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Following is a speech by the Secretary for Trade and Industry, Mr Chau Tak Hay, at the 38th Annual General Meeting and Members' Luncheon of the Federation of Hong Kong Industries today (Friday):
Government-Private Sector Partnership
Mr Tang, ladies and gentlemen :
Introduction
It has been three years since I last addressed the Federation of Hong Kong Industries in my capacity as Secretary for Trade and Industry. Wearing that hat again after an absence of two and a half years, I am delighted to have the opportunity today to enjoy the warm hospitality of the Federation.
I would like to share with you some of my thoughts about developments on the trade front, their implications for Hong Kong and how the Government and the private sector can work together in furthering our economic growth.
Multilateral Trading System
Last month I led the Hong Kong, China delegation to attend the second Ministerial Conference of the World Trade Organisation (the WTO for short) and to celebrate the 50th Anniversary of the General Agreement on Tariffs and Trade (the GATT in short) in Geneva. These are significant events in the development of the multilateral trading system. For they encapsulate the many opportunities and challenges brought about by trade liberalisation.
Back in 1948, 23 industrialised countries got together and cut import tariffs on each other's goods under the then newly created GATT. As the first multilateral accord to lower tariff barriers, the GATT set in train a series of agreements and global trade talks that removed many of the shackles restricting trade. Today, the WTO, created in 1995 by the Uruguay Round of global trade talks, has 132 members and 31 more are waiting to join. Average tariffs of member countries and regions are a mere tenth of what they were when the GATT first came into being. The WTO has continued to oversee impressive growth in world trade. In 1997, we saw the volume of world merchandise trade grow by 9.5%.
Hong Kong attaches much importance to the multilateral trading system and the activities of the WTO. As a small economy which is heavily dependent on external trade, Hong Kong has benefited enormously from the fundamental strength of the system. A stable, rule-based, transparently operated and non-discriminatory multilateral trading system helps protect the interests of Hong Kong businessmen in the global market, and provides a greater degree of certainty and predictability for our investors. We therefore expect the WTO to chart an agenda that will not only further trade liberalisation, but also strengthen the existing rules. The aim is for the multilateral trading system to continue to meet the needs and challenges of an increasingly globalised and technology-driven world economy.
I am therefore pleased with the outcome of the second WTO Ministerial Conference. The Conference underlined the crucial importance of the multilateral trading system. Against the background of the recent financial turmoil in Asia, we are satisfied with Ministers' reaffirmation that keeping all markets open must be a key element in a durable solution to these difficulties. We are also glad that Ministers rejected the use of protectionist measures. In addition, Ministers agreed to establish a process to prepare for the third Ministerial Conference to be held in the US in late 1999. Such a process will require the WTO General Council to submit to the third Ministerial Conference recommendations on the WTO's future work programme. This programme will need to include further liberalisation which is sufficiently broad-based, so as to respond to the range of interests and concerns of all members. The third Ministerial Conference is expected to decide on the scope, structure and time frame of the multilateral trade negotiations for the new millennium. It is also mandated to evaluate the implementation of individual agreements and the realisation of their objectives.
Hong Kong is also delighted at the adoption of the Ministerial Declaration on Global Electronic Commerce. In view of the huge impact modern telecommunications and computing technology have on the way we do business all over the world, it is important for the WTO to begin a work programme to examine all trade-related issues involving electronic commerce. The agreement of WTO members to continue the current practice of zero customs tariffs on electronic transmissions is also welcome.
It is encouraging to see the second Ministerial Conference provide a fresh impetus for the world to move in the direction of further trade liberalisation. We are living in an increasingly globalised world where, as this audience knows, trade liberalisation provides a win-win situation for all. Liberalisation of international trade in goods and services facilitates a more efficient use of scarce resources both in the importing and exporting economies and will present substantial market access opportunities to our traders and industries. The liberalisation of the infrastructural sectors, namely financial services, telecommunications services and information technology, following last year's WTO agreement, will benefit a wide range of industries, including manufacturing industries and related services such as design, product development, transport and, marketing. Consumers will also benefit significantly from trade liberalisation, which will enhance competition, improve efficiency and hence reduce operating costs.
So the opportunities brought about by trade liberalisation are immense. These opportunities are presented in terms of increased market access. But there are also challenges, which are presented in terms of maintaining our competitiveness and of tackling excuses for protectionist measures. In order to enable our economy to fully reap the benefit of these opportunities and to be able to meet the challenges, a close partnership between the private sector and the Government is essential.
The Partnership
For the Government's part, this partnership sees the Government safeguarding our trading interests externally, and providing a business friendly environment for our industries, be they manufacturing or services, to flourish internally. Translated into concrete action, in safeguarding our trading interests in the world market, we have been and will continue to pursue actively the idea of launching a balanced, broad-based and comprehensive package of multilateral trade negotiations before the start of the 21st century. We expect such negotiations to inject a strong impetus into multilateral trade liberalisation, help set a visionary agenda for the WTO in the new millennium and enhance the credibility of the WTO as a leading international organisation. We will also strive to sustain the momentum of trade liberalisation carried over from the Uruguay Round and continue to play an active and constructive role in the WTO, seeking to ensure the best possible market access for our traders both in goods and services.
As an important part of our work to promote free market access for our traders, the Government is striving to remove all sorts of trade barriers put up at the importing end to one of our major products --- textiles and clothing. These unfair measures, while having their historical reasons, are no longer justified when liberalisation and globalisation have become the world trend. With the demise of the Multi-Fibre Agreement, we were, once, hopeful that the Agreement on Textiles and Clothing, with its provisions for phasing out quotas, would restore some economic sense to the textile trade. But, regrettably, the implementation by the importing countries of their obligations under the Agreement on Textiles and Clothing has been disappointing. Liberalisation of the textiles and clothing trade has not been as meaningful as it should have been. The Government will continue to monitor closely the implementation. We want to see no discriminatory measures imposed on us and that importing economies are meeting their obligations in accordance with the spirit as well as the letter of the Agreement on Textiles and Clothing. We will not be shy to make our voice heard in multilateral forums and to take appropriate action if we consider that our interests are encroached upon.
Whilst we are urging others to fulfil their obligations under the Agreement on Textiles and Clothing, we ourselves must be doing the same. That is, as long as export quotas continue to exist under the Agreement, we must make sure that exports of textile and clothing products from Hong Kong using Hong Kong quotas meet our rules of origin. This is the best way to maintain our legitimate access to our traditional markets. This is also the best argument that we can use to combat discriminatory measures imposed by importing countries.
More fundamentally, illegal transhipment activities and origin malpractice undermine the credibility and status of the Hong Kong Special Administrative Region as a separate customs territory and hence our reputation and wider interests as a leading member of the international trading community. The Government therefore attaches great importance to upholding origin compliance. To this end, we will use all available measures to maintain the integrity of our textile export control system.
By now the role of the private sector in this partnership should be abundantly clear. For ultimately the effectiveness or otherwise of the Government's endeavours will depend on our own traders. The consequences are also ultimately theirs to bear. Our businessmen are encouraged to make full use of the increased market access to create wealth for our economy. At the same time, in the interest of preserving and furthering its own well being, our trading community is encouraged to render help and cooperate with the Government, not only in combatting illegal transhipment, but also in upholding our reputation as a responsible trading partner in general.
From the external environment, I turn to the internal one. I have earlier said that the Government is committed to providing a business-friendly environment for our industries to flourish. The rule of law, a level playing field for all, good infrastructure and respect for intellectual property rights, to name but a few, are part of this environment. More specifically, our industrial support policy is also geared towards providing a comprehensive programme with maximum support for the development of our manufacturing and services industries.
While maintaining the long-established principle of free market economies, we have set up different industrial support organisations such as the Hong Kong Productivity Council and the Hong Kong Industrial Estates Corporation. We are also committed to the timely provision of new infrastructural facilities such as the Science Park and the second industry technology centre. Besides, we have established different funding schemes to finance projects which are beneficial to the competitiveness of our industry e.g. the Industrial Support Fund, the Applied Research Fund and the Services Support Fund. We strive, through our industrial support programme, to create a conducive environment for our industries to grow. Given the presence of so many industrialists in the audience, I will not bore you by describing each of these support organisations, fundings schemes or infrastructural projects in detail. But I would like to stress that the range of support services and facilities has been developed to meet the needs of the business community. So for this partnership to work, there is no better way than for the business community to make full use of these services and facilities and to let the Government know how it may be further improved.
This brings me to my next point. We cannot be complacent. In order to sustain our competitiveness in global markets, we fully recognise that the only way forward for Hong Kong industries is to move to higher value-added and more knowledge-based activities. To ensure that our industrial support programme keeps pace with this market trend, we will continue to build on existing measures and introduce new ones. An example of improving existing measures is the Applied Research Fund. With the injection of additional money at the beginning of this year, it is now a fund with some $750 million to support technology ventures. In order to improve its operation and effectiveness, we are now in the process of engaging private sector professional fund managers to manage the money.
As for newer measures, we have established the Chief Executive's Commission on Innovation and Technology. The Commission is an important organ in helping us fulfil the Chief Executive's vision of making Hong Kong a regional innovation centre. Achieving this target will not only benefit Hong Kong but also add value to our economic hinterland. The Commission, chaired by Professor Tien Chang-lin, is now considering ways to add value to our industries so as to enhance their competitiveness in the global market. The Commission has held three meetings since its establishment in March this year, and is expected to submit an interim report to the Chief Executive in October and finish its work in another 12 months' time. I am happy to report that the Commission is now actively looking at ways and means to strengthen the links between industry and local academia, to facilitate technological collaboration with the Mainland and to foster a culture of innovation in Hong Kong. I believe that the Commission's recommendations will play a significant part in our strategy to enhance our support to the development of innovative and high value-added industries in Hong Kong.
Way Forward
The Government and the private sector have a long-standing partnership which is co-operative and mutually beneficial. Together we have seen Hong Kong's economy grow over the years. In many ways, the private sector has a key role to play to make the Government's effort meaningful. Through a mutually beneficial iterative process, the private sector and the Government have tackled many challenges. This needs to continue. As we all know, we are undergoing a difficult period of adjustment. But with the concerted effort of the community at large, we should be able to weather the storm. To revitalise the economy, the private sector has a major part to play. Our businessmen are well known for being able to capitalise on Hong Kong's competitive edge. They will have to sharpen their vision and adopt a longer perspective in positioning themselves in the move away from low value activities to high quality, high value-added industrial production and services. They will have to set an example by responding quickly to regional and world demands.
If I may close on a brighter note, we should perhaps take solace from international surveys which continue to regard Hong Kong as a competitive economy. For example, the Global Competitiveness Report 1998 by the World Economic Forum ranks Hong Kong as the second most competitive economy in the world. We therefore should not lose faith in Hong Kong's long-term growth potential. We should not lose confidence in ourselves. I would urge the private sector to continue to work with the Government to ease the adjustment process for the long term benefit of our economy.
Thank you.
End/Friday, June 26, 1998
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