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Following is the speech by the Chief Secretary for Administration, Mr Rafael Hui, today (October 31, London time) at the Hong Kong Trade Development Council Annual Dinner in London:
Peter, Minister Hodge, Ambassador Zha, Lords, Distinguished Guests, Ladies and Gentlemen,
Here in London last November, attending the Wilton Park Conference four months after taking office, our Chief Executive outlined a package of proposals for further political development in Hong Kong. These embraced the election of the Chief Executive in 2007 and the formation of the Legislative Council in 2008. They were backed by public opinion because they represented a significant step towards universal suffrage. But they failed to secure the necessary support of a two-thirds majority in LegCo. This is very regrettable since the electoral arrangements for 2007 and 2008 must now stay the same as before.
But the Government is not giving up. Our main challenge now is to forge community consensus on the model for implementing universal suffrage. Discussions are taking place in the Commission on Strategic Development personally chaired by the Chief Executive. With membership coming from a broad cross-section of the community, the Commission will endeavour to work out a roadmap for universal suffrage. A report will be published in the first half of next year.
There is one very important lesson to be learnt from the voting result in LegCo last December.
We cannot just blithely ignore the fact that Hong Kong's democratic development must be in accordance with the principle of gradual and orderly progress, according to Articles 45 and 68 of the Basic Law.
If we are to seriously move forward, all the principal players -- the democratic camp, other factions in LegCo, the business sector and the Government have to achieve a meaningful compromise. A compromise that is based more on trust and less on fundamentalism and posturing. As in most mature and educated communities, domestic politics, over time, would tend to converge towards the centre. Agreement must be reached on electoral arrangements for 2012.
Electoral matters aside, it seems everything else in the garden is looking a lot better than it did. And you don't have to take my word for it. You can read about it in your own newspaper, the Financial Times.
Their review of October 24 carries the headline ¡§Hong Kong : Staying ahead of the game¡¨. In reference to the perceived rivalry between Hong Kong and Shanghai, the writer asks ¡§which has the upper hand so far?¡¨ The answer, he says, is undoubtedly Hong Kong.
The reasons are many. The Hong Kong economy is in the midst of a broad, sustained recovery. Our GDP grew by 7.3 per cent last year, and 6.6 per cent in the first half of this year.
Through it all, our external trade has shown enduring strength. Though export growth has moderated recently, this has been cushioned by the vibrant Mainland economy. And Hong Kong's exports of services have maintained remarkable growth, thanks to very healthy offshore trade and inbound tourism.
Consumer confidence is high and overall investment expenditure keeps growing. These are clear reflections of strong investor confidence on the back of expanding business activity. As a result, the unemployment rate has declined to 4.7 per cent, a 62-month low and down from 8.6 per cent in the dark days of 2003.
Yet even with all this expansion, inflation is still a moderate 2 per cent for the first nine months of this year. With resilience in domestic demand and further anticipated growth in trade, our economy should easily achieve the forecast growth range of 4-5 per cent this year. We also have achieved a reduction in the size of public sector expenditure as a percentage of GDP. This is down from 22 per cent three years ago to 17.7 per cent in 2005-06.
Hong Kong continues to be rated the world's freest economy by leading public policy institutes in the United States and around the world. Further confirmation of our success is the fact that overseas companies keep moving our way. There are now over 3,800 with regional operations in Hong Kong, which is a record high. And that total includes some 400 British firms.
Since 1997, overseas companies with regional operations have increased by over 50 per cent, confirming Hong Kong as the most popular place in Asia to establish a base. They recognise Hong Kong's value as the best business platform, not only for the Mainland, but in the Asia-Pacific region as a whole.
Consequential to that, as you would imagine, is an increasing demand for international school places from expatriates bringing their families to Hong Kong. The number of non-local students enrolled in our primary and secondary schools rose from about 25 000 in 2004/05 to over 26 000 in 2005/06, a 6% increase. There are expansion plans and proposals from a number of our 55 international schools. And the Government has been making its best efforts to facilitate and accommodate.
Some may view this strong continuous influx of expatriate school children as a bit odd in view of the reported deteriorating air quality in Hong Kong in the past few years. Be that as it may, air quality indeed is one of the major concerns of the international community in Hong Kong. As an international business centre with a steadily growing expatriate population, Hong Kong is committed to improving our air quality. We tackle this on two fronts, through regional cooperation with the Guangdong Provincial Government and rigorous measures to reduce emissions from local sources. We have set emission reduction targets with our Guangdong counterpart for four major air pollutants to be achieved by 2010. To do this, Guangdong has undertaken a number of initiatives such as introducing LNG for power generation, retrofitting flue-gas desulphurisation systems at existing power plants and speeding up the introduction of new motor vehicle emission standards.
In Hong Kong, building on our past efforts, we are introducing Euro IV motor vehicle emission standards this year. We will continue to impose caps on the total emissions of power plants and build in even more stringent requirements in the new Scheme of Control Agreements with the power companies in 2008. In his Policy Address delivered earlier this month, our Chief Executive announced a number of new initiatives to further reduce emissions, including provision of financial incentives for use of environment-friendly vehicles and replacement of older commercial diesel vehicles.
All this is by way of illustrating the great importance we attach to maintaining and developing our international position. And among all the facets of that position, none is more crucial than that of an international financial centre.
In this particular connection, we know we still have a lot to learn as an international financial centre; not least from your remarkable record right here in London. Indeed, Hong Kong aspires to be Asia's London.
From January to September this year, the total capital raised by means of IPO in Hong Kong ranks number three in the world after London and New York. I am sure many of you who are active in the financial world would have realised that Hong Kong has just surpassed New York earlier this month and is now second only to London.
And, it's more than that. Nearly a full decade after the handover, Hong Kong thrives as a staunchly capitalist, free market economy. We're also making considerable contributions to our nation's development.
Take, for example, our ever-expanding role in China's modernisation. The Industrial and Commercial Bank of China ¡V largest in the country ¡V has made history when it was simultaneously and successfully listed on both the Hong Kong and Shanghai Stock Exchanges on 27 October. This marked the world's biggest-ever IPO. The date of the ICBC listing, 27th October 2006, should augur well for the Hong Kong Stock Exchange because it was also on the 27th October 1986 that the ¡¥Big Bang¡¦ in the city of London was launched. Some of the remarkable success of London in the past twenty years may rub off on us. The listing raised more than US $19 billion. Of this, about 73% was from shares sold in Hong Kong, accounting for some US $14 billion. And of that amount, about 90% came from global institutional investors.
We have Asia's second largest stock market, with capitalisation of over US $1.3 trillion as at the end of September. It has become the primary platform for Mainland enterprises to raise money. The average daily turnover was almost US$4 billion in the first three quarters of this year.
As at the end of September, there were 1,152 companies listed in Hong Kong, of which 352 are Mainland enterprises, accounting for 31% of the total. Mainland enterprises have raised about US $164 billion in recent years. They have provided about 44% of total market capitalisation. Their turnover supplies about 57% of the daily total for the exchange.
Hong Kong also is one of the top three asset management centres in Asia. In 2005, our combined fund management business, which included REITs, asset management, advisory and other private banking business, amounted to about US $580 billion. This represented an increase of 25% over 2004. Funds sourced from overseas accounted for over 60% of the total fund management in Hong Kong.
In November last year, our Legislative Council passed a bill to abolish estate duty. More local and overseas investors will be attracted to hold assets in Hong Kong. This also means more business and employment opportunities.
Offshore funds are now exempted from profits tax, and the exemption applies with retrospective effect from the 1996/97 tax assessment year. All these measures will encourage more international investors to invest in our financial markets and make use of our asset management services.
In case you haven't visited Hong Kong for a while, isn't it time that you do so? As you know, we hosted the WTO Ministerial Conference last December, and this December we will be welcoming 100,000 visitors to ITU Telecom World 2006, the world's premier telecommunications event. Looking further ahead, we will organise next year a series of territory-wide celebration activities, including international exhibitions and conferences, and cultural and sports events to celebrate the 10th anniversary of the establishment of the Hong Kong SAR. In 2008, Hong Kong will be hosting the equestrian events of the Beijing Olympics.
A lot is happening in Asia's World City. Perhaps most remarkable of all is how much of this has happened since we saw a change of leadership. Over the past 15 months, we've opened Hong Kong Disneyland; Ngong Ping 360, which includes a cable-car ride to the big Buddha statue and a Buddhist-themed village; Hong Kong Wetland Park; and Asia World-Expo, our new exhibition centre at the airport. Expansion works of the Hong Kong Convention and Exhibition Centre also have started.
We have made considerable progress towards resolving issues with regard to major projects such as the West Kowloon Cultural District, a new cruise terminal at the former airport site at Kai Tak, the new Central Government Complex and Legislative Council Complex at Tamar and the Express Rail Link connecting Hong Kong, Shenzhen and Guangzhou. The Western Corridor, a new boundary crossing between Hong Kong and Shenzhen, will be open next year. We also have done much on issues of major concern to the community, such as setting up the Centre for Food Safety and strengthening our infectious diseases notification system with the Mainland. We have initiated a review of our competition policy. And, after much hard work, we have restored fiscal balance, with a healthy surplus once again.
Tonight is not an appropriate occasion for a full review of the first decade since reunification, and perhaps a glimpse of the future as well. For that you will have to wait until next year. I am sure there will be someone from Hong Kong to do that. So for now, ladies and gentlemen, let me close by thanking you for your support of Hong Kong over the years. Support that is firmly based on our close linkage and mutual understanding. Support that is deeply appreciated.
Thank you.
Ends/Wednesday, November 1, 2006
Issued at HKT 09:27
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