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SCED's speech at Prime Source Forum luncheon (English only)

    Following is a speech by the Secretary for Commerce and Economic Development, Mr Frederick Ma, at the Prime Source Forum luncheon today (April 1):

Distinguished guests, ladies and gentlemen,

    It is a pleasure to join you today.  A warm welcome to those of you who have travelled long distances to be here. 

    This is only the third Prime Source Forum but it is already a major event for the industry worldwide, contributing to Hong Kong¡¦s pre-eminence as an international conference and exhibition destination as well as a major sourcing hub in the region.  The Government is stepping up its marketing effort to continue to build up Hong Kong¡¦s events calendar with prestigious events like the Prime Source Forum.  But without eager participants, our efforts would be to no avail. 

    The textile and clothing business is central to Hong Kong¡¦s economy, accounting for 39% of our domestic exports and 11% of our re-exports among all merchandises in 2007, and Prime Source Forum brings to us some of the most influential players on the global scene. 

Hong Kong embraces free trade

    As you all know, the textiles and clothing industry ¡V in Hong Kong, in Asia and around the world ¡V faces a range of challenges, from supply chain coordination to identifying the right markets for finished products.  Since 2005, quota restraints affecting international trade in textiles and clothing are largely gone.  Local companies have since been looking at ways to reposition themselves, move up the value-added chain and explore new markets.  Yet high tariffs and other forms of trade barriers still dog us.  These will continue to be the subject of negotiations under the World Trade Organisation (WTO). 

    WTO Members have set clear goals for the Doha Round of negotiations which ¡V when adopted ¡V will slash tariffs and open up new opportunities for the textile and clothing industry.  As a staunch supporter of free trade, Hong Kong participates in the negotiations and supports tariff cuts and the removal of trade barriers.

    Indeed, you would expect nothing less from an economy that is consistently ranked as the freest in the world.  We have retained top spot in the Heritage Foundation¡¦s Index of Economic Freedom for 14 years in a row.  This status reflects real advantages for businesses in Hong Kong, such as a low and simple tax regime.  In his Budget last month, the Financial Secretary lowered profits tax by one percentage point to 16.5% and salaries tax also by one percentage point to 15%.  We have no VAT, no inheritance tax, no capital gains tax and zero tax on investment. And for those wine drinkers, if the Legislative Council approves, no wine tax. 

    Importantly for trade, there are no tariffs on imports or exports and we don¡¦t offer export subsidies.  We have found that the best way to promote a business-friendly environment is to establish a level playing field for all and let market forces play out. 

Hong Kong as a sourcing hub

    This strategy has helped Hong Kong emerge as a sourcing centre for a variety of industries, including textiles and clothing.  A growing number of international trading houses are coming to the city to establish buying offices or intermediaries here.  Advanced infrastructure combined with the tacit knowledge of our enterprises ¡V covering international rules and regulations, customer preferences, and regional sourcing knowledge ¡V make for short lead times for delivery of quality clothing.

    Although we have worked hard to establish a positive trading environment, we could not have planned or predicted our biggest competitive advantage ¡V our proximity to the Mainland of China.  We just happened to be in the right place at the right time!  Today, the Pearl River Delta is known as the ¡¥factory of the world¡¦, and many of our manufacturers have been operating across the boundary for decades.  And as people in the Mainland become increasingly well off, on the back of China¡¦s booming economy, the increasingly affluent middle-class have emerged as a new target market for high quality products and the latest fashion trends. 

    Earlier I mentioned our commitment to free trade.  That commitment extends to cross-boundary trade in the form of our Closer Economic Partnership Arrangement with the Mainland, what we call CEPA for short.  CEPA is a unique free-trade pact that opens up Mainland markets to Hong Kong companies. Under CEPA, all products of Hong Kong origin have started to enjoy zero tariff in the Mainland market since January 1, 2006, upon applications by local manufacturers and upon the CEPA rules of origin (ROOs) being agreed and met.  And because CEPA rules are nationality neutral, foreign firms incorporated in Hong Kong enjoy the same benefits as local companies.  As at end-February this year, more than 31,000 Certificate of Origin applications under CEPA had been approved.  Textile and clothing products accounted for almost 28 per cent (27.8%) of them.  Indeed, textiles and clothing companies have been among the biggest beneficiaries of CEPA, with an export value of goods concerned amounting to more than HK$1.6 billion.

    Currently, almost half (45.7%) the companies leveraging CEPA are of foreign interest.  We welcome more overseas enterprises to join them; there is still plenty of room.  Remember that CEPA applies nationally, to the whole of China and its 1.3 billion people, so just imagine what it could do for your customer base!

    CEPA has consolidated our role as a revolving door between Mainland and the rest of the world, placing us at the centre of sourcing activities in the region.  With our substantial regional production knowledge and professional management skills in the textiles and clothing industry, we will continue to serve as a sourcing hub for quality and value-for-money products to cater for diverse customer preferences. 

Future of Hong Kong¡¦s textiles and clothing industry

    Hong Kong ¡V like many of our competitors in the region ¡V has had to move with the times.  As Asia¡¦s world city, we have placed great importance on our international role.  Recently, TIME magazine has recognised Hong Kong as a lynchpin of the globalised economy, along with New York and London. The magazine coined the name ¡§Nylonkong¡¨ to describe the interconnectivity between the three cities in our globalised world.  This interconnectivity will enhance the quality, range and efficiency of services we can provide to the textiles and clothing industry in the future.

    We are on the right track, but we can always do better.  We will continue to diversify into services which are complementary to textiles and clothing manufacturing, such as logistics, merchandising, marketing, brand-name building, financing activities, and strategic planning.  Our local textiles and clothing industry will continue to move up the value chain towards Original Brand Manufacturing.  Design and innovation, in particular, fashion design as well as research and developments in advanced technologies for textile materials and textile processing, will be part and parcel of our textiles and clothing sector.  By further developing on such scores, we are confident that our brand names will continue to expand into overseas markets.

    Indeed, this forum is a good opportunity to share experiences and explore new areas of co-operation to enhance efficiency, quality and cost effectiveness.  I look forward to hearing your views on how to ensure an even brighter future for the industry in Hong Kong, in Asia and around the world.

    Thank you and I wish you all a very successful forum.

Ends/Tuesday, April 1, 2008
Issued at HKT 15:26


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