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Following is the speech by the Secretary for Economic Development and Labour, Mr Stephen Ip, on "Developing Hong Kong's Competitiveness - Tourism and Logistics Infrastructure in an Age of Change" at the Hong Kong Management Association 2002 Annual Conference today (November 13) (English only):
David, Paul, Ladies and Gentlemen,
Good morning, it is my honour to be here this morning to address such a distinguished audience. I have been asked to speak on Hong Kong's competitiveness in an age of change. As tourism and logistics are two of the four pillars which the Chief Executive identifies as the engines of growth for Hong Kong, I am pleased to share with you today our work on the development of Hong Kong's tourism and logistics infrastructure. In developing both sectors, I cannot emphasize enough that it requires the joint efforts of both the private and public sectors.
Changes in the Tourism Industry
People say "There is nothing permanent except change." How true this is for the tourism sector! In the past five to six years, our tourism industry has seen significant changes - the pre-1997 Hong Kong fever which raised our visitor arrival figures; the impact of the Asian financial crisis in 1997; the tragedy of the 9/11 attack in 2001 and its impact on global tourism; the enormous increase in Mainland visitors to Hong Kong since the abolition of the quota system of the Hong Kong Group Tour Scheme in January this year; and of course the yet unknown impact of the terrorist attacks on Bali.
Each of these events has had an impact on tourism. From the high of 12.97 million visitors in 1996 prior to the handover, we suffered a major decrease in the number of arrivals in 1997 and 1998 of 13.1% and 9.9% respectively. A recovery to 11.5% increase was seen in 1999 and the rise continued in 2000 and 2001. Indeed 2001 was another record year despite the 911 incident. Our performance this year also looks very good so far - from January to September this year, we had 11.74 million visitors which represents an increase of 16% from the same period last year. Mainland visitors made up 40% of them and were up 47.6% from last year.
It seems that so far Hong Kong has been successful in weathering the negative changes and benefiting from the positive ones. However, it is also important for us not to mistake change for progress. To achieve Government's policy objective to maintain Hong Kong as the most preferred city destination of Asia, we need to do our best to meet the increasing expectations from visitors and intense competition from other destinations. "The will to win is important, but the will to prepare is vital" ¢w an effort which will require equal input from the private sector as from the Government.
Development of Tourism Infrastructure
It is true that visitors are more selective in their choice of tourist destination and are increasingly looking for value for money. We must respond to this by offering diverse and appealing tourist attractions at reasonable cost in order to maintain our competitiveness.
The Government is investing in new tourist attractions and working to enhance existing ones. In 2005, we will see some of the most exciting tourism infrastructural projects completed - the Hong Kong Disneyland, Tung Chung Cable Car and Hong Kong Wetland Park. They will enhance the diversity of tourist attractions in Hong Kong and allow us to tap further into the market segments of family travelling and green tourism. I am pleased to say that the Hong Kong Disneyland and Hong Kong Wetland Park projects are making good progress, and we have already entered into a provisional agreement with the MTRC on the development of the Tung Chung Cable Car project.
Apart from building brand new attractions, we also make good use of our existing heritage structures. We will soon invite the private sector to submit proposals on the use of the Former Marine Police Headquarters in Tsim Sha Tsui for tourism purposes. On the Island side, we will also consider similar use for the Central Police Station, Central Magistracy and Victoria Prison. This has the potential to link Lan Kwai Fong, Hollywood Road and other existing attractions to build a heritage, entertainment and dining complex in the heart of Central.
We are also considering the development of a cruise terminal in Southeast Kowloon, cultural and performing venues in West Kowloon, ecotourism in Sai Kung and a tourism node in Aberdeen. These medium to long term infrastructural developments will give Hong Kong a new look as a tourist destination.
We are not overlooking the need to upgrade existing tourist attractions. The district enhancement projects implement improvements in visitors-frequented areas to beautify the physical environment and install better signage systems to facilitate visitors going around in Hong Kong.
Upgrading of Tourism Services
Even with the best infrastructure and facilities, we will not succeed if we do not have equally exemplary software. Tourism is not just about looking at the attractions. Visitors want to meet our people, experience our lifestyle and learn more about our culture.
The tourism industry and its related sectors employ some 10% of the workforce in Hong Kong. The expanding industry is expected to create more job opportunities in the years to come as it develops. Most important is the fact that jobs will be created at all levels and in diverse areas of the industry. The reality is that the industry will provide opportunities for both the unskilled and the highly qualified as well as offering diverse career paths which will allow our workforce to develop.
As John F. Kennedy once said, "In a time of turbulence and change, it is more true than ever that knowledge is power." The Government has therefore invested heavily to enhance the skills of the workforce of the industry. The training programme for tour guides, which commenced in July this year, is run by the trade with $16 million subsidy from the Government's Skills Upgrading Scheme. The $5 billion Continuing Education Fund also identifies tourism as one of their major target sectors to promote life long learning and skills upgrading. A total of $40 million has been allocated to the Hong Kong Tourism Board to run the "Tourism Orientation Programme" which aims to train up a high calibre workforce for the industry.
Besides working on the individual employee, we also work to improve the service standard of different sectors of the industry. For inbound travel agents, the Travel Agents (Amendment) Ordinance has already come into effect since 1 November. The licensing scheme and industry regulation will ensure the delivery of satisfactory services to visitors by travel agents. Complaints will be investigated and malpractice will be dealt with. The key to this, once again, is industry support. We firmly believe that self-regulation is more effective than external regulations. The new legislation will provide support to the efforts of the Travel Industry Council of Hong Kong (TIC) as it supervises the travel trade.
For restaurant and retail sectors, the Quality Tourism Services Scheme (QTS) of the Hong Kong Tourism Board (HKTB) provides consumers with the confidence to spend their money here. It promotes the concept of service excellence in the retail and restaurant sectors and provides quality assurance to visitors. Of course, it is not only visitors who benefit from this scheme; local residents are increasingly looking to those shops for quality services and products. The HKTB is now reviewing the scheme with a view to expanding and enhancing visitors' and local residents' awareness of the benefits of shopping at QTS shops.
To provide even more confidence to visitors, the HKTB distributes leaflets to visitors at control points to advise them on how to make the best use of the range of customer protection measures already in place. The TIC recently introduced a 100% refund policy on members under which outlets included in tour itineraries must offer to refund in full the price of merchandise returned to them within 14 days.
Of course it is most important to promote the service concept among the general public as a whole. The tourism industry, unlike many others, involves not just people working in the related sectors but the entire community to offer hospitality to visitors. We have a public education campaign "Hospitable Hong Kong" making use of TV media to promote awareness among the community and engaging young students to learn more about tourism. We aim to improve the visitor-friendliness of Hong Kong as a whole.
I hope you will appreciate, tourism is firmly on the Government's priority list. We are investing in our hardware, software, marketing and research to ensure the future growth of this key industry. The private sector will, undoubtedly, play an important role in contributing towards the success of these efforts.
Logistics Infrastructure
Let me now turn to logistics infrastructure. In pursuit of our policy objective to maintain Hong Kong as the preferred international and regional transportation and logistics hub, we should look beyond our own confines and maximise the scope for cooperation and coordination with other parts of the Pearl River Delta (PRD) in developing inter-modal transportation links to achieve synergy. Reducing the cost of operation and improving the overall competitiveness of our logistics sector by facilitating the exchange of information and data amongst logistics players through the enhanced use of modern technology are of equal importance.
Hong Kong: the Logistics Heart of Asia
Prime Location
Located in the heart of Asia, Hong Kong is within five hours' flight from half of the world's population. The unrivalled geographical location of Hong Kong has given us the edge as the major gateway to the fast growing and most populous consumer market and the largest manufacturing base in the world.
World Class Infrastructure
A total of 72 airlines operate at the Hong Kong International Airport (HKIA), providing more than 4 100 flights every week connecting Hong Kong with some 130 destinations around the world. In the 12 months up to September 2002, the Hong Kong International Airport (HKIA) handled a total of 2.35 million tonnes of cargo and over 33 million passengers. The HKIA has been leading the world in terms of international cargo throughput and now ranks 5th in international passenger throughput. HKIA is a state-of-the-art airport built for the future. Upon full development, it can handle up to 87 million passengers and 9 million tonnes cargo every year. The round-the-clock operations of our airport also facilitate passenger and cargo traffic across time-zones, which can further sharpen our competitive edge as an international and regional aviation hub.
Physical and Information Connectivity
In addition to international aviation and maritime transport services, Hong Kong also offers a wide choice of multi-modal connectivity with Mainland China - by rail, trucks and barges. Proximity with the dynamic Pearl River Delta offers unique opportunities for synergistic cooperation.
Hong Kong offers excellent information connectivity with the world. It has the highest rate of telephone line penetration in Asia and one of the highest rates of business fax use internationally. Cellular phone penetration reached 85% in early 2002. Hong Kong provides IDD service to 220 locations, and is home to some 220 internet service providers, more than 50 TV channels and 113 international media organisations.
A Culture for Excellence
The Hong Kong workforce is well-educated, flexible, resilient and industrious. The services sector in particular enjoys a sophisticated cluster of business skills, managerial experience and a commitment to efficiency and productivity. An extensive range of financial, legal and other professional expertise is also available to cater for the needs of the logistics industry in providing one-stop integrated services. In these, the Hong Kong Management Association plays a pivotal role in equipping our managers to rise to the challenges and we appreciate your contribution.
Friendly Business Environment
As a free port with an open economy, Hong Kong imposes no trade barrier, no investment restriction, and no foreign exchange control. Customs facilitation is speedy and reliable. Underpinned by a clean government, strong tradition of rule of law, and a simple tax regime plus low tax rates, Hong Kong promises a friendly business environment and a level playing field almost unparalleled in the world.
Future Work Plan
At present, the HKIA has a capacity to handle 45 million passengers and 3 million tonnes of cargo per annum. The Airport Authority (AA) forecasts that, in the next 20 years, passenger and cargo traffic at the HKIA will increase at an average annual rate of 5% and 6% respectively. To meet the forecast demand, the AA plans to make further enhancements to airport facilities. Major initiatives to support the logistics development are -
* Development of a logistics centre on the airport island to process time-critical and high value-added air cargo. Expected to be operational in early 2003, the centre will help boost logistics services development at the HKIA; and
* Development of a dedicated express cargo terminal on the airport island to enhance the express cargo handling capacity of the HKIA. The terminal is scheduled to commence operation in 2004.
On sea transport, Hong Kong's natural deep sea port serves more than 80 international shipping lines reaching 500 destinations worldwide. Renowned for efficiency, reliability and value for money, the privately owned and operated container terminals at Kwai Chung offer round-the-clock service, with cranes operating up to a maximum of 40 times per hour. In 2001, we retained the title as the world's busiest port, handling a total of 17.8 million Twenty-foot-Equivalent Units (TEUs).
To cope with forecast demand, construction works for the new Container Terminal 9 are underway. We expect that the new terminal will be completed by 2004, adding 6 berths and an additional capacity of 2.6 million TEUs.
We have recently commissioned a study to develop a masterplan for Hong Kong's port development in the coming 20 years and beyond (generally known as the Study on Hong Kong Port - Master Plan 2020). The study findings, with a new set of Port Cargo Forecasts, are scheduled for completion in late 2003.
We are actively exploring the business case for building value-added logistics parks, and examining the feasibility of developing a Digital Trade and Transport Network System, an open and neutral e-platform for exchange of data among logistics players in the supply chain. If these projects are found to be worth pursuing, the new facilities will offer high value-added logistics services and further boost Hong Kong's position as a preferred international transportation and logistics hub.
Ladies and Gentlemen, in an age of change, it is our strategy to concentrate our efforts on areas where we already have an edge and that also have good growth potential. It is important that in restructuring our economy we don't stray from our core business. What we need to do now is to move up the value-added chain, consolidate and expand the four economic sectors that we believe to be our engines of growth in the future, namely, financial services, logistics, tourism and producer and professional services. In other words, we are concentrating on our core strengths, and adding value to them with a touch of the basic essentials of quality, speed and creativity. We must make sure that we provide exactly what the customer wants in today's highly competitive environment. But more than that, we are leveraging on the synergy between Hong Kong and our hinterland, the Pearl River Delta (PRD). Hong Kong's future hinges on how best we could capitalise on the economics comparative advantages of what is, and will increasingly become, one of the world's greatest manufacturing centres in the PRD, and one of the world's most successful services economy in Hong Kong.
Concluding Remarks
Today's Conference will provide a very useful forum for participants to exchange views on issues pivotal to the development of Hong Kong. I would like to take this opportunity to thank the Association once again for organizing this conference and I wish you all a rewarding and enjoyable day. Thank you.
End/Wednesday, November 13, 2002
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