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Following is a speech by the Secretary for Commerce, Industry and Technology, Mr Henry Tang, at a meeting of Hong Kong Institute of Arbitrators today (February 28) (English only):

Samuel (Wong), ladies and gentlemen,

I am very pleased to have the opportunity to address you today. With a membership of over 500, the Hong Kong Institute of Arbitrators has done a fine job in promoting Hong Kong as the key regional centre for international dispute resolution.

Today, I would like to share with you what I perceive as Hong Kong's competitive advantages and what my bureau will be doing to further enhance our attractiveness as an Asian hub for doing business.

As we all know, the strengths of Hong Kong lie in our world-class infrastructure, a low and simple tax system, a level playing field, the rule of law, and the free flow of capital, information, people, services and goods. These attributes are important and unique, and it would be unfair if we take them for granted.

Another of our fundamental strength, to use a real estate term, is 'location, location, location'. We have the best deep-water port in the southern China. We are strategically located within a four-hour flying radius of all the key business centres in Asia, not to mention all of the major cities in China. No other city in China provides the same access for international and national businesses as Hong Kong.

Our fully digitised telecommunication system, together with broadband coverage over practically all office buildings, offers our businesses a seamless connection to the rest of the world. Indeed, Hong Kong has been ranked No.1 in a recent ITU Mobile/Internet Index which measures how each economy is performing in terms of information and communication technologies (ICT) while also capturing its potential in taking advantage of future ICT advancements.

Because of all these favourable conditions and our proximity to the Mainland, we are the second largest recipient of foreign direct investment in Asia. According to our latest survey, over 3 100 foreign companies base their regional operations in Hong Kong. More and more overseas firms conduct their high-value regional activities in Hong Kong, such as corporate management, while managing production operations in the delta and tapping into Hong Kong's superb marketing and logistics hub to manage the global supply chain in the industry.

Hong Kong is an ideal centre for resolving disputes arising out of international business transactions in the Mainland. As a general rule, the parties to an international contract in the Mainland can agree that Hong Kong law applies to it, or that disputes arising under it are to be resolved in Hong Kong. It is not surprising that foreign businessmen would find Hong Kong an appealing place for dispute resolution - we have a sound and familiar legal system, a trusted judicial institution, a wealth of English-speaking legal practitioners and internationally renowned arbitrators specialising in litigation and arbitration services, and above all, Hong Kong arbitral awards are enforceable in the Mainland and in all countries that are members of the New York Convention.

Though we possess all the above edges, our externally-oriented economy remains susceptible to the performance of our trading partners and the world economy. The outlook is also clouded by the uncertainty of an outbreak of war in Iraq. We are experiencing heavy deflationary pressure and the economic restructuring towards a knowledge-based economy has sent our unemployment rate to over seven per cent. All these have put considerable stress on public confidence, and presented challenges to the business community.

My bureau and the Government as a whole have put the objective of creating new opportunities for business at the centre of our work. Let me explain briefly how I plan to achieve this in my area of responsibility.

First, we must continue to strengthen our economic ties with the Mainland, in particular the Pearl River Delta (PRD). In my view, Hong Kong's future hinges on how best we can captialise on the enormous advantages of combining our successful service economy with the great manufacturing capacity of the PRD.

Including Hong Kong and Macau, the Pearl River Delta has a population of almost 50 million, and an overall GDP of US$271.2 billion. It is the most prosperous and fastest-growing region in China. It is the largest exporter in the country, accounting for 34% of its export; and, it is, by far, the most popular destination for foreign investment. For 25 years, Hong Kong's private sector has been investing in the Delta. That explains why there are more than 65,000 Hong Kong-linked enterprises employing an estimated 7 to 10 million people in Guangdong Province.

Hong Kong and the PRD together provide a total solution for overseas companies hungering for a taste of the Mainland market. We need to market this strength more aggressively.

The Government's investment promotion agency, Invest Hong Kong, the Guangdong Economic and Trade Office, and the Hong Kong Trade Development Council will organise more joint promotions with Guangdong authorities to promote Hong Kong/PRD region as the preferred business platform for overseas investors, with Hong Kong as the preferred service centre for the investors. For instance, Invest Hong Kong will team up with Shenzhen to organise a mission to Silicon Valley to attract high-tech companies to invest in the Pearl River Delta in April this year.

Besides marketing efforts, we are examining new passenger and cargo rail links. We will make it a lot quicker for container trucks from all over the Delta to access the excellent intermodal logistics network in Hong Kong. We are enabling businessmen and ordinary people to cross the boundary more conveniently and faster. Travel documents on both sides are being upgraded to allow speedier processing. Co-located Customs and Immigration facilities are being developed.

In order to stay ahead in this competitive global environment, we must continue to support innovation and technology as the pivotal economic drivers for Hong Kong and encourage our SMEs to think and operate in such terms.

Over the past five years, a lot has been achieved in spearheading innovation and technology development in Hong Kong. We have established a programme of investment in Hong Kong's research and development activities. The Government will continue to provide the best hard and soft infrastructure through, for example, the Science Park, the Cyberport, the Applied Science and Technology Research Institute and other institutions and the Innovation and Technology Fund.

Design is an integral part of our innovative capability. The Government's policy is to facilitate the industry to enhance competitiveness through embracing technology and innovative design.

Indeed, as I have said on many occasions and as the Chief Executive has pointed out in his policy address, Hong Kong possesses the basic qualities for the development of creative industries, which cover product design, IC design, hi-tech instruments, multimedia, film, digital entertainment and games, and so on. I have already set up two Steering Committees on innovation and design under my portfolio to better co-ordinate Government efforts to facilitate enterprises to engage in more innovative activities and to move up the value chain. These committees will serve to identify the industries' potential and problems, and look for the right solution. The promotion of education and industry synergy is naturally one of their major tasks. A number of concrete projects are already in the pipeline. These include a Digital Media Centre in the Cyberport, and an IC Design Support Centre to be housed in the Science Park.

The Government's job is not to tell the businessmen how to do business. We would continue to promote a more business-friendly environment. Over the last few years, the Government has introduced over 300 measures to improve our services for the business sector through cutting red tape, eliminating over-regulation, and introducing new services. As an ex-businessmen who has years of experience tackling government bureaucracy from the private sector's point of view, I assure you that the momentum will not stop. Removing red tape will always come high on my agenda.

Here I should also like to mention briefly the importance I attach to the protection of intellectual property rights (IPR) if we were to succeed as a knowledge-based economy.

In this respect, Hong Kong has a good story to tell. We protect IPR through comprehensive legislation, vigorous enforcement actions, public education and close cooperation with copyright owners. The IPR laws in Hong Kong fully comply with international standards. And, they are complemented with vigorous enforcement action. Our Customs and Excise Department, which has one of the strongest dedicated enforcement teams in the region, spares no efforts in enforcing the new criminal provisions. As a result of the Customs' relentless enforcement actions, local copyright privacy has been generally brought under control.

Ladies and gentleman, China's accession to the WTO presents tremendous challenges, and I dare say, once-in-a-life-time opportunities for, among others, the business and the arbitration service sectors.

As the Mainland market continues to open up, foreign-related disputes constitute an important area of work in the adjudication work of the Mainland court. This has placed a higher demand on China's judicial work. Although the Mainland's legal profession has grown rapidly in recent years, there are still insufficient lawyers to handle these large number of cases which require highly technical skills and experience in international business.

As most foreign-related disputes giving rise to arbitration are related to construction, joint ventures, intellectual property rights, information technology and shipping, the arbitral institutions in Hong Kong are best placed to handle them. The use of Hong Kong as an arbitration forum will help bolster the confidence of foreign businesses. This will, in turn, help to enhance their confidence in investing in the Mainland. In the long run, it will also benefit the economic development of the whole country, including Hong Kong.

And on this note, I wish to end by wishing everyone a happy, healthy and prosperous Year of the Ram.

End/Friday, February 28, 2003

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