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Following is a speech (English only) by the Chief Secretary for Administration, Mrs Anson Chan, at a luncheon co-organized by the HKSARG, the Hong Kong Trade Development Council, the Mexican Foreign Trade Bank and the Mexican Business Council for International Affairs in Mexico City, on Monday (June 21, Mexico time):
Dr. Blanco, Mr. Vilatela, Mr. Guajardo, Mr. Sze, ladies and gentlemen,
Thank you for such a warm welcome. It is a great pleasure and a great honor to visit this wonderful country, and to have this opportunity to speak with you today. This is our first official promotion in Mexico, but I am sure it will be the first of many more to come.
One of the major reasons that we have come to Mexico is to personally extend the hand of friendship. We are already friends, that is true. Mexico has had a Consulate-General in Hong Kong since 1966, which over the past 33 years has worked very hard to strengthen ties between Hong Kong and Mexico. Hong Kong is home to a number of representative offices for Mexican companies as well as the Mexican Business Association of Hong Kong, which is the first association of its kind in Asia. Hong Kong and Mexico also share the same commitment to free trade and open markets in such fora as APEC and the WTO. But I hope that this inaugural visit will lay the foundations for an even closer, stronger relationship and the development of new trade and business links between Mexico and Hong Kong.
Our bilateral economic ties are still in the early stages of development. But this simply means there are plenty of opportunities that have yet to be fully explored. World trade figures tell part of the story - in 1998 total two-way trade between Hong Kong and Mexico was about US$843 million. Yet, together our two economies accounted for about US$609 billion worth of trade last year. That was more than 5.5% of total world trade. Looked at from another angle, bilateral trade between Hong Kong and Mexico was less that 0.14% of our combined total trade in goods in 1998. This is what I would call 'untapped opportunity'.
So what does this mean? In simple terms we could say: "There's still plenty I can sell you; and there's still plenty you can sell me."
One might then ask: But why should we change the equation?
A wise man once said that: "A man's feet must be planted in his country; but his eyes should survey the world." This visit to Mexico, I hope, will lead more Hong Kong entrepreneurs to turn their eyes towards this part of the world. In the same vein, I hope that more Mexican businessmen will look to Hong Kong as the natural base from which to capitalize on new and emerging opportunities in the Mainland of China and East Asia.
Now, let me tell you why I think this is the right direction for both of us.
The major reason is that the global trading and investment environment is changing, and changing fast. The Asian financial crisis is a painful example of just how fast and furious the economic fortunes of not one country, but an entire region, can be turned around. In Hong Kong, our economy has suffered its worst decline on record, and we have had five consecutive months of negative GDP. Last year our GDP declined by 5.1%, after growth of 5.3% in 1997 and average annual growth of 3.7% over the previous decade. Unemployment is at record levels. Asset values have dropped by 40 to 50% in the space of 18 months. As you can see, it has been a very painful experience. It has also been a very necessary experience to regain our competitive edge. But, most importantly, it has been an enlightening experience.
But in the first five months of the year, there have been some promising signs. The property market has stabilized and there has been healthy buyer interest in competitively priced new units coming onto the market. This has been helped by a lowering of interest rates, and an easing of the credit crunch. Our government land auction in April - the first since a moratorium was introduced in June last year - attracted good buyer interest. The three lots on offer were sold at 20-30% above market expectations. The stock market has been more active, and rather more liquid than it was in 1998.
However, despite improving local and overseas sentiment, I believe 1999 will continue to be difficult in Hong Kong. We have probably hit the bottom of the trough, but will stay at this level for some time. We expect, all going well, to see the economy begin to pick up towards the end of the year.
One of the valuable lessons we learnt was just how closely-knit the world economies are. What started with a seemingly innocuous devaluation of the Thai baht on July 2, 1997, quickly led to a massive flight of capital from East Asia. Russia defaulted on its loans. And then the South American currencies and economies came under severe pressure.
We have watched with admiration how your Government and community have worked to turn the Mexican economy around in the last few years. What subsequently happened in Mexico following the peso crisis is very much like the recovery process taking place now in East Asia - the markets became more open and liberal; there was more privatization; a clear undertaking to achieve stability in interest rates and the exchange rate; determination to achieve a balanced budget. And the Mexican government set out to achieve three main objectives of growth in GDP, lower unemployment and increased living standards.
The dramatic results of the reforms in Mexico have been a surge in trade over the past few years and a significant realignment of the economic base. I have been told that oil now accounts for only 6% of Mexico's export earnings, when once it was 70%. What is really impressive is the fact that Mexico still exports the same amount of oil - but there has been a very substantial increase in earnings from an expanded economic base, particularly manufactures such as cars and auto-parts, electronics, computer components and telecommunications equipment. Mexico provides us all - not only in East Asia, but the whole world - with a very valuable insight into how a crisis can be turned into an advantage if the correct economic measures are taken, and taken with a long-term view.
I would now like to tell you about Hong Kong's long-term future, and how I think Hong Kong and Mexico can work together to our mutual benefit. Almost two years ago, on July 1, 1997, Hong Kong became a Special Administrative Region of China. You may have even seen the Handover ceremonies on television. Under the concept of 'one country, two systems', Hong Kong people have been running Hong Kong with the high degree of autonomy promised under our constitution, the Basic Law. The Basic Law guarantees that Hong Kong's way of life and its capitalist system will remain unchanged for at least 50 years from July 1997 to 2047. The only areas for which we do not have responsibility are foreign affairs and defense.
All of the ingredients of our past success as an international financial and trading center are enshrined in the Basic Law. These include our legal system and way of life; the protection by law of all fundamental human rights; the free movement of goods and capital; the right to free movement to and from Hong Kong; the protection of property rights and foreign investments; freedom of the press and freedom of speech.
We remain a member in our own right to the WTO, the World Customs Organization and APEC. We negotiate our own air services agreements and maintain our own shipping register. More than 200 international treaties, as well as multi-lateral and bilateral agreements continue to apply to Hong Kong.
All of this allows us to maintain and build on our role as Asia's leading international city. We have Asia's second-largest stock market after Japan. More than 320 banking institutions and 134 local representative offices - including 78 of the world's top 100 banks - have offices in Hong Kong. We are one of the world's top four gold markets; the 8th-largest banking center; 7th-largest foreign exchange market; 9th-largest trading entity in goods. We have a very well developed private sector debt market, and we are Asia's second-largest fund management center.
That is where we are today. But what of the future? Like Mexico over the past few years, Hong Kong is realigning its economic base to achieve sustainable and equitable growth in the new millennium. We are reforming our financial markets to make them more competitive and more accountable, especially in the light of global trends such as 24-hour stock trading, electronic-commerce and on-line brokerages. We are branching out into new areas of innovation and technology, and carving ourselves a niche in the development of information technology. On top of this we are building on our traditional strengths such as our close trade and investment ties with the Mainland of China and our strategic position as a communications and transport hub between the time zones of Europe and the Americas.
And, we are also actively 'surveying the world' to look for new opportunities and strategic partnerships which will not only strengthen and expand our economic base, but also that of our newfound partners. That is why I am here today with my colleagues from the Hong Kong Trade Development Council and Hong Kong Tourist Association. The Trade Development Council has an office here in Mexico and can deal with any inquiries, or provide any assistance you may need, in searching for business opportunities in Hong Kong.
During this visit I have a very full and important program, which includes meetings with President Ernesto Zedillo as well as the Foreign Affairs Minister Rosario Green, the Minister for Commerce and Industries Herminio Blanco and the Finance Minister Angel Gurria. On top of that we have launched a tourism campaign for the Millennium, which incidentally coincides with the very auspicious 'Year of the Dragon' in the Chinese horoscope. We have today's lunch, which I am very happy to see has been so well attended. We have a Hong Kong-Mexico gala dinner tonight, at which we expect some 250 people. This morning I had very fruitful talks with some of Mexico's most important business leaders at a meeting kindly hosted by the President of the Mexico Stock Exchange Manuel Robleda. And of course, as with any visit like this, I have had a full round of media interviews with TV and print journalists.
So, how do we take all of this good work forward? No doubt our traditional strengths provide an excellent basis on which to develop the trans-Pacific bonds between Hong Kong and Mexico.
For Mexican businessmen and entrepreneurs, this may mean taking advantage of Hong Kong's position as the pre-eminent gateway to the massive markets in the mainland of China, and greater East Asia. Hong Kong handled almost US$580 million worth of re-export trade from China to Mexico in 1998. The likely entry of China into the World Trade Organization will enhance Hong Kong's middle-man role in this respect. We are the natural conduit for international trade and investment not only for China, but for the entire region. It is our view that China's membership of the WTO will provide all members with better market access, improved transparency and predictability of trade policies and measures. And as we are the Mainland's number one trading partner, we believe Hong Kong has a lot to gain.
We very much want to see China successfully assuming its rightful role in the world trading system. We strongly believe that market liberalization will bring about more business and trade opportunities. China's accession will also enhance Hong Kong's direct involvement in the economic development of the Mainland as more sectors open up to foreign participation. We are well-prepared, and doing more, to make the most of the opportunities ahead. And I would say that if anyone here is looking for opportunities in Mainland China then the best place to start that process is in Hong Kong.
The reason is more than just our natural cultural, language and business links. It is because Hong Kong is also a cosmopolitan, modern city and Asia's premier international business center. More than 2,400 international companies have established a regional headquarters or office in Hong Kong. Among them are 11 Mexican companies, which makes Hong Kong the major base of operations for Mexican business in Asia.
We have advantages and facilities not readily available in other parts of Asia, but which are essential elements in attracting and retaining international business. These advantages include low and predictable taxes, a rock-solid exchange rate, excellent communications, modern infrastructure, a familiar legal system, high living standards, good schools and health care, world-class cuisine and a wide range of cultural and entertainment experiences. I might also add that there are some excellent Mexican restaurants in Hong Kong and, as I am told by those who know about these things, that Sol and Corona beer are among the most popular sold in our nightclubs and bars. So even if you do get a little homesick in Hong Kong you will always be able to revive your spirits.
I believe we have the most business-friendly policies in the world. Individuals pay no more than 15% salaries tax, while corporations pay 16% profits tax. We have no capital gains tax, no withholding tax on dividends and interest, no sales tax, no global taxation and unlimited carry-over of losses. Virtually all goods are duty-free, or tariff free. There are no restrictions on foreign investment. No restrictions on the amount of foreign currency or Hong Kong Dollars that can be brought into, or taken out of, Hong Kong. No restrictions on gold or silver trading. It is about as free a market as you will find anywhere, and that is the way we like it.
On a practical level, we offer all of the services needed for any business to get quickly started. The banking system is open and efficient. It is easy to buy and register a company. Our Industry Department's Investment Promotion Division has a 'one stop unit' to answer all and any inquiries about investing in Hong Kong. There is a deep reservoir of highly-educated and competent bilingual or trilingual professionals in important sectors such as law, accounting and auditing, transport, insurance, business management and consultancy. Local companies have established extensive networks of contacts throughout the region and beyond, and our entrepreneurs are noted for their considerable business acumen and ability to 'strike a good deal'.
Hong Kong's telecommunications facilities are amongst the best anywhere. And since deregulation this year there is a much wider choice of service providers which, in turn, has led to greater competition and lower prices for consumers. We have the world's first, fully digitized telephone network and more than 130 Internet service providers to hook into the world-wide web.
The major pillars of our success have been our level playing field and the rule of law upheld by an independent judiciary. Everybody competes on an equal footing, the government picks no winners. Everyone has access to the courts to pursue or determine commercial disputes. We have a clean and efficient administration, and one of the world's most successful anti-corruption commissions. Our law and order situation is very stable - we have one of the lowest crime rates in the world for a major city.
In business, English remains the language of choice. Along with Chinese, it is one of the two official languages and is widely used in government and in the legal system.
Last year, we opened our new Hong Kong International Airport, which was recently judged one of the top 10 construction achievements of the 20th Century. The airport is an international and regional gateway that handles more than 27 million passenger journeys annually. More than 3,000 flights a week serve some 120 destinations in more than 40 countries.
Hong Kong is blessed with the finest deep-water port in East Asia, which has allowed us to develop a world-class reputation as a shipping center.
These are just some of the areas which I believe Mexican business can use to their advantages when looking to expand their reach into China and Asia. Hong Kong, I believe, is the natural staging post for any new ventures in the region.
On the other hand, I am sure Hong Kong enterprises are eager to expand their reach into Mexico, and also make use of Mexico's role as the natural conduit between the vast markets of the North America Free Trade Agreement and Latin America. The old real estate maxim "location, location, location" comes immediately to mind when you look at the strategic position of Mexico and its increasing importance as a trading nation and a trade facilitator. I believe that these are areas which we will be able to explore during this promotion, and hopefully in the years and decades after.
Hong Kong today remains an open and pluralistic society which welcomes trade, investment and interaction with our partners in the global village. And I very much hope that the Hong Kong-Mexico partnership, in particular, grows and matures in the new millennium.
Finally, I would just like to say - and I hope I get it right:
Que Nuestra Amistad Perdure Para Siempre
[Kay / new-estra / army-stud / pear-do-ray / para / see-empray]
May our friendship last forever.
Thank you.
End/Tuesday, June 22, 1999
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