Following is the speech by the Financial Secretary, Mr Henry Tang, at the Guangdong-HK investment environment seminar in Tokyo today (October 30) (English only):
Distinguished Guests, Ladies and Gentlemen,
It is my great pleasure to welcome all of you to this event today. I am pleased to join Governor Huang Huahua in telling you about investment opportunities in the Greater Pearl River Delta region. Governor Huang has just told you about the great offering of Guangdong province. I shall in turn tell you what Hong Kong does best, before I get into the formidable partnership of Hong Kong and the Pearl River Delta.
Hong Kong's economic development is a history of constant change and adaptation to meet new opportunities and challenges. We have developed from a city that mainly focused on export manufacturing to a predominantly services and knowledge-based economy. This ability to continuously reinvent ourselves and respond positively to economic shifts is not only a desirable but an essential quality in today's volatile global economy.
The other assets for Hong Kong's success are our sound economic fundamentals, combined with a regulatory environment that helps companies to prosper.
Built around the cornerstones of free enterprise, free trade and free markets, Hong Kong is one of the most open, externally orientated economies in the world. It is a duty-free port, where no quotas or tariffs apply. Goods, services, capital, information and people flow with virtually no restrictions. It is to no one's surprise that the Heritage Foundation and the Fraser Institute have consistently ranked Hong Kong as the world's freest economy.
Our strategic location and unsurpassed infrastructure are unrivalled in the region. Combining these with a strong and expanding pool of talent, Hong Kong possesses a winning formula for local as well as overseas companies. We continue to invest heavily in our hardware and software so as to guarantee our future success.
Hong Kong taxes are among the lowest in the world. Our government upholds a level playing field for all, and places strong emphasis on policy consistency and predictability. Businesses are able to make long-term investment decisions without fear of tilted preference and arbitrary changes.
These fundamentals have helped establish Hong Kong as one of the most attractive business hubs in the region. Hong Kong is the chosen base for some 3,000 regional headquarters and regional offices representing multinational companies from around the world. More than one-third of the multinational firms active in the Asia-Pacific have their regional headquarters in Hong Kong. Hong Kong is the second largest recipient of FDI in Asia after China, according to the World Investment Report 2003 published by the United Nations Conference on Trade and Development (UNCTAD).
Japan has contributed significantly to Hong Kong's economic development and foreign investment. Japan is the third largest export market and the second largest source of imports for Hong Kong. Some 2,000 Japanese companies are doing thriving business in Hong Kong. Japanese banks constitute one of Hong Kong's largest groups of foreign banks. As of May 2003, there were 40 Japanese banks with branches or representative offices in Hong Kong.
Almost all leading Japanese trading companies and manufacturers, including Itochu, Marubeni, Mitsubishi, Mitsui, Nissho Iwai, Citizen, Bandai and Onward Kashiyama, have set up purchasing offices and distribution offices in Hong Kong. They play a significant role in Hong Kong's trade with Japan. A lot of these companies are increasingly engaged in business with Mainland China. Japanese SMEs also flourish in Hong Kong, particularly in the areas of import/export and information technology.
For Japanese and other international companies, Hong Kong is the first choice for their high-value corporate activities. It is the place in the region where they carry out corporate co-ordination and central management functions - including regional strategy formulation, sales, marketing and customer service.
Hong Kong has become even more attractive with the signing of CEPA, the Closer Economic Partnership Arrangement. CEPA opens up new and exciting opportunities for Hong Kong, for the Mainland, as well as for our overseas friends. CEPA will eliminate tariffs on many Hong Kong goods exported to the Mainland, provide businesses and professionals in various services sectors with early access to the Mainland and simplify cross-border trade.
On trade in goods, 273 Hong Kong products will enjoy zero import tariffs in the Mainland from the first of January next year. On trade in services, the Mainland will grant preferential treatment to a total of 18 service sectors. They include telecommunications, real estate and construction, banking, securities, logistics and freight-forwarding, tourism, advertising, etc. On trade and investment facilitation, we will be doing a great deal in making the regulatory more transparent and user-friendly to all concerned.
I would like to emphasise that CEPA in this current form is just the beginning of an open and continuous process. The content of CEPA will be further enriched over time and new areas of co-operation will be explored, taking into account the latest developments of Hong Kong's as well as the Mainland's economies. Here lies the genuine power of CEPA.
The partnership of Hong Kong and the Pearl River Delta (PRD) is destined to earn increased dividends with CEPA. The PRD is the fastest growing portion of the fastest growing region of 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.
Over the past two decades, Hong Kong and the Pearl River Delta have combined and leveraged our respective strengths to develop one of the world's most efficient and cost-effective manufacturing supply chains. The paddy fields of Shenzhen, Dongguan, Zhuhai and Zhongshan have been transformed into a production powerhouse manufacturing US$300 million worth of goods in a day, every day of the year. Tens of thousands of factories employ millions of workers. And during the same period, Hong Kong's service industries have blossomed and now account for more than 85% of our GDP.
Abundant land and abundant labour, together with increased consumer spending power and business sophistication, will continue to be the main drawcards of businesses wanting to make the most of the PRD's resources. At the same time, our services expertise, our position as an international financial centre and our global outlook, will continue to be the main attraction for businesses wanting to place a strategic two-way platform in Hong Kong in order to enter the Mainland.
Many Japanese companies will be considering how to take advantage of the opportunities arising from the opening of the Mainland China market. Some companies will wish to use it as a low-cost manufacturing base and then export elsewhere; others will want to tap into the largest consumer market in the world. No matter which ways Japanese companies want to go, the Hong Kong/Pearl River Delta business model offers you the most strategic partnership.
Many international companies have cast their votes of confidence in the Greater PRD model. They have opted to perform their management, finance, information, co-ordination and logistics activities in Hong Kong, while overseeing their huge manufacturing facilities and sales operations in the Pearl River Delta.
The combination of Hong Kong's international business practices and Guangdong's highly skilled and low-cost workforce provide a winning combination for Japanese firms looking to tackle the Chinese market.
Hong Kong always stands ready to offer unsurpassed economic value, including capital, resources and long-standing relationships on the Mainland based on decades of experience. If you want to combine an international business environment with immediate access to Mainland China, there is simply no match for Hong Kong.
We therefore welcome you to do business, maximise your opportunities and achieve success in Hong Kong and Guangdong Province. And your competitors are certainly doing that.
Ends/Thursday, October 30, 2003