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FS's speech at Reception of the Board Meeting of Dubai Financial Services Authority (English only)
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    Following is the speech by the Financial Secretary, Mr John C Tsang, at the Reception of the Board Meeting of Dubai Financial Services Authority today (April 3):

Mr Saleh, Ladies and Gentlemen,

    Good evening. 

    I am pleased to welcome you all to Hong Kong.  We are deeply honoured that DFSA, the Dubai Financial Services Authority, has chosen to hold its Board Meeting in Hong Kong.  Not only is this a vote of confidence in our city, it is also a great opportunity for us to further explore with you areas of mutual interest and benefit.

    I also take this opportunity to thank you for hosting a roundtable in Dubai in January when our Chief Executive led a business delegation to the Middle East for the first time.

    We are delighted to have this opportunity to reciprocate your generous hospitality.

    In the next few minutes, I wish to talk about our potential for developing a market for Islamic finance in Hong Kong.  But first, I shall explore with you the opportunities for further co-operation between Hong Kong and Dubai in the rapidly changing global financial landscape.

    The Dubai International Financial Centre, under the direction of the DFSA, has emerged in a remarkably short time as the world・s fastest-growing international financial centre in recent years.  Demonstrating great vision and regulatory leadership, Dubai has moved from the original idea of creating a financial free zone in the Emirate of Dubai in 2002, to become a world-class financial district hosting many global financial intermediaries.

    Indeed, Dubai IFC and Hong Kong have much in common as financial centres.  We have both built and developed our financial architecture around our core belief in the free market.  Our regulatory frameworks and financial markets follow the best international standards and practices.  The transparency and efficiency of our financial markets are key strengths in the eyes of market players. 

    There is even a resemblance in the advantage of our locations: Hong Kong sits at the heart of Asia with a broad hinterland that gives us unique access to the market of Mainland China; and Dubai IFC occupies an ideal location as the premier gateway to the Middle East and North Africa. 

    I have touched on some of the similarities, but we also have different strengths.

    Dubai possesses deep understanding and great expertise in developing Islamic finance; it is experiencing considerable growth in infrastructure development; and it has some of the wealthiest customers on the planet.

    Hong Kong・s biggest advantage lies in a different direction, our relationship with the Mainland of China.  Our area of expertise is in integrating the two financial systems in Hong Kong and in the Mainland, as well as establishing a sound regulatory environment and a world-class banking system.

    I am sure the DFSA, as regulator and architect of a developing financial centre, will agree that there are great opportunities for us to further develop our relationship and co-operate to bring about even closer partnership of our economies and financial markets. 

    So where should we begin this co-operation?  I suggest we start by focusing on global financial opportunities and the strengths of our respective markets.

    Hong Kong has been serving as a centre for international financial intermediation for many years, matching investors and fund-raisers from many different places.  Our stock exchange has successfully hosted the largest IPOs of Chinese enterprises globally.  Our bond market is also very open and highly internationalised with foreign issuers being the major player in the Hong Kong dollar bond market. 

    Offering financial intermediation services that are Shariah compatible is a natural extension of Hong Kong・s role as an international financial centre.

    With the well-developed financial services industry in Hong Kong, and deep and liquid markets here, we see a role for Hong Kong as the ideal channel for funds from the Middle East to tap investment opportunities in China.  And, in the other direction, we would serve as a centre for Middle Eastern issuers to raise capital by tapping the massive savings in the Mainland.

    Dubai IFC is well recognised for its leading role in Islamic finance.  Its securities exchange attracted over 70% of the value of sukuks listed on exchanges worldwide in 2006.  The amount of sukuk issuance has quadrupled since 2004, an illustration of the exceptional growth of Islamic finance in recent years.  There is a high level of international interest in these sukuks from European and Middle Eastern investors, and increasingly so, from Asian investors.

    With our own unique and complementary market advantages, Dubai and Hong Kong can work together to promote the development of Islamic finance in Asia.  Hong Kong can learn a great deal from Dubai・s experience of how to build a framework to facilitate the conduct of Islamic finance. 

    At the same time, Dubai may also wish to use Hong Kong・s financial platforms to introduce the investment opportunities available in the Middle East to investors in our region.  The two centres may also jointly explore ways to broaden awareness and understanding of Islamic finance in Asia, and foster Islamic financial activities between Dubai IFC and Hong Kong.

    As a first step in that direction, the Hong Kong Monetary Authority will lead a high level financial services delegation to Dubai and Jordan in May this year, to showcase Hong Kong・s competitive advantages and capabilities for developing an Islamic capital market.

    In addition, Hong Kong・s world-class financial market infrastructure, providing a multi-currency multi-dimensional payment and settlement platform, will be well suited to serve the needs of financial intermediation in international currencies. In this respect, Hong Kong should also collaborate with the Dubai authorities to enhance our payment and settlement links to provide efficient channels for financial flows between our markets.

    Before closing, I wish to congratulate SFC and DFSA on the signing today of the bilateral Memorandum of Understanding.  This MOU aims to enhance our co-operation on promoting and developing our respective Islamic capital market segments.  You have opened a new chapter in the collaborative relationship between Dubai and Hong Kong by taking quick action on this potential growth area.  This is a good sign, and I am sure more collaborative activities will be in the pipeline.

    Ladies and gentlemen, I hope I have set out for you Hong Kong・s strengths and how keen we are to forge even closer ties with our partners in Dubai.  A more integrated financial system will benefit the financial markets and economies of both Dubai and Hong Kong.  I am confident that today will mark another great step forward in what will be a long and fruitful relationship.

    Thank you very much.

Ends/Thursday, April 3, 2008
Issued at HKT 19:55

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