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Following is the speech by the Financial Secretary, Mr John C Tsang, at the M.I.T. Dinner today (July 18):
Good evening.
Julian, Distinguished Nerds, Techies, Tools, Co-eds, Casino Wreckers, Martial Arts Story-tellers, Budding Nobel Laureates, Fans of Smoot, Fine Diners of the Twenty Chimneys, Travellers of the Infinite Corridor, Friends and Lovers of All things M.I.T., including Alumni, and if you don't fit in any of those categories, Ladies and Gentlemen,
Thank you so much for having me here tonight. What an honor. I must admit when I was asked to speak to this alumni gathering, I felt a bit odd because I know you all so well. What would I say that you have not already heard? What would I say to a group of individuals who are, should we say, slightly above normal intelligence, well-read and experts in a wide array of interests? I really don't know for sure.
But then I must admit M.I.T. is very special to me. I have many happy memories of my time there as an impressionable young man, memories that I cherish. And, of course, you guys are very special friends too. I have had more lunches than I can count with some of you over the years. And, of course, all those functions we attended together.
So I am delighted with your offer to have me speak here tonight. Let's make it an occasion to mark not only the best AGM of the Hong Kong M.I.T. Alumni Club, but also the end of the first year of my term as Financial Secretary.
Yes, believe it or not, I have just completed my first year as Financial Secretary. Maybe I should say I have just survived my first year as Financial Secretary! You know what people say about one week being a very long time in politics. Well, what about 52 weeks as Financial Secretary!
Actually, I am just kidding. I have loved every minute of these 52 weeks. Not only is it a great honour and an even greater privilege for me, it has been the most rewarding way for me to serve the Hong Kong community.
In recent weeks, I have given quite a bit of thought to everything that I have done in the past year, and I have concluded that the highlight of my first year as Financial Secretary has to be, at least in my opinion, my first Budget in February.
Preparing and delivering my first Budget was extremely challenging, and time consuming, I must admit. But it was also an exhilarating experience. I was going to say it gave me a wonderful high, but thought, better not, in case some people took that too literally, and thought my heady feeling had something to do with the consequence of my having abolished wine and beer taxes!
But honestly, the decision to reduce wine and beer taxes to zero was a totally clear-headed one! I have already explained the rationale for that decision a number of times, and I will not bother you with the details tonight. But let me just say this: it had to do with creating jobs in the community, and not to make your favourite tipple a little more affordable.
Which is why I did not approach the task of preparing my Budget from the point of view of whether Hong Kong had a half full glass or a half empty glass! Rather, I looked at it as a pie, and it was a pretty good-sized pie, I must say. We had, the year before, a healthy surplus that was, and I'm not going to be modest here, the envy of my counterparts around the world. Even though inflation was becoming a worry, our economy looked rather healthy and growing steadily, and the outlook was rather promising. We could afford to be generous in returning the wealth to the people. The community deserves that.
The trick I faced was how do I slice up this pie - not pour out the bottle, let me remind you again - so that everyone got a satisfying piece and go home happy? How do I make it so that all Hong Kong people have their pie and eat it too? In other words, I asked myself, how does a Financial Secretary become a magician?
Actually, it does not require tricks to return wealth to the people. The wealth belongs rightfully to the people. I am only the guardian, and I have to manage that wealth on behalf of our community, in a manner that is pragmatic and sustainable and in a manner that demonstrates our commitment to society.
So we cut salaries and profits tax back to pre-SARS levels, we gave one-off tax reductions, raised allowances, gave one-off grants to the elderly, gave a month of rent to residents of public housing, gave electricity subsidies to every household, gave an extra month in allowance to social security recipients, put money into the retirement accounts of low income earners...etc. I won't list everything because it really does require a magic trick to sum up my Budget in a single sentence! It took 100 minutes in February.
But let me just say this: on the whole, I think the Budget was generally well-received, at least for about a couple of weeks. Then the high was gone. There I go using that word again! My popularity began to plummet after that. Denizens of this lovely mercantile community, in the usual Hong Kong manner, pocketed all the initiatives, ratcheted up their demands, then put on their Oliver Twist face and said: Please, can we have some more? I have Charles Dickens to thank for that!
Fair enough, but I still believe that we carved up that pie in a pretty generous way that pleased the community as a whole. We had our critics, of course. Some reasonable. Others, less so. I know you cannot please all the people all of the time, but reality is part of the governing process. And we accept that whole-heartedly.
Now, back to the bottle! Our decision to abolish wine and beer taxes was not without its critics, like some of the other decisions Hong Kong has taken in the past months to keep us ahead of the curve by identifying and capturing new opportunities. But like I said, criticism comes with the territory.
Wine trading, wine storage, wine distribution and wine auctions are big business. Convincing evidence shows abolishing duties can help make Hong Kong a wine hub that will create jobs and wealth. So why not give it a go?
And why not pursue the promising area of Islamic finance? This is a rapidly growing sector which has been estimated to be worth some US$1 trillion. I talked about carving out a pie earlier. Why not carve ourselves a piece of this profitable pie? This oil rich pie. Our globalised world means Hong Kong doesn't really have to be physically located in the Islamic world or be re-named something like "Hong Kong-rabia" to tap the benefits of this market.
Just like you do not have to be an oil producer to eye the prospects of an oil derivative market in Hong Kong, especially at a time when prices are booming. Soaring prices have made oil a buzzword these days. And the Mainland's phenomenal economic growth makes it a no-brainer to at least try and develop an oil futures market here. A Hong Kong-based oil futures market would enhance not only our own status as a commodities trading centre, but also hopefully, help the Mainland secure supplies at more competitive prices.
The creation of the Hong Kong Mercantile Exchange has just been announced. It will trade in fuel-oil contracts. We shall watch its progress with interest.
Hong Kong, with its open economy, level playing field, free press, independent judiciary and rule of law is a much envied Asian financial powerhouse. But having reached the top does not mean you are guaranteed a spot there forever, especially now, when we live in an increasingly challenging world.
The top is becoming a crowded place in this competitive global economy. Everybody wants to be there, but there is only so much space. Hong Kong can stay at the top only if we stay ahead of the curve, and to be always on the cutting edge of new ideas and innovation. That means we must always be on the lookout for new and suitable initiatives, always be unafraid to diversify our services.
A recent article in a local newspaper questioned the need for Hong Kong to explore the potentials of Islamic finance, the potentials of a new commodities market and the potentials of a wine hub. The author even suggested that I should, instead of dealing with these extraneous issues, spend my time properly and pay more attention to personnel matters. OK. Noted. But that's rather parochial, don't you think?
In a different article in the same local paper, another author suggested that it was wrong for me to pick winners by building platforms for these new products. It seems to imply that we would be better off continuing with what we have been doing, and let new initiatives grow organically. Sure. That's cool, but these things don't just spring from the ground. They need a proper environment and proper nourishment.
We do not in Hong Kong pick winners, but we do need to build platforms that are available to all concerned in order to facilitate the implementation of ideas put forth by the market. The market will do the rest, incentivizing investors to put up real money to pursue their visions. Not only is cash king, it cannot be wrong.
After all, Hong Kong is not exactly Somerville. We have never been afraid to try new things, to take reasonable risks. Our mindset has always been that if you do not succeed, you do not cry. You try again. That spirit is the trademark of our success.
Think about it. Eleven years ago, some wondered if we could hang on to that spirit. Well, the doubters have been proven wrong. It has been 11 years since Hong Kong's reunification with the Mainland, and here we are, resilient as ever. And let us not forget that.
So, what's next for us here in Hong Kong? The handover-related uncertainties are, thankfully, well and truly behind us. Not only has the passage of time proved the workability of "One Country, Two Systems", the concept has actually opened up new gateways that are beneficial to both us and the Mainland. Think CEPA and the easing of restrictions for the Mainland visitors here, just to mention two.
But uppermost in our minds for now is the worrying state of the global economy. We all know the landscape has changed quite a bit in the past four months since my Budget.
Factors such as the sub-prime crisis, falling stock prices, rising inflation, increasing food prices, and the eye-opening, near daily, jumps in oil prices have combined to create a near-perfect storm that is blowing away at confidence.
We all know there are few things we in Hong Kong can do to anchor ourselves. Many of the factors are external ones that are beyond our control. The Chief Executive has said that regardless of the external environment, we need to pay more attention to livelihood issues, especially when many families are having a hard time now. This is something we in Government fully intend to do. We will do all we can, and the Chief Executive has outlined an ambitious programme a couple of days ago to help those in need. As Financial Secretary, I will work with the relevant bureaus and departments to sort out the resources required to lend a helping hand. Our people are our business.
Ladies and Gentlemen, while we are mindful of the worrying times that we are in, Hong Kong's economic fundamentals remain strong, and the Mainland's growth engine continues to hum despite concerns in certain areas.
Hong Kong has ridden out many storms before and our history of resilience tells us we must not lose faith. We must not allow political gibberish to shake our confidence. We must keep our cool.
And for me to ride out the storm, I must now anchor myself back at my seat where I understand a delicious dinner awaits! All this talk of carving up pies and emptying bottles has tickled my appetite!
So let me just stop here. Thanks so much for listening, and have a great evening.
Ends/Friday, July 18, 2008
Issued at HKT 21:00
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