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LC: Secretary for Economic Services speech at debate of the Appropriation Bill 2001


Following is the translation of a speech by the Secretary for Economic Services, Ms Sandra Lee, on the resumption of the second reading debate of the Appropriation Bill 2001 in the Legislative Council today (April 4):

Madam President,

Competition Policy

During the budget debate, some Members have expressed views and concerns about Government's competition policy. They urged Government to attach importance to a fair business environment, and even introduce an all-embracing competition law.

First of all, I have to reiterate that the Government has all along been committed to promoting competition. Our objective is to enhance economic efficiency and promote free flow of trade, thereby also benefiting consumer welfare. Hong Kong is a free economy. We believe that allowing free market operation is the best way to promote competition. Following the principle of keeping intervention to the minimum, we should not adopt legislative control lightly, unless there are market distortions in individual sectors which impair economic efficiency or free trade to the detriment of the overall interest of Hong Kong.

Before formulating our present competition policy we have made thorough analysis and wide consultations on the pros and cons of an all-embracing competition law. A general and all-embracing competition law is likely to be an overkill, it creates uncertainty in the business environment, and compromises free and open trade principles. There will also be enforcement problems, for example, protracted court cases may not be beneficial to our business environment.

To be more positive, we should review Hong Kong's competitiveness and see whether there is a reasonable level of competition in the market.

Hong Kong is one of the freest markets in the world. This is recognised by some internationally renowned institutions, such as the International Monetary Fund, the Heritage Foundation, the Harvard Institute for International Development, the World Economic Forum, the International Institute for Management Development and the Fortune Magazine. Their reports have repeatedly spoken highly of our legal system; independent judiciary; efficient administration; the free flow of news and information, capital, goods and services; openness to international trade; and fair business environment.

In respect of business environment, all local and foreign businesses, big or small, are treated equally in Hong Kong. We have no entry barrier to the market. Businesses, big or small, all have room for development here, and can compete on a level-playing field.

More importantly, we have to recognise that the objective of promoting competition is not targetted at certain market phenomena, trade practices, or market allocation. It is to enhance economic efficiency and free trade. That is why we should not determine whether or not a business is anti-competitive on the basis of its scale of operation or market share per se. Instead, we have to understand the more fundamental situation, for example, whether the business has abused its dominant market position, limit market accessibility and contestability, thus giving rise to economic inefficiency or obstruction of free trade to the detriment of the overall interest of Hong Kong. This principle is applicable to assessing the level of competition in different sectors, including supermarkets, telecommunication, and port facilities as Members have mentioned. Apart from considering administrative arrangements to promote competition, if we find that an individual sector requires legislative regulation, we would pursue it seriously.

I also want to clarify certain allegations about Hong Kong's business environment in last year's European Parliament's Hong Kong Report as cited by some Members. The author of that Report had publicly clarified during his visit to Hong Kong last year, that the allegation about individual sectors being controlled and led by a few consortia was the view reflected to him by some people in Hong Kong. It was not the view of the European Parliament. In fact, the Report carried positive comments on various aspects of Hong Kong. Separately, some Members have mentioned the comments made by the International Monetary Fund (IMF) on competition in Hong Kong. The IMF's Report in 2000 reminded us to pay close attention to competition in our local market, and urged the Administration to take the most appropriate measures to ensure high transparency and a level playing field. However, the introduction of a competition law was only regarded as one of the options to be considered in the Report.

Of course, we should not be complacent. Instead, we should keep under review the existing competition environment, adopt appropriate measures, and examine areas for improvement in our framework for policy implementation. That is why we issue a report on the work of the Competition Policy Advisory Group (COMPAG) annually to inform the public of the various measures adopted by bureaux and departments in response to COMPAG's request to promote competition in different sectors. This year, we will also engage a consultant to study competition-related issues in other economies and offer advice to us.


During the Budget Debate, several Members commented on how Hong Kong should be developed into a transportation and logistics hub in the region. I would like to thank the Hon Mrs Miriam Lau, Hon Lau Hon Chuen and Hon Kenneth Ting for their support of our efforts in this regard.

In fact, the Commission on Strategic Development has identified "Trade, Transportation and Logistics" as one of the seven key areas to support Hong Kong's long term growth. Although Hong Kong is currently the world's busiest container port and international air freight centre, we must continue to strengthen our competitiveness in these areas, actively expand our transport links with the rest of the world, provide more logistics facilities, and develop associated supporting services.

On the air transport side, we have signed 45 and initialled six air services agreements. In the past three years, we also reviewed 33 air services arrangements. We will continue to proactively expand Hong Kong's air services network. The Airport Authority (AA) has also been taking forward a series of measures to enhance the competitiveness of the Hong Kong International Airport (HKIA). For example -

- the marine cargo terminal on the airport island has commenced operation since 28 March this year. It will facilitate the development of sea-air inter-modal transportation services between the airport and the Pearl River Delta;

- in February this year, the AA granted a sub-lease for the development of a logistics centre. Upon completion, the centre will help to attract more cargo to go through the HKIA to other places; and

- the airport cargo area will have eight more aircraft stands in 2001, bringing the total number of stands for freighters to 21;

The AA is conducting a Strategic Overview of Major Airport Developments (SOMAD) study. The study will recommend strategies for the development of our airport, including a second passenger terminal and additional cargo handling facilities.

On the port side, as you are aware, construction works for the new Container Terminal 9 have started last year. We expected that the new terminal will be commissioned in phases between 2002 and 2004.

The Hong Kong Port and Maritime Board (PMB) has conducted the "Port Development Strategy Review" with a view to mapping out a plan for future port development. In parallel, it is studying the strategy to consolidate Hong Kong's position as the premium transportation and logistics hub in the region. These two studies, together with the SOMAD study in respect of the HKIA, will be completed in the second half of this year. By then, we can formulate a set of comprehensive development initiatives, taking into account recommendations of the various studies.

Logistics services span over sea, air and land transport, and involve various policy areas. To ensure a "through train", they also require the support of the private sector at different stages of the supply chain. Recognising this point, in the past nine months, the Committee on Logistics Service Development (CLSD) under the PMB has studied the necessary measures to strengthen the three pillars for logistics development, namely physical infrastructure, human resources and cyber and regulatory infrastructure. It will also examine the necessary changes to the existing institutional arrangements so as to facilitate the development of logistics services. In the past year, we have also enhanced liaison with our Mainland counterparts with a view to strengthening the air, sea and land transport links between Hong Kong and the Pearl River Delta.

In addition, we consider that there is a need to step up our efforts to promote Hong Kong's position as the premium transportation and logistics hub in the region. With this objective in mind, PMB and representatives of the transport sector have been organising overseas tours to promote our developments in port and logistics. The PMB has also been liaising closely with other organisations, such as the Trade Development Council, the Airport Authority and the Invest Hongkong, in working out joint promotion plans.

Thank you, Madam President.

End/Wednesday, April 4, 2001


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