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Following is a speech by the Secretary for Commerce, Industry and Technology, Mr Joseph WP Wong, at a reception for Australian companies in Sydney today (September 20):
Thank you all distinguished guests and good evening.
Ladies and gentleman. I want to express my appreciation to the Sydney Economic and Trade Office for organising this event and all of you for joining us tonight. It's wonderful to be back in Sydney, "the Harbour City," which is certainly one of the world's most beautiful and dynamic places.
Sydney and Hong Kong have strong family and business connections dating back from the 19th century. Many companies from this city and indeed the whole of Australia are active in Hong Kong - and vice versa.
Australians have contributed substantially to Hong Kong's growth and success. We have a long history of trade and investment in both directions. Our total trade in goods reached some A$7 billion in 2005, representing a 14% increase over 2004.
But trade in goods is only a very small part of the Hong Kong/Australia tie. The 50,000-strong Australian community in Hong Kong, one of the largest expatriate communities, has been involved in business and professional organisations, education, medicine and health, charities, sports and other areas that have helped make Hong Kong a better place in which to live and work.
Take education, Hong Kong is an importer of Australia's education services. We have no complaint. Some 25,000 Hong Kong students study in Australia or gain an Australian qualification while in Hong Kong. Around 300 of the native English-speaking teachers in our local schools are Australians, as are many leading academics and professors at Hong Kong's universities.
We have very successful Australians working in our business sector. We recruit capable Australians, like Shane Solomon, to be the head of our Hospital Authority, or Tim Calnin as Chief Executive of the Hong Kong Philharmonic Orchestra. The Australian Chamber of Commerce in Hong Kong, which I understand is the largest Australian chamber outside this country, is a leader of our international business community. By the way, AustCham tells me that at least half of the Western chefs in Hong Kong are Australians.
Before I came, the spectacular Ngong Ping 360 cable car on Hong Kong's Lantau Island, opened for public use and will no doubt become another tourist attention. The car and the operation is another example of Australian technology and management.
When I landed today, I noticed that there is a memorial service today for the one and only Crocodile Hunter, Steve Irwin. But some of you may not be aware of a related Hong Kong story. Mr Irwin had, during his career and because of his movies and TV programmes, aroused the interest of the Hong Kong people in crocodiles, so much so that when a young crocodile, illegally smuggled from Mainland China, was seen losing her way in one of our rivers three years ago, there were widespread calls for enlisting the help of Mr Irwin. For some reason, Mr Irwin was not available and we enlisted the help of another Australian crocodile hunter who had no luck with his mission after spending a week in his boat. However, I am happy to say that the story has a happy ending. The crocodile was finally caught a year later by our civil servants, given the name "Pui Pui", and is now one of the most popular inhabitants at our new Hong Kong Wetland Park.
And, of course, Hong Kong and Australia share a passion for horse raising. As an owner of 1/10 of a horse, I know for a fact that many of our most successful jockeys, trainers and horses were born in Australia.
But we also share another passion - an unswerving commitment to free trade and open markets and the elimination of barriers to trade and investment. Our two Governments have worked as partners in the WTO, APEC and other forums aimed to make further progress on trade liberalisation. In fact, one of the purposes of my visit here is to attend an informal trade ministers' meeting involving ministers from Australia, New Zealand, Chile, Pakistan and the US to look for ways to restart the Doha Development Round negotiations.
Introduction to Hong Kong
Let me now say what opportunities that Hong Kong, and its hinterland in the Mainland of China can offer to Australian and other international companies.
Hong Kong has come a long way since the British took it over 100 years ago when it was a "barren rock". We started as an entrepot, then became a manufacturing base and prospered as such after the Second World War. We are still number six among the world's largest trade in goods economies, if we count EU as one entity, mainly due to our enormous re-export trade with Mainland China.
But we have also developed into an important service-based economy -- accounting for some 90% of our GDP and we are an international centre of commerce, finance and transportation, both passenger and cargo.
As a result, Hong Kong is attracting more investment, and more business than ever before.
Healthy economy
During 2005, our real GDP increased a very healthy 7.3% from the same period a year ago and rose another 6.7% in the first half of this year. Forecasts remain favourable; around 5% this year -- although external factors like high energy prices and rising interest rates could adversely affect our economy.
Foreign investment has been particularly strong. Inflows of foreign direct investment (FDI) to Hong Kong in 2005 amounted to A$47.6 billion -- second to Mainland China in Asia and one of the highest in the world. The 2005 total represented a 5.6% increase over 2004 and 164% more than 2003.
FDI inflows remain robust so far this year. In the first quarter of 2006, inward FDI to Hong Kong reached nearly A$17.5 billion.
These numbers underscore Hong Kong's strong appeal to a growing number of international companies, not just to operate in Hong Kong but also as a platform to reach Guangdong, the rest of the Mainland, as well as the Asia-Pacific region.
In addition, the number of regional operations in Hong Kong has continued to expand, demonstrating that Hong Kong remains the preferred base in Asia for foreign and Mainland companies to oversee their regional businesses. As of the 1st of June this year, there were well over 3,800 regional headquarters or regional offices in Hong Kong (nearly 90 which are Australian). On average, one foreign-owned company is setting up a regional headquarters or office in Hong Kong every week.
Australian investment in HK
The 400 plus Australian companies in Hong Kong are a vibrant and diverse group, including financial services, electronics, IT, chemicals, energy, consumer products, transportation, retail, media and a vast array of professional services.
And there are more coming all the time. For example, during the past year,
* Logistics company OBM International Trade Services set up its first overseas office in Hong Kong.
* Training facilities provider Cliftons, which has its regional headquarters in Hong Kong, opened a flagship facility in our city's central business district.
* Servcorp expanded further with its third serviced office centre in Hong Kong.
* Spotlight - the fabric, craft and home interior chain -- plans to open its first superstore in Asia early next year.
These companies came to Hong Kong because they are convinced that it is the place for their line of business, and because Hong Kong is the best place in the world for doing business.
Hong Kong's competitive advantages
Why is Hong Kong doing so well in attracting Australian and other foreign companies?
Let me quote the words of an Australian, the Honourable Alexander Downer in his most recent visit to Hong Kong last month:
"Hong Kong's own fundamental advantage is its values and institutions. Hong Kong is a success story in large part because its citizens and businesses have unrestricted access to information from anywhere in the world, an independent judiciary that protects them and makes contracts enforceable, and a high standard of governance that provides certainty for investors - both domestic and foreign."
We have successfully preserved and strengthened our competitive advantages from a "barren rock" to a British colony and to a Special Administrative Region of China when Hong Kong was reunified with its Motherland in 1997. The unique "One country, two systems" is working well. All these factors that have made Hong Kong such an attractive place for foreign investors down the years -- rule of law; clean governance; a simple, low tax regime; unfettered flow of information and capital; level playing field; lack of government interference -- remain intact.
Let me also mention two specific distinctive competitive advantages. One is the "clustering" of professional services. We have over 400 financial institutions and banks, probably more than any other place in the region except Japan. It is not just banks; there are lawyers, accountants, and all other support services that you need to manage your business in the region.
Another specific competitive advantage is in our hardware. Our efficient roads, railways, telecommunications network, airport and port are unrivalled in this region.
At a more personal level, Australians and other foreign investors bringing their families will feel comfortable in Hong Kong which is one of the safest places in the world. We offer a year-round feast of exciting social, cultural and recreational activities. Expatriate children can choose among 56 international schools - including the excellent Australian International School which offers a comprehensive programme based on the Australian education system. In fact, I had the honour of overseeing the establishment of the school in its current and permanent location when I was Secretary for Education and Manpower in 1998. The fact that many Australians find the adjustment to life in Hong Kong so smooth has something to do with the cultural mix they find in our city.
The Guangdong connection
I now turn to what I call the Mainland advantage. Hong Kong is blessed because of where we are. We are in the heart of Asia, which makes us the natural hub for doing business in Asia as a whole - and at the heart of the Pearl River Delta (PRD), the most economically dynamic region in China.
The interaction of Hong Kong and Guangdong Province, particularly in the PRD, has contributed greatly to prosperity on both sides of the boundary. This combination has resulted in the PRD developing into one of the world's leading manufacturing centres - with its clusters of industries and services reinforced by a continuous stream of start-ups and numerous small and medium enterprises. Each day, over US$300 million worth of goods are produced by thousands of factories in this region, some of which are still owned by Hong Kong enterprises.
During the past quarter century, Hong Kong and Guangdong Province have combined and leveraged our respective strengths to develop one of the world's most efficient and cost-effective manufacturing supply chains.
We provide the capital, management, technology, market knowledge and access to international markets while PRD cities offer world-class, low-cost manufacturing, and access to a new, demanding consumer base.
Pan-PRD
We are now also working more closely with the other provinces in the southern part of China to ensure greater co-operation and growth that will lead to more business opportunities for your companies. The Pan-Pearl River Delta (Pan-PRD) Regional Co-operation and Development Forum - begun in 2004 and encompassing China's nine Southern provinces, Hong Kong and Macau -- is a high priority for our Government as we work towards a unified and open market in this region.
Making up one-fifth of China's land mass, the Pan-PRD has grown exponentially over the past few years. It has a combined population of 450 million -- which is as big as the EU -- and GDP of A$835 billion - which is over 40% of China's total output and larger than most of the world's economies.
The CEPA factor
And for the whole of Mainland China, Australian and other international companies in Hong Kong are benefiting from the Closer Economic Partnership Arrangement (CEPA), essentially a free trade pact between two autonomous trading partners within the same nation, which came into effect on January 1, 2004. It represents one of the most significant steps we have taken to increase and enhance economic flows between Hong Kong and the Mainland.
CEPA covers three areas: trade in goods, trade in services and trade and investment facilitation. It is WTO compliant but many benefits go beyond WTO commitments and are not being offered to other economies at this stage. Importantly, these benefits are available to people and businesses of ALL nationalities.
All goods of Hong Kong origin, except for prohibited articles, qualify for zero tariffs when entering the Mainland of China. CEPA also gives qualified companies based in Hong Kong (with no regard to the nationality of the ownership of the companies) greater access to the Mainland in 27 services sectors, including banking, distribution, professional services, IT, transportation and logistics and telecommunications - areas in which Australian companies excel. It also significantly improves trade and investment facilitation across the boundary.
This is a dynamic arrangement, with extended benefits agreed and implemented every year. For example, the latest and fourth round of the CEPA benefits announced in June this year covers two broad areas: expanding market access for 10 services sectors; and extending trade and investment facilitation measures to include intellectual property protection.
And it works. Over 25% of the companies assisted by Invest Hong Kong, our investment promotion agency, say that CEPA was either the main reason or one of the factors in their decision to invest or expand in Hong Kong.
Earlier this month, Hong Kong's Chief Executive convened an Economic Summit on "China's 11th Five-Year Plan and the Development of Hong Kong" - involving leaders from the Government and private sector. The Summit discussed opportunities and challenges faced by Hong Kong under China's 11th Five-Year Plan, and how Hong Kong can respond positively to the plan and play a positive role in the national economy. By the beginning of next year, we will have an "action agenda," with detailed follow-up measures to be taken by the Government, the business sector, academics and public organisations concerned. And I have no doubt that the action agenda will provide more opportunities for foreign companies operating in Hong Kong and having an interest in doing business in China.
Conclusion
So with these promising prospects, I hope many more enterprises in Sydney and other parts of this country -- including small and medium-sized companies -- will want to be close to the action.
And you don't have to do this alone. Our Government is in business to help you do business. We can supply a step-by-step guide to setting up in Hong Kong; we can help link you with business partners, we can guide you through the government regulations and requirements; and we can provide sector-specific advice. And once you are up and running, we'll always be available to lend a helping hand.
If you are interested in doing business with Hong Kong or China, you can begin with our ETO and its investment promotion unit in Sydney -- who are ready to provide you with what you need when you need it.
Thank you again for joining us this evening and making me feel so much at home. I look forward to welcoming you -- or welcoming you back -- to my home Hong Kong in the very near future.
Ends/Wednesday, September 20, 2006
Issued at HKT 18:52
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