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Following is a speech (English only) by the Chief Secretary for Administration, Mr Donald Tsang, at a luncheon hosted by the Hong Kong Economic and Trade Office in Brussels and the Italian Institute for Foreign Affairs in Rome today (May 23, Rome time):
Mr Chairman, distinguished guests, ladies and gentlemen,
It's a great pleasure for me to be here once more in your marvellous city. I remember on my first visit to Rome many years ago, the driver who was showing us the sights remarked: 'You know, Donald, we have street furniture here that would be in museums in most other cities.'
Rome is indeed a city of monuments. By contrast, I think of Hong Kong as a monument of a city. It is a monument to capitalism. To the power of the free market. To free trade. To the freedom of speech, worship and assembly. It is a monument to progress. Above all, it is a monument to the human spirit: to what free men and women can achieve when they are able to unleash their energies and ambitions without restraint or hindrance.
Hong Kong is very much a free spirit, and I want to use the time I have with you today to tell you how our tiny community on the edge of China has fared since our historic reunion with our ancient nation on July 1, 1997. More to the point, I want to explain how the success of this extraordinary diplomatic and constitutional experiment continues to provide rewarding opportunities for Italy and Italian business. Those opportunities will grow in number and potential in the years ahead as the results of China's accession to the WTO make themselves felt in the global economy.
First, that historic transfer of sovereignty just under five short years ago. From British colony to Special Administrative Region of the People's Republic of China virtually without a hitch. Certainly without any signs whatever of some of the more alarming predictions that were made. Forecasts that Hong Kong's freedoms and liberties would be diminished; our rule of law undermined; increased corruption; sweetheart deals for Mainland companies.
These predictions have turned out to be as hollow as those of us who were closely involved in the negotiations on Hong Kong's future knew they would be. The fact is that the long and often tense and tough negotiations which took place between Britain and China over Hong Kong's future dating back to 1982 produced the detailed institutional and constitutional framework to enable men and women of goodwill on both sides to make a reality of "One Country Two Systems". This imaginative concept, the brainchild of the Chinese leader Deng Xiaoping, has enabled Hong Kong to flourish as a bastion of free market economics, underpinned by the rule of law and the institutions of civil society.
That is why we are called a Special Administrative Region. It means that we continue to enjoy all of the precious political and economic rights and freedoms we have built up over many decades, while at the same time enjoying the pride and privilege of once again being part of our great country. It really has been a far-sighted solution to what was potentially a very thorny international issue. Best of all, "One Country Two Systems" has manifestly worked.
As we gear up to celebrate the 5th anniversary of this remarkable achievement we can look back with enormous satisfaction that our national leaders in Beijing have been scrupulous in their hands-off policy towards Hong Kong. For our part, we have remained true to the foundations of our success: the rule of law upheld by an independent judiciary; a level playing field for business; the free and unfettered flow of information and ideas; and a clean and efficient civil service.
These 'four pillars', as I call them, are the foundations of Hong Kong's success. They are the bedrock of our future. And they are at the heart of our constitution, the Basic Law, which sets out in considerable detail how Hong Kong is to function as a great international city, with a free market economy, and as a free and open society.
The Basic Law protects the many ingredients so essential to our ongoing development as an economy and a society. These include the free flow of capital and goods, a freely convertible currency; our status as a separate Customs and Immigration territory; the right to maintain our own shipping register; and to negotiate our own air services agreements. In fact, we successfully negotiated an important extension to our air services agreement with the authorities in Italy just over a month ago. This will increase the number of flights between Hong Kong and Italy as well as provide for direct cargo services for the first time between Hong Kong and Milan.
The Basic Law also charts a course towards more representative government in the SAR. The ultimate goal is for the legislature and Chief Executive to be directly elected by the people.
We have already held two elections for the legislature since 1997, and our Chief Executive, Mr Tung Chee Hwa, has recently been elected for a second five-year term by a broadly-representative Election Committee. And now we are in the process of introducing a new, more open Cabinet-style Accountability System which you would recognize in your own Ministerial system.
In essence, this will move us on from the arrangements we inherited from our past in which permanent civil services had Jeckyll and Hyde roles of being both politically-neutral civil servant on the one hand and quasi-Minister on the other, selling and defending policy in the legislature and in the market place of public politics.
The new-era Hong Kong needs more modern governance to meet community aspirations, and the Accountability System is designed to make the top echelon of our administration more accessible and accountable to the body politic. This includes the prospect of resignation or dismissal in the event of policy failure, unlike the current system where the incumbents, as career civil servants, enjoy lifetime tenure.
Politically, Hong Kong is a very vibrant community. We have a vocal and demanding legislature, an even more demanding press and a plethora of non-government organisations and interest groups which lose no opportunity to press this or that demand on the government. In short, not too much different to what you have here in Italy.
For all that, we are a very law-abiding community with a fine, well-trained and disciplined police force. We can say with certainty that Hong Kong is one of the safest cities in the region, if not the world. This is one of the most attractive features of Hong Kong for our citizens, and a major plus for foreign investors.
More than 3,200 international companies have a regional base in Hong Kong. More than 100,000 companies source products in China for the global market from Hong Kong. More than 250,000 expatriates live in Hong Kong. They pay a maximum of 15% salaries tax or 16% corporate profits tax. Seventy-six of the world's top 100 banks are established in Hong Kong. More than 100 international insurance companies, including 11 of the world's top 20, do business in Hong Kong.
Where does Italy fit into all of this?
Hong Kong and Italy already have a very strong and cordial relationship. There are more than 300 Italian or Italian-owned companies in Hong Kong. They are active in many sectors, including banking, engineering, consumer goods, transport and logistics, franchising. The scope of their operations range from large multi-nationals down to the single importers of silverware or Italian food stuffs. Hong Kong people are very brand conscious. Italian brands are everywhere. I once heard a visitor describe a popular shopping district in Hong Kong as 'Gucci Gulch'.
There is a small but very lively Italian community in Hong Kong. At this very moment we are in the midst of our largest ever Italian Fair organised by a very active Italian Chamber of Commerce and supported by the Italian Consulate General. This month-long festival features a great variety of events and attractions including film, music and cuisine festivals, fashion shows, a modern furniture exhibition, a gala dinner, open air concerts, Italian art and stamps and, naturally, an Italian Soccer evening as a prelude to the World Cup.
The reason I am here today, and spent the earlier part of this week in Milan, is that I am committed to strengthening Italian/Hong Kong linkages across the board. I know the Italian Government shares that commitment.
This morning, I formally witnessed the signing of a Memorandum of Understanding on IT Co-operation with Communications Minister Gasparri. And after lunch, I am witnessing the signing of another Memorandum of Understanding between Hong Kong and Italy, this time on cultural co-operation. As I said, we want to broaden and deepen our relationship.
This makes sense for both sides. Hong Kong's role as the natural gateway to China is going to be vital in the years to come. With the opening up of the Mainland, there is no doubt that some will try to take the China market head on. But many more - the wiser ones - will want to use the commercial, cultural and personal connections Hong Kong traders and businessmen have built up over the last 150 years of doing business in the Mainland - in particular since Deng Xiaoping opened China to the rest of the world in 1978. Even after WTO, the Mainland will continue to be a complex and sometimes difficult market. But what a market it promises to be.
Years of strong economic growth in China have produced an accumulation of wealth and capital. China's GDP has reached US$1 trillion, and is growing at 7% per annum. Some think it could reach US$2 trillion within a decade. One estimate puts China's stock market capitalization at US$2 trillion by 2011.
Such phenomenal growth will create great demand for a wide range of professional services - lawyers, accountants, fund managers, brokers, insurance agents. Hong Kong already has such services in abundance, and is perfectly positioned to stay ahead of requirements. I have seen one report that estimates China will eventually require the service of 20% of the world's actuaries.
Hong Kong is China's natural international financial and capital formation centre. The major Italian banks which have established a beach head in Hong Kong understand that.
China's accession to the World Trade Organisation late last year opens up enormous possibilities for the future. We conservatively estimate that the extra business created for Hong Kong by China's accession will add half a percent point annually to our GDP.
Throughout our history, Hong Kong has thrived as the world's major entrepot for trade and investment with the Mainland. Around one-quarter of the Mainland's imports and 40% of its exports are handled through Hong Kong. More than 30,500 vehicles cross between Hong Kong and Guangdong daily, while over 325,000 people cross between China and Hong Kong every day by land, sea or air. About 1,000 flights a week link Hong Kong to more than 40 Mainland cities. People and infrastructure links are well entrenched. They are becoming ever deeper and broader.
Crucial to Hong Kong's positioning as Asia's world city and long-term success is greater economic co-operation and inter-dependence with our hinterland in the Pearl River Delta - which is the fastest growing and most affluent region in China. Including Hong Kong and Macau, the Pearl River Delta has a population of about 48 million - about 10 million more than Canada, or 10 million less than Italy. Total GDP is US$258 billion - more than Switzerland, Sweden or Austria. This places the Pearl River Delta among the world's top 20 economies.
Within China, the Pearl River Delta has the highest per capita GDP; it is the largest consumer market in the country, accounting for 12% of retail sales from less than 4% of the population; it has the country's highest export capability. The region was the first area in China to liberalise its services market; it attracts the most Foreign Direct Investment in China. It is where the action is.
The Pearl River Delta has specific advantages and significant potential as a consumer market, a trading hub, a manufacturing base, a services market and as a destination for investment. Hong Kong lies at its heart. It has been the principal driver of its growth for more than two decades. Hong Kong owned enterprises employ some five million workers in the region alone.
We are now working very hard to significantly boost cross-boundary co-operation to leverage this synergy, and maximize the region's potential. This is one of my key areas of responsibility as Chief Secretary for Administration.
My goal is to smooth the flows of people, goods and capital between Hong Kong and the Pearl River Delta's other major cities, which include Guangzhou, Shenzhen, Zhuhai and Macau. To do this, more resources will be devoted to such initiatives as co-located Customs and Immigration checkpoints; the development of an electronic cargo clearing system; and the opening up of new road and rail routes between Hong Kong and the region. There are plans for further co-operation in the logistics sector and to provide ferry services connecting the Pearl River Delta's major port cities with Hong Kong International Airport, so as to enhance the export efficiency of the region.
Mr Chairman, I apologize for going on at such length. But when I talk about my home, and the prospects I see in store for us, I tend to get a little excited. Maybe this is the Italian in me. But the fact is there is so much happening, the potential is so great that I feel I must share that excitement with you. The Italian presence in Hong Kong goes back generations. Italian engineers and tunnellers built some of our biggest projects. Your compatriots in the SAR know and understand our part of the world and its potential. We would welcome more Italian investment, trade and business.
Italians and Chinese have a friendship and understanding going back to the days of Marco Polo. I hope I have been able to convey the good news that a new and rewarding chapter in our shared history is about to open for us all.
Thank you very much.
End/Thursday, May 23, 2002
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