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Speech by SCIT at a boardroom luncheon (English only)

    Following is a speech by the Secretary for Commerce, Industry and Technology, Mr Joseph W P Wong, at a boardroom luncheon for Australian businesses in Sydney today (September 21):

Distinguished guests,

     I am delighted to be in Sydney again, in my capacity as Secretary for Commerce, Industry and Technology, and in a business friendly, culturally diverse and beautiful country where many of my friends stay and work and most of the Hong Kong people have a close relationship or good story to tell.
     We in the Hong Kong SAR Government place a high value on our relationship with Australia and Australians, and that's why I believe it is important for senior government officials such as myself to meet and talk with members of the Australian business community to keep you up to date with events in Hong Kong, and on how we are leveraging our proximity and unique circumstances to benefit from China's outstanding economic growth and contribute to it.

     Apart from visiting your lovely harbour city, I'm also on my way to Cairns for bilateral meetings on Friday, first with Susan Schwab, the United States Trade Representative, then Mark Vaile, your Deputy Prime Minister and Trade Minister, and later with Phil Goff, New Zealand's Minister for Trade and Trade Negotiations. The four of us will join the Buick Group meeting of Trade Ministers, which include also ministers from other economies.  

     I think you all know that the Doha Development Agenda, the latest WTO negotiations, has reached a precarious stage and those of us who are fervent supporters of the multilateral system, Hong Kong and Australia certainly included, are looking to see what we can do at this late hour to restart the round.

     There's a good deal at stake beyond agriculture which is of interest to Australia. In my view, not concluding the round next year would bring irreparable damage to the WTO and the multilateral trading system itself and result in renewed trade disputes and protectionist trade measures in various forms and shapes. Hong Kong and Australia know the importance of free and open trade, not just to ourselves, but to the whole world, including the developing countries. I'm looking forward to meeting my Ministerial colleagues to see how we can collectively do to move the negotiating process forward.  

Hong Kong economic outlook

     In the meantime, I'd like to make just a few points about what's happening in Hong Kong. For the past two years, Hong Kong has enjoyed a sustained and broad-based recovery. Last year we posted GDP growth of 7.3% on the back of 8.6% in 2004. After another growth of 5.2% in the second quarter of this year, our forecast for the whole year of 2006 is 5%, quite respectable for a mature economy like Hong Kong. We have emerged leaner and healthier from the problems of the late 1990s and early 2000s, when we faced some daunting challenges thrown at us by the Asian Financial Crisis, and such natural near-disasters as the bird flu and SARS.

     Those of you who have been to Hong Kong will know that by comparison to this great country, and many others, it is but a tiny dot on the map. Today Hong Kong is the world's 11th largest trading economy, 6th if you take the EU as a whole. We have the world's busiest container port, and our airport, considered to be one of the world's finest, handles more cargo than any other elsewhere.

Hong Kong's competitive advantages

     Our harbour is our only natural asset. The rest of Hong Kong's success has been built on the strength of the finest of British institutions and systems, and the entrepreneurial skills and hard work of our citizens.

     At the hub of the Pacific Rim, Hong Kong is within five hours' flying time of half the world's population. Our low tax regime, free market philosophy, well tried and trusted legal, judicial and governmental systems, world class communications and transport infrastructure, and a robust and free press, have attracted 3,800 regional operations of the international business community to set up a base in Hong Kong, far more than any other place in the region.  

     Earlier this year, we were named the "Asian City of the Future" and the city with the best foreign direct investment potential by fDi magazine.  Foreign direct investment last year amounted to nearly A$48 billion, second only to China in Asia.

Australia-Hong Kong economic links

     Some 450 Australian companies are in Hong Kong, employing more than 200,000 people. But this is not the total figure - there are many, many more Aussie companies and entrepreneurs using Hong Kong as their base in Asia or in southern China, or as a market in its own right.

     Australians feel at home in Hong Kong, in the same way as Hong Kong people feel at home in Australia. We share many of the same values - freedom of speech; freedom of the press; freedom to work, travel, worship, make money, and enjoy life, nature and horse-racing. Freedom to criticise politicians and government officials and others on a routine basis. Believe me, as a Minister in Hong Kong, I can vouch for this.

Pan-PRD cooperation

     Like Australia, Hong Kong has always been quick to adapt to changes in the global economy. We have transformed ourselves from an entrepot to a manufacturing base and now, among other things, an international centre of finance, trade and transportation. Our manufacturers were the first to migrate to the Pearl River Delta after China opened up in the late 1970s, and the first to invest heavily there.

     Indeed, Hong Kong is the largest external investor in China, the largest in every province and region. One important outcome of this manufacturing migration, coupled with the development of our financial and transportation infrastructure, have resulted in our services sector now constituting nearly 90% of our GDP. That must rank as one of the highest in the world.

     As the fastest growing part of China, the Pearl River Delta has become the "factory of the world", and Hong Kong is its gateway.

     There is a new visionary concept now taking shape in the southern part of China. This is known as the Pan Pearl River Delta Regional Co-operation Initiative - or simply Pan-PRD. It encompasses nine southern provinces and regions of China, together with the Special Administrative Regions of Hong Kong and Macao.  

     With a population of 460 million, matching the population of the European Union by the way, Pan-PRD has a GDP comparable to the 10-nation ASEAN. And the initiative is designed to break down domestic barriers to trade in goods and services.  

     The Central Government of China supports the initiative as it wants Pan-PRD to add momentum to the nation's long-term economic growth. The Mainland's growth will require a strong international financial, commercial and logistics infrastructure to sustain it and that is where Hong Kong comes to the fore.

     How? Add to the key factors already mentioned: Hong Kong's convertible currency; world-class financial services; a well-regulated market with excellent liquidity; international best practice standards; corporate governance rules; a robust and transparent, common-law-based legal system; modern knowledge and management skills; global connectivity and state-of-the-art logistics and communications networks. Hong Kong has it all.

     The growth of the Pan-PRD region will revolve around Hong Kong in terms of financial and services support. We are the principal services hub for outward-looking Chinese companies, and we are the Mainland's premier capital formation centre. Mainland enterprises have raised nearly A$170 billion on the Hong Kong stock exchange over the past dozen years, and increasingly they are using us and our international know-how to venture into global markets.


     Our other big co-operation initiative with the Mainland is the Closer Economic Partnership Arrangement, or CEPA, a Free Trade Agreement dating back to January 2004.

     It covers three broad areas: CEPA offers zero import tariffs for all products that are made in Hong Kong for export to the Mainland. On trade in services, CEPA provides preferential market access to service suppliers in 27 services sectors, including banking, distribution, construction, management, consulting, advertising, logistics, freight forwarding and warehousing. CEPA also provides a framework for the facilitation of trade and investment.

     Some of these measures, like the zero tariff preference, go beyond China's own multilateral commitments at the WTO and provide Hong Kong manufacturers and service suppliers with a clear advantage over competitors from elsewhere as far as the Mainland market is concerned.  

     When I say "Hong Kong manufacturers and service suppliers", I could be talking about any Australian company, because CEPA rules have no nationality requirements on ownership. For example, any foreign service provider which has been established in Hong Kong for more than three years is treated as a Hong Kong company.  

     This minimum length of operation requirement does not even apply to manufacturing, where you can fly in, set up your operation and begin exporting tariff-free immediately if your products are covered by CEPA and meet the rules of origin requirements. These products might be goods with high value-added or intellectual property content, allowing you to take advantage of Hong Kong's transparent and independent legal system and rigorous IP protection regime.  

     It is important to note that CEPA is an open and evolving arrangement. We have four rounds of liberalisation measures and more will come if both parties consider it is ready to do so.  The Central Government has already agreed that Hong Kong banks can conduct a limited amount of renminbi business and has undertaken to expand its scope. And similar opening up opportunities are available in many other service sectors.

     CEPA clearly demonstrates that Hong Kong is not just another Chinese city. We are a Special Administrative Region operating under the "One Country Two Systems" enshrined in the Chinese constitution and Hong Kong's Basic Law. We are a separate customs territory with autonomous right to enter into multilateral and bilateral trade agreements. We are a unique part of China and will remain Asia's world city.  


     By itself, Hong Kong has a population of close to 7 million, a total GDP of A$235 billion and a relatively high GDP per capita of A$34,000, plus all our international connections in trade and services. We also have Mainland China, our long-term and supportive neighbour - the biggest growing economy in the world - averaging 10% a year for 1.3 billion people. So if you want to manage your risk in China; if you want to partner with people who have decades of experience in China; if you want to deal with people who understand the culture and language of China; if you want to take a shot at the China market in small chunks rather than one big bite, then you will find no better place than Hong Kong to achieve those goals.

     I therefore invite you to work closely with us as Hong Kong, China and the whole of the Asia Pacific region enter a new and exciting era of business opportunities.

     Thank you.

Ends/Thursday, September 21, 2006
Issued at HKT 15:41