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Following is the speech by the Financial Secretary, Mr John C Tsang, at the Asia Society in Melbourne, Australia, today (August 5):
Sir Rod (Eddington), distinguished guests, ladies and gentlemen,
Good evening.
It is a great pleasure for me to join you for dinner tonight, and enjoy the world-famous Australian hospitality.
Indeed, this is a timely get-together. In just three days, my nation's capital will host the Beijing Olympics and join Melbourne, as well as Sydney, in the elite club of Olympic cities.
As you may know, Hong Kong will be a co-host city for the 2008 Games as the venue for the Olympic and Paralympic Equestrian Events. Our Olympic hour has almost arrived, and we are looking forward to playing a high profile role in helping to make the Beijing Games a wonderful and memorable Olympics.
The Olympics aside, Hong Kong and Melbourne have many other things in common. Continuing with the equestrian theme, both our cities are famous for some of the world's best horse racing. In addition, we are both major business and financial centres and we have thriving multicultural societies. Melbourne has the oldest Chinatown in Australia, and your Mayor John So and Councillor Catherine Ng have been residents of Hong Kong.
It is no surprise that so many Hong Kongers come here to work and to study in your world-class universities. At the same time, some 55,000 Australians have made Hong Kong their second home and they contribute significantly to our community.
They enjoy the vibrancy of Hong Kong and they take full advantage of the opportunities our city has to offer as an international centre for business and finance in the dynamic heart of East Asia.
My talk today will focus on some of the things my Government is doing to facilitate new possibilities for the business community in Hong Kong, such as developing our physical and financial infrastructure. I will also touch on some of the challenges we are facing in these uncertain economic times.
I look forward to taking the discussion further during the roundtable session a little later.
Despite the worldwide economic slowdown, Hong Kong's economy remains in fairly good shape. Our GDP grew 7.1% in the first quarter of this year. That is on the back of 6.4% GDP growth for the whole of last year. We expect full year economic growth this year to come in at between 4 and 5%.
Our stock market remains strong. It is the third largest bourse in Asia and eighth largest in the world by market capitalisation. At end-June market cap was more than US$2.1 trillion.
In terms of equity funds raised in 2007, Hong Kong was ranked second in Asia and fifth globally with total funds raised at around US$9 billion.
I welcome the announcement last month by the Australian Securities and Investments Commission (ASIC) and the Hong Kong Securities and Futures Commission (SFC) of a mutual recognition agreement.
Australia and Hong Kong are two of the region's largest markets for mutual funds. The agreement will strengthen Australia's capability for managing Asian funds. It will also give Australian managed investment schemes greater access to Hong Kong's market and to the market in Mainland China.
This is the first such agreement signed by our SFC and will reinforce our status as an international financial centre.
Another exciting opportunity for us is Islamic finance. This sector is estimated to be worth up to US$1 trillion and expected to grow by 15% annually. A strong and transparent regulatory regime and large pool of financial expertise are just two factors that make Hong Kong a good platform for sharia-compliant products.
In May, the Hong Kong Monetary Authority signed a Memorandum of Understanding with the Dubai International Financial Centre Authority to promote co-operation in developing sharia-compliant products in our two jurisdictions.
The first Islamic fund in Hong Kong has raised some US$65 million since its launch last November, mostly from local retail investors. The Hong Kong Airport Authority is set to launch the city's first Islamic bond, or sukuk, in the near future.
In another development, the Hong Kong Mercantile Exchange was established in June and plans to launch oil contracts early next year.
The Exchange will help to give China, one of the world's largest oil consumers, more influence over the pricing of oil and allow Asian importers to hedge their oil price risks in a fair and transparent manner in the Asian time zone.
Prices are currently set in Dubai and do not reflect the conditions in Asia. The establishment of an oil futures platform to meet the growing needs of the Mainland as well as multinational traders would be a significant step forward in the development of Hong Kong's commodities market.
I will turn now to physical infrastructure development.
This is crucial to our sustainability as a fast, efficient and cost-effective platform for trade between the Mainland and overseas markets.
We estimate infrastructure spending of some $22 billion, or some AUS$3 billion, this fiscal year alone. We have earmarked 10 major projects that will promote long-term economic growth. These projects are in various stages of development.
Allow me to highlight just a few of them.
The biggest and most ambitious project is a massive 29 kilometre-long bridge connecting Hong Kong with Macao and Zhuhai in the western part of the Pearl River Delta, a dynamic manufacturing hub in the region.
When completed, the bridge will cut travelling time between Hong Kong and Zhuhai from three hours by sea to about 45 minutes by car. A major hurdle was cleared in the planning phase earlier this year when financial arrangements between the three Governments involved in building and operating the bridge were finalised.
Another cross-boundary project is a proposed rail link between Hong Kong International Airport and Shenzhen Airport to connect more efficiently with markets in the Mainland of China. This will strengthen the synergy between our two airports connecting a strong international network of destinations with a strong domestic network of destinations on the Mainland.
We are also pressing ahead with the Guangzhou-Shenzhen-Hong Kong Express Rail Link. This will tie in with the national high-speed rail network, and connect Hong Kong to major cities on the Mainland.
An exciting project that is making progress within Hong Kong is the development of a cultural hub spanning some 40 hectares along the Kowloon waterfront. We call it the West Kowloon Cultural District. This will be an integrated arts and cultural district with a mix of world-class facilities including performing arts venues and museums as well as commercial ventures.
Last month, our Legislative Council approved an upfront endowment of $21.6 billion (AUS$2.8 billion), to fund the development. Legislators also gave the green light to the setting up of the West Kowloon Cultural District Authority, which will take the project forward.
No doubt, we will be looking to the international community, including Melbourne's experience in promoting the arts and cultural activities, as the West Kowloon Cultural District begins to take shape.
These are just some of the long-term projects that will enhance Hong Kong's status as Asia's world city.
Turning now to an issue that has been focusing minds, not only in Hong Kong but also around the world including here in Australia. The issue is inflation.
According to the latest figures, consumer prices in Hong Kong rose 6.1% in June over a year earlier. That is our highest inflation jump in more than a decade.
As with most other places, the prices of food and fuel saw some of the biggest increases in Hong Kong. Food prices are an area of particular concern. Recent flooding in Guangdong province, which affected the supply of certain products, compounded the problem.
Last month, our Chief Executive announced a series of additional measures to tackle inflationary pressure, on top of the many initiatives contained in my Budget in February this year.
These include giving two extra months' payment of Old Age Allowance and an additional month¡¦s payment for people claiming welfare through our Comprehensive Social Security Assistance scheme.
There was also a one-off subsidy of $1,000 for students who need financial assistance with their studies.
Government fees and charges related to livelihood will be frozen for a year. And there is a doubling of the HK$1,800 (AUS$240) electricity subsidy for each household.
The total package is worth some $11 billion, or almost AUS$1.4 billion. The relief measures are mostly one-off payments so they will not contribute to inflationary pressures.
The Hong Kong dollar's peg to the US dollar means we have to be a little more creative with our strategy to fight inflation. However, this link to the greenback has served us well in the past quarter of a century, and will continue to do so. There are no plans whatsoever to change the status quo.
I will end my talk on a more palatable topic, wine. More specifically, on what we are doing to establish Hong Kong as a fine wine trading and distribution centre in Asia.
In my Budget in February, I reduced duties on wine and beer to zero. As you can imagine, that made me a popular guy, at least for a while. More importantly, the decision was about seizing an opportunity to promote Hong Kong as a focal point for the wine industry in Asia.
We already have the infrastructure, the financial platform and business connections to sell, distribute and promote wine throughout the region and in particular throughout China.
What we don't do is produce wine, which is where Australia comes in.
Last year, AUS$8.88 million worth of wine from Victoria was exported to Hong Kong. Not only is that a healthy figure, it is also a lucky number given that the sound for number "eight" is harmonising with good fortune. It is no coincidence that the Beijing Olympics are scheduled to open at eight minutes past eight on the eighth day of the eighth month in the year 2008.
Perhaps this is a good omen for wine trading between our two places. Australian wines are already popular in Hong Kong and across Asia and are known for their high quality and good value for money.
The wine industry in Victoria is a great Australian success story. Many Victoria wineries - and its famous regions such as the Yarra Valley, Rutherglen, Pyrenees and the Grampians - are already well known in Hong Kong and have a strong brand identity.
With zero duties on wine, Hong Kong is an ideal springboard for the Australian wine industry to tap the China market as well as the wider Asia market.
According to a Hong Kong Trade Development Council consultancy report, the industry predicts total consumption value of wine in Asia - excluding Japan - to double to US$17 billion (AUS$17.8 billion) by 2012 and increase further to US$27 billion (AUS$28 billion) by 2017. This represents a huge opportunity for Australian wines.
Since eliminating duties, Hong Kong has also attracted some high-profile wine auctions. A sale by Bonhams in April was the first such auction in Hong Kong in a decade. It was soon followed by an auction by Acker Merrall & Condit, which fetched a total of $64 million, or almost AUS$8.5 million - a record for Asia.
Building on this momentum, our Trade Development Council will be staging the first Hong Kong International Wine Fair next week, in parallel with the Olympic Equestrian Events.
August promises to be a busy and productive month for Hong Kong. I hope you will be able to join us to celebrate the Olympic spirit. If you can't make it during the Olympics, come when you can and sample some of the business opportunities in our neck of the woods.
Most of all, I thank the Asia Society for its continued support of Hong Kong.
Thank you.
Ends/Tuesday, August 5, 2008
Issued at HKT 19:03
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