Press Release

 

 

Speech by FS in Budapest

*********************

Following is the full text of the speech by the Financial Secretary, Mr Donald Tsang, at a business lunch in Budapest, Hungary (September 20, Budapest time):

Distinguished guests, ladies and gentlemen,

Thank you very much for such a warm welcome. It is an absolute delight to be back in Budapest, re-discovering its rich history and culture. I came as a tourist on two previous visits. And although I have been here for less than a day on this occasion, I know already that I do not want to leave. The beautiful Danube, the relaxing spas, the magnificent architecture of Budapest is truly breathtaking, and of course, my favourite red wine 'Bull's Blood' - Egri Bikaver, (I hope I pronounced it correctly). I agree entirely with the sentiments of the great Hungarian revolutionary and poet Petofi Sandor, when he once wrote:

    What else could I need, but good friends and good wine
    These two will keep me going, until the end of time

I know Hungary has an abundance of good wine - and I understand more of it will be available in the Hong Kong market soon. Indeed, I was pleased to see that six quality Hungarian wines were featured at the "black tie gala" to celebrate the opening of the Hong Kong Philharmonic Season 11 days ago. But it is my earnest hope that, on our first official visit to your country, we can lay the foundations of a friendship that will last until the end of time. On behalf of the people of Hong Kong, I am here to personally extend the hand of friendship and partnership to the people of Hungary.

An important part of this process is getting to know one-another. So, I would like to paint for you a picture of modern Hong Kong, and to put it into perspective I will contrast that with some facts and figures about Hungary.

Hong Kong is strategically located on the south China coast and is blessed with one of the finest deep water ports in East Asia. We have a land area of 1,100 square kilometres, but because of hilly terrain and protected parkland, our useable land area is about the same size as your Lake Balaton (598 sq km).

We are a small, crowded and cosmopolitan community of 6.8 million. We have a population density of about 6,500 people per square kilometre but in some older areas it is more than 50,000 people per square kilometre. This compares with about 110 people per square kilometre in Hungary.

Economically, about 85 per cent of our GDP comes from the services sector, compared to about 65 per cent here. The vast majority of our manufacturing establishments are located in the Pearl River Delta of mainland China, just north of Hong Kong, where land and labour costs are considerably lower. To give you an idea of the size and scale of those operations, we estimate that about five million people in the southern part of China are employed by companies wholly or partly owned by Hong Kong concerns.

That's about 1.5 million more than Hong Kong's entire working population, or about one million more than the workforce of Hungary. Our GDP in 1999 was about US$157 billion.

Bilateral economic ties between Hong Kong and Hungary are still in the early stages of development. But they have been growing strongly over the past few years. Total trade surged by 40 per cent to US$190 million in 1999, on the back of 30 per cent growth in 1998. In the first half of 2000, total trade has grown by a startling 90 per cent, year on year, to US$143 million. All of this is very encouraging.

We are extremely happy that Hungary opened a consulate in Hong Kong last year. This will not only lead to closer economic ties, it will also increase the flow of news, views and ideas between our two communities. In other words, it will help us to get to know you better; and help you to learn more about us. I expect there will also be some flow-on benefits for bilateral tourism, as more and more Hong Kong people look to Central and Eastern Europe as a holiday destination.

I would now like to explain briefly how Hong Kong is moving ahead as a Special Administrative Region of China. Since the Handover on July 1, 1997, Hong Kong people have been running Hong Kong under a unique concept of 'one country, two systems'. For the first time, we also have a written constitution, the Basic Law.

This guarantees that Hong Kong's 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. These are the responsibilities of the national government, as they were under British administration.

All of the ingredients of our past success as an international financial and trading centre are enshrined in the Basic Law. In other words, our separate identity as the Hong Kong Special Administrative Region is protected by law. This includes our legal system, which is based on English common law, and our way of life; the protection 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.

We remain a member in our own right of the World Trade Organisation, the World Customs Organisation and the Asia-Pacific Economic Co-operation forum. 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.

This has allowed 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 450 banking institutions and local representative offices - including 79 of the world's top 100 banks - have offices in Hong Kong. We are among the world's top four gold markets; the 4th largest banking centre; 7th largest foreign exchange market; 10th largest trading entity in goods. We are Asia's second-largest fund management centre. We have no external debt and more than US$l25 billion in reserves.

That is where we are today. But what of the future? Like Hungary over the past few years, Hong Kong has been realigning its economic base to achieve sustainable and equitable growth in the new millennium. We are reforming our financial markets to make them even more competitive, especially in 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.

I believe you are also giving much more emphasis to IT development by bringing it under the umbrella of the Prime Minister's Office and providing new opportunities for the many skilled workers in this field.

So, how do we take our bilateral relations forward. No doubt our respective traditional strengths provide an excellent basis on which to develop the bonds between Hong Kong and Hungary.

For Hungarian business 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$165 million worth of re-export trade from China to Hungary in 1999.

The entry of China into the World Trade Organisation will enhance Hong Kong's middle-man role. We are the natural conduit for international trade and investment not only for China, but for the entire region. China's membership of the WTO will provide all members with better market access, improved transparency and predictability of trade policies and measures.

There is no doubt we will face greater competition from other global players in the China market. But we are excited by it. Hong Kong enterprises have been pioneering greater access, and preparing for a more open market, in China since the open door policy was launched in 1978.

That kind of advantage, that kind of groundwork, is something we will not surrender lightly. Indeed, we will use our existing presence and know-how, our contacts, our language and cultural ties to leverage the opportunities - and challenges - presented by a Chinese market more closely aligned to the rules-based world trading system.

Many large corporations might opt for direct access to the Mainland market because they have the financial resources, the staff and international experience to attempt such an approach.

But there will be hundreds, probably thousands, of small and medium enterprises without those resources lining up to enter what is potentially the world's single largest consumer market. Many of the opportunities in the Mainland's domestic market will come not only from the prosperous coastal regions but from the developing inner and western provinces where Hong Kong's small and medium enterprises already have an established foothold.

These so-called 'second-tier' markets accounted for 60 per cent - or US$100 billion - of the Mainland's imports last year. Hong Kong enterprises have been slowly but surely reaching into the Chinese heartland paving the way for the opportunities now on the horizon.

These existing links are an enormous resource for overseas companies wishing to do business in China. By joining forces with established Hong Kong firms, overseas companies will be able to bring their products and services into the Mainland market, while at the same time draw on the decades of experience of our entrepreneurs. It is a natural synergy that should be developed.

The reason for this is much more than just our natural cultural, language and business links. Hong Kong is a cosmopolitan, modern city and Asia's premier international business centre. Almost 2,500 international companies have established a regional headquarters or office in Hong Kong.

We have advantages and facilities not readily available in other parts of Asia, but they 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 believe we have some of the most business-friendly policies in the world. Individuals pay no more than 15% salaries tax, while corporations pay only 16% profits tax. We have no capital gains tax, no withholding tax on dividends or interest, no sales tax, no global taxation and unlimited carry-over of losses. We have no tariffs or quotas and virtually all goods are duty-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 to set up a business quickly. The banking system is open and efficient. It is easy to buy and register a company.

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, and business management. 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 we have more than 180 Internet service providers to hook you 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 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.

The new Hong Kong International Airport, opened in July 1998, is an international and regional gateway that handles more than 30 million passenger journeys annually. A state-of-the-art international air cargo center is one of the largest and busiest in the world.

Our fine deep-water port has allowed us to develop a world-class reputation as a shipping centre with a container port that is the world's busiest.

These are just some of the areas which I believe Hungarian business can use to their advantage when looking to 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 Eastern and Central Europe. In this regard, Hungary is an ideal base from which to start because of its strategic position between Western Europe and the Balkan Peninsula, as well as between the Ukraine and the Mediterranean basin. We have a Hong Kong business delegation with us on this trip, exploring new opportunities in your country.

I know that within a few years, Hungary is expected to join the European Union. When this happens Hungary will provide an ideal base from which to enter the pan-European market. Compared to elsewhere in Europe, the cost of land and labour in Hungary is relatively cheap. Education standards are high, the legal system is sound and there are well-established transport networks. All of this gives Hungary a tremendous competitive advantage. I'm sure Hong Kong investors and entrepreneurs will be looking to capitalise on these advantages in the near future.

Ladies and gentlemen, I very much hope that the Hong Kong-Hungary partnership will grow and mature in the new millennium. After all, that is why I am here today. I invite you all to come to see for yourselves what we have to offer. You will find that Hong Kong is an open, pluralistic and tolerant society which welcomes trade, investment and interaction with our partners in the global village.

Thank you.

End/Wednesday, September 20, 2000

NNNN