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Following is the speech by the Secretary for Economic Development and Labour, Mr Stephen Ip, at the Hong Kong Re-launch Lunch in Amsterdam on September 16 (Amsterdam time) (English only):

Ladies and gentlemen,

It's a great pleasure to be back in Amsterdam and to speak to you about Hong Kong and to renew, in a small way, the strong ties that have developed between our two communities. We may have slipped briefly from the international business radar screen as a result of the SARS outbreak earlier this year, but I'm here today to tell you Hong Kong is back - healthier, more competitive and with new vitality. Even though Hong Kong is now free from SARS, ladies and gentlemen, I can assure you that we remain vigilant against the revival of SARS and are doing all we can to protect ourselves from the threat of another outbreak.

I am delighted that on my current European visit, I have the pleasure of being in one of the most picturesque cities in Europe - Amsterdam. Our ties with the Netherlands have traditionally been close, going back to the earliest of days when cargoes were carried in the holds of ships of the United East Indian Company and the sailors were at the mercy of the trade winds. In more recent times, since the early part of the 20th century, the Dutch have been closely involved in helping to build Hong Kong. Perhaps the most spectacular example has been the part played by the Dutch dredging fleet in forming the land on which the new Hong Kong International Airport was built - an airport that earlier this year was awarded Best Airport of the Year for the third year in a row. To tell you a little secret, I have worked for a Dutch Company, the Royal Interocean Lines and this was the one and only one company I have worked for in the private sector before I joined the Hong Kong Government!

And, we are continuing to develop the close ties established so many years ago. The Netherlands is now the fourth largest investor in Hong Kong with the stock of direct investment at the end of 2001 amounting to more than US$25 billion. That is a significant stake in Hong Kong and obviously a vote of confidence in our future. Indeed, over 200 Dutch companies have established a presence in our city. The names read like a who's who of the Dutch business world, with companies like Philips, ABN AMRO, ING Barings, Friesland Foods, and, of course, Heineken, which is also a sponsor of some major events in Hong Kong.

These companies and many more like them from all parts of the globe find Hong Kong an attractive place in which to invest and establish a base. Our strategic location, our strengths as a free and open market; low and simple taxes; a legal system familiar to the West and upheld by an independent judiciary; a level playing field for business; a clean and efficient civil service coupled with free flow of news and information, have become a hallmark of our stability and openness. And they remain as firmly entrenched today as they did prior to our reunification with China six years ago. Our Customs service is renowned for providing speedy and reliable services; there are no trade barriers, no investment restrictions nor are there any foreign exchange controls.

The business-friendly environment we have built up over the years is amongst the best in the world; and we are making it better by leveraging on our "One Country, Two Systems" status with the Mainland to strengthen two-way links between China and the rest of the world, with Hong Kong as a finance, transport and logistics hub and facilitator of trade. For instance, we are planning to develop a Value Added Logistics Park near the airport to provide "one-stop" logistics services. We are also inviting proposals to develop a Digital Trade and Transportation Network System to facilitate information flow in the supply chain.

Last year, Hong Kong handled a quarter of the total trade between the Netherlands and China. We are extremely fortunate to be an integral part of the Pearl River Delta (or PRD), which is also known as the "factory of the world". Indeed, the common goal of Hong Kong and our immediate neighbour, Guangdong Province, is to develop the PRD region, with a population of nearly 50 million, into one of the world's most vibrant economic hubs within the next two decades.

The PRD is already the fastest growing, most affluent and most open economic region in China. It's also the single largest contributor to the nation's GDP and its largest exporter. And much of this rapid development has been driven by Hong Kong entrepreneurs and developers investing billions of dollars into the region. Over 70% of the cumulative foreign direct investment in the past 20 years has come via Hong Kong. As a result, our economies have become closely interlinked, particularly in more recent times, and this "union" will only strengthen as China opens up more to the world as a full member of the World Trade Organisation.

To cope with the impact of this anticipated "explosion" in trade and business opportunities, we in Hong Kong are continuing to upgrade our infrastructure, expand our port facilities and improve our boundary crossings with the Mainland. Hong Kong has been the world's busiest container port for 10 of the past 11 years. Last year, we handled a record throughput of 19.1 million TEUs. The boundary between Hong Kong and Guangdong has become one of the world's busiest border crossings with more than 300,000 people and over 30,000 vehicles criss-crossing every day. Even the economic downturn and the outbreak of SARS in April this year have not blunted Hong Kong's export trade - which surged by more than 12% throughout the second quarter.

With SARS now under control, we are beginning to experience signs of recovery and comeback of confidence both amongst the people of Hong Kong and in other parts of the world. Hong Kong's famous entrepreneurial flair is once again coming to the fore. The recovery is particularly noticeable in inbound tourism and related sectors such as airlines, retail, catering and business services. The average daily passenger flow of 80,000 at Hong Kong International Airport has nearly returned to the pre-SARS level. The number of visitors in August was 1.64 million, up 9.6% compared with August last year. Hotel occupancy rate in the same month also jumped to 83% from a low of 15% in May at the height of the SARS epidemic.

One of the major boosts to the tourism industry has been the decision of Mainland authorities to allow residents from several cities in Guangdong Province to visit Hong Kong on an individual basis instead of through the normal tour group operations. This trial scheme has now been expanded to include Beijing and Shanghai and will be extended to the whole of Guangdong, which has 86 million people, by May 2004. It has already provided a boost to Hong Kong's tourism industry because it has tapped into a new and willing market of high-spending Mainland visitors who stay longer and spend more than the average tourist. This, in turn, stimulates our retail and catering sectors and the local consumption market.

While we welcome more Mainland visitors, we are not overlooking our international markets, which during the past few months have been the target of some high profile and innovative campaigns to attract visitors back to Hong Kong. We realise it may be a little more difficult to attract long-haul travellers to come back as quickly as visitors from the Mainland but we are starting to see signs of gradual return of tourists from Europe and the United States. With SARS behind us now and the pleasant autumn weather, I can assure you this is the best time to visit Hong Kong.

So, things are looking up for Hong Kong. And nowhere is this more evident than with our enhanced co-operation with the Mainland. I have already mentioned the impact this is having on our tourism industry. But, our major initiative is the Closer Economic Partnership Arrangement, or CEPA, which Hong Kong signed with the Mainland on June 29.

This landmark free trade agreement covers three broad areas - trade in goods, trade in services and trade and investment facilitation. It will provide a new platform, and new impetus, for businesses wishing to tap the vast potential of the Mainland market. It gives Hong Kong companies a head start on their competitors. At the same time, it opens a new avenue of co-operation between Hong Kong and overseas firms and partners wanting a foothold in the Mainland market.

In fact, since the signing of CEPA, there has been an increase in the number of enquiries received by our economic and trade offices overseas. Companies worldwide are seeking ways to take advantages of this new platform, which will mean more investments in Hong Kong.

The agreement will also breathe new life into Hong Kong's industrial sector. With tariff free treatment and better intellectual property protection, it will be much more attractive for manufacturers of high value-added products to establish their plants in Hong Kong. In addition to manufacturing and services, CEPA will also help facilitate trade. Better co-operation on customs clearance, a high degree of transparency on laws and regulations, and a streamlined licensing and accreditation regime, will mean a smoother trade flow between Hong Kong and the Mainland. This will further strengthen our role as a premium two-way platform for the Mainland.

With SARS brought under control, our integration with the PRD, the conclusion of CEPA, and the steady pick-up in tourism and related sectors, we are pleased to say that Hong Kong's economy is now on the road to recovery and we have recently revised our GDP forecast growth rate for 2003 from 1.5% to 2%. And this is just the beginning. I am sure there are companies in the Netherlands interested in establishing offices in Hong Kong. We are here to help you explore the opportunities in Hong Kong and, through us, to establish firmer footholds in China. Certainly, as two great trading entities we should be doing as much as we can to boost commercial links. That time is now.

Ladies and gentlemen, I don't wish to take up any more of your time except to say that Hong Kong is in a unique position as a Special Administrative Region of China. We have the benefit of our close geographic, economic, political and cultural ties to the world's fastest growing economy. Yet we have our own separate system with its institutional strengths, financial and business acumen and an infrastructure that no other city in China has. We have the skills, the knowledge and the resources to help companies in China compete under WTO; and to help companies from around the world who want to do business in China. Most importantly, we're well and truly back in business and looking for your business.

Thank you

End/ Wednesday, September 17, 2003

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