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Following is the full text of the speech by the Secretary for Commerce, Industry and Technology, Mr Henry Tang, at the luncheon hosted by the Hong Kong Exporters' Association today (September 26) (English only):
Cliff, dear friends, ladies and gentlemen,
It is my pleasure to speak at this luncheon today. Over the years, Hong Kong Exporters' Association has contributed enormously to promoting and safeguarding Hong Kong's trading and economic interests. It has done so in close partnership with Government and other trade associations. So I am delighted to use this occasion to share with you my views on how Hong Kong's industries could improve their competitiveness, amid the numerous challenges and opportunities facing us.
With few natural resources save a deep water harbour, Hong Kong's economic growth and development has always been dependent on external trade. During the past 40 years, Hong Kong's total external trade increased from $11 billion to over $3,000 billion, a growth of more than 270-fold. During the same period, our GDP per capita increased from less than HK$3,000 to about HK$190,000.
In 2001, we were ranked the world's 10th largest trading entity in goods, and the 12th largest trading entity in commercial services. These are no small achievements, though sometimes we tend to forget them when we are up against adversity. The increasing competitiveness of our service industries means that there should be much room for expansion in our trade in services. All the same, we should bear in mind that the value of our goods trade is still about six times that of our total trade in services. So today I would like to focus on goods.
The first point I would make is that export of goods is not an isolated business activity. It is but a part of a whole business chain which includes design, production, wholesale, retail, after sale service, etc. So export business cannot survive on its own. Other parts in the chain must gel.
As an ex-businessman, I fully understand that doing businesses these days are not easy. And not only because of the economic downturn. Other forces like globalization and the advent of information technology all have major and lasting impact on how businesses are done. Expectations keep rising. Business partners demand ever shorter turnaround time and ever tighter margins. Consumers also give you no easy life. Their fickle tastes cost you a lot to invest in new products but with no guarantee that they will sell, as I am sure veterans from the toy industry can testify.
For Hong Kong, we all agree that competing on cost is no longer an option. Our high living standard brings us comfort at home, but also costs us more in doing business. According to some recent estimates, the average salary of our manufacturing industry is about 6 times that of Shenzhen, and our factory rental is about 3 times Shenzhen's average. The cost differential with other parts of the Mainland are, needless to say, even more pronounced.
Like many other places, Hong Kong is undergoing a process of economic adjustment. Our way out, and I do not believe there is any dispute on this, is to develop Hong Kong into a knowledge-based economy driven by technology and innovation. For our industries, the key is to move up the value chain through a three-pronged approach: (a) high quality goods, (b) high value-added activities and processes, and (c) premier branding and design.
The common thread here is creativity. A few weeks ago, I came across a cover story of the "Newsweek". A central theme of that article is that "creativity emerges from chaos". Several examples were quoted. But what impressed me most was the story on Afghanistan. Now, conventional wisdom would suggest that the last place you would look for creativity is a war-torn country like Afghanistan. But after the collapse of the Taliban Government, millions of refugees returned to Kabul, bringing the cultural influences of their places of refuge - Pakistan, Iran, Europe and the United States. The massive influx has sparked a dynamic exchange of ideas among film directors, painters and novelists. Membership of the Artists Association of Afghanistan has reached a remarkable 3,000.
What is the lesson in all this for Hong Kong? We are now in a bit of a bind. Perhaps what we need to do is to shake things up, in a figurative, not literal, sense of course. We need to question conventional wisdom, and we need to be imaginative and innovative. To borrow the phrase of the Princeton Professor Christine Stansell, we should dare to be "on the edge of what's possible".
Before 1979, no one would have thought of bringing along his cassette player when he went out. It was simply too bulky. Then Sony invented the Walkman. The rest, as people say, is history. So this is a classic case of creativity pushing back the frontier, ushering in a whole new portable entertainment business, and changing people's lifestyle for the better.
Here is another example: 3M's Post-It Notes. Its birth was almost an accident. The company originally intended to develop a super-strong adhesive. But it failed. Long after, a researcher incidentally found this weak glue stuck nicely on paper and could be peeled off easily without causing any damage. The Post-It Notes was then born. As Professor Joseph Badaracco of the Harvard Business School once said, "Sometimes creativity just means the daily work of helping others to see a problem in a different way."
And in fact, our industries are already doing this, and there are more than a few success stories. Last Saturday was the Mid-Autumn Festival. What kind of moon cakes did you have? Well, we are spoiled with choices these days. But not too long ago, even in the early 1990s, there was only one choice. Not really a choice perhaps. Consumers got tired of the nearly identical products in the market. The industry realized that they had to do something to break new ground. In 1991, the first "snowy moon cake" was launched. Now we have products like ice-cream moon cakes, fruit moon cakes, mini moon cakes and so on, offering real choices to consumers.
Of course, it is not quite enough to invent a product ( you need to sell it. And no one can deny the importance of branding in product strategy. Hong Kong has many successful brands. Just think of your home. The probability is that you will have Cliff's Kinox cookware in your kitchen, Lee Kam Kee sauces in your fridge, and Giordano shirts in your wardrobe.
Hong Kong people are generally very receptive to new technologies and gadgets. What we need to do is to work harder to synergise creativity with business. Collectively, we need to nurture and free up creative talents and their energies. Good design is essential for branding.
Fashion is a particularly pertinent case in point. Hong Kong garments are well known for their quality and fashionable design. Hong Kong labels are often trend-setters, offering a wide variety of design and the use of fabrics.
The same equally applies to other products. Just the other day, I was told about a watch designed by one of our many enterprising watch companies. The watch, with an LCD display, shows both western calendar and lunar calendar. The lunar calendar is supported by a evolving image of the moon. A new moon appears at the beginning of a month. It changes shape, until reaching a full moon on the fifteenth, and a new moon begins again. It is perhaps befitting that this watch is designed by a Hong Kong company, as we have always prided ourselves to be the melting pot of East and West. I hope it will do well, as do our many other outstandingly designed products.
One of my priorities as the Secretary for Commerce, Industry and Technology is to promote Hong Kong as a hub for design services in the region. The establishment of the Hong Kong Design Centre two weeks ago, with a capital funding of $10 million from Government, marked a significant milestone in the promotion of design and the development of the design industry in Hong Kong. It represents a big step forward in bringing together Government, the industry and the educational institutes in joint pursuit of this very important vision.
Indeed, we see the Government's role as a facilitator - creating the best possible environment where businesses can thrive and compete on a level-playing field. Business decisions are best left for businesses to take. The Government's responsibility is to ensure that the necessary infrastructure - hard and soft - is in place. I mentioned just now the opening of the Hong Kong Design Centre.
You are of course aware of the four SME funding schemes totally HK$1.9 billion, the primary objective of which is to help our SMEs innovate and move up the value chain. We are in fact bringing forward a review of the four schemes to ensure they serve their purposes, and are able to facilitate the development of our industries. We will also continue our efforts in promoting a business-friendly environment by further simplifying government licensing procedures and cutting red tape.
Above all, we will continue to do our best to facilitate our businesses leverage on Hong Kong's unique strength - our unparallel position as the conduit between the Mainland of China and the rest of the world.
For example, we have streamlined procedures to improve the flow of people and goods across the boundary. The number of passengers cleared within 15 minutes at Lowu has increased from 84% to 87% since October 2001, despite an increase of daily passengers from 240,000 to 270,000. About 20% of the container trucks can now make more than two single trips a day at Lok Ma Chau. The completion of the Western Corridor in 2006 and the Lok Ma Chau Spur Line in 2007 will enhance the cross-boundary capacity. We will continue to see what further improvements can be made.
Most of you will also be familiar with the promotional work being done in the Mainland by the Trade Development Council offices. And I hope many of you have already signed up to the largest ever Hong Kong trade show in the Mainland, "Style Hong Kong", to be organised in the Beijing World Trade Centre next March. The objective of course is to facilitate Hong Kong businesses in finding suitable business partners and buyers, so as to further expand your businesses in the Mainland's booming retail market.
Finally, I should like to say a few words on the Container Security Initiative. Last Monday, the Government signed a Declaration of Principles with the US Administration, signifying our participation in the Initiative. There are two reasons why we have done so. First, because we want to demonstrate Hong Kong's commitment to help safeguarding the global maritime trading system against terrorism. Terrorism, I should emphasize, is not just the US' enemy. It is everybody's enemy. It is the common enemy of the entire civilized world. As a responsible member of the international community, it is incumbent on us to contribute to the fight against terrorism.
Equally important is the need to maintain the competitiveness of our port. Containers pre-screened in Hong Kong would normally not be inspected again by the US Customs when they arrive at US ports. Hong Kong's participation in the CSI will therefore help ensure the smooth flow of cargo from Hong Kong. We will continue to be guided by this dual objective of enhancing security and facilitating trade as the two Customs authorities work together on the details of implementation, and in the process, the business community, including the Hong Kong Exporters' Association, will continue to be closely consulted.
Ladies and gentlemen, there is no doubt that the Hong Kong economy is facing a tough time at the moment. We must not however let the temporary pains overcome us. We should recognize the abundant opportunities ahead, especially with China's accession to the WTO. Opportunities not seized in a timely manner are opportunities lost. And mind you, we are talking about once-in-a-life-time opportunities here. I wish you well in your business ventures.
Thank you very much.
End/Thursday, September 26, 2002
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