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Following is the speech by the Secretary for Economic Development and Labour, Mr Stephen Ip, at the Networking Luncheon hosted by the Trade Development Council in Rotterdam yesterday (September 15, Rotterdam time) (English only):

Mr Vice Mayor, Mr Ten Heggeler, distinguished guests, ladies and gentlemen,

It is a great pleasure to see so many of you here today in Rotterdam. Greetings also go to the Hong Kong delegates who have come all the way here to exchange experience and enhance their business network with our friends in the Netherlands.

Although I have been to Rotterdam several times before, this is my first official visit here since taking up this job in July last year. I am particularly thankful to the Mayor of Rotterdam and the Port Authority here for their warm hospitality.

Hong Kong has enjoyed and maintained strong economic ties with the Netherlands. In 2002, the Netherlands was our 4th largest trading partner among the EU Member States. Over 23% of goods traded between China and the Netherlands were routed through Hong Kong. We also maintain a close relationship with Rotterdam. The Port of Rotterdam has established an office in Hong Kong to enhance communication between the two cities. And I can tell you that your representative in Hong Kong (Edward Yau) is a classmate of mine going back many years!

The theme of the Luncheon today is "Hong Kong - Your logistics partner for success in China and Asia". I particularly like the word "partner" which aptly describes the relationship between the Netherlands and Hong Kong. It is also what makes Hong Kong successful as the preferred international logistics and transportation hub in Asia.

Strategically located at the southern doorstep of China, Hong Kong is the major gateway to the fast growing and most populous consumer market in the world. Accession to the World Trade Organisation (WTO) demonstrates the importance accorded by China to international trade and reaffirms its commitment to open its markets further. The World Bank predicts that by 2020, China will become the world's second largest trading entity ahead of Germany and Japan. More trade and investment will flow into Southern China which is a dynamically growing economy. Hong Kong is perfectly positioned and equipped to capitalise on that expansion.

Our container port has been the world's busiest in ten of the past eleven years. In 2002, Hong Kong handled a world-record throughput of 19.1 million TEUs (twenty-foot equivalent units). We are confident that we will equal or even beat that world-record this year. Hong Kong is also the world's seventh largest shipping centre. Our shipping register hit a record high of 18 million gross tonnes last year. We expect to hit 20 million gross tonnes in 2004.

The state-of-the-art Hong Kong International Airport has been the busiest international air cargo airport in the world since 1996. It has also been awarded the Best Airport for the past three years and the Best Cargo Airport for the past two years. Hong Kong's air cargo sector is a high value industry. In 2002, our international airport handled 50 billion US dollars worth of exports. This is 1.6% of our export volume, but almost 25% of our total export value.

Under the "One Country Two Systems" principle, Hong Kong practices a system that you are familiar with. Our tax regime is simple and predictable, and our tax rate is low. Hong Kong has a clean government, strong tradition of rule of law, and a free press. Our Customs is renowned for providing speedy and reliable services. There is no trade barrier, no investment restriction nor foreign exchange control. Hong Kong is the freest economy in the world.

Despite the outbreak of SARS from March to June this year which affected many sectors, the logistics industry in Hong Kong has performed strongly in these few months. Up to July this year, we have witnessed a 5.6% surge in air cargo volume in tonnage and a 5.4% surge in container sea cargo of TEU being handled.

As Dwight D. Eisenhower once said, "Our real problem is not our strength today; it is rather the vital necessity of action today to ensure our strength tomorrow." Let me now focus on what has been done to prepare Hong Kong for a better tomorrow.

Construction of the Container Terminal 9 started in 2001 to cope with the anticipated increase of cargo flow. Two months ago, I officiated at the opening of the first berth of this new container terminal. Upon its full commissioning in early 2005, we will add more than 2.6 million TEUs to our container handling capacity.

In addition, a dedicated Express Cargo Terminal with total investment of 100 million US dollars, the largest project of its kind in Asia, is scheduled to commence operation in 2004. We are also actively pursuing the idea of developing a value added logistics park near the international airport to provide "one-stop" integrated services.

Besides physical infrastructure, we are fully aware of the importance of information technology. Proposals have been invited for the development of a Digital Trade and Transportation Network System, with a view to enhancing the overall competitiveness of our logistic industry. The system aims at providing a neutral e-platform for the exchange of information and data among participants in the supply chain and enhancing speed and reliability.

Enhancing our "partnership" with Mainland China is high on our agenda. The Closer Economic Partnership Arrangement (CEPA) signed on 29 June 2003 between the Mainland and Hong Kong is an important milestone in the furtherance of our partnership. When CEPA takes effect on 1 January next year, Hong Kong companies will enjoy greater flexibility and business opportunities when operating business 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 the Mainland at least one to two years before other WTO members.

Furthermore, Hong Kong companies will be allowed 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. As China has not made any WTO commitments in respect of logistics services and maritime transport services, Hong Kong companies will enjoy unique advantages under the CEPA.

At the sixth Plenary of the Hong Kong/Guangdong Co-operation Joint Conference held in Hong Kong last month, Hong Kong and Guangdong agreed to capitalize on and complement each other with its own strengths, with a view to bringing mutual benefits. Hong Kong will focus on developing into one of the world's most important service centres excelling in financial, business, transportation, logistics and high value-added services, while Guangdong will focus on developing its manufacturing industries and building up production infrastructure.

Let me add a few points on the partnership with the Mainland, in particular with the Pearl River Delta (or PRD). PRD is China's single largest GDP contributor and largest exporter. It is also the most affluent and most open economic region in China. Hong Kong has been the source of more than 70% of the cumulative foreign direct investment in PRD. In the past two decades, Hong Kong has been serving as a springboard for multinational companies to access PRD. We are more than a partner of PRD - we are part of the PRD.

We are now strengthening our connectivity with the Mainland. The Shenzhen-Hong Kong Western Corridor, which will be a 5-km bridge connecting Shenzhen to Hong Kong, is now under construction. As the fourth land boundary crossing, the Shenzhen-Hong Kong Western Corridor will relieve the existing land boundary crossings by providing a capacity of at 80,000 vehicles per day upon its completion in 2005.

A working group comprising officials of the Hong Kong, Guangdong and Macau administrations is now pressing ahead with the advance work for the construction of the Hong Kong-Zhuhai-Macau Bridge. This bridge will enable flow of goods and people between Hong Kong and the Western part of PRD within half an hour.

Since 2001, the Hong Kong Airport Authority has participated actively in the "A5 Forum", which brings together the five major airports in the PRD - Hong Kong, Macau, Guangzhou, Shenzhen and Zhuhai. Participating airports have already reached agreement on enhanced emergency co-ordination and support and joint promotional activities. With our well-established international aviation network, we see a special role for Hong Kong in the A5 Forum and will continue to play a constructive role in fostering cooperation among airports in the PRD.

Ladies and gentlemen, I truly believe that partnership is the focus of Hong Kong's future logistics development. While we are enhancing our cooperation with the Mainland on the governmental level, we will continue to communicate and cooperate with other stakeholders of the logistics industry. We value advice and support from every partner, no matter whether it is a local company, a multinational company or other governmental body. If you are looking for a strategic partner in Asia Pacific, Hong Kong is your right choice.

In closing, I wish to thank the Hong Kong Trade Development Council, for its excellent work in promoting the logistics service of Hong Kong and in organizing this "Hong Kong Logistics Study Mission". I understand that there will be busy schedules in the coming few days for business networking and field trips, including a conference this afternoon. I wish this logistics conference every success and I look forward to seeing all of you in Hong Kong.

Thank you very much.

End/Tuesday, September 16, 2003

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