**************************************
Following is the speech by the Financial Secretary, Mr John C Tsang, at an Executive Business Lunch in Ljubljana, Slovenia today (May 26):
Ladies and gentlemen,
Good afternoon.
It is my great pleasure to be here today. This is my first visit to Slovenia, but I already know it will not be my last. Aside from the rich culture, heritage and beauty of this city and this great country, the desire to succeed and your entrepreneurial spirit remind me very much of Hong Kong.
You've rightly earned your place as a high-flier among the new economies of Central Europe ¡V and with your current Presidency of the European Union, your political acumen and potential leadership are also being felt.
Today I'm here with a highly experienced and diverse group of business people, some born and bred in Hong Kong, and others from elsewhere who came, fell in love with our city, and never left.
Their in-depth knowledge in specific sectors frees me up to take a more macro approach in my remarks today. I am sure they will all be delighted to share their insight and experiences with you.
I'm also joined by colleagues from our trade and investment promotion offices. Every year, these teams help thousands of companies find suitable business partners, or set up offices in Hong Kong. They are also an excellent source of detailed market research.
I would like to focus today on two broad themes: firstly, where I see the opportunities for Slovenian companies both in the wider Asia region and, more specifically, in China. And secondly, I'd like to focus on Hong Kong's role in helping you access these opportunities.
It is easy to make sweeping statements about Asia. It is, after all, a continent that extends almost to your doorstep in the west, and as far north as Japan, and as far south as Australia and New Zealand. In the heart of this region sits Hong Kong.
This is a region that, over the past decade, has seen a rise in political stability, economic success and, as a result, increased buying power, both on a consumer and corporate level.
It's a region noted for the quality and range of its manufacturing and sourcing operations.
But the trade flow is by no means one-way. The companies and consumers in this region are emerging as some of the strongest customers for international products and services.
Put simply, if you're interested in sourcing, manufacturing, or in selling your products and services to new customers, this part of Asia deserves your close attention.
Let me turn more specifically to China. The coming of age of the Chinese economy has, to say the least, been spectacular. Over the past 30 years, China has stunned the world with its ability to make everything from mass-market T-shirts to the highest precision electronic components at prices that have helped reduce and, indeed, stem inflation worldwide.
Opportunities to source from, or manufacture in, China continue to attract substantial interest and investment from foreign companies. But to see China simply as "the factory of the world" is a great over-simplification.
China's manufacturing success has fuelled massive demand from consumers and businesses alike. China is now home to a substantial middle class ¡V close to the size of the population of the entire European Union, and still growing fast ¡V and these consumers want greater access to international products and brands of higher quality.
Equally, a new breed of entrepreneurial companies want to fast-track their business by upgrading their technology, financial, management and marketing skills.
Demand for products and services is sky rocketing. Imports grew by 20% in 2006. And external investment is pouring in. China is Asia's number one recipient of external investment; Hong Kong is number two.
With this level of development, it's understandable to think you may have missed the boat. This couldn't be further from the truth. Despite this rapid advancement, China is still ¡V relatively speaking ¡V in its economic infancy. The potential for Slovenian companies in taking part in this economic transformation remains considerable.
But, this scale of opportunity can seem daunting, especially for small businesses testing the water for the first time. They may be unfamiliar with the language, the culture and the way of doing business.
This is where Hong Kong steps in.
If I may, I would like to quote a passage from the Financial Times' magazine on Foreign Direct Investment. Every two years it names an "Asian City of the Future" from 60 contenders. Hong Kong ¡V against stiff competition ¡V has topped the last two surveys.
The author of the report called Hong Kong: "A member of the elite group of truly world-class cities on a par with London, New York and Paris."
He added: "Hong Kong continues to fend off pretenders to its Asian throne."
And concluded: "The unique advantage Hong Kong provides ... is not to be underestimated: come and get a piece of the China action, but from a safe, stable and familiar base camp."
So what do we mean by a safe, stable and familiar base camp?
Every year, the government surveys foreign companies on what they consider to be Hong Kong's key advantages.
The number one advantage should come as no surprise to a room full of business people.
Tax. And when I say 'tax', I mean 'low tax'! Our top band of salaries tax is 15%. And profits tax is capped at 16.5%. We have no sales tax or VAT; no dividends tax; no capital gains tax; no death duties; and no tax to the Central Government in Beijing. In Hong Kong, most of what you earn, you keep. Nor are we a tax haven as some might suggest. Just look at the extent of services rendered in our community. And the happy fiscal surpluses too. You will be surprised that it is actually not that difficult to achieve. Just keep the Government small. Leave more to the private sector. For us, we have been able to maintain our Government expenditure at an average of 17.2% of GDP for the past 10 years.
Another obvious advantage is our location. But it's about more than geography. It's about the dual role that Hong Kong plays: both as a major city in China; and as a global financial and business centre in Asia.
As a regional base, Hong Kong is second to none. Almost 4,000 foreign or Mainland Chinese companies have their regional offices or headquarters in our city.
Why? Quite simply because if you're going to be overseeing regional operations, while connecting with your head office in New York, London or... Ljubljana, you need the city with the best and most reliable technology, communications, transport infrastructure and, of course, people.
Let me give you some examples.
Major retailers today tend to source from multiple manufacturers. Hong Kong is a major buying centre for many of the world's international retailers. They base themselves in Hong Kong because they can manage buying operations across multiple regions ¡V Vietnam, Indonesia, Thailand and, of course, China.
On the business services side you need only look to the world's top international banks: Citibank, Morgan Stanley, Goldman Sachs and our very own HSBC. While they all have a strong presence across Asia, including Mainland China, Hong Kong is where they have their Asia headquarters.
Closer to home, Hong Kong is ideally placed next to China's most successful economic region ¡V the Pearl River Delta. This is the most prosperous part of China, and dominates much of the world's production of electronics, jewellery, watches and clocks, household items and toys. The success of this region has been driven by investment from Hong Kong.
But Hong Kong's economic integration with Mainland China goes much deeper. China is Hong Kong's largest trading partner ¡V and Hong Kong is the largest source of external investment across China ¡V in all of its major cities.
Another simple, yet important, reason why Hong Kong attracts so many international companies is... that it works! It really is impossible to overstate the value of systems that work: legal, financial, technological and infrastructure.
Let me add one more advantage under this 'ease of business' theme. Hong Kong offers a completely level playing field. We have no foreign ownership restrictions, no minimum investment, no capital controls. Every company that comes to Hong Kong is afforded the exact same treatment.
The third reason foreign companies love Hong Kong is the quality of our workforce. Hong Kong has excellent home-grown talent ¡V as well as international talent. Many people are not only bilingual, but trilingual. They are motivated and flexible. Industrial disputes are extremely rare, and I have problems persuading some of my staff to go home in the evening, such is their dedication to the job!
In the financial, business and professional services, Hong Kong offers Asia's highest concentration of bankers, fund managers, accountants and trade service professionals.
Most importantly for a Slovenian company, much of our workforce is experienced in both international and Asian business practices. These people have the expertise, networks and contacts to give you a head start in the region.
What I must also mention is that, despite our relatively small size, Hong Kong offers tremendous opportunities within our own boundaries.
Our pivotal role in supporting development in the Mainland of China is fuelling tremendous growth in our financial, business, professional and management services.
Mainland companies looking out, and foreign companies looking in, rely on Hong Kong for a range of services, including, for example,
* raising capital, and you may not be aware that Hong Kong¡¦s stock market is the bourse of choice for Mainland companies raising international capital;
* drawing up ¡V and enforcing ¡V contracts; and
* upgrading business skills from corporate governance and human resources to marketing and sales, retailing, and supply chain management.
Another booming sector is tourism and leisure. In 2007, we welcomed a record 28 million visitors. Foreign retailers, restaurants and hotels ¡V and all the services that support the tourism sector ¡V are coming to Hong Kong to capture a slice of this lucrative market.
As well as shopping and dining, both of which are major Hong Kong pastimes for locals, tourists and government ministers alike... Hong Kong has a hugely successful exhibitions and trade fair industry. Hong Kong hosts many of Asia's leading fairs. In July alone, Hong Kong is hosting fairs for gifts, houseware, toys and fashion. It's an excellent opportunity to see a huge range of products and services under one roof and, most importantly, to network with key players in the region.
Ladies and gentlemen, whatever your business model ¡V be it manufacturing, sourcing, retail or business services ¡V if you¡¦re looking to lower costs, to source new products, or to find new customers ¡V I suggest that you come see what Hong Kong has to offer.
For thousands of international companies ¡V large and small ¡V Hong Kong is an integral part of their China and Asia strategy.
Smaller companies ¡V with little appetite or budget for risk ¡V can feel secure in Hong Kong's familiar and transparent business environment. They can start to develop the contacts and know-how so essential for success in China.
At the other end of the spectrum, for multinational corporations, Hong Kong is a clear leader in Asia as an international financial and professional services centre. In terms of project financing, corporate governance and the free flow of information, our city has few rivals.
I want to add one more thing before I close. During my brief visit I've had the good fortune to enjoy some of your exceptional wines. What I didn't know was that Slovenia's wine-growing heritage is much longer than that of its neighbours, France, Italy and Germany.
The popularity of wine in Asia is skyrocketing. And more and more people are drinking whites in a region previously committed to heavy reds. I suspect one of my most popular decisions as Financial Secretary so far was to remove completely the tax on importing wine. I felt this was an important move to bolster Hong Kong's growing role as a wine distribution hub in Asia.
Hong Kong has had too little of your delicious vintages ¡V I hope this will change in the months and years ahead.
There is only so much I can say from behind this podium. Like the many thousands of business people who visit Hong Kong every year, I'm a firm believer that coming to Hong Kong is the best way to feel the energy of our city. And like many before you, including some of my colleagues here, may never want to leave.
Thank you very much.
Ends/Monday, May 26, 2008
Issued at HKT 20:52
NNNN
