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SFST's speech


Following is the speech by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, at the Opening Dinner of the Citigroup International Case Competition 2004 today (October 26) (English only):

Catherine, Prof Chan, Distinguished Guests, Participating Team Members, Ladies and Gentlemen,

It gives me great pleasure to be with you this evening at the Opening Dinner of the Citigroup International Case Competition 2004. To the HKUST Business School, may I congratulate you on successfully organising this important event, and bringing together participating teams from many leading business schools around the world. To students and faculty advisers of the participating teams who come from places outside Hong Kong, may I extend my warmest welcome to you all on behalf of the Hong Kong Special Administrative Region (SAR) Government. To the Citigroup, may I express my appreciation for your generous sponsorship which has made this meaningful event possible.

This is the second time the Citigroup International Case Competition has been held in Hong Kong. In the following days, in this Asia's world city, outstanding students from 17 leading business schools will be competing against each other in coming up with the best analyses, findings and recommendations on a business case which highlights the strategic challenges and managerial dilemmas faced by business leaders. This is indeed a most challenging task for you all. I am confident that you will find this a most invaluable experience as you work together as a team to apply the knowledge you have acquired in solving problems in a business case situation. Moreover, I am sure that you will benefit from the cross-cultural exchanges and fertilisation which are made possible through the participation of students and faculty advisers from Asia, Europe and North America. Although there will only be one champion in any competition, there will be 17 "winning teams" in this case competition as all participating teams will only gain, and not lose, in the process.

Tonight, I am here in my capacity as the Secretary for Financial Services and the Treasury, and also as someone who has the privilege of spending some 30 years in the pursuit of a rewarding career in the financial market of Hong Kong, New York and London. During these 30 years, I have witnessed first-hand the emergence of Hong Kong as an international financial centre. With the concerted effort of the Government and the market, we have succeeded in developing Hong Kong into a world financial services hub in the region. Throughout the years, Hong Kong has demonstrated strong resilience both in the face of external shocks and during cyclical downturn. It is therefore of particular relevance for this case competition to be held in Hong Kong, a place where business opportunities are plentiful. Indeed, Hong Kong itself presents rich materials for any business studies.

Now, let me share with you a few highlights on the past achievements of Hong Kong and the challenges we are facing in the years ahead.

Hong Kong is well-known as an international financial centre. We provide an extensive range of financial services and products to the local and overseas economies, including banking, securities, insurance, fund management and other related services. We now run the world's 7th largest foreign exchange market in terms of turnover and the 8th largest stock market in terms of market capitalisation. On the banking side, we are the 12th largest banking centre in terms of external banking transactions. Over 75 of the world's top 100 banks have an operation in Hong Kong. With more than 180 insurance companies from over 22 different countries, we also have the highest concentration of insurers in Asia. On fund management, according to the Fund Management Activities Survey conducted recently by our Securities and Futures Commission (SFC), the fund management business in Hong Kong amounted to some US$378 billion as at the end of 2003.

The financial services sector is one of the key pillars of our economy. Over the past decade, it has shown an impressive growth of over 6% per annum. The sector employs more than 170,000 people, representing around 5% of the working population and contributes well over 12% of our GDP.

Hong Kong's economic success is due to a combination of factors - the rule of law, our free market economy, our up-keeping of a level playing field, our simple and low tax regime, our effective regulatory system, our efficient administration, and above all, our talents. These are our institutional strengths which we must safeguard, maintain and enhance.

Hong Kong's close proximity to and economic relationship with Mainland China is one of our major comparative advantages. Our financial institutions, together with other professionals including legal and accounting experts, are the major providers of a wide range of financial services and products to customers of the Mainland market. In particular, Hong Kong is the premier venue of choice of leading Mainland enterprises for raising fund in the international capital market. Since mid-1990s, Mainland-related enterprises have raised more than US$100 billion in Hong Kong. Over the past five years, three-quarters of the funds raised in the Hong Kong Stock Exchange have been for Mainland-related enterprises. And in 2003, the five largest IPOs in Hong Kong all involved Mainland issuers. One of these IPOs, the China Life Insurance, was the world's largest share offering that amounted to US$3 billion. Starting with the listing of Tsingtao Brewery some 10 years ago, Mainland-related enterprises now account for one- forth of listed companies by number, for nearly 30% by market capitalisation and for over 50% by average daily turnover. Hong Kong has become the premier capital formation centre for the Mainland.

While our financial services industry is actively seeking business opportunities brought by the remarkable growth of Mainland China, the Hong Kong SAR Government continues to play its role as a facilitator. We have successfully launched the Renminbi ("RMB") personal banking business in Hong Kong this year. The current scope of business includes RMB deposits, remittances, money exchange and RMB bankcard business for individuals in Hong Kong this year. This is another important milestone which has not only provided a new channel for the flow of RMB between Hong Kong and the Mainland through the banking system, but has also further fostered the close economic ties between the two places.

While we celebrate our achievements, we are fully aware that there is no room for complacency. It is, and it will always be, a matter of prime importance to maintain our position by strengthening and deepening our market development, particularly in this fast changing competitive environment that we are operating. In this regard, I would like to highlight three main areas which we are currently working on.

First, corporate governance. Corporate governance is an essential ingredient to a quality market. In Hong Kong, we have been giving priority to corporate governance reforms. The Government has taken the lead to work with the SFC and the Hong Kong Exchanges and Clearing Limited (HKEx) to develop a "Corporate Governance Action Plan" to ensure that our corporate governance requirements are in line with the best international standards and practices. The action plan includes upgrading listing rules, enhancing the regulation of IPO sponsors, implementing the new Securities and Futures Ordinance, and proposing changes to the regulation of different aspects of directorship, shareholders' rights and corporate reporting. A lot have been accomplished over the past 18 months in this regard.

In the next 12 months, we are working on legislative amendments to provide statutory backing to important listing requirements so as to give the Listing Rules stronger teeth. We are also pressing ahead with initiatives on the oversight of auditors and the quality of financial reports. These include the establishment of a Financial Reporting Review Panel and an Independent Investigation Board, which will promote the quality of financial reporting and oversee the auditing profession.

Secondly, we are also taking active steps to promote the development of our bond market, which is relatively underdeveloped compared to the equity market and the banking sector over the past 30 years. Apart from encouraging public bodies like the Hong Kong Mortgage Corporation, the KCRC, the Airport Authority and the MTRC to come to the market, we have also successfully securitised the revenue of government-owned tunnels and bridges with an offering of HK$6 billion worth of bonds this year. Our first $20 billion Hong Kong SAR Government Global Bond Offering has also been successfully launched, issued and listed. These transactions have been received enthusiastically by both international and local institutional and retail investors. Various investors have demonstrated their confidence in the future of Hong Kong by placing large subscriptions, as high as over US$300 million per order. To further promote the development of our local bond market, we would continue to strongly encourage various local and overseas enterprises to make use of our good infrastructure here to issue bonds.

Thirdly and in my view, the most important ingredient to succeed as an international financial centre is human resources. Hong Kong has attached great importance to human resources development. Over the years, the Government has been investing heavily in education and training. For the year 2004-05, estimated education expenditure amounts to more than 20% of the Government budget. With the joint efforts of all concerned parties, including the reputable HKUST, we continue to prepare our younger generation to face the challenges ahead.

With particular reference to the financial services sector, the related professional bodies have been dedicated to promoting professionalism and ethics of the industry practitioners. Apart from ensuring the input of right calibre by keeping the qualification requirements under review, the Hong Kong Institute of Certified Public Accountants and the Law Society of Hong Kong also develop and organise an extensive range of post qualification education and training. These programmes seek to enhance the expertise and professional conduct of the industry practitioners to ensure that they are able to keep pace with the changes of the industries and maintain their competitive edge in the provision of financial related services.

The Government has also established an Advisory Committee on Human Resources Development in the Financial Services Sector in 2000 to foster better co-ordination of efforts made by the Government and the industry on financial services manpower development. The committee includes representatives from the industry, regulators, professional bodies, training providers and the Government. Together we are committed to achieving the objective by developing relevant strategies, raising awareness and encouraging dialogue among all stakeholders. This December, the Government and the committee will organise a one-day forum to explore the challenges and opportunities for Hong Kong in its continued development as an international asset management centre. We believe that this forum will provide an excellent opportunity for high-level industry practitioners, market analysts, academics and government officials to exchange views on the subject.

The tertiary institutions and the academia play an important role in preparing and equipping our talents to face the exciting challenges in the financial market. Apart from teaching, HKUST and various leading business schools also organize an extensive range of fora, workshops, exchange programmes and other related extra-curricular activities for the students. Business education is not only about the passing on of knowledge to students. It is also concerned with equipping our future business leaders with the necessary skills and outlook to solve the problems being encountered in the business world.

At the practical level, the private sector also plays a vital role in the development of human resources, in particular continual professional development. Companies such as the Citigroup enhance their competitiveness by providing well-structured local and overseas training to their staff throughout their career. The positive impact of such training are far-reaching - the staff, the companies and the market as a whole all benefit.

I say this because I was one of those who have benefited from such type of training programme. After joining the banking sector in the early 1970s, I have been posted to different cities around the world, including New York, Toronto and London. This was an invaluable experience for me, as such exposure had enriched my professional knowledge and broadened my horizon. I have no hesitation to say that such training has formed a strong foundation for my subsequent career development.

Finally, I wish you all have a memorable and rewarding experience through working with your team members and learning from other participants. I hope to meet you, the future leaders of the business world, in Hong Kong again and before long. Thank you.

Ends/Tuesday, October 26, 2004


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