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Following is a speech by the Secretary for Commerce, Industry and Technology, Mr John Tsang, at the Thailand-Hong Kong Business Council Dinner in Bangkok, Thailand today (August 26) (English only):

Thank you, Dr Vachara. Ladies and Gentlemen,

Good evening.

It is a great pleasure for me to be back in my favourite city, Bangkok, the City of Angels, and to be among so many friends of Hong Kong.

I would like first of all to thank Bernard for suggesting the possibility of my paying a visit to Bangkok to meet with you all and to update you on the latest economic developments in Hong Kong. I would also like to thank the Thailand-Hong Kong Business Council for organising tonight's dinner. The Council is a fine symbol of the close relationship that Thailand and Hong Kong enjoy. In fact, there aren't very many closer relationships anywhere. I say that because Thailand provides Hong Kong with 86 per cent of the rice that we consume everyday. Rice, of course, is an essential life-sustaining need of Hong Kong people, ranking right up there with oxygen, water and mobile phone. And Thai rice has earned such a good reputation in Hong Kong that its share of the market has been increasing steadily in recent years. I can assure you that in my household we eat only Thai fragrant rice.

But rice is just part of an overall trade relationship that has grown at an annual rate of 10 per cent over the past few years, to more than 260 billion baht in 2003. And in the first half of this year, the value of our bilateral trade increased by nearly 20 per cent over the same period last year. That is a remarkable achievement. In addition to trade, there is a massive flow of tourists between us, as well as people engaged in business and employment. So it is no exaggeration to say we share an extremely warm and mutually beneficial friendship. Again, I want to offer my thanks to the Thailand-Hong Kong Business Council for your excellent work in making this a reality.

My key message this evening is about how Thai businesses can take advantage of Hong Kong's unique circumstances, infrastructure and skills to enter and thrive in the Mainland market.

But before I get into that, I would like to commend all the members of the World Trade Organisation (WTO) for their efforts towards reaching a framework agreement that includes agriculture earlier this month. At that meeting in Geneva a few weeks ago, the WTO membership also confirmed that Hong Kong would host the 6th Ministerial Conference in December next year. This is a great privilege for Hong Kong. The Ministerial Conference is the most significant event in the WTO calendar, and we are hopeful that next year in Hong Kong the global community can consolidate and take forward the breakthrough reached in Geneva last month. We would like nothing better than for Hong Kong to be an important milestone in the Doha Round, because we are as committed as anyone to furthering the broad and balanced development of the global multilateral trade regime.

Hong Kong's hosting of the 6th Ministerial Conference highlights the fact that the Hong Kong Special Administrative Region is a member in its own right of the WTO - just as Hong Kong is represented by our own delegation of athletes and officials at the Olympic Games in Athens.

I stress this point because it is central to what makes Hong Kong special, to what makes Hong Kong a leading international financial and transport hub. The Hong Kong SAR has separate membership in not only the WTO and the Olympic movement, but also the World Customs Organisation, APEC and other international forums. This autonomy is guaranteed by the Basic Law, Hong Kong's constitution, under which Hong Kong continues to enjoy the same freedoms and way of life that it did before 1997.

Hong Kong is consistently ranked as the world's freest economy every year by think tanks like the Heritage Foundation and the Fraser Institute. Our freedoms are the pillars of our success. These pillars include the rule of law, administered by an independent judiciary; no foreign exchange controls or trade barriers; minimum government interference; a level playing field for all businesses; the free flow of news and information; and effective intellectual property protection. We have maintained Hong Kong's low and simple tax regime. And, I should stress, we are not required to pay taxes to the Central Government coffers in Beijing.

But, having said that, Hong Kong's prosperity and dynamism are closely tied to the rapid development and opening up of the People's Republic of China. Hong Kong is simultaneously contributing to, and benefiting from, the huge strides that the Mainland is making in its economic and social development.

China is the fastest-growing large economy in the world. As the Mainland opens up under its WTO commitments, it is driving an increasing share of the world's economic growth. The WTO had predicted that by 2020, China would be the world's second-largest exporter. But as recent WTO figures show, China could well reach that landmark a decade earlier.

Last year, China's imports grew by an astounding 40 per cent in dollar terms, and its exports by 35 per cent. The WTO described these as "unprecedented levels of expansion for a country with such substantial trade volume".

This confirms that China has indeed become the "factory of the world". But it also demonstrates even more dramatically what a relentless consumer of goods and services our country has become.

In fact, China is in such a rush to develop that it is ahead of schedule on construction of the Olympic Stadium and other venues for the 2008 Games. We are accustomed to reading about construction delays in the host city as the Olympics approach every four years. So it is refreshing to learn that the International Olympics Committee has actually urged the Beijing organisers to slow down. It seems that, if stadiums are completed ahead of schedule, their maintenance costs increase. But that's the way things are going in the Mainland these days. It's on the fast track to prosperity.

Hong Kong is a fast-moving place, too. And we are better positioned than anyone to help feed China's growth. We possess a depth and breadth of high-value-added services and long experience in the Mainland. Hong Kong companies began shifting their manufacturing operations there 25 years ago. Today, about 53,000 Hong Kong-linked companies employ over 10 million workers in neighbouring Guangdong Province alone. That is more than the entire population of Hong Kong or Bangkok. Indeed, Hong Kong companies had invested 223 billion US dollars in the Mainland by the end of last year, making Hong Kong the largest external investor in China.

Much of that investment is focused in Shenzhen, Dongguan and other parts of the Pearl River Delta, the world's fastest growing manufacturing basin. Altogether, about 7,500 multinational corporations have set up manufacturing operations in the PRD, along with tens of thousands of small and medium-sized enterprises.

Including Hong Kong and Macau, the Pearl River Delta is a leading manufacturing base, consumer market, trading hub, services centre and investment destination, with a combined GDP of 280 billion US dollars - which would place it among the world's top 20 economies.

In the past few years, we in Hong Kong have been working more closely with the Central authorities, as well as provincial and municipal officials in the Mainland, to co-ordinate the development of the Greater PRD and beyond. Earlier this year, we established the "9+2" Pan-PRD forum, which is designed to broaden co-operation between nine southern provinces of the Mainland, Hong Kong and Macau. This new economic alliance has a combined population of 457 million and a GDP of 634 billion US dollars - comparable in size to ASEAN.

As Hong Kong's principal official responsible for technology, I am personally involved in efforts to strengthen cross-boundary co-operation in upgrading manufacturing industries and promoting research and development. We also have several bridges and other infrastructure projects in the works to facilitate the ever-increasing flows of people and goods across the boundary.

One of the most significant steps we have taken in this direction is the Mainland-Hong Kong Closer Economic Partnership Arrangement, or CEPA. It is essentially a free trade pact between two autonomous trading partners within the same nation, which came into effect on January 1st this year.

Very briefly, Hong Kong products covered by 374 Mainland tariff codes can now enjoy zero tariffs when exported to the Mainland. CEPA also gives Hong Kong companies greater access to the Mainland in 18 services sectors, including banking, distribution and telecommunications. CEPA offers tremendous opportunities for Thai and other overseas companies to enter the Mainland market by setting up in Hong Kong, partnering with Hong Kong companies, or even acquiring a company in Hong Kong. All the information is available on our website, so I won't go into details here. You may wish also to speak with Grace who is our representative here in ASEAN.

But here are some interesting figures. In less than eight months, the Hong Kong Government has issued more than 1,400 Certificates of Hong Kong Origin, involving a total export value of more than 3 billion baht. These certificates cover products such as textiles and clothing, pharmaceuticals, electrical and electronic goods, dyes and plastics.

On the services side, more than 400 applications for Services Supplier Certificates have been approved, mainly covering logistics, distribution, value-added telecommunications services, and advertising.

We are promoting CEPA within Hong Kong; we are promoting CEPA among our trading partners, such as Thailand; and we are also promoting CEPA in the Mainland. Just a couple of weeks ago we launched our latest road show of exhibitions to promote CEPA in 10 more Mainland cities. It's all part of generating more business opportunities. By partnering with Hong Kong businesses and drawing on their decades of experience in the Mainland, overseas companies can gain a fast track into that burgeoning market.

Besides experience, language and cultural links, Hong Kong offers a raft of sophisticated services, from financial, accounting and legal services to expertise in marketing, logistics and supply chain management. Indeed, services today make up 88 per cent of Hong Kong's GDP.

Hong Kong is one of the leading international financial centres. It is the world's seventh largest centre for foreign exchange transactions. Our banks' capital adequacy ratio stands at a very healthy 16 per cent, and our stock market is Asia's second largest. Three-quarters of the world's top 100 banks have operations in Hong Kong.

These are all reasons why Hong Kong is the most popular location in Asia for international companies to base their regional operations. At last count, 966 overseas companies had established regional headquarters there, and another 4,448 had set up regional or local offices.

For many international companies, whether large or small, the best way to enter the Mainland market is to set up manufacturing operations in the PRD while running management, finance and distribution out of Hong Kong. It is a business model that combines the low costs and efficiency of the Pearl River Delta with Hong Kong's sophisticated business infrastructure.

Besides all the business and financial factors, many companies set up in Hong Kong because it offers their executives a safe and cosmopolitan lifestyle. And we are working hard to improve the non-business side of life in Asia's World City by developing new arts and cultural districts and countryside attractions. One of the most exciting leisure projects in the pipeline is Hong Kong Disneyland, which is scheduled to open in the next year-and-a-half. It will be only the third Disney theme park outside the US, and we expect it to be quite a hit with families around the region.

And so, Ladies and Gentlemen, from free trade to Disneyland, there are plenty of reasons to consider using Hong Kong as your launching pad to the Mainland. We welcome you to explore the countless opportunities for new partnerships between Thai companies and Hong Kong companies. And let us work together to bring even greater prosperity to our economies.

Thank you very much.

Ends/Thursday, August 26, 2004

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