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Following is a speech by the Secretary for Commerce and Economic Development, Mrs Rita Lau, at the Hong Kong-Guangdong Business Conference in Madrid, Spain, today (October 28, Madrid time):
Minister Sebastiˆhn, Ambassador Qiu, Governor Huang, Mr Fernandez, distinguished guests, ladies and gentleman,
Buenos dias.
It is a great pleasure to participate in the Hong Kong-Guangdong Business Conference today. This event is an excellent demonstration of the growing and mutually beneficial co-operation within our region and the opportunities it presents for Spanish and other international companies.
Madrid is one of the most beautiful cities in the world. Your city celebrates its rich heritage, preserving the look and feel of your historic neighbourhoods and buildings surrounded by expansive green spaces and parkland. Of course, Madrid is also well-known to Hong Kong people because of her most famous soccer team, Real Madrid.
Real Madrid came to Hong Kong in early August 2003, just as we were beginning to recover from the devastating effects of SARS, as well as the Asian financial crisis. The incredible skill and charisma of the team attracted over 100,000 Hong Kongers to various events and brought positive media coverage around the world.
This very timely visit lifted our spirits just when we needed it most and helped spread the message globally that Hong Kong was back in business. We will always be grateful.
We are now experiencing another time when our spirits, not to mention our portfolios, need some lifting. The global economic turmoil has affected all of us. Spain ¡V like Hong Kong, Guangdong and the whole of China ¡V retains strong fundamentals and sound financial policies and management ¡V which have been tested and fortified by earlier crises.
I assure you the attributes that have made our city the preferred location for international businesses serving the Asia Pacific region have not changed and have even been enhanced. The continued interest in Hong Kong by international investors, which I will discuss a bit later in more detail, confirms that we retain the many attractions that make us a business and financial hub and preferred location for multinational companies to establish regional headquarters.
Indeed, many of Hong Kong's advantages have been highlighted by the way we have dealt with the current and previous financial crises. I am confident that the people of Hong Kong have the skill, can-do spirit and ingenuity to meet the challenges to emerge stronger than ever.
Today, I will talk about these and other fundamental strengths of Hong Kong. We are attuned to the needs of the marketplace. It is where East meets West. And we are on the doorstep of the fastest growing large economy in the 21st century, the Mainland of China.
You have just heard from Governor Huang Huahua about the remarkable and exciting developments in Guangdong Province.
Now, I would like to tell you the Hong Kong story, which is very much interrelated with Guangdong's and the rest of China. Both of us ¡V individually and together ¡V have developed and expanded vibrant economies that offer attractive opportunities to companies like yours.
My visit to Madrid comes at a time when we are recognising an important anniversary. Thirty years ago, Deng Xiaoping initiated the "opening up" policy that led to rapid economic development and a dramatic rise in living standards for our country.
Then, China was a poor, underperforming economy; today, it is the third largest economy in the world.
During the same time span, Hong Kong has changed dramatically as well. To keep up in a highly competitive region and world, we have had to reinvent ourselves in many ways.
In 1978 we were a manufacturing base, accounting for 25% or more of our economy. We produced fine products in the cheapest possible way and we marketed ourselves as such.
But we changed with the times and the competition. Ours is now very much a service-based economy ¡V accounting for some 90% of GDP ¡V and we are rapidly moving towards a knowledge-based economy. The transformation is a response to global trends and is necessary if we are to achieve our vision to be Asia's world city.
Specifically, we market Hong Kong around the world as Asia's finest service centre, and as the undisputed regional hub for Spanish and other international companies wishing to do business in Asia. Increasingly, we also sell Hong Kong to Mainland companies encouraging them to use us as a springboard for the rest of the region and indeed the world.
As a result, Hong Kong, as well as Guangdong and the rest of the Mainland of China, are still attracting substantial investment, and more business than ever before. Companies from Spain and elsewhere in Europe are looking at our region as a promising opportunity for the future development of their businesses in the midst of economic uncertainty.
Some 3,900 other overseas and Mainland companies have chosen Hong Kong as their regional headquarters or office. It's a number that has risen by over 50% in the past decade, and which makes us the most popular city in Asia for foreign companies.
At the same time, more companies have opted to base global operations and executives with global responsibilities in Hong Kong. The world headquarters of two of Philips' businesses are based in Hong Kong, while earlier this year, DuPont announced it would locate one of its new global businesses in our Science Park.
Inward foreign direct investment (FDI) rose to a shade under US$60 billion in 2007, the second highest in Asia Pacific and seventh in the world, according to the UN Conference on Trade and Development¡¦s annual World Investment Report. For the first half of 2008, another US$34.4 billion in FDI has come into Hong Kong, some 27% more than the same period in 2007.
And the Mainland of China has already brought in US$74 billion for the first nine months of this year ¡V a 40% jump from last year.
These numbers underscore Hong Kong's strong appeal to a growing number of international companies as a platform to reach Guangdong and the rest of the Mainland, as well as the Asia-Pacific region.
Invest Hong Kong ¡V the government department responsible for attracting and assisting companies from around the world to establish or expand operations in our city ¡V is bringing in new investments at a rate of one new completed project every working day.
The well-known Spanish brand Zara was one of those investments in 2004, when the first Zara shop opened in our city's IFC Mall. Now, there are six shops throughout Hong Kong.
In fact, the Spanish community has long played an important role in Hong Kong's economic development and has contributed substantially to our growth and success.
Zara is one of the 100-plus Spanish businesses in Hong Kong which form a vibrant and diverse group. Many of them are active in the industrial, telecommunications, logistics, infrastructure and financial services sectors - such as Banco Popular Espa?ol and Banco Santander.
Spanish SMEs also flourish, especially those in purchasing, consultancy, and the food and beverage sectors.
For Spanish businesses, Hong Kong is a natural base for managing many of their regional operations and activities. For SMEs, setting up in Hong Kong is often the first step outside Spain, which is then followed by a gradual regional expansion. Given our geographic advantage and highly developed infrastructure, Hong Kong is also the ideal hub for Spanish companies to move into Guangdong, the rest of China and elsewhere in Asia.
In addition, there are increasing cultural and academic links between Spain and Hong Kong. Spanish artists, musicians, dance teachers and other ensembles are regular participants in many of Hong Kong¡¦s cultural festivals, in addition to giving performances or classes throughout the year. The Consulate General of Spain and the Spanish Chamber of Commerce have been active organisers of a range of events for several years.
My friends, our close ties have enriched both of our societies and contributed substantially to our economic development and competitiveness. We recognise the importance of your companies¡¦ vital role in bringing in new ideas, services and technologies into Hong Kong to strengthen the overall competitiveness of our economy.
It's not because we offer extensive tax, land or financial incentives like some other governments in Asia and globally. We do not need to offer special deals because our whole tax system is an incentive: our taxes are low and the system is simple and predictable.
The rates became even lower earlier this year. And the duty on wine and beer dropped rather dramatically ¡V to zero. This attracted many wine producing countries around the world to look for co-operating opportunities with us. In this regard, Minister Sebastiˆhn and I have signed a Memorandum of Understanding this afternoon to jointly promote Spanish wine in Hong Kong. So next time you stay in Hong Kong, try a few bottles of Rioja or Ribera Del Duero in one of our world famous restaurants as the highlight of your stay.
It is our firm belief that the best incentive is the quality and strong fundamentals of our business environment and the future potential in Hong Kong and our region.
Our city has benefited tremendously from a much closer relationship with our sovereign, China. At the same time, we have not lost any of the characteristics that set us apart in Asia.
Our transparent common law legal system and impartial judiciary; low level of corruption, state-of-the-art infrastructure; free flow of information; and a dynamic and cosmopolitan workforce distinguish us from our neighbours and will remain appealing to investors in Hong Kong.
We also have a "clustering" of professional services. Hong Kong has over 400 financial institutions and banks, probably more than any other place in the region except Japan. It is not just banks; there are lawyers, accountants and all other support services you need to manage your business in the region.
Another advantage is in our hardware. Our efficient roads, railways, telecommunications network, airport and port are world-class.
And we are located within four hours by air of almost all Asia's major cities and are part of the fastest growing major economy in the world.
All of these factors are important to Hong Kong as an international financial and business centre.
But I should also mention one more big plus: Spanish and other foreign investors bringing their families with them feel comfortable in Hong Kong. Our city is safe and offers a year-round feast of exciting social, cultural and recreational activities. And you may choose from among over 50 international schools for your children.
Hong Kong is blessed because of where we are. We are in the heart of Asia, which makes us the natural hub for doing business in Asia as a whole ¡V and at the heart of the Pearl River Delta (PRD), the most economically dynamic region in China.
The interaction of Hong Kong and Guangdong Province, particularly in the PRD, has contributed greatly to prosperity on both sides of the boundary. This combination has resulted in the PRD developing into one of the world's leading manufacturing centres ¡V with its clusters of industries and services reinforced by a continuous stream of start-ups and numerous small and medium enterprises. Each day, over US$300 million worth of goods are produced by thousands of factories in this region.
During the past quarter century, Hong Kong and Guangdong Province have combined and leveraged our respective strengths to develop one of the world's most efficient and cost-effective manufacturing supply chains.
Hong Kong provides the capital, management, technology, market knowledge and access to international markets while PRD cities offer world-class low-cost manufacturing, and access to a new, demanding consumer base.
Hong Kong's pivotal role as a China gateway is now more pronounced than ever. The booming manufacturing region of Guangdong Province, where some 12 million people are employed by Hong Kong companies or joint ventures, is a short train journey or a trip by high-speed ferry away. Scores of flights depart daily from our award-winning international airport to Guangzhou, Shanghai, Beijing and other major Chinese cities - all of which can, if necessary, be covered in just one day, there and back.
And there's more good news. Spanish and other international companies in Hong Kong are benefiting from the Closer Economic Partnership Arrangement (CEPA), essentially a free trade pact between two autonomous trading partners within the same nation, which came into effect on January 1, 2004. It represents one of the most significant steps we have taken to increase and enhance economic flows between Hong Kong and the Mainland.
CEPA covers three areas: trade in goods, trade in services and trade and investment facilitation. It is WTO compliant but many benefits go beyond WTO commitments and are not being offered to other economies at this stage. Importantly, these benefits are available to people and businesses of ALL nationalities.
All goods of Hong Kong origin, except for prohibited articles, qualify for zero tariff when entering the Mainland of China. CEPA also gives qualified companies based in Hong Kong greater access to the Mainland in 38 services sectors, including banking, distribution, professional services, IT, transportation and logistics and telecommunications ¡V areas in which many Spanish companies excel. It also significantly improves trade and investment facilitation across the boundary.
This is a dynamic arrangement, with extended benefits agreed and implemented every year.
And it works. Around 25% of the companies assisted by Invest Hong Kong, our investment promotion agency, say that CEPA was either the main reason or one of the factors in their decision to invest or expand in Hong Kong.
In short, by investing in Hong Kong to export goods to the Mainland, you save money; for services, more markets are open to you and many entry barriers are lower or eliminated. By partnering with Hong Kong businesses and drawing on their decades of experience in the Mainland, Spanish companies can gain a fast track into our burgeoning market.
At the same time, we are working more closely with our colleagues in Guangdong and the other provinces in the southern part of China to ensure greater co-operation and growth that will lead to more business opportunities for your companies. The Pan-Pearl River Delta (Pan-PRD) Regional Co-operation and Development Forum began in 2004. This initiative encompasses China¡¦s nine southern provinces as well as the Special Administrative Regions of Hong Kong and Macao. It is a high priority for our Government as we work towards a unified and open market in this region.
Making up one-fifth of China's land mass, the Pan-PRD has grown exponentially over the past few years. It has a combined population of 450 million ¡V which is as big as the EU ¡V and GDP of US$835 billion ¡V which is over 40% of China¡¦s total output and larger than most of the world¡¦s economies.
I am confident that co-operation between Hong Kong and the Mainland, particularly Guangdong and the rest of South China, will develop even more rapidly with the expanded CEPA and the easing of restrictions on the movement of people, goods and services. Such reforms will facilitate additional business flows within Guangdong and with other parts of the Mainland ¡V especially in service industries and high value-added manufacturing sectors ¡V and accelerate the integration of both economies.
Our co-operation is not limited to economic affairs and trade. It also encompasses areas of education, environmental protection and infrastructure, as well as culture and sports. It is through this type of collaboration that we can achieve an overall enhancement of the people's quality of life, facilitate free flow of people and goods, resolve environmental issues and promote cultural exchanges.
Ladies and gentlemen, Hong Kong is a world leading business centre providing the best and lowest-risk access to the world¡¦s leading market. Our city's advantages are not easily replicated by other cities in the region. We have to continue to build on these competitive advantages. We are confident that our role as an international financial centre, as a centre for logistics, for transport, for trade, for the clustering of international companies, and for tourism, is unique and remains as strong as ever.
At the same time, Hong Kong is not isolated from the challenging global economic environment. We will have to work even harder to reinforce Hong Kong's advantages, including our sturdy and reliable financial system, to attract and retain investors from all over the world.
We hope that many more firms from Madrid and other parts of this country ¡V including small and medium-sized companies ¡V will want to be close to the action. They will join the thousands of international companies involved in the China trade that have established "beachheads" in Hong Kong.
We would be pleased to assist you with realising your business objectives. Hong Kong has the institutions, system, regulatory environment and people ¡V such as our European Economic and Trade Office, Invest Hong Kong and the Hong Kong Trade Development Council ¡V who are ready to provide you with what you need when you need it.
Thank you again for joining us this morning and making me feel so much at home. I look forward to welcoming you ¡V or welcoming you back ¡V to my home Hong Kong in the very near future.
Ends/Tuesday, October 28, 2008
Issued at HKT 19:43
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