****************************************
Following is the full text of the speech (English only) by the Financial Secretary, Mr Donald Tsang, at Hong Kong and South Africa : "Strategic Partners into the New Millennium" Plenary Session at Pretoria today (Monday, HK time):
Minister Erwin, ladies and gentlemen,
Thank you for the warm welcome. It is a great pleasure and an honour to be here today and for the opportunity to say a few words about what I hope will be the start of a new era in trade and economic ties between South Africa and Hong Kong.
In reality, the partnership between China - of which Hong Kong forms an integral part - and Africa, goes back nearly 600 years when the Chinese fleet under Admiral Cheng Ho landed on the East Coast of Africa. That was during his voyage of 1421-1424 which resulted in the establishment of official relations between the Ming court and the rulers of a number of East African states.
So you can see, the evolution of our current economic and trade relations has been a slow process. But with the political changes and the restructuring of African economies now taking place, we see a great opportunity to give full meaning to the strategic move by Admiral Cheng 600 years ago, and rekindle a new generation of co-operation and development.
One manifestation of this has been the two-way exchange of economic and business visits, and the opening up of the Hong Kong Trade Development Council's office in Johannesburg some four years ago.
Hong Kong is home to a growing number of representative offices for South African companies - at last count it was around 20, including your top five banks - as well as the South African Business Forum. They are rubbing shoulders with 2,400 other international companies that have established a regional headquarters or office in our city.
1998 was a poor year when our total two-way trade dipped to US$1 billion. This represented a decline of 21 per cent over the previous year - a decline fuelled no doubt by the continuing impact of the Asian financial crisis on the economies in both our regions. But, even discounting this fact, our bilateral trade over the past few years has been well under 1% of Hong Kong's total trade.
Investment is also in its infancy. At the beginning of 1997, Hong Kong companies had invested some US$187 million in South Africa; while South African investment in Hong Kong was put at some US$77 million by the end of the same year.
To me, this simply means there are plenty of opportunities that have yet to be fully explored and exploited to our mutual benefit.
I hope this visit will result in more Hong Kong entrepreneurs turning their eyes towards this part of the world. And, conversely, we want to see more South African businesses looking to Hong Kong for investment and trade, and as the natural base from which to capitalise on new and emerging opportunities in the mainland of China and East Asia.
Why do 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 it could rapidly turn around the economic fortunes of not one country, but an entire region.
In Hong Kong, our economy has suffered its worst decline on record. Last year our GDP fell by 5.1%, after growth of 5.3% in 1997 and average annual growth of 3.7% over the previous decade. Unemployment has been at record levels. Property prices dropped by 40 to 50% in the space of 18 months. It was a sharp wake up call. And a very salutary experience to regain our competitive edge.
Fortunately, the first half of this year has shown some promising signs. The property market has stabilised and there has been healthy buyer interest in competitively-priced new units coming onto the market. A lowering of interest rates, and an easing of the credit squeeze have helped the recovery. The stock market has been more active, and rather more liquid than it was in 1998. And tourist arrivals have shown significant gains.
Nevertheless, I believe that convincing signs of full recovery will only appear towards the end of the year, by which time we hope to achieve a very small GDP growth of around 0.5% for 1999 as a whole.
Armed with this information, you may be wondering how we can work together to our mutual benefit. Just over two years ago, on July 1, 1997, Hong Kong became a Special Administrative Region of China.
Under the concept of 'one country, two systems', Hong Kong people are running Hong Kong with the high degree of autonomy promised under our constitution, the Basic Law. This guarantees that our way of life and capitalist system will remain unchanged for at least 50 years until 2047. The only areas for which we do not have responsibility are foreign affairs and defence.
So all of the ingredients of our past success as an international financial, business and trading centre remain in place. These include the rule of law, based on the common law system. An independent judiciary. The protection by law of all fundamental human rights. The free movement of goods and capital. The right of free movement to and from Hong Kong. The protection of property rights and foreign investments. Freedom of the press and freedom of speech. And we don't pay taxes to Beijing!
We continue to build on our role as Asia's premier international city. We are one of the world's top four gold markets; the 8th-largest banking centre; 7th-largest foreign exchange market; 9th-largest trading economy. We have a well developed private sector debt market, and we are Asia's second-largest fund management centre. All this in a tiny land area of 1,100 square kilometres. In South African terms, that's about twice the size of Pilanesberg National Park, but with a population approaching 7 million!
That is where we are today. But what of the future? Like South Africa 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 looking for new opportunities and strategic partnerships. That's why I'm here today with such an impressive business mission.
So, how do we take this forward?
For South African businessmen and entrepreneurs, this may mean taking advantage of our position as the pre-eminent gateway to the massive markets in the mainland of China, and greater East Asia.
Hong Kong handled almost US$600 million worth of re-export trade, mainly from China, to South Africa in 1998 - that's nearly two thirds of our total trade with you. The likely entry of China into the World Trade Organisation will enhance our middle-man role and boost our direct involvement in the Mainland's economic development as more sectors open up to foreign participation.
As the springboard to China, Hong Kong has no equal. We are part of that great country with a unique cultural, constitutional and commercial access to its markets. But we have our own distinct and separate systems that I touched on earlier. It includes being a separate customs territory with a clearly defined boundary. This enables a South African businessman to tap the rapidly growing new markets in the mainland of China from a secure base in Hong Kong, with his transactions radiating from, and protected by, our well established common law system with which South Africa is so familiar.
But our role as a facilitator goes much deeper. As a regional distribution hub and a leading convention and exhibition centre, we can assist South African companies in promoting their products to the tens of millions of consumers in East Asia. And I was delighted to see the South African presence, for the first time, at the Hong Kong Gifts and Houseware Fair earlier this year. It's Asia's largest, and widely regarded as the shop-window to the world.
This is an example of the advantages and facilities we have that are not readily available in other parts of Asia, but which are essential elements in attracting and retaining international business.
Your location as the gateway to southern Africa with its market reach of almost 200 million people is an added incentive for Hong Kong companies wanting to invest in South Africa. And you have the best infrastructure and services in the region with which to access that market.
And Hong Kong people love to travel. So, I'm sure you can capitalise on the natural beauty and diversity of your tourist attractions to entice even more of our people to visit this wonderful part of the world.
With such opportunities, I believe it's time to look at how we can strengthen the Hong Kong-South Africa partnership. Perhaps we could achieve this through developing a strategic alliance on economic and trade co-operation at two levels - government and business - to better position ourselves into the new millennium.
Such an alliance will require further discussion. But the most important factor is to encourage and facilitate our private sectors. We must make them appreciate that globalisation will continue to change the trading scene at a rapid pace. Traditional markets are not always secure and new markets yield unrivalled opportunities and potential. Business opportunities abound in our respective regions. Governments can help show the way, but it's up to the private sector to make the running.
Another avenue to pursue is the scope for reaching a comprehensive double-taxation agreement with South Africa. In its simplest form, these agreements avoid the same income being taxed by two jurisdictions. Hong Kong already has an arrangement with the mainland of China and we are now in discussion with a number of other key countries.
I believe the conclusion of a comprehensive double taxation agreement between us would provide an added incentive for Hong Kong and South African businesses to redouble their efforts in furthering bilateral trade and investments.
There are many areas for mutual co-operation which we can develop through a wide range of government-to-government contacts. There is even more scope and flexibility in the private sector in promoting our bilateral economic relationship, although I will gladly leave this to those members of the delegation who can do it far better than me.
But from discussions with representatives of the South African Consulate-General in Hong Kong, I believe our experience and active involvement in aspects of the work of the WTO, and the regional grouping APEC could be used to our mutual advantage.
This would be relevant in the lead up to the WTO meeting in Seattle later this year, particularly in relation to the possible accession of China to the world trade body. And Hong Kong could also act as a link in areas of common interest between APEC and South Africa in relation to your membership of SADC.
If you are looking for co-operation with Hong Kong in developing services in areas such as maritime transport, port development and management, import and export trade, technology exchanges, air cargo, e-commerce and tourism, then I am sure we can facilitate this. After all, that's what we're good at doing.
And we can help in further developing your small and medium enterprises. As you may know, they form the backbone of our economy. We have over a quarter of a million SMEs which employ about 60% of our total workforce. Their ability to quickly adapt to new and changing trends is legendary.
Finally, I would like to thank the South African Government, and specifically the Department of Trade and Industry, in making this forum possible. I hope it will lead to a new strategic alliance between Hong Kong and South Africa.
After all, as President Mbeki said when he visited Hong Kong last year as Deputy President - "our times demand that we do not wait for another day to build on a partnership which is 600 years old".
Keyale boha (Thank you).
Photo: The Financial Secretary, Mr Donald Tsang, delivering a speech to South African businessmen at a seminar in Pretoria. Sitting at the right next to the Financial Secretary is the South African Minister for Trade and Industry, Mr Alec Erwin. He called for stronger trade and economic ties between South Africa and Hong Kong at the seminar.
End/Monday, July 26, 1999
NNNN