LCQ5:The Economic Prospect of Hong Kong

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Following is a question by the Hon Bernard Chan and a reply by the Secretary for Commerce and Industry, Mr CHAU Tak Hay, in the Legislative Council today (November 21):(Translation)

Question:

It has been reported that according to a survey published by a consultancy company, among the foreign investors living in 13 Asian territories, only those in Hong Kong are pessimistic about the local economy five years from now and are disappointed with the leadership of the Hong Kong Government and the assistance it provides to the business sector. In this connection, will the Government inform this Council:

(a) of the measures in place to change the pessimistic mood of foreign investors regards the prospects of the local economy;

(b) whether it has compared the economic prospects of Hong Kong with those in other Asian territories; and

Reply:

Madam President,

With careful reading of the report referred to by the Hon Bernard CHAN, one will discover that contrary to the general impression, the consultants are in fact optimistic and affirmative about the economic prospect of Hong Kong.

The company releasing the report has surveyed foreign businessmen residing in 13 Asian economies, requesting them to give their perception marking to the suitability of the economies where they reside as a business hub of the region in the next five years.

The result of the survey shows that among the 13 economies, Hong Kong is the only place whose foreign businessmen grade its prospects as a regional hub five years from now worse than today. Notwithstanding that the mood of foreign businessmen in other economies are more optimistic, the report clearly points out that those places, including a country in Southeast Asia, are almost certainly not going to take over the leading position of Hong Kong as a hub in the region in five years. According to the report, Hong Kong will maintain its distinct advantages in the next five years despite the effects of various external factors. Its good legal, exchange rate, taxation and regulatory environments, coupled with its excellent professional services, have made it especially well suited for regional headquarters and regional offices. In addition, Hong Kong will remain firm in its position as a financial centre.

In fact, the findings of the survey have not mentioned that foreign businessmen in Hong Kong are disappointed with the leadership of the Hong Kong Government or the assistance it provides to the business sector. What the report does is when commenting on the Southeast Asian country just mentioned, the report compares the leadership style of the governments of Hong Kong and that country. The report comments the Hong Kong Government will not direct enterprises in commercial activities; enterprises will have to make commercial decisions themselves. But the report considers this actually serves as a catalyst for the business sector to act proactively. On the contrary, the report points out that businessmen of that country over-rely on the government and hence may lack a sense of urgency to take action to cope with changes.

Let me now reply to the specific questions raised by the Hon Bernard CHAN.

(a) Based on the content of the report outlined just now, we could derive a clear message in that foreign businessmen in Hong Kong are relatively realistic and crisis-sensitive. In fact, other surveys reveal that foreign businessmen in Hong Kong are not pessimistic at all. According to a study recently announced by the Census and Statistics Department, the number of regional headquarters or offices established by foreign companies in Hong Kong hits a record high of 3 237 in 2001. This figure is the highest in Asia. 510 new headquarters and offices were established here in 2000 and more than 230 in 2001, making an accumulative growth of close to 30 per cent over two years.

Surveys were also conducted by the American Chamber of Commerce and the British Chamber of Commerce in Hong Kong in 2000 and 2001 respectively to assess their members' confidence in the economic prospect of Hong Kong. These surveys show similar results. The survey conducted by the British Chamber of Commerce shows that, consistent with the results of the last two years, over 90 per cent of the respondents held positive views of the business environment in Hong Kong. Over 50 per cent were optimistic about the prospect of profitability in 2002, with the figure in 2003 rising to over 80 per cent. The survey conducted by the American Chamber of Commerce shows that over 90 per cent of the respondents were confident and optimistic about the economic prospect of Hong Kong, and this positive outlook would be sustained through 2005. Over 60 per cent of the respondents planned to expand their operations while over 50 per cent would hire additional staff.

Of course, we will not ignore the pessimistic mood that some foreign businessmen may have. We spare no effort in improving our business environment and in promoting the advantages of Hong Kong through our Economic and Trade Offices overseas. Last year, we set up Invest Hong Kong to implement a proactive investment promotion programme which concentrates on attracting inward investment in sectors where Hong Kong has a competitive edge.

(b) The Government is concerned about the economic prospect of other Asian economies as much as it does about Hong Kong. Accordingly, we have made relevant comparisons.

In 2001, the whole world is undergoing a cyclical economic slowdown. Economic data of major economies including the United States, the European Union and Japan have indicated a sharp economic slowdown or a recession. The situation has been further aggravated by the "September 11" incident. The downward adjustments in the economic growth forecasts for 2001 of South Korea, Taiwan, Singapore, Malaysia, Thailand and Hong Kong reflect the adverse effects of the global economic downturn.

Hong Kong, like other East Asian economies, has unavoidably been adversely affected by the global economic downturn and the drastic slump in the United States. The slack in external trade has seriously depressed internal consumption and investment sentiment, resulting in a drop of aggregate production, a decreased growth rate and increased unemployment. Nevertheless, when compared with some other economies in the region, our economic structure is relatively stable. Our export trade and inward investment have been developed in a relatively balanced and diversified manner. On top of these, the Mainland of China is the only economy in the region that is expected to sustain a rapid economic growth. Its accession to the WTO will create abundant business opportunities for Hong Kong. Our economic prospects are therefore optimistic in the long term.

(c) It is a well established principle of the Government to strive to maintain a business-friendly environment, including a robust legal system, a clean government, a simple taxation system with low tax rates, a level playing field and free trade. It is meant to enable the business sector to give full play to its dynamism and advantages, and as a result drive the robust development of the Hong Kong economy. In previous years, the Chief Executive announced in his Policy Addresses a series of initiatives to assist the business sector. These include measures to expand substantively our investment in infrastructure, to strengthen our manpower training and retraining, to relax the entry requirement for talents and professionals from outside Hong Kong, to enhance the quality of our living environment, to promote environmental protection and education, to streamline Government licensing and reporting procedures and so on. As for promotion of innovation and technology , the Government has set up an Innovation and Technology Fund amounting to $5 billion. On providing support to small and medium sized enterprises, the Government has set up four funding schemes, totalling $1.9 billion, to assist SMEs to enhance competitiveness, strengthen training, develop businesses and purchase equipment and machinery. The Government will keep up its efforts in improving the existing framework and systems as well as the software and hardware infrastructures in order to maintain Hong Kong's position as the Asia's international metropolitan city.

End/Wednesday, November 21, 2001

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