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Following is the speech by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, at the Forum on "Hong Kong as an International Asset Management Centre:
Challenges and Opportunities" this (December 9) morning (English only):
David, Roger, Distinguished Guests, Ladies and Gentlemen,
It gives me great pleasure to be here today to deliver the opening address at the Forum on "Hong Kong as an International Asset Management Centre: Challenges and Opportunities". On behalf of the Hong Kong Special Administrative Region Government and the Advisory Committee on Human Resources Development in the Financial Services Sector (the FinMan Committee), may I extend to all of you our warmest welcome. I would also like to express my heartfelt appreciation to Roger and members of the FinMan Committee for their hard work during the past few months in making this event possible.
Today, I am particularly pleased to see so many of you here. Indeed, the response to this Forum is so enthusiastic that it is oversubscribed. While this venue is just sufficient to hold about 300 people, we have among us an excellent mix of participants from different sectors of the financial market, the academia, the regulators and the Government. We can see familiar faces from various quarters of the financial services sector, including insurance, banking, securities and fund management, as well as related professions such as financial analysts, risk management professionals, lawyers, accountants and so on. We also have with us faculty staff and students from tertiary institutions. This provides an excellent opportunity for us to share our insights on the opportunities and challenges facing Hong Kong in its further development as an international asset management centre.
Hong Kong as an asset management centre
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Hong Kong is not only an international financial centre, but also one of the most prominent asset management centres in Asia. A recent survey conducted by the Securities and Futures Commission (SFC) shows that the total assets in fund management business in Hong Kong in 2003 amounted to HK$2,947 billion, of which HK$1,860 billion or 63% originated from overseas investors. We have a significant presence of international fund houses in Hong Kong. In the survey, a total of 166 licensed corporations and 30 registered institutions responded that they engaged in asset management, private banking or related advisory services, employing over 15,000 staff. As you all know, financial services sector is one of the economic pillars of Hong Kong. It has contributed 12 per cent of our GDP and employed approximately 170,000 people. So it is a very important pillar of our economy. The licensed corporations recorded a 42% increase in their asset management and advisory business last year. Many large international fund houses from different parts of the world have operations here, including those from the US, the UK, Japan, Singapore, Switzerland and France, just to name a few.
Hong Kong's development as an international asset management centre is premised on a number of fundamental strengths, including:
* Rule of law supported by an independent judiciary;
* A well-established financial infrastructure;
* A robust and effective regulatory regime;
* A rich pool of talents;
* A stable currency;
* Absence of currency control and restriction on capital flows; and
* A low and simple tax regime.
Of course, there is no room for complacency. We must capitalise on our strengths, seize all the development opportunities and prepare ourselves well for the challenges ahead. The Chief Executive in his Policy Address this year emphasised that Hong Kong is well-placed to further develop as a world class asset management centre. This forum provides a good opportunity for us to pool our wisdom on how we may further sharpen our edge and capture the opportunities ahead.
The Opportunities
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Great opportunities are in front of us. The prospects for asset management business in Asia are tremendous. First of all, the savings rate in Asia is high - it stands at about 30% compared to 14% for the US and 22% for Europe EMU. The demand for asset management is set to grow in the long run.
Second, the good prospects for economic growth in the region also accelerates the growth in the demand for asset management. Over the past few years, economies in the region have demonstrated a remarkable ability to recover from significant setbacks. Regional economies are forecast to grow strongly in the next five to 10 years. A very crucial factor impacting on the development of the region is the rising importance of the Mainland's economy. It has become the seventh largest economy in the world and its GDP has reached US$1.4 billion in 2003. Growing at an average rate of 9% per year in the last decade, the economic strength and potentials of Mainland present huge opportunities for Hong Kong.
Third, the policies in the Mainland are moving towards allowing investors more room for enhancing return and diversifying risks through broadening the scope of investment. The National Social Security Fund has been approved to invest outside the Mainland, and the CIRC has also promulgated new arrangements to allow the Mainland insurance companies to invest their foreign exchange reserves outside the Mainland. These are encouraging developments, and in the long run it is for sure that more opportunities will be coming up as the Mainland progresses along this policy direction. With our proximity to and close relationship with the Mainland, Hong Kong is in a unique position to benefit from all these changes.
The Challenges
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Side by side with the opportunities are many challenges. I would just like to highlight a few here.
Keen competition
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First, we are facing ever-increasing competition in a globalised economy. There is keen competition from not just our neighbouring countries such as Singapore, but also other international financial markets as many of them eye the Mainland market. We must double our efforts in order not to lose out.
The Government will spare no efforts in fulfilling its facilitating role by creating a conducive environment for maintaining Hong Kong's competitiveness as an asset management centre. To cite a few examples, we are working on the detailed arrangements for providing profits tax exemption to offshore funds and we expect to be able to introduce the legislative proposals to the Legislative Council within the current legislative session. The Government and the concerned bodies are also working closely to promote Hong Kong as an investment platform for global investment for the Mainland. I have led a one hundred-strong delegation to Beijing last month to attend a forum organised by my bureau to share experience with the Mainland insurance industry on the management of funds. The strong presence of financial services professionals from Hong Kong at the forum was itself an excellent showcase of our wealth of talents in financial services.
Wider Environment
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Apart from keen competition from other financial centres, the volatile economic, financial and geo-political environment in the region and the world at large also poses another great challenge to our further development as an international asset management centre. As a small economy, Hong Kong is affected by changes taking place in other parts of the world such as high oil prices, increase in interest rates, US trade and budget deficits, speculation on RMB appreciation and economic cooling measures in the Mainland.
The best way to cope with these challenges is to further strengthen our financial system to enhance its stability and resilience to external shocks, and to further improve our regulatory regime to ensure quality and maintain investor confidence. Key initiatives in the pipeline include making legislative amendments to provide statutory backing to important listing rules, implementing the new capital adequacy requirements under BASEL II and setting up an Independent Investigation Board and a Financial Reporting Review Panel.
Human Resources
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Above all, the existence of sufficient and good quality human resources is key to Hong Kong's further development as an international asset management centre. It requires talents covering a wide spectrum of professions including fund managers, financial analysts, lawyers, accountants, and so on. To support the growth of our asset management industry, we must enhance our pool of human resources in terms of both quality and quantity. It requires work at different levels within the education system and at workplace. I am sure our speakers and panelists today will have a lot of brilliant ideas to share with us.
On the part of the Government, we attach great importance to enhancing the quality of education and the grooming of talents in various professions. The fact that we devote one-quarter of our budget to education speaks for itself. Certainly, our tertiary institutions and professional bodies also play a key role in expanding and upgrading our pool of human resources. For instance, I am told that, through efforts over the past years, we have by now over 2,500 Chartered Financial Analysts in Hong Kong, as compared to just 40 in 1992. According to latest figures, we also have about 7,000 lawyers and over 22,000 accountants. But I have already heard of shortage in some of these professions such as accounting. We really need to step up our efforts in expanding our pool of talents through both strengthening local education and training and attraction of talents from outside.
To foster better co-ordination of efforts made by the Government, the industry and the academia on financial services manpower development, the Government set up the FinMan Committee in June 2000. The Committee comprises members from industry associations, professional bodies, regulators, training providers and Government bureaux. At this Forum which is co-organised by the Government and the FinMan Committee and attended by so many distinguished participants, we look forward to a most fruitful discussion on the human resources development strategy for supporting Hong Kong's further development as an international asset management centre.
Concluding Remarks
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Ladies and gentlemen, I wish the forum every success and hope all of you have an enjoyable day. Thank you very much.
Ends/Thursday, December 9, 2004
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