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Speech by SCIT on business opportunities under CEPA for Korean companies


Following is the speech by the Secretary for Commerce, Industry and Technology, Mr John Tsang, at the Business Opportunities under CEPA for Korean Companies Seminar in Seoul, Korea today (October 23) (English only):

Good afternoon, Ladies and Gentlemen,

It is my great pleasure to welcome all of you to this seminar and share with you the business opportunities for Korean companies under the Closer Economic Partnership Agreement or CEPA, which is basically a free trade agreement that was recently completed between Hong Kong and Mainland China.

Korea and Hong Kong have strong economic ties and your country has contributed substantially to Hong Kong's recent development. There are at present 700 Korean companies doing business in Hong Kong. They include chaebols such as Hyundai, LG, Samsung, Ssangyong, SK and many others. Of these companies, there are 15 regional headquarters and 60 regional offices.

The Korean companies in Hong Kong make up a vibrant and diverse group. Apart from import/export companies that are engaged in merchandise trade, many Korean companies in Hong Kong are also active in the services sector. There are 30 Korean financial institutions in Hong Kong. There are also quite a few IT, logistics and shipping companies. A lot of these companies are increasingly engaged in business with Mainland China.

Hong Kong is an important trading hub between Mainland China and Korea. In the first half of 2003, total trade between the two countries via Hong Kong increased by 23 per cent to US$ 3.9 billion. Re-exports of Mainland products to Korea grew by 17 per cent, while Korean re-exports to the Mainland increased by 26 per cent. Clearly, there is already significant trade interest between us.

And CEPA will make Hong Kong even more attractive for Korean companies looking to expand in China.

With the launch of this historic agreement between Hong Kong and Mainland China, CEPA will open up new and exciting opportunities for Korean firms. CEPA will eliminate tariffs on products of Hong Kong origin exported to the Mainland, provide local businesses and professionals in 18 services sectors with early access to the Mainland and facilitate cross-border trade and investment. Generally speaking, CEPA covers three main areas:

- Trade in goods

- Trade in services

- Trade and investment facilitation

Regarding trade in goods, the Mainland will apply zero import tariff from the first of January next year for exports from Hong Kong meeting CEPA origin rules in 273 products. As a result of the zero tariff concession under CEPA and China's commitments upon accession to the WTO, about 90 per cent of Hong Kong's domestic exports to the Mainland will enjoy zero tariff right from the beginning of next year.

These products include electrical and electronics products, plastic articles, paper articles, textiles and clothing, chemical products, pharmaceutical products, watches and clocks, jewellery, cosmetics and metal products. No doubt Korean companies will find interest in some, if not all, of these products.

For other products, the Mainland will apply zero tariff at the latest by January 1, 2006 upon application by local manufacturers and upon CEPA rules of origin being agreed and met. As for products that are not being manufactured in Hong Kong for the time being, we have also a mechanism to include these Hong Kong products when they are manufactured in the future in the zero tariff regime through a similar application process.

As for trade in services, the Mainland will grant preferential treatment to a total of 18 sectors. Those of particular interest to Korean companies include telecommunications, real estate and construction, banking, securities, logistics and freight-forwarding, transport, tourism and advertising.

This month, the Mainland has already commenced implementation of the new arrangements for the telecommunications sector. The specific commitments for the other 17 sectors will take effect on January 1, 2004.

The Mainland and Hong Kong will enhance cooperative measures in several areas with a view to further facilitating trade and investment between the two places. You may be interested to note that cooperation in Chinese medicine industry is one of the items under this category and, given the strength and appeal of Korea's ginseng business, I am sure you would find our arrangement of considerable interest.

CEPA adopts a building block approach and provides a mechanism for further liberalisation measures. In order to broaden the scope and coverage, the two Governments have agreed to pursue further liberalisation in goods and services trade. Liaison mechanisms established will be utilised to monitor implementation, resolve difficulties that arise and expand the current coverage.

CEPA has helped strengthen Hong Kong's position as a centre for value added manufacturing and high quality services for a vast domestic market of 1.2 billion people. With China's accession to the WTO and the signing of CEPA, Hong Kong's role as an international trade and business center and the principal gateway to China will be further enhanced.

Moreover, the emergence of Mainland China as one of the world's most dynamic economies offers a range of additional opportunities - especially in the Pearl River Delta (PRD), which is the fastest growing region in the fastest growing large economy in the world. With its population of 48 million, the PRD has enjoyed double-digit average annual growth for more than a decade. Each day, an estimated US$300 million worth of goods are produced by thousands of factories in the region.

CEPA will strengthen the appeal of Hong Kong for Korean investors in several ways. For example, Korean manufacturers based in Hong Kong will be able to take advantage of the zero import tariff preference to produce high-value added products. The WTO-plus market liberalisation measures for trade in services would give Korean or other enterprises based in Hong Kong a "first mover" advantage. It naturally is up to companies to decide how best to take advantage of the opportunities offered by CEPA to gain greater access into the Mainland market.

For Korean companies looking to profit from a Hong Kong/Mainland China strategy, Hong Kong is the ideal base. The city's infrastructure, business and cultural links with the Mainland, as well as its institutions, regulatory environment and people provide an excellent entry platform.

And we are ready to help you succeed. Invest Hong Kong, the investment promotion agency of the Hong Kong Government, is in business to help you do business. It can assist you with setting up in Hong Kong, connect you with business partners and service suppliers, guide you through the government regulations and requirements and provide sector-specific expert advice.

Ladies and gentlemen,

CEPA will have a profound impact on Hong Kong's economic integration with the Mainland. It clearly opens a new chapter in cross-border trade and investment, making it considerably easier for Hong Kong-based companies to expand across the boundary. These opportunities should prove to be attractive for Korean companies.

CEPA will reinforce and expand Hong Kong's advantages as an investment destination for Korean companies. We welcome you to come to Hong Kong to do business, to maximise your opportunities and to achieve success.

Thank you.

Ends/Thursday, October 23, 2003


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