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Following is the speech by the Chief Executive, Mr Donald Tsang, at the HK-Abu Dhabi Business Luncheon in Abu Dhabi today (January 30):
Your Excellencies, Distinguished guests, Ladies and Gentlemen,
As-Salaamu Alaykum (Peace be upon you).
I am delighted to be here in Abu Dhabi, one of the world's major capital cities. As well as being one of the wealthiest cities on earth, Abu Dhabi's rich culture adds to its splendour, and "Father of the Gazelle" is an enchanting name.
Although this is the first visit to the United Arab Emirates, and indeed the Gulf States, by a Hong Kong Chief Executive, I know it won't be the last. Thank you all for the warm welcome to me, and the Hong Kong delegation.
You celebrated the Islamic New Year on January 10 (going by the Western calendar) - and I wish you all a belated Happy New Year. In Hong Kong we will celebrate the Lunar New Year on February 7.
We will welcome the ˇ§Year of the Ratˇ¨, which is said to be auspicious for new opportunities and good prospects, including for business. So, with this in mind, I'd like to talk about new opportunities and good prospects for Abu Dhabi business and investors in Hong Kong, in China, and in East Asia too.
Quite a lot has happened in recent years, so please allow me to give you a brief update. Last year, we celebrated the 10th Anniversary of the establishment of the Hong Kong Special Administrative Region of China. As with any anniversary, we welcomed it as a timely opportunity to reflect on the past, to take stock of the present, and to chart the best course for the future.
In 1997 Hong Kong was reunited with China. Although once again an integral part of our country and although we are a predominantly Chinese community, Hong Kong has lost none of the characteristics that set us apart as Asia's world city. We grew up in a different way, and with different economic and legal systems. These attributes, and our way of life, are protected under the 'One Country, Two Systems' formula for our reunification, and by our mini-constitution, the Basic Law.
This formula promises Hong Kong people a high degree of autonomy in running Hong Kong and this has happened.
Our capitalist system continues to be a cornerstone of our success. We remain a separate member of international organisations such as the World Trade Organization and the World Customs Organisation, just two of many. We continue to negotiate our own air services agreements, and maintain our own shipping register. We have our own passport and immigration procedures. We maintain a separate tax system, and have our own freely convertible currency, which since 1983 has been linked to the US Dollar - as indeed is your currency.
Earlier this month, Hong Kong was ranked as the world's freest economy by the US-based Heritage Foundation, for the 14th year in a row. I note that the same survey gave the UAE a high ranking of 99.9% for fiscal freedom and, of course, I find it interesting that the UAE has no income tax and no federal-level corporate tax.
Our own tried and trusted legal system, based on the English common law system and underpinned by an independent judiciary, continues to provide a reassuring certainty. We have a level playing field for business - with no restrictions based on nationality or domicile. Any company from any country, including of course the UAE, is welcome in Hong Kong. We have a clean, efficient administration and our highly trained Police Force ensures that we remain one of the safest large cities in the world.
International companies doing business in Asia have made Hong Kong their location of choice. Some 3,900 international companies maintain regional headquarters or regional offices in Hong Kong. There is still plenty of room, and we'd like to see more Middle Eastern companies setting up a base in Hong Kong.
Hong Kong - like Abu Dhabi - is constantly upgrading its infrastructure to enhance the efficiency and competitiveness of our economy. A new airport, new road and rail links to the Mainland of China, and new shipping terminals have all come on line since 1997, underscoring our determination to upgrade and improve our external connectivity.
Well-considered and far-sighted planning and infrastructure development are vital to a city the size of Hong Kong, with about seven million people on a landmass of roughly 1,100 square kilometres. That is about the same size as the Emirate of Fujairah (1,300 square kilometres).
In the next five to 10 years we will have even more projects coming on line including new bridges and highways serving our port; a bridge more than 30 kilometres long linking Hong Kong to Macao and the Mainland of China; a new express railway line linking up with the national rail network; a new cruise liner terminal to boost tourism; and, enhanced links between the Hong Kong International Airport and Shenzhen Airport. All of this is designed to significantly boost the inter-connectivity between Hong Kong and the prosperous Pearl River Delta region - and beyond. Hong Kong is not a place that stands still.
This rapid infrastructure development has also expanded the horizons of engineering in areas such as reclamation, construction and transport. It has given our engineers unique experience and skills that may be useful to other cities, including here in the UAE. We have also devised new and imaginative ways to enhance the management of properties, hotels and hospitals as well as improving logistics and port systems and technology.
Strong co-operation between Abu Dhabi and Hong Kong already exists, involving companies such as our Mass Transit Railway Corporation and DP World, as well as sharing of ideas between our two governments. I am confident this atmosphere of mutual co-operation will deepen further in the future.
As well as boosting physical linkages with our neighbours and beyond, we are working on other initiatives to deepen our economic engagement with the Mainland of China.
Our country's 11th Five Year Plan, covering the period from 2006-2010, gives clear support for Hong Kong's core sectors such as shipping and logistics, tourism, as well business and information services. Significantly, it affirms Hong Kong's irreplaceable position as China's global financial centre.
Hong Kong welcomes this as an enormous opportunity that we are seizing with both hands. We already have a world-class financial services sector with a high concentration of international banks including about 70 of the world's top 100 banks.
Our stock market is the world's 7th largest in terms of market capitalisation, and the 3rd largest in Asia. Global financial markets have been highly volatile in recent weeks, and Hong Kong stocks have not been spared. But recent events, triggered by the sub-prime mortgage problems in the US, have in no way undermined the sound fundamentals of the Hong Kong economy. Indeed it has highlighted the efficiency, liquidity and reliability of our banking and securities market infrastructure.
Hong Kong is the largest funds management centre in Asia, a leading insurance centre and one of the world's top gold markets. Hong Kong ranked 4th in the world for IPO funds raised in 2007. The 80 IPO listings last year raised total funds of more than US$37 billion.
Of course, we can and will do better.
Leveraging the enormous market potential in China - the world's fastest growing large economy, we are working to align Hong Kong's financial system more closely with that of the Mainland. Banking services in the national currency, the Renminbi, were launched in Hong Kong in 2004. We are also the only place outside the Mainland to have a Renminbi bond market, and qualified institutional investors in the Mainland can now directly invest in our stock market.
Beyond this, we must explore opportunities further afield to enhance our status as an international financial centre. I believe we are well placed to become a major platform for Islamic finance.
Our legal system is flexible and well adapted to supporting Islamic financial transactions. It permits freedom of contract subject only to certain public law restrictions, none of which should inhibit Islamic financial instruments for legitimate purposes.
A unique advantage for Hong Kong is our unrivalled role in bridging the Mainland to the international market. There is a huge potential requirement for capital in the Mainland, especially for infrastructure development projects, which are well suited to Shariah-compliant financial structures. Hong Kong can play a significant role in structuring and financing Islamic investment products to meet the needs of Mainland Chinese borrowers.
A significant number of leading international banks in Hong Kong have already devoted considerable resources to the creation and servicing of Islamic financial products.
The first Islamic retail fund in Hong Kong was launched recently. By December last year, the fund had already attracted some US$45 million worth of orders.
I invite UAE banks and financial services companies to extend and diversify their global reach through Hong Kong. For all the financial products you may need in a mature and liquid market within the Asian time-zone, halfway between Wall Street and London, you will hardly find an equal to Hong Kong. Our location, in the heart of Asia, means we bridge the gap in daily trading hours.
Meanwhile, we can learn a great deal from your expertise in the provision of Shariah-compliant services.
We also welcome investment by Sovereign Wealth Funds, which are becoming prominent in global financial markets. Our sound financial services infrastructure and well-established legal system make Hong Kong an attractive location for such investments.
Trade and tourism are other links we would like to expand. The UAE is an important partner for Hong Kong in the Middle East. In 2006, bilateral trade was worth US$3.4 billion making the UAE our largest trading partner in this part of the world, far ahead of other Middle Eastern countries. Between 2002 and 2006, bilateral trade grew at an average rate of more than 11 per cent annually. I believe we can build on that momentum.
One way to deepen the trading relationship is for UAE companies to capitalise on Hong Kong's special status within China. One of our biggest advantages is a unique free trade pact between the Mainland and Hong Kong, what we call our Closer Economic Partnership Arrangement, or CEPA for short.
All manufactured items meeting the 'Made in Hong Kong' origin requirements under CEPA enjoy tariff-free access to the Mainland. CEPA also covers 38 services areas, including banking, advertising, accounting, legal services, logistics and freight forwarding.
Service providers incorporated in Hong Kong benefit from enhanced access to what is potentially the biggest consumer market in the world. And because Hong Kong has a nationality-neutral policy, foreign-owned firms incorporated in Hong Kong can enjoy the same benefits of CEPA as local enterprises.
CEPA applies nationally, across the whole of China, covering 1.3 billion potential customers, including in particular the prosperous Pearl River Delta (PRD) region that has a population of around 50 million - a ready-made testing ground for those wishing to offer products and services in China.
We have another promising initiative, what we call the Pan-PRD grouping, or 9+2 economic co-operation. This brings about closer co-operation in nine southern provinces of China, plus the two Special Administrative Regions of Hong Kong and Macao. The aim is to break down the many regional and local trade barriers to trade and investment in this region.
Some 470 million people live in an area of two million square kilometres within the Pan-PRD economic caucus. This is close to that of the European Union, and bigger than NAFTA. It is also more than 10 times bigger than the population of the Gulf Co-operation Council common market (approx 35.8 million). Hong Kong will act as a knowledge bank of international best practice in this undertaking.
All of our long-held fundamentals, our open door policy for trade and investment, our prime position in East Asia, our key role as a global financial centre in China, and the enormous potential of the China market form a recipe that is hard to beat. Hong Kong is a city of unlimited potential that we invite UAE businesses to explore with us.
Finally, as many of you will know, this year will be an historic one for China with Beijing hosting the 2008 Olympic Games. We in Hong Kong will also play a role in this once-in-a-lifetime opportunity by staging the Olympic and Paralympic Equestrian events.
Our preparations are well advanced, and we are determined to stage the best-ever equestrian events. We know that the grace and precision of equestrian sport is well appreciated in the Middle East, which has a long tradition of excellent horsemanship.
The UAE will be well represented at the Olympics with the show jumping team having already qualified, and no doubt there will be high hopes for (Ms) Sheihka Latifa Al Maktoum. I wish your riders well in the competition and I hope that some of you will be there to lend your support to them.
We are very keen to welcome competitors, officials, spectators and visitors from the Middle East later this year. So, please, come and help us celebrate the Olympic Spirit in 2008 - and if you can't make it then, come and visit us any way when you have the time.
I am sure you will not be disappointed. Thank you.
Ends/Wednesday, January 30, 2008
Issued at HKT 18:42
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