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Following is the speech by the Chief Executive, Mr Donald Tsang, at a Gala Dinner co-hosted by the Belgium-Hong Kong Society and HKETO Brussels at Chateau de Grand-Bigard in Brussels tonight (November 7, Brussels time):
Distinguished guests, ladies and gentlemen,
Good evening. I am delighted to be back in the wonderful city of Brussels and dining with you in this magnificent old castle. We have several world class meeting venues in Hong Kong - but, I must say, we don't have anything quite like this.
Brussels and Hong Kong have a great deal in common. You are at the heart of Europe, host to several major international organisations. We are an international financial and commercial hub in Asia. Both places have developed into cosmopolitan cities that are wide open to the world.
Not only is Belgium an important trading partner for Hong Kong, it is also a pioneer in negotiating agreements with us such as our landmark Avoidance of Double Taxation Agreement. This important Agreement adds to Hong Kong's many attractions as the preferred location for doing business. European companies are attracted as a result to Belgium to do business with Hong Kong and the Mainland of China. In parallel, Mainland enterprises are attracted to Hong Kong to do business with Belgium and Europe. So the agreement is instrumental in the deepening of the already close bilateral relations between Belgium and Hong Kong.
Ladies and gentlemen, this evening I would like to update you on how Hong Kong is sharpening its competitive edge, our economic strategy for leveraging our closer ties with the Mainland of China, and the many opportunities this strategy opens up for European companies.
Next July First will be the tenth anniversary of Hong Kong's reunification with China. In the decade since 1997, Hong Kong has retained its freedoms and its capitalist way of life under the unique concept of "One Country, Two Systems", which has proved to be extremely successful. Hong Kong continues to be a progressive, stable and free society. We continue to grow our institutional strengths that set us apart in Asia - the rule of law, upheld by an impartial judiciary; a level playing field for business; the free flow of information and capital; an efficient, corruption-free administration; and low and simple taxes.
Taking advantage of our institutional strengths are well over 3 800 overseas companies that have set up regional operations in Hong Kong. That's a record high. Since 1997, the number has grown by over 50 per cent, confirming Hong Kong as the most popular place in Asia to establish a base. These companies recognise Hong Kong's value as the best platform for doing business, not only with the Mainland of China, but also in the Asia-Pacific region as a whole.
Thanks in large part to the successful implementation of "One Country, Two Systems", international public policy think-tanks continue to recognise Hong Kong as the world's freest economy - year in and year out.
Hong Kong may have only 7 million people, but it is the world's 11th largest trading economy. We have the world's busiest airport for international air cargo, and we actively seek to expand our air services agreements to boost the connectivity of our international and intra-China passenger and cargo services. Our container port is one of the busiest and most efficient you will find anywhere. More important, we are the Mainland's primary trade and investment hub, and we are each other's closest economic partner. In virtually all Mainland provinces, Hong Kong companies form the largest source of external investors.
In Guangdong Province adjacent to Hong Kong, for example, some 80 000 Hong Kong-linked enterprises employ more than 11 million workers. Within Guangdong, the Pearl River Delta has become one of the Mainland's primary economic engines, known as the "factory of the world". The Greater Pearl River Delta, including Hong Kong and Macau, is developing into one of the most prosperous and vigorous economic centres in the world, with Hong Kong being a major international services centre and Guangdong a dynamic manufacturing base.
In this and many other ways, the rapid economic growth in the Mainland of China has opened a wide array of opportunities for Hong Kong, and reinforces our role as a two-way business platform for the Mainland market.
The Central Government certainly appreciates Hong Kong's crucial role in China's growth. The current Eleventh Five-Year Plan of my country recognises our pillar industries - financial services, logistics, tourism and information services - and upholds Hong Kong's status as an international centre for finance, trade and shipping. To cite one example, the State Council is actively pursuing the expansion of renminbi business in Hong Kong - we are a testing ground for the convertibility of the renminbi in the international market. We have the financial infrastructure necessary for such experiment. Hong Kong is not just another Chinese city. It is a world city belonging to China, performing a unique and irreplaceable role in our nation's development. To excel in this role, we must constantly upgrade ourselves and sharpen our competitive advantages.
With this objective in mind, I convened an Economic Summit in Hong Kong two months ago to address the challenges and opportunities presented by our country's the Eleventh Five-Year Plan. In collaboration with leaders in our business, labour and professional sectors as well as eminent scholars in our universities, we are drawing up an action agenda, to be ready by early next year, to chart a path forward for the further development of our economy.
This includes bolstering our status as an international financial centre. That requires continuing liberalisation of our financial market operating within the most advanced global standards. This is our way of sharpening our competitive edge and attracting new types of financial business to Hong Kong. For example, as home to the world's eighth largest stock market and Asia's second largest, we aim to broaden the source of enterprises seeking to list in Hong Kong. We are also studying the development of a commodity futures market, all the while making sure our regulatory regime keeps up with the best international standards.
Hong Kong used to be the exclusive gateway into China. But since China joined the WTO five years ago, the business landscape has changed. Nowadays, more companies are exploring the direct route into the China market. So, the question arises: Is Hong Kong still the best route into China, or should companies today go directly into the Mainland?
The answer depends on an enterprise's size and needs. What Hong Kong provides is a platform where companies can get their foot in the door - particularly small and medium-sized enterprises. In addition to the institutional strengths I mentioned earlier, Hong Kong provides a business-friendly environment, including a communications and transport infrastructure second to none in Asia. But perhaps our most important asset is the many companies operating in Hong Kong with the know-how, contacts and experience to give SMEs a head start in China. European SMEs don't have to reinvent the wheel; Hong Kong enterprises have had the cogs turning in the Mainland for decades.
As for multinational corporations, Hong Kong is a clear leader in Asia as an international financial and professional services centre. In terms of project financing, corporate governance and the free flow of information, Hong Kong has few rivals.
So, at both ends of the spectrum - small companies taking their first steps in Asia and major blue chips looking for a premium business location - Hong Kong has proven itself.
It is a common practice for many governments to attract trade and investment by offering tax, land or financial incentives. Hong Kong does not believe in that. We believe that tax incentives grafted on a high and progressive tax base is illusory and ephemeral. Hong Kong's best incentive lies in the quality of our business environment and a simple and low tax structure across the board. We are also located at the heart of the fastest growing economic region.
And it works. In the World Investment Report 2006, issued by the United Nations Conference on Trade and Development, Hong Kong retained its position as Asia's second largest destination for foreign direct investment. We were behind only the Mainland of China last year, and together we accounted for over half of FDI inflows in Asia.
You all know how the economy of the Mainland of China has been powering along at close to double-digit growth. Hong Kong's economic performance has been nearly as notable in recent years. Our gross domestic product rose by 8.6 per cent in 2004, 7.3 per cent last year and 6.6 per cent in the first half of this year. This is outstanding growth for a developed economy like Hong Kong's. It is all the more impressive considering that we've endured the Asian financial crisis of 1997 and '98, and the SARS outbreak of 2003.
Ladies and gentlemen, allow me to give you two prime examples of how Hong Kong is using its strengths, advantages and international connectivity to enhance economic co-operation with the Mainland of China and open up new business opportunities for both overseas companies and those from Mainland China.
The first is our Closer Economic Partnership Arrangement with the Mainland. Commonly known as CEPA, it provides tariff-free access to the Mainland market for Hong Kong goods, as well as enhanced access in 27 services sectors. Even after China's WTO commitments are fully implemented, CEPA offers supra-WTO access for Hong Kong companies in manufacturing and most services sectors. This arrangement, akin to a free trade agreement, is possible because under "One Country, Two Systems" both Hong Kong and China are members of the WTO, in our own right.
When we talk of "Hong Kong companies", we mean that any locally incorporated subsidiary of an overseas company is treated the same as a local company. Since CEPA was implemented in 2004, more than 1 000 companies have secured service supplier certificates in sectors such as transport and logistics, distribution, advertising, construction professional services and management consulting. Of these 1 000-odd certificates, roughly half are held by foreign linked companies and 120 by EU-linked corporations.
As we continue to work with the Mainland authorities to broaden and deepen CEPA, it will provide an even more favourable business platform for international companies to enter the Mainland market via their Hong Kong operations, or to team up with established operators in Hong Kong to do the same.
The second example of how Hong Kong and the Mainland are working together is the Pan-Pearl River Delta initiative, or Pan-PRD for short. This brings together the nine southern provinces of China plus the two Special Administrative Regions of Hong Kong and Macau, all working to unleash the economic potential of a huge, integrated economy in southern China - a market of more than 470 million people, about the same population as the EU's. China is not yet a unified market. It is an agglomeration of markets with differing customs and business procedures in different provinces and even within different cities of the same province. Our main aim is to break down these non-tariff barriers to trade and investment, thus enhancing the flow of talent, capital, goods and services within this economic caucus. While Hong Kong provides capital, international know-how and global connectivity, our Pan-PRD partners provide land, abundant labour, local market know-how and enhanced market access. This is a mutually beneficial relationship that allows full play of each other's strengths and advantages.
Co-operation under the Pan-PRD umbrella extends beyond trade, commerce and investment to embrace infrastructure, education and culture, IT, environmental protection, tourism, as well as public health and prevention of infectious disease. The close cooperation among the Pan-PRD partners allows Hong Kong to not only contribute to our country's engagement with the world on the economic front, but also deepen our relationship within the Mainland of China across a wide spectrum of important sectors. Such cooperation has resulted in an enhanced understanding in the Mainland of what underpins Hong Kong's success as a world city, and a deeper appreciation in Hong Kong of the growing strengths of the Pan-PRD provinces, as well as enhanced avenues for cultural, tourism and professional exchanges. We believe that the Pan-PRD initiative can serve as a model for ongoing economic liberalisation and opening up in the rest of the country.
The upshot of all this is that Hong Kong is now poised to enter a new phase of development, a phase of development firmly underpinned by a competitive advantage that is second to none in Asia and our ready access to a vast market in the Mainland of China. Like Brussels, Hong Kong will be the hub of a vast and increasingly prosperous regional economy. And, we have a clearly defined role in our nation's development blueprint for the next five years.
Ladies and gentlemen, the honing of our competitiveness as an international financial, trade and business services hub, our growing interaction with the Mainland of China, CEPA and Pan-PRD - all these mean that Hong Kong is perfectly placed to take advantage of China's extraordinary growth. As Asia's world city, Hong Kong has much to offer European investors in this new era of development.
Thank you very much.
Ends/Wednesday, November 8, 2006
Issued at HKT 05:09
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