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Following is the speech by Secretary for Commerce and Economic Development, Mr Frederick Ma, at a business conference organised by the Hong Kong Economic and Trade Office (San Francisco) today (November 5, San Francisco time):
Distinguished guests, ladies and gentlemen,
Good morning, it is a great pleasure to be here in beautiful San Francisco - one of the most important financial, trading and transportation hubs in the US.
This is my first official visit to the west coast since taking up the post of Secretary for Commerce and Economic Development in July. I am delighted to learn that many of you here have close business and social ties with Hong Kong and the Mainland of China. I will therefore dispense with general background information and focus on some recent developments in Hong Kong that I hope will be of interest to you. I also want to talk about a couple of the key initiatives under my policy portfolio.
Let's first take a look at the macro trade scene between Hong Kong and the US. Hong Kong is an open, efficient economy that counts the US as its second largest trading partner, just after Mainland China. Our bilateral trade in 2006 was worth over US$63 billion. There are about 1,300 US firms in Hong Kong, many of which are from California, including big names like Apple Computer, Cisco, Hewlett-Packard, Yahoo, Walt Disney, Sun Microsystems and Sybase, just to name a few. There are good reasons why the US has such a significant presence in Hong Kong. These reasons have a lot to do with the theme of today's conference - Hong Kong being the premier business and financial hub in Asia. I will elaborate on this a little later.
Often the first thing I'm asked overseas is this: how is Hong Kong doing these days? Well, I can sum up the current economic situation in one short sentence - we are in pretty good shape. I might also add that our economic recovery has added to celebrations this year marking the 10th anniversary of Hong Kong's reunification with the Mainland.
Our economy continues to grow at a brisk pace. Over the past three years, Hong Kong's real GDP grew at an average of 7.4% per annum. The trend has continued this year with further growth of 6.1% in the first half of 2007. The financial services, trading, logistics and tourism sectors are doing particularly well. Our performance is a good indication of our sound economic fundamentals. It also points to our unique position and strength as a two-way springboard for overseas companies wanting to access the vast China market, as well as for Mainland enterprises looking to expand into the global arena. Hong Kong is now home to some 3,800 international companies with regional headquarters and offices - that is 50% more than what we had in 1997. Unsurprisingly, the US tops the list with about 900 companies having their regional operations in Hong Kong. We are also the second largest destination for foreign direct investment (FDI) in Asia, according to the United Nations' World Investment Report issued just last month. In 2006, Hong Kong attracted FDI valued at US$42.9 billion, up 28% from the year before. The Mainland tops the list with US$69 billion worth of FDI last year.
Hong Kong remains the preferred location in Asia for many foreign companies and for capital. Business people continue to be attracted by our sound legal system, level playing field for business, clean and efficient government, free flow of information and capital, connectivity with the world, proximity to the Mainland market and well-educated and productive workforce. We also have a full range of professional and support services, from financial, accounting and legal services to transport and logistics. And we have a duty-free port as well as a simple and low tax regime. These attributes have seen the Heritage Foundation consistently rank us as the world's freest economy, while the Fraser Institute and the Cato Institute have for more than a decade rated us Number One for economic freedom. There's no place else quite like Hong Kong.
For a long time, we have been leveraging on our location at the crossroads of East-West trade and business. With our well-recognised entrepreneurial spirit, dedication and commitment to quality, it is only natural that we capitalise on our strategic geographic location and position as a Special Administrative Region of China. We are well positioned to make the best out of the new opportunities on the Mainland. Today, there are some 80,000 Hong Kong manufacturers just across the boundary in the Pearl River Delta region, which is often referred to as the "factory of the world". These manufacturers employ over 11 million people - that's roughly one-third of the entire population of California, and 1.6 times the population of Hong Kong.
But our close partnership with the Mainland doesn't stop there. You may have heard of the Closer Economic Partnership Arrangement, or CEPA. It is the first free trade agreement signed between the Mainland and Hong Kong. It is made possible under the successful implementation of 'One Country, Two Systems', the unique formula for our reunification with the Mainland. CEPA provides Hong Kong companies with access to the Mainland market over and above what is offered to the other World Trade Organisation members. Under CEPA, Hong Kong enterprises can take advantage of China's growing demand for quality goods and services through zero tariff arrangements. It also gives preferential access to the Mainland market in 27 services sectors, such as banking, logistics and distribution, exhibitions and conventions, telecommunications, construction, tourism and transport. Another 11 service sectors will be added to the list on January 1 next year.
What does this mean for US businesses? Because CEPA does not apply a "nationality" test, foreign-owned or controlled companies incorporated in Hong Kong can also fully benefit from CEPA. I am sure you will learn more about the benefits of this free trade agreement later from our distinguished speaker, Thomas (Wu). He will share with us the experience of the United Commercial Bank in expanding its operations into Hong Kong and the Mainland. It is one of many CEPA success stories. The implementation of CEPA in 2004 has opened the door for over US$1.2 billion worth of goods to enter the China market tariff-free. About 1,100 companies have been certified as Hong Kong service suppliers, gaining preferential access to the Mainland market ahead of their international competitors. Roughly 45% of these are foreign-linked companies.
In tandem with CEPA, another exciting initiative on our doorstep is the Pan-Pearl River Delta (Pan-PRD) cooperation. We often refer to this simply as "9+2" because it brings together nine provinces of southern China, including Guangdong, plus Hong Kong and Macau. To give you some idea of the size and scope of the concept, the Pan-PRD has a population of some 470 million, which is roughly the size of the EU. It is spread over an area of about 770,000 square miles. That is larger than the states of California, Oregon, Washington, Idaho, Nevada, Arizona and Utah combined. It's big! The region's combined GDP in 2006 was just over US$1 trillion (US$1.036 trillion), accounting for 36% of China's total output. The objective of the Pan-PRD initiative is to break down barriers to trade and enhance co-operation in a variety of areas. These include environmental protection, tourism, infrastructure, science and technology, health and disease prevention. We believe that the region will grow into one of the world's largest and most efficient economies, and contribute to the overall development of our country.
Looking to the future, our Chief Executive announced in his Policy Address last month that he would push ahead with 10 major infrastructure projects in the coming years. Several of these projects are designed to boost our economic growth and connectivity with the Mainland. We will build new bridges, such as the massive Hong Kong-Zhuhai-Macau Bridge that will link our city directly to the Pearl River West area. There will also be an express rail line to Guangzhou and Shenzhen as well as a rail link between Hong Kong International Airport and Shenzhen Airport. When completed, these will make it easier and faster to move goods and people around the region. We estimate that the 10 projects highlighted by the Chief Executive will bring about an annual added value of over US$12 billion to our economy, and create some 250,000 jobs. No doubt, there will also be opportunities for US companies with expertise in construction, engineering and consulting to bid for contracts.
Talking about the Policy Address, another piece of good news was a tax cut. The Chief Executive announced that the standard rate of salaries tax will be reduced from 16% to 15%, and profits tax will be lowered from 17.5% to 16.5% next financial year. According to a recent survey by our investment arm, InvestHK, two out of three foreign companies regard our tax regime as a favourable factor. So this latest tax cut provides an even bigger incentive to set up shop in Hong Kong.
I will turn now to a couple of priority areas under my portfolio, creative industries and the convention and exhibition sector. As we are in San Francisco, a Mecca for arts and entertainment, I'll start with creative industries. Like California, Hong Kong has excelled in industries such as film, television, music, advertising and design. Some of our actors, producers, directors and cinematographers have become international household names. I am sure many of you will be familiar with Hong Kong's latest film productions. Hong Kong is the world's third largest film production centre and ranks first in terms of film production per capita. The government is playing its role. We recently injected US$38 million into the Film Development Fund to encourage the production of medium and small budget films. This will help our talented up-and-coming directors and producers to make a name for themselves. Later today, I will meet with one of your successful players in the creative industry to exchange ideas, and to see how the government can become more effective in fostering the development of creative industries. Hong Kong is also an excellent place for location shooting. As I speak, the Caped Crusader is in Hong Kong. Yes, the Batman crew is filming part of the new movie The Dark Knight in downtown Hong Kong. It promises to be quite a sight.
In addition to the continuing efforts in individual sectors such as film, the Chief Executive has announced a plan to accelerate the development of Hong Kong's overall creative industry sector and foster our position as a creative capital in the region. We will set up an overarching steering committee to bring together industry representatives, non-governmental organisations and professional bodies to devise an overall strategy for the sector.
Finally, a word about Hong Kong's convention and exhibition business. The city has long been a leader in this field in Asia, thanks to our strategic location, state-of-the-art facilities and world-class transport links and professional support. Our two major convention and exhibition facilities are the Hong Kong Convention and Exhibition Centre (HKCEC) in the downtown area and the AsiaWorld-Expo located right next to the airport. Together they provide over 1.4 million square feet (about 134,000 square metres) of rentable function space. The HKCEC has consistently been voted as the "best convention and exhibition centre" in the Asia Pacific in various awards and surveys. The AsiaWorld-Expo, which started operation two years ago, has already hosted a number of world-renowned conferences and large-scale exhibitions including the ITU Telecom World 2006, and the Asian Aerospace International Expo and Congress 2007.
The government is committed to maintaining our position as a premier international convention and exhibition centre. In the face of growing regional competition from other cities, we are enhancing our appeal as an international convention, exhibition and tourism capital. We are engaged with various industries in seeking ways to bring more prestigious international events to Hong Kong. Our city has always thrived on competition and we see this as the ideal time to upgrade our facilities and devise new ways to attract events.
On the hardware side, we are doing a good job. An extension of the Hong Kong Convention and Exhibition Centre is due to be completed in 2009. This will increase the exhibition area by 42%, bringing total space to over 700,000 square feet (about 66,000 square metres). At the same time we are working on an early start to phase 2 of the AsiaWorld- Expo project. This will bring its total exhibition area to over 1 million square feet (about 100,000 square metres). Together with the HKCEC extension, we will have a total of over 1.7 million square feet of exhibition area. As for the software, we are continuing to attract and train more world-class professionals to support the development of the related industries. So if you are thinking of staging a conference or convention in our part of the world, I invite you to do so in Hong Kong. I am confident you will not be disappointed.
Ladies and gentlemen, I have brought you up to date with some of the key developments in Hong Kong and how we are forging ahead. The future is bright. As always it is the strength, determination and entrepreneurship of the Hong Kong people that has proved to be our greatest asset.
We want to attract more talented individuals to become part of the Hong Kong story.
Last year we launched a Quality Migrant Admission Scheme to encourage the best and brightest people to come to Hong Kong to live and work. This year we are expanding the scheme so that more people can become eligible. If you have an interest in Asia and are looking for an exciting challenge I encourage you to test the waters in Hong Kong. I have a feeling you might like it!
Thank you.
Ends/Tuesday, November 6, 2007
Issued at HKT 12:16
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