Following is the speech (English only)delivered by the Chief Secretary for Administration, Mr Donald Tsang, at a business luncheon at Zofin Palace, Prague today (October 29, Prague time):
Hong Kong - Asia's world city
A new era of opportunity
Distinguished guests, ladies and gentlemen, good afternoon.
It is a great pleasure for me to be back in the beautiful and historic city of Prague. I was last here four years ago, when I was serving as Financial Secretary, and I've been looking forward to this return visit with anticipation. I almost made it a year ago, but unfortunately I had to postpone my trip because of a neck injury that prevented me from flying for a while. In the meantime, your President and First Lady honoured us with a visit to Hong Kong in April this year. So I'm extremely pleased to finally be standing before you in the magnificent Zofin Palace. That fact that I arrived in Prague while you were celebrating Czech Founding Day makes this visit all the more special.
An event like today's luncheon is important for nurturing a bilateral relationship that I believe holds great promise. During my previous visit to Prague, I noted that Hong Kong and the Czech Republic had much in common, and I suggested that our similarities should be exploited. I said at that time, "We are both gateways to our respective regions and we can leverage this strategic position for our mutual benefit".
This is no less true today, and indeed, substantial progress is being made. One of the most significant developments occurred two-and-a-half years ago, when the Czech Republic became the first Central European nation to set up an investment promotion office in Hong Kong. The establishment of the Southeast Asian office of CzechInvest in Hong Kong reflects the international outlook of both your Government and your business community. It is an outlook that we in Hong Kong proudly share.
I would also like to congratulate all Czechs on your accession to the European Union earlier this year. This watershed event marks the full emergence of the Czech Republic as a prominent European voice and a key player in global affairs.
Today I'd like to bring you up to date on Hong Kong's development in the seven years since we returned to China, and in the process to give you a taste of the exciting new opportunities that are available to Czech investors in Asia's world city.
Under the Basic Law, our constitutional document, Hong Kong was guaranteed a high degree of autonomy under the principle of "One Country, Two Systems". This was something that had never been tried before. We may expect a few bumps in the road, but the concept has been remarkably successful and the implementation without serious hiccups. All of the social freedoms that Hong Kong enjoyed before the handover remain intact today: the freedom of speech, of the press, of assembly, of religion, of travel. We are home to a large foreign community, who enjoy these same freedoms and who operate their businesses on a level playing field. In short, Hong Kong is as vibrant and dynamic a city as it's ever been. And just as free.
In terms of political development, we are making steady progress. Just last month, we held the most democratic election in our history. Hong Kong people elected all our 60 legislators, 30 of whom were directly elected while the remaining were from functional constituencies. That was something that had never been done under any previous administration. Naturally, there has been disagreement over the pace of political reform in Hong Kong. But there is full agreement on the final destination, which is universal suffrage, as spelled out in the Basic Law. And the path we will take to get there is paved with rational debate.
The most striking aspect of the Hong Kong story has been our recent economic success. Like most economies in our region, we were hit hard by the Asian financial crisis, which burst our asset price bubble and put a big dent in corporate balance sheets. Then, early last year, just as we were getting back on our feet, we were blind-sided by SARS.
Ladies and gentlemen, I'm delighted to report that Hong Kong is back in fighting form. The long spell of deflation and economic restructuring that we endured has reduced our costs and made the Hong Kong economy more lean and competitive. Deflation is over, the property market has bounced back, the unemployment rate is slowly but surely coming down to a manageable level, tourists are arriving in record numbers, our exports continue to flourish, and consumer confidence is once again strong. The result is that we expect GDP growth of 7.5 per cent for 2004. There may be a perception in some parts of the world that Hong Kong's best days are behind it. Well, 7 to 8 per cent GDP growth by a developed economy, with per capita GDP of over US$25,000, says otherwise.
Hong Kong has always been a leading financial and business hub in Asia. The main thrust of our recovery plan was to leverage and support China's rapid economic growth and reap the fruits of its success. We knew we had to foster greater economic co-operation with the Mainland. We pursued this goal in many different ways, and the results have been quite dramatic.
Hong Kong companies were the first in the world to move their manufacturing operations across the boundary to the Pearl River Delta, or PRD, when China opened its economy 25 years ago. Today, the PRD is a manufacturing and export powerhouse, the fastest-growing region of China, which in turn is the fastest-growing large economy in the world. Tens of thousands of foreign-invested factories are churning out well over US$300 million worth of goods every day in the PRD. Hong Kong companies are the largest investors there, as they are in the whole of the Mainland. There are now nearly 60,000 Hong Kong-invested factories in the PRD, employing over 10 million workers -- more than there are people in Hong Kong, and roughly equal to the population of the Czech Republic.
In the past couple of years, we have focused on expanding our presence in other ways. We are working closely with Guangdong Province and the Central Government to smooth and enhance the two-way flows of people, goods, services and capital across our boundary. New bridges, highways and rail links are under construction or in the planning stage. We are speeding up boundary crossings with co-located checkpoints. The Central Government introduced the Individual Visit Scheme, which allows travellers from 32 big cities in the Mainland, as well as the whole of Guangdong Province, to visit Hong Kong on an individual basis. Hong Kong banks were given the green light to handle personal renminbi business.
On the 1st of January this year, we implemented the Mainland and Hong Kong Closer Economic Partnership Arrangement, or CEPA. This is a free-trade arrangement that gives Hong Kong manufacturers and service industries "first mover advantage" into the Mainland market, ahead of China's World Trade Organisation commitments. Foreign companies can take advantage of CEPA, too, by setting up in Hong Kong, finding a Hong Kong partner or investing in a Hong Kong firm. You can get all the details from the Hong Kong Trade Development Council or representatives of our Economic & Trade Office who are here today.
So now we have CEPA, and we have ever-greater flows of people, goods, services and capital between Hong Kong and the Mainland. Hong Kong is the premier financial and trade services platform for both international companies entering the Mainland and for Mainland companies seeking to explore external markets. It's a pretty exciting scenario, but we haven't stopped there.
A new initiative was launched a few months ago, called the Pan-Pearl River Delta Regional Co-operation and Development Forum. That's quite a mouthful, so we call it 'Pan-PRD' or simply '9+2'. It's an initiative that brings together the nine provinces of southern China and the two Special Administrative Regions of Hong Kong and Macau.
9+2 has been described as "a budding European Union" within China. It may be budding, but it's certainly not small. The Pan-PRD encompasses 457 million people, which is one-third of China's population. To put that into perspective, that's the same population as the entire 25-nation EU. And the Pan-PRD region's combined GDP in 2003 was US$634 billion, accounting for 40 per cent of China's total economic output.
With 9+2, Hong Kong's economic catchment area expands more than five-fold, radiating from the PRD to cities like Fuzhou in Fujian Province in the east, Changsha in Hunan Province in the north and Chengdu in Sichuan Province in the west. These cities will become increasingly important manufacturing and consumer centres as the PRD moves up the value chain. Highways and railways are coming online to carry more goods and people, more quickly. Hong Kong is already the world's busiest container port and the world's busiest air cargo hub. Hong Kong is already the biggest investor in this region, and the preferred place for Mainland companies to raise funds. Undoubtedly, 9+2 will enhance Hong Kong's position as the leading financial and services hub, while this huge and rapidly developing region will benefit from the world-class financial, logistics and business services of Hong Kong.
All of this activity in our part of the world creates a new era of opportunity for Czech companies. You can take advantage of CEPA to enter the Mainland market. You can use Hong Kong as your base for doing business in the Pan-PRD, or indeed anywhere in the Asia-Pacific region.
The decision by CzechInvest to establish its regional office in Hong Kong places that organisation in good company. More and more international companies, not to mention government bodies, are choosing Hong Kong as an Asian base. As of June this year, a record 3,600 overseas companies had set up regional headquarters or regional offices in Hong Kong. Another 2,300-plus overseas companies have local offices there. These numbers are growing every year as more and more companies, large and small, come to realise the advantages that Hong Kong has to offer. We expect this trend to continue as more foreign investors set up or expand their Hong Kong operations to enjoy preferential treatment under CEPA.
Why do they choose Hong Kong? They appreciate our low and simple tax system, our corruption-free government, the absence of exchange controls and the free flow of information. They like the fact that Hong Kong law protects their intellectual property. They make full use of our modern communication and transportation infrastructure and our world-class business and professional support services. They know that Hong Kong is the world's freest economy and a leading international financial hub - the sixth-largest foreign-exchange centre and Asia's second-biggest stock exchange, with three-quarters of the world's top 100 banks operating there.
They use Hong Kong as their platform for business in China, because we can help them achieve their goals in the Mainland. And they know that from Hong Kong's award-winning airport, they are within five hours' flying time of half the world's population.
Another encouraging trend is the increasing number of Mainland enterprises that are setting up operations in Hong Kong as a springboard to expand overseas. They come to Hong Kong to source capital, to make use of the sophisticated supply-chain and professional services on offer, and to take advantage of Hong Kong's long experience in international trade.
Executives who settle in Hong Kong find it a safe and highly liveable city. It is vibrant, cosmopolitan and affluent, with a per capita GDP of over US$25,000. It is an intriguing mix of Eastern and Western influences, and there is plenty of culture on offer from both traditions. Perhaps some of you will get a chance to hear the Hong Kong Chinese Orchestra Ensemble when it performs tonight at the Prague Municipal House.
Ladies and gentlemen, as I said, we have much in common. Like Czechs, Hong Kong people are highly educated, highly skilled and entrepreneurial in spirit. We need to build on our commonalities. I hope there will soon be direct flights between our two great cities. But even if you need to stop over on the way, I invite you to visit Hong Kong, to see for yourselves what we have to offer in Asia's world city.
Thank you very much.
Ends/Saturday, October 30, 2004