Following is a speech by the Secretary for Commerce, Industry and Technology, Mr John Tsang, at the Seminar on Auto Parts Business Opportunities in Hong Kong and the Mainland this morning (March 17)(English only):
K K (Yeung), Distinguished Guests and Friends from Mexico, Ladies and Gentlemen,
I am delighted to join you all today. I am doubly delighted to see so many local industrialists getting together with their counterparts from abroad to exchange views on business opportunities in the auto parts industry in Hong Kong and Mainland China. Let me first extend my warmest welcome to our friends from Mexico and the Mainland, and wish you all a fruitful and enjoyable stay here in Hong Kong.
I would like to take this opportunity today to share with you the initiatives of the Hong Kong Special Administrative Region (HKSAR) Government in promoting innovation and technology and in supporting the development of the Hong Kong industry, with special emphasis on the auto parts industry. When we talk about the auto parts industry, we are, in fact, stepping into the realm of some 50 industry sectors, ranging from foundation industries, such as electronics, plastics manufacturing and metal fabrication, to emerging industries, such as opto-electronics.
Hong Kong is renowned as a global financial, trade and service centre, but it is not common knowledge that we do have a strong base of foundation industries. In fact, our manufacturing industries have extended their production base beyond our limited boundary into the Pearl River Delta (PRD) region since the late 70s when the policy of economic reform was implemented in the Mainland. Hong Kong concerns have grown by leaps and bounds since then, and they are now employing some 11 million workers in over 60,000 factories in the Pearl River Delta. Many local manufacturers have, for years, been supplying a wide variety of automotive parts and accessory systems to overseas automobile assemblers, including storage batteries, sound and visual signalling apparatus, micro motors, plastic external trims and accessory systems.
The US and Europe have, in the past, been the major export markets for the Hong Kong auto parts industry. However, with the fast economic growth in the Mainland, many local manufacturers, like their overseas counterparts, are keen to explore and develop opportunities right here in the China market. In recent years, the demand and production of automobiles on the Mainland have increased significantly. China is now the fourth largest automobile production base and the third largest market in the world, producing more than four million vehicles each year. And those rankings will, no doubt, improve further in the years to come. Given Hong Kong's strategic location and our close economic relationship with the Mainland, our auto parts industry is well-positioned to seize a good share of the business opportunities in the Mainland.
The Mainland/Hong Kong Closer Economic Partnership Arrangement (CEPA) provides an added advantage to our industry in developing the Mainland market. Under CEPA, the Mainland has committed to apply zero import tariff for a total of 1,108 Hong Kong goods under its 2005 tariff codes, and give preferential market access to service suppliers in a total of 26 service sectors. Mainland and Hong Kong have also agreed to enhance co-operation in trade and investment facilitation.
Although CEPA does not yet cover auto parts classified under Chapter 87 in Mainland's tariff system, a number of auto parts and accessories classified under other headings in the Mainland tariff system, such as re-treaded tyres, safety glass for vehicles, air conditioning machines for motor vehicles, oil and air filters for internal combustion engines, and seat angle regulating devices used for motor vehicles, have already been included in the CEPA lists and are enjoying zero tariff. By the way, the applied import tariff rates for these named products in 2005 range between 10% and 20%.
For other goods that have not yet been included in the CEPA zero tariff lists, the Mainland has agreed to apply zero tariff upon application by local manufacturers to the Trade and Industry Department, and upon CEPA origin rules being agreed upon and met. The Trade and Industry Department is now inviting manufacturers to submit requests for implementation of zero tariff by April 30, 2005. I understand that the Hong Kong Productivity Council is actively working on this, and our Trade and Industry Department will be more than happy to provide the necessary assistance, if required.
While CEPA has given our industries a head-start in developing the Mainland market, it is also important for our industries to enhance continuously their productivity and competitiveness through the development and adoption of new technologies and innovative ideas. The HKSAR Government is committed to providing a conducive environment for the development of high technology and high value-adding industries in Hong Kong, consistent with the demand of the market through a comprehensive programme of infrastructure and funding support.
Over the past five years, the Innovation and Technology Fund has approved over 660 projects that aim to promote innovation and technology upgrading in our industry. We have also established the Science Park and the Cyberport to provide state of the art facilities and services to support the development of technology-based enterprises, including technology start-ups. These facilities, together with the Applied Science and Technology Research Institute (ASTRI), which was established in the year 2000 to perform high quality R&D for transfer to industries, have helped create strategic clusters of technology-based enterprises and a critical mass of research and professional talents.
I must also mention that the Hong Kong Productivity Council has been playing a key role in promoting productivity excellence through the provision of integrated support across the value chain of Hong Kong firms in order for us to achieve a more effective utilisation of resources, to enhance the value added contents of products and services and to increase international competitiveness. In addition, to encourage more product design activities in Hong Kong and further promote Hong Kong brand names, we launched in June, 2004, a DesignSmart Initiative with the establishment of a $250 million fund. Four programmes have been set up under this scheme to support design research, design education and training, designer/business collaboration and design/branding promotion.
In order to leverage on CEPA and utilise the production base in the Mainland as a platform for commercialisation of applied R&D deliverables, we have strengthened technology co-operation with the Mainland. A Mainland/Hong Kong Science and Technology Co-operation Committee, co-chaired by myself and a vice-minister of the Ministry of Science and Technology, was established in 2004 to formulate and co-ordinate technology collaboration programmes between Hong Kong and the Mainland. The committee has agreed to strengthen co-operation in four areas, including "Automotive Parts and Accessory Systems". One of the main proposals in this area is to promote cooperation between Mainland automobile manufacturers and the Hong Kong auto parts industry in developing new products and components.
In September last year, we also launched a "Guangdong/Hong Kong Technology Co-operation Funding Scheme" with the Guangdong Provincial Government to encourage co-operation between research institutions and industry in the Greater PRD region. Under the scheme, we have approved seven R&D projects in auto parts with a total funding of HK$26.7 million.
With the concerted effort of industry, the research community, technology support organisations and Government, we have witnessed the strengthening of research capabilities in Hong Kong and increased spending in R&D activities in the business sector. This, together with our excellent physical infrastructure as well as our technology infrastructure, the rule of law, our robust IP protection regime and close co-operation with the Mainland, has made Hong Kong a highly desirable location for conducting high-end, high-value added business activities as well as an innovation and technology hub in the region.
Looking ahead, we aim to build on our R&D strengths and sophisticated technological infrastructure to further promote the development of innovation and technology in Hong Kong. Taking into account the current economic landscape and the state of innovation and technology development in Hong Kong, we have decided to adopt a new strategic framework to enable the sustainable development of our innovation and technology programme and enhance the competitiveness of our industry.
Under the new strategy, we will set up R&D centres to drive and co-ordinate R&D efforts in selected technology focus areas and promote technology transfer to the relevant industry sectors. With institutional and financial support, the R&D centres would develop core competencies in their respective technology areas and become the focal points of collaboration among different stakeholders in the innovation system. We plan to set up R&D Centres in nine areas and "Automotive Parts and Accessory Systems" will be one of them. This is a highly focused approach, and we hope that our applied R&D in these priority areas would address the needs of industry and create greater synergy among different R&D institutions and industry.
Private sector participation in R&D activities is crucial to the further development of innovation and technology. Therefore, one of the key elements of the new strategy is to closely involve the industry in different stages of our innovation and technology development programme.
During our consultation exercise, we noticed that there was strong industry support for the Hong Kong Productivity Council to host the R&D Centres on "Automotive Parts and Accessory Systems". We have invited the council to submit a proposal on hosting the Centre. I understand that the council has held a technology forum last week to solicit views on potential projects from local industry partners and research institutions. I am also pleased to note that the council is actively looking for collaboration opportunities with Mainland and overseas partners. We look forward to receiving the council's proposal.
Ladies and Gentlemen, Government's plan to establish this R&D Centre will benefit the development of the auto parts industry. I hope that the industry, the universities and the R&D organisations will actively participate, and give full support to the work of R&D Centres in future. Our concerted efforts would build an even brighter future for Hong Kong.
Finally, I would like to wish this seminar every success. With your active participation, I am sure that it will be a great success.
Thank you very much.
Ends/Thursday, March 17, 2005