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Following is the speech by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, at the Hong Kong Services Seminar in Dubai today (February 26):
His Excellency, distinguished guests, ladies and gentlemen,
This is my first visit to Dubai. However, I have seen pictures of Dubai in newspapers and watched the Dubai Classic. I therefore feel I know a bit about Dubai and I am so excited by this dynamic city. As His Excellency has said, Dubai and Hong Kong have many things in common, so I also feel very much at home today. The immerse growth Dubai has achieved in so many sectors of the economy, ranging from tourism, commerce, finance to information technology, etc. within such a short span of time surely provides a lot of valuable experience which we would very much like to share.
As Dubai's economy further expands and enterprises as well as investors here look for more business and investment opportunities beyond the geographical boundary of the Middle East in a bid to enhance returns and diversify risks, Hong Kong, as a major international financial centre in Asia with our unique relationship with the Mainland China, definitely provides an excellent platform for you to access the markets in Asia, in particular the Mainland. Our infrastructure and real estate industry, with rich expertise in managing large-scale infrastructural projects and modern facilities, can also contribute to the development in Dubai.
Our delegation, comprising some 25 distinguished representatives from the financial services sector as well as the infrastructure and real estate industry in Hong Kong, are here to introduce to you the excellent services which Hong Kong may offer to assist you in realising the maximum potential of your capital and in furthering the development in Dubai. There are certainly a lot of areas on which we may cooperate to achieve a win-win situation.
Hong Kong as Asia's World City and Major International Financial Centre
As Asia's World City and major international financial centre, we are well-known for our fundamental strengths which include -
* rule of law;
* state-of-the-art infrastructure;
* a well-established and advanced financial system;
* a rich pool of talents;
* a stable currency and non-existence of exchange control;
* free flow of capital; and
* a low and simple tax regime.
We are also one of the most open economies and our system is well recognised to be fair, advanced, efficient and transparent. Indeed, we have been ranked by the Heritage Foundation as the world's freest economy for the 12th consecutive year. In addition, for the 4th consecutive year, Hong Kong has been ranked by the World Investment Report 2005 published by the United Nations as the second most preferred destination for foreign direct investment in Asia, after Mainland China.
Premised on the above fundamental strengths, Hong Kong has been developed into one of the most vibrant international financial centres in the region. We enjoy a number of advantages, including a sound regulatory regime on a par with international standards as well as an efficient and transparent market, and we have a large pool of financial professionals from around the world.
We are the world's 15th and Asia's 3rd largest international banking centre and the 6th largest foreign exchange market. Over 70 of the world's top 100 banks operate in Hong Kong and our stock market ranks 8th worldwide and 2nd in Asia. In terms of equity fund raised in 2005, our stock market ranked 4th worldwide and 1st in Asia, ahead of Japan. In 2005, both the World's largest equity IPO and Real Estate Investment Trusts IPO were launched in Hong Kong. Our financial markets have attracted huge amounts of overseas funds and got recognition from international investors. Overseas investors, including those from the US, the UK and the rest of Europe constantly contribute to around 35% - 40% of our market turnover.
Hong Kong as the Premier Capital Formation Centre for the Mainland
China experienced tremendous economic growth in the past two decades. According to the Institute of Economics of the Chinese Academy of Social Science, China is now the fourth largest economy in the world, with its real GDP grew by 9.9% in 2005. We are obviously aware of international investors' keen interest in the ever-expanding Mainland market. To fully capitalise on the opportunities, Hong Kong has been serving as the Mainland's premier capital formation centre and the gateway for channelling capital to the Mainland market. Indeed, the International Monetary Fund concluded in its 2005 consultation with us that Hong Kong is well positioned to play a significant role in the Mainland's financial intermediation.
Since 1993 when the first H-share company was listed on our stock exchange, we have so far raised some US$140 billion for the 335 Mainland enterprises listed in Hong Kong. Mainland enterprises currently account for about 30% of the total number of listed companies and 39% of the market capitalisation in Hong Kong. The trading of shares of Mainland enterprises accounted for 46% of total market turnover in 2005. Our markets offer an abundant supply of investment opportunities with huge growth potential to investors from all over the world. We strongly encourage you to make use of the platform provided by Hong Kong to get a slice of the these lucrative investment opportunities presented by the rapidly growing economies in the Mainland and other places in Asia.
To enhance the quality of our financial markets so as to further strengthen investor confidence, we will continue to improve our regulatory regime. We attach great importance to good corporate governance and high quality of financial reporting. To this end, we have embarked on a number of initiatives to further upgrade our standards, including the establishment of a Financial Reporting Council to reinforce the quality of financial reporting.
Hong Kong as a Venture Capital Centre in Asia
Hong Kong is not only the premier capital formation centre for the Mainland, but also the gateway to the Mainland market. Hong Kong is the Mainland's largest contributor of foreign direct investment (FDI). The cumulative value of Hong Kong's realised direct investment in the Mainland was US$260 billion as at end-2005, accounting for 42% of the Mainland's total accumulated FDI. About 30% of the Mainland's FDI inflow in 2005 was contributed by Hong Kong. These impressive figures clearly demonstrate our expertise in channelling investments to the Mainland market. As an international financial centre in Asia, we serve as a gateway for both local and overseas investors into the Mainland. Many overseas corporations are working hand in hand with Hong Kong firms to expand into the Mainland. Others may choose to establish presence in Hong Kong, using our well-developed financial infrastructure as their platform for entering the Mainland market. As at June 2005, 90% of the regional headquarters and 84% of the regional offices set up by foreign companies in Hong Kong were responsible for the companies' operations or business in Hong Kong as well as the Mainland.
Hong Kong is also a magnet for private equity funds looking for investment opportunities. In particular, Hong Kong is experienced in managing venture capital which targets at growing and innovative businesses. Latest statistics showed that Hong Kong is the largest venture capital centre in Asia outside Japan. As at end-June 2005, Hong Kong managed US$30 billion of private equity funds or about 27% of the pool of private equity funds in the region. There were some 180 Hong Kong based private equity funds employing more than 600 venture capital professionals in Hong Kong.
Situated at the heart of Asia with Mainland China as our hinterland, Hong Kong has strong links with other Asian economies and excellent communications with the rest of the world. This provides an attractive environment for Hong Kong to serve overseas investors by managing, advising and executing their private equity transactions. The majority of private equity funds managed by Hong Kong are disbursed to Asian companies in various parts of the region, including the Mainland China, Korea, Japan, Taiwan and other South East Asian countries. The Asia-Pacific Region is believed to be the fastest growing market in the world. With Hong Kong's experience and track record in investing in such a wide range of Asian countries, investors can take the advantage of Hong Kong's expertise to reap the benefits of the promising growth of the region.
Within the Asia-Pacific Region, the Mainland China's huge domestic market, strong growth potential of its economy as well as rapid technological advancement have rendered it an extremely attractive emerging market to investors worldwide. Our experience accumulated over the years in doing business in the Mainland will be invaluable to overseas investors in tapping the Mainland market. You are strongly encouraged to make use of our superb services to manage your venture capital to diversify risks and maximise returns.
Hong Kong as a Major Asset Management Centre
Let me also update you on the latest development of our asset management industry. As of end 2004, our asset management business amounted to US$464 billion, of which 63% were sourced from overseas investors. The significant inflow of foreign funds is a clear illustration of the attractiveness of our financial markets to international fund managers. Given Asia's high domestic savings, positive regional economic outlook and the vast pension scheme assets, there is great potential for Hong Kong to expand our asset management business further.
More than 80 international fund houses from the US, the UK, Japan, Singapore, Switzerland, France and other parts of the world have set up operations in Hong Kong, casting a vote of confidence in Hong Kong's asset management industry. Our expertise in managing investments in Asia is widely recognised. 73% of the assets managed in Hong Kong are invested in Asia. I also wish to emphasise that the Hong Kong Government has spared no efforts in protecting privacy. In Hong Kong, bank customers' information is well protected by common law and the Personal Data Protection Ordinance. Our rule of law and independent judiciary are the cornerstone of Hong Kong's continued success, and earn high reputation in the international community.
The Hong Kong Government is committed to providing a conducive environment for the further development of our asset management industry. We have recently abolished estate duty to facilitate Hong Kong's further development as a leading asset management centre in Asia. The abolition of estate duty helps to create a win-win situation for Hong Kong's asset management business as well as for foreign investors, including those from Dubai, who are looking for effective investment means and professional asset management services.
Another initiative taken by the Hong Kong Government to enhance our attraction as an international financial centre is our proposal to exempt offshore funds from profits tax. "Offshore funds" refer to non-resident entities including individuals, partnerships, trustees of trust estates or corporations administering a fund. Under the proposal, transactions of offshore funds which relate to dealings in securities, futures contracts, foreign exchange trading, exchange-traded commodities and placing of deposits will all be exempted from profits tax. The legislative amendments will be put to our legislature for passage on the coming Wednesday. Once the proposal is implemented, Hong Kong's tax treatment of offshore funds will be on a par with other international financial centres such as the US and the UK and even more favourable than some other financial centres in Asia.
I am sure these tax concessions will further enhance Hong Kong's attractiveness as a world-class asset management centre in Asia. Given our close ties with the Mainland China, coupled with Hong Kong's fundamental strengths, we are in a good position to serve as the preferred asset management centre for Middle East investment funds.
The Infrastructure and Real Estate Industry
Many visitors to Hong Kong are impressed by our spectacular skyline, infrastructure, urban development and architecture. Hong Kong is a city of skyscrapers, or some said a concrete jungle, depending on the way you see it. Our real estate services professionals have spearheaded large projects in Beijing, Shanghai and other major cities in the Mainland China. The unique strengths of Hong Kong's infrastructure service industry lie in our expertise in constructing high-rise buildings in high-density areas efficiently. Over the years, we have built a reputation in the speedy construction of numerous world-acclaimed buildings, using specialised construction solutions such as design-and-build. I have some personal experience in this regard. In the 90's, I worked in a construction company, which was involved in the building of some skyscrapers in the Mainland.
Hong Kong has a large cluster of world-class professionals covering every aspect of the building development process, from interior design, architecture, engineering, construction, project management and property maintenance. More importantly, we have expertise in risk management and in handling complicated projects in an efficient and effective manner. We have high regard for preserving local culture and heritage.
Our representatives from the infrastructure and real estate industry in Hong Kong are here to explore with you how we may collaborate for mutual benefits. Our professionals have the know-how in managing large-scale infrastructural projects and constructing buildings that provide modern facilities but also preserve heritage and embrace harmony. They also offer a total package of services to support infrastructure projects in Dubai by ensuring effective management and efficient completion of the projects.
Conclusion
Ladies and gentlemen, with the strengths of our financial services as well as infrastructure and real estate industries mentioned above, we are well placed to serve as your partner for development and platform for global investments. Our delegates here are more than happy to furnish you with more information on the range of services we can offer to you. We are also very pleased to learn that the Dubai Development and Investment Authority has opened its first overseas office in Hong Kong. This would help to further strengthen our economic ties with Dubai.
I strongly recommend you to visit Hong Kong to see for yourself what Asia's World City and one of the most dynamic cities in the world can offer.
Thank you.
Ends/Sunday, February 26, 2006
Issued at HKT 17:55
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