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Speech by SEDL at luncheon of Federation of HK Industries


Following is the speech by the Secretary for Economic Development and Labour, Mr Stephen Ip, at 43rd AGM and Members' Luncheon of the Federation of HK Industries (HKFI) today (July 18) (English only):

Andrew, Victor, Ladies and Gentlemen,

Thank you for the free lunch and my congratulations to Andrew on his being elected Chairman of HKFI.

When I was invited to attend this event back in March, Hong Kong was just beginning to feel the full force of the SARS outbreak. Few of us at that time could have imagined the extent of the impact of SARS on our economy, and our lives.

Today, I want to talk about two sectors of our economy: Tourism and Logistics.


The tourism sector was hard-hit by the SARS outbreak and the Government moved quickly to offer financial assistance. This took the form of low interest loans, waivers of various Government fees and charges and funds set aside to help relaunch the economy.

There was close co-operation between the Government and the tourism and related sectors over the past few months to prepare a proactive comeback plan to revitalise the tourism industry post-SARS.

The tourism comeback plan was announced last month, immediately after the World Health Organisation (WHO) removed Hong Kong from its list of SARS affected areas. The Hong Kong Tourism Board has since rolled out a nine-month campaign featuring a series of world-class events and worldwide publicity. The objective is to bring visitors back to Hong Kong and, in so doing, re-assert our image as one of the region's premier tourist destinations.

The Tourism Board's campaign includes activities such as a two-month shopping and dining festival with special offers and a super lucky draw with fantastic prizes. Other events coming up include an unprecedented international fireworks competition in October, and a spectacular harbour lighting show in December. In parallel, a series of world-class sport, entertainment and cultural events will also be brought to Hong Kong. These will include the visits of Liverpool, Real Madrid and Victoria Beckham!

I am delighted to say that there are already encouraging signs of a pick-up in arrivals. Although the long-haul markets will take some time to return to normal, we have seen the quick return of Mainland visitors to Hong Kong over the past few weeks. Mainland arrivals last month increased by 51% compared to May 2003, and by 11% over June last year. This clearly indicates the pent-up demand that has built up over the past few months.

In order to capitalise on this demand, and to further facilitate entry into Hong Kong for people living in Guangdong, new arrangements have been put in place for 'individual visitors' from four cities in Guangdong. There is great potential for development of this market. Current estimates are that up to one million people may come to Hong Kong from these four cities under this new scheme in the first year. The scheme is expected to be extended to cover the whole of Guangdong, which has 86 million people, by July 2004.

In the short term, we hope that a quick tourism recovery will help to re-energise other sectors and thus propel overall economic recovery. For example, our hotel occupancy rate has risen quickly, from a low of 10% during the worst of the SARS crisis, to 30% or more in June and now to about 60% in the past two weeks! Airlines, the retail and services sectors are all showing signs of recovery. Daily passenger flow at the Hong Kong International Airport reached about 86,000 in the past weekend, as compared to less than 20,000 per day in May.

Developing new tourism attractions and upgrading existing new tourism attractions

Let me now tell you about our investments in the tourism infrastructure.

We are making good progress on the Hong Kong Disneyland and the Tung Chung Cable Car projects. Development of the Hong Kong Wetland Park in Tin Shui Wai is also well in train. All of these are scheduled to be completed in 2005.

In December this year, we will launch the Harbour Lighting Plan - the first of its kind in the world. The highlight will be a nightly show combining special sound and light effects to tell the story of Hong Kong and to showcase our magnificent harbour in a new and exciting way. The Avenue of Stars, another new tourism product to come on stream early next year, will enhance Tsim Sha Tsui's attraction as a tourism hub. These two projects, together with the former Marine Police Headquarters development, are good examples of partnership between Government and the private sector: an approach which we believe is well suited to tourism projects.

Government is also taking forward a diversified programme of green tourism projects in the northern New Territories. This will establish the basis for the careful use of our natural resources in support of tourism. The various new initiatives will help diversify Hong Kong's tourism development and ensure that we remain a premier tourist destination in the years to come.

Enhancing industry standards and hospitality

A critical issue for our tourism sector to prosper will be our ability to ensure a steady supply of well-trained, well-motivated people who are prepared to enter this industry. The Government is firmly committed to supporting training and development activities related to the industry. Service standards in some parts of the industry are already among the best in the world. But, we need to meet these world-class benchmarks in all sectors of the industry. And this cannot be achieved without the joint efforts of the industry, the community and the Government.

Regional Co-operation on Tourism

The SARS outbreak has highlighted the importance of regional co-operation to guard against the spread of diseases through travel activities, and to ensure effective communication. Equally important is the need to work together to rebuild confidence in Asia as a whole. In early June, Guangdong, Hong Kong and Macau tourism authorities met in Guangzhou and agreed on a number of initiatives to boost tourism.

The Boao Tourism Conference organised by the World Tourism Organisation and the Boao Forum for Asia earlier this week was a clear demonstration of our government's commitment to work with our regional partners to rebuild tourism. We will continue to work closely with them to maintain effective vigilance against diseases and take necessary steps to establish Asia as a safe destination for tourists.


Let me now turn to the logistics sector. The logistics sector accounts for 4.8% of our Gross Domestic Product and provides over 200,000 jobs, or 6.3% of our workforce. As the preferred international logistics hub in Asia, we enjoy a prime geographical location, world-class transport infrastructure, as well as excellent physical and information connectivity. In 2002, our container port handled a world-record throughput of 19.1 million Twenty-foot-Equivalent Units (TEUs), retaining its title as the world's busiest container port for the 10th time in the past 11 years. We are also the world's sixth largest maritime centre. The Hong Kong Shipping Register has hit a record high of 18 million gross tons and is set to reach the 20 million mark next year.

Hong Kong International Airport, the world's busiest international cargo airport, handled 2.5 million tonnes of freight last year.

Enhancing our Logistics Infrastructure

One of our key measures to enhance logistics infrastructure was announced by the Chief Executive in his 2003 Policy Address. A site on North Lantau will be made available for the private sector to develop a Value Added Logistics Park. This facility will enhance Hong Kong's capability to provide 'one-stop' integrated logistics services and reinforce our status as the premier international logistics hub in Asia.

Modern logistics is as much about communications as it is about physically moving merchandise. So, the Government has invited proposals for the development of a Digital Trade and Transportation Network (DTTN) System to enhance the overall competitiveness of our logistics industry. This project is accorded the highest priority and our aim is to bring the DTTN initiative on line as soon as practicable.

Next week, the first berth of Container Terminal 9 will come on stream. Upon completion of the remaining five berths by 2005, our container handling capacity will be further enhanced. We have also commissioned a study to develop a master plan for Hong Kong's port development in the coming 20 years and beyond. The study is scheduled for completion in late 2003.

Co-operation with the Mainland

As I mentioned earlier in respect of tourism, regional co-operation is most important. This is even more important when it comes to the logistics sector. We have jointly commissioned, with the National Development and Reform Commission, a study on the broad framework for pursuing logistics co-operation with the Mainland, (particularly the PRD regions), and the feasibility of new ways to facilitate cross-boundary freight flows, such as the development of logistics pipelines and inland freight villages.

Enhancing physical connectivity with the Mainland remains high on our agenda. In 2002, significant improvements were made to extend the operating hours of the Lok Ma Chau Boundary Control Point and enhance its throughput, thus reducing costs for the logistics industry. Looking ahead, the completion of the Shenzhen Western Corridor will provide a significant boost to our capacity to handle cross-boundary vehicles. The Government is also committed to pursuing a bridge linking Hong Kong, Macau and Zhuhai as a priority project. We are also building an additional bridge between Lok Ma Chau and Huanggang.

Closer Economic Partnership Arrangement

Before I finish, I would like to share some thoughts on the recently-signed Closer Economic Partnership Arrangement (CEPA) with the Mainland, with particular reference to the two sectors that I have spoken about today.

The objectives of CEPA are to strengthen trade and investment co-operation between the Mainland and Hong Kong, and to facilitate the development of both economies. When CEPA takes effect on January 1, 2004, Hong Kong companies will enjoy greater flexibility and business opportunities when operating in the Mainland.

Hong Kong companies providing freight forwarding, storage, and road freight transport services, for example, will be allowed to set up wholly-owned enterprises in these sectors roughly one to two years before other WTO members. Freight forwarding and storage companies will enjoy the same treatment applicable to Mainland enterprises on the minimum requirement on registered capital. In addition, CEPA will allow Hong Kong companies to set up wholly-owned enterprises to provide a wide range of logistics services in the Mainland, international ship management services, storage for international maritime freight, container station and depot services, and non-vessel operating common carrying services. They can set up wholly-owned shipping companies and will enjoy greater flexibility in the handling of empty containers. Since China has not made any WTO commitments in respect of logistics services and maritime transport services, Hong Kong companies operating businesses under CEPA will enjoy unique advantages.

On tourism: Hong Kong hotels and restaurants will be permitted to operate in the form of sole ownership in the Mainland with effect from 1 January 2004. From the same date travel agents will be able to set up joint venture arrangements with Mainland operators without geographical restrictions to offer both inbound and domestic tours throughout the Mainland.

I trust you will agree that CEPA will bring many new business opportunities to Hong Kong, facilitate our economic recovery, and boost investment between the Mainland and Hong Kong.

I would also emphasize that all our efforts will be in vain if the private sector does not make the most of the opportunities available.

Ladies and Gentlemen, the future is in your hands and I am sure that under the able chairmanship of Andrew, your Federation will help Hong Kong industries to make the most of CEPA.

Thank you.

End/Friday, July 18, 2003


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