace a pluralistic and inclusive society and uphold the rule of law. Our public sector is small yet efficient; our financial system is well-established and our service industries are well-developed, marking our irreplaceable strengths in the region. In 2015, our pillar industries contributed close to 60 per cent of our GDP and about half of the employment opportunities in Hong Kong, serving as the linchpin of our economy. It is therefore of utmost importance to consolidate and enhance the competitiveness of our pillar industries.

Trading and Logistics Industry

70. Being the lifeline of Hong Kong's business, the trading and logistics industry accounts for 22 per cent of our GDP and employs about 750 000 people. The value of Hong Kong's external merchandise trade amounted to about $7.6 trillion in 2016, a rise of 50 per cent over the past decade. In terms of the total value of trade, Hong Kong was ranked the eighth largest trading entity in the world in 2015, up three places from its position ten years ago.

71. Recently, there are signs of rising protectionist and anti-globalisation sentiments around the world. Some individual economies have advocated or even implemented trade protection measures. Global economic growth remains weak and sluggish. Under such uncertainties in the macro-environment, Hong Kong as a small and open economy should uphold the principle of free trade. We will continue to work with our major trading and investment partners to open up more markets and remove market impediments, so as to strengthen our status as an investment, financial and logistics hub in the region.

Free Trade Agreements

72. As a founding member of the World Trade Organization (WTO), Hong Kong has always been a staunch supporter of the multilateral trading system under the auspices of the WTO, upholding the policy of open and free trade. We have endeavoured to promote the liberalisation of trade through the rule-based multilateral trading system and join hands with our trading partners to remove trade barriers. This has helped develop a favourable and sustainable business environment and safeguard Hong Kong's commercial interests.

73. Hong Kong, as a separate customs territory, has signed trade agreements with various economies and continuously expanded its Free Trade Agreement (FTA) and Investment Promotion and Protection Agreement (IPPA) networks.

74. The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) is the first FTA concluded by Hong Kong. It is also the most liberal trade agreement ever signed by the Mainland. We are discussing with the Central Government further expansion and enhancement of CEPA, with the aim of achieving some concrete results by the middle of this year. In addition, we will continue our FTA negotiations with the Association of Southeast Asian Nations (ASEAN) as well as Georgia on the land route and Maldives on the maritime route under the Belt and Road Initiative.

75. The IPPA between Hong Kong and Canada entered into force last September. Together with that concluded with Chile last November, the number of IPPAs signed by Hong Kong has increased to 19. We concluded the negotiation with Mexico and initialled the draft text in January this year. Looking ahead, we will continue our efforts to negotiate IPPAs with Iran and Russia.

Trade Single Window

76. The establishment of a Trade Single Window is high on the Government's agenda. It will provide a one-stop electronic platform for the lodging of trade documents, promote cross-border customs co-operation and expedite trade declaration and customs clearance with a view to facilitating trade. The dedicated Project Management Office is maintaining close liaison with the industry to enhance the pre-shipment and post-shipment declaration arrangements to ensure that only the most essential information will be required for customs clearance. We aim to roll out the initiative by phases as soon as practicable to keep Hong Kong in line with the international trend.

Maritime Industry

77. The Hong Kong Maritime and Port Board was established last April to work closely with the industry to foster the long-term development of high value-added maritime and port services. In the next five years, Invest Hong Kong will strengthen its promotional activities overseas and in the Mainland, focusing on the development of Hong Kong into a maritime services hub in the region, as well as a platform connecting the Mainland with the maritime industry in other parts of the world.

Aviation Industry

78. Based on the assessment by the Joint Works Committee of the Three Governments, the three sides will strive to complete the construction of the entire Hong Kong-Zhuhai-Macao Bridge (HZMB) project by the end of this year for early simultaneous commissioning subject to factors such as the implementation of cross-boundary transport arrangements. We are looking at various possibilities to better connect Hong Kong and places in the Pearl River Delta (PRD) region upon the commissioning of the HZMB. We will also consider the provision of cross-boundary helicopter service between Hong Kong and PRD cities to further enhance cross-boundary transportation services with a view to developing more diversified commercial and other economic activities in the region.

79. To facilitate transit passengers travelling between the Hong Kong International Airport (HKIA) and the PRD region via the HZMB in the future, the Airport Authority Hong Kong (AA) has suggested providing two-way land-to-air shuttle bus service to take these passengers direct to the Restricted Area of the HKIA for outbound flights. Overseas passengers travelling to Zhuhai and Macao via the HKIA may also benefit from the service. We are actively discussing the detailed arrangements with the two governments, the AA and relevant organisations.

80. Rapid development of the civil aviation industry in Asia in recent years has generated a long-term demand for aircraft leasing in the market. The proportion of new aircraft being financed by leasing has exceeded 30 per cent worldwide. Over the next 20 years, the number of global aviation passengers is expected to grow at about five per cent per annum, and that of new aircraft delivered is estimated at over 39 000, valued at about US$5.9 trillion.

81. Aircraft financing is a very promising global business. As the tax factor is one of the key considerations for aircraft financing companies in selecting the place of domicile for their business, the Government plans to introduce a bill into the Legislative Council (LegCo) in 2017 to amend the Inland Revenue Ordinance to offer tax concession. Such concession will attract aircraft leasing companies to develop their business in Hong Kong, thereby creating job opportunities for both the financial and aviation industries, and will further consolidate Hong Kong's position as an international financial centre.

Air Cargo Industry

82. The HKIA has been the world's busiest cargo airport in the past six consecutive years. The cargo handled by the HKIA accounts for less than two per cent of our total cargo volume by weight, but makes up nearly 40 per cent of our exports and imports by value, contributing significantly to our economy.

83. The strong growth of cross-boundary e-commerce in recent years has generated new opportunities for the air cargo industry. To capitalise on these opportunities, the AA has taken an array of measures, which include reserving land on both the airside and landside in the South Cargo Precinct, so as to support the growth in transhipment, cross-boundary e-commerce and high value-added air cargo business. The AA is working with Hongkong Post to explore ways to enhance the handling capacity and operational arrangement of the Air Mail Centre at the HKIA.

84. The AA and the industry are striving to enhance the HKIA's capacity to handle high-value temperature-controlled goods, such as pharmaceuticals, by upgrading hardware and software so as to attract more transhipment of such goods via Hong Kong. The Government and the AA will actively examine facilitation measures to promote air-to-air transhipment in Hong Kong, with a view to enhancing the HKIA's competitive edge as an international air cargo hub.

85. In view of the rapid development of high value-added third-party logistics services over the past decade, the Government has been identifying suitable sites to facilitate and to further enhance the strengths of our logistics industry in this area. Three logistics sites in Tsing Yi made available by the Government totalling about 6.9 hectares were sold by open tender in 2010, 2012 and 2013 respectively, providing a total of some 280 000 square metres of floor area. The Government has reserved two more sites in Tuen Mun West totalling around ten hectares for high value-added logistics services. We will endeavour to release the land for use by the industry as early as practicable.

86. We will continue to promote the development of high value-added logistics services so as to strengthen Hong Kong's position as an international aviation and maritime centre.

(To be continued.)

Ends/Wednesday, February 22, 2017
Issued at HKT 11:56

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