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Following is a speech by the Secretary for Commerce, Industry and Technology, Mr Joseph W P Wong, at the "Hong Kong: Turning China into Opportunity" Seminar co-organised by the Hong Kong Trade Development Council and Hong Kong Economic and Trade Office in London on November 6 (Budapest time) (English only):
Minister Garamhegyi, ladies and gentleman,
Good morning.
I want to begin by expressing my gratitude to the Hong Kong Trade Development Council and London Economic and Trade Office for organising this event -- and to all of you for joining us today.
I am delighted to be in Budapest. After only a short time in your beautiful city, it is easy to understand why it has been called "The Pearl of the Danube".
I am also pleased to be visiting Budapest at a time when economic and cultural relations between Hungary and Hong Kong are expanding rapidly. Our two-way trade has been growing at a strong annual rate exceeding 30% during the past five years.
In fact, Hungary has become Hong Kong's largest export market in Central and Eastern Europe. Last year, we exported nearly US$1 billion worth of goods to your country - representing a 28% year-on-year increase and 46% of Hong Kong's total exports to this region. We send mainly optical instruments and telecommunications to Hungary, while you sell us telecoms and electrical equipment and parts. While recent growth has been impressive, there certainly is scope for considerably more economic interaction between our two economies.
Although Hungarians make up a relatively small percentage of our international community in Hong Kong, their numbers are growing as well. I understand from Hungary's Consulate General in Hong Kong that at least two companies from your country are planning to establish operations in our city during the next few months.
That is very welcome news. They and, I hope, all of you here today will come to Hong Kong and join many others from elsewhere in Europe who have helped to make our city a truly cosmopolitan one. The MOU on cultural co-operation signed last year between our two governments will help expand and deepen our relationship.
Those of you who do come and stay in Hong Kong will, I believe, find that our city and Budapest have some important similarities. Of course, you have the beautiful Danube, while our central business district overlooks the spectacular Victoria Harbour.
We also both are business cities which serve as hubs for two of the most economically robust areas in the world. The southern half of China - the Pan Pearl River Delta - has been the fastest growing region of the fastest growing large economy globally; Central and Eastern Europe is in the midst of rapid economic expansion, which includes a 60% increase in consumer spending in the past four years.
But we also share another, related role - as a gateway to these two very dynamic regions and an array of business opportunities. We are both two-way platforms for international companies accessing the markets, respectively, of China and Central & Eastern Europe. And we are both platforms for Chinese and Central and European firms looking to develop their businesses in the rest of Asia, the EU and globally.
Indeed, just before I came here, I met Dr Miklos Persanyi, the Minister of Environmental Protection and Water Management of Hungary, and a trade delegation led by Mr Retfalvi Gyorgy, CEO of Hungarian Investment and Trade Development Agency, in Hong Kong last month. They had just returned from a visit to the Mainland of China and were convinced that Hong Kong was a good place to do business on its own right and as a gateway to China.
Introduction to Hong Kong
Let me now talk more specifically about the opportunities that Hong Kong offers to Hungarian and other international companies as your business partner for China and the Asia Pacific region.
Hong Kong has come a long way since the British took it over 165 years ago when we were a "barren rock". We started as an entrepot, then became a manufacturing base and prospered as such after the Second World War. We are number 11 among the world's largest trading economies, mainly due to our enormous re-export trade with Mainland China. Our total trade in goods last year reached US$587 billion, representing an increase of US$200 billion in just two years.
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.
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.
Foreign investment has been particularly strong. Inflows of foreign direct investment (FDI) to Hong Kong in 2005 amounted to US$35.9 billion -- second to Mainland China in Asia and 6th highest in the world. The 2005 total represented a 5.6% increase over 2004 and 164% more than 2003 - and was greater than the inflows for Singapore, South Korea and India combined.
FDI inflows remain robust so far this year. In the first half of 2006, inward FDI to Hong Kong reached nearly US$20.7 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 3,845 regional headquarters or regional offices in Hong Kong. On average, one foreign-owned company is setting up a regional headquarters or office in Hong Kong every week.
Hong Kong's competitive advantages
Why is Hong Kong doing so well in attracting international companies? Let me begin by quoting a European executive, who has started and operated successful businesses in Hong Kong for many years:
"Nothing compares to Hong Kong in terms of business friendliness. With its unique position as a gateway to China and a regional trading hub, Hong Kong is the ideal place for European companies aiming to expand into Asia."
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.
Hong Kong exemplifies prudent and effective financial management. We are living proof of a maxim popularised by the American publisher and sometime politician Steve Forbes: "Learn to live within your means and you will have more means to live with."
Let me also mention several 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 competitive advantage is in our hardware. Our efficient roads, railways, telecommunications network, airport and port are unrivalled in this region.
Hong Kong also offers an excellent environment for the use of information and communications technology (ICT), which underpins almost every facet of business operations and our daily lives. Our purpose-built Cyberport, which has first class broadband and Internet connectivity, and Hong Kong Science Park, which provides state-of-the-art infrastructure for the development of applied Research & Development, innovation and technology, have brought together telecommunications and high-tech companies and professional talent from all over the world.
In fact, as a community, Hong Kong embraces every new stage of technology development with enthusiasm. Our broadband penetration of 67% at households and mobile phone penetration at 129% or 9 million subscribers are amongst the highest in the world, and we offer the world's most affordable Internet connection and mobile phone services according to a survey conducted by the International Telecommunication Union (ITU) in 2005.
At a more personal level, Hungarians and other Europeans bringing their families to Hong Kong will feel at home. Our city is one of the safest places in the world. We offer a year-round feast of exciting social, cultural and recreational activities, and expatriate children can choose among 56 international schools.
The Guangdong connection
I now turn to what I call the Mainland advantage. Hong Kong is blessed because of where we are. As another Hong Kong-based European businessman put it:
"At the heart of Asia and Asia at heart, that's Hong Kong."
We are indeed at 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, with a population of more than 40 million.
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, many of which are owned by Hong Kong enterprises.
Pan-PRD
But we have moved beyond the confines of PRD. HKSAR Government and private sector are working more closely with all the 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 US$635 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, 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 China's WTO commitments which China has not offered to other economies at this stage. Importantly, these benefits are available to people and businesses of all nationalities operating in Hong Kong.
For example, all goods of Hong Kong origin, except for prohibited articles, qualify for zero tariff when entering the Mainland of China. CEPA also gives foreign-owned companies based in Hong Kong meeting the same capital or operating requirements greater access to the Mainland in 27 services sectors, including banking, distribution, professional services, IT, transportation and logistics and telecommunications - areas in which European 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.
Conclusion
So, with these promising prospects, I hope that more enterprises in Hungary and other parts of this region -- including small and medium-sized companies - will want to be close to the action. We offer opportunities that you should not miss; and this is a particularly good time to take advantage of them.
One of your greatest countrymen, Franz Liszt, seems to have agreed. Nearly 200 years ago, he provided this sage advice:
"Beware of missing chances; otherwise it may be altogether too late some day."
And we can help make sure that you and your company don't miss these business "chances" in Hong Kong and the Mainland of China. Our Government, as represented by InvestHK, and the Hong Kong Trade Development Council, are in business to help you do business. InvestHK 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.
Thank you again for joining us today. I look forward to welcoming you in Hong Kong in the very near future.
Ends/Tuesday, November 7, 2006
Issued at HKT 12:57
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