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Following is the speech by the Financial Secretary, Mr John C Tsang, at the Hong Kong Business Seminar luncheon "Hong Kong: Your Regional Partner for Success" in Hanoi, Vietnam today (December 16, Vietnam time):
Distinguished Guests, Friends, Ladies and Gentlemen,
Good afternoon.
It is a great pleasure for me and my delegation to be here in Hanoi enjoying the wonderful Vietnamese hospitality. Thank you for the warm welcome you have extended to us.
It is always a delight to visit Vietnam, for business or for pleasure. It is especially so on this occasion when we have some good news to share.
As well as leading a business delegation to explore potential investments here in Vietnam, I have also the privilege of signing a Comprehensive Double Taxation Agreement between Vietnam and Hong Kong this morning.
And when I fly back to Hong Kong tomorrow, I will be taking advantage of a new flight connection between our two cities.
I will talk more about these positive developments a little later and how they link in with today's theme: "Hong Kong: Your Regional Partner for Success".
First though, I would like to thank the Hong Kong Trade Development Council (TDC) for organising this luncheon as well as the Hong Kong Business Seminar this morning.
Trade links between Hong Kong and Vietnam go back a long way. The TDC established an office in Ho Chi Minh City in 1997. We are grateful for the TDC's work in deepening the relationship between our two business communities, and I am pleased to see so many business leaders here today.
Of course, 1997 was also the year of Hong Kong's reunification with the Mainland of China. Since then, we have been able to maintain political, social and economic stability. The "One Country, Two Systems" concept is working well and has helped to ensure a smooth transition. Hong Kong people continue to run Hong Kong with the promised high degree of autonomy.
Hong Kong has retained all the characteristics that have contributed to our city's development over the years. These include the common law legal system, which is underpinned by an independent judiciary. We have our own freely convertible currency, which has been pegged to the US dollar since 1983. We have a clean and efficient civil service and a liberal immigration regime.
Our economy has been consistently ranked as the freest in the world for over a decade and it continues to thrive on open trade, free market and a free flow of information, ideas and talents. Our business-friendly approach is built on a commitment to maintain a low and simple tax system. Salaries tax is capped at 15% and corporate tax is 16.5%. There is no VAT, no GST, no capital gains tax and no death duties.
This winning formula has attracted more than 6,600 Mainland and overseas companies, including Vietnamese enterprises, to set up offices in Hong Kong. More than half of them run their regional operations out of our city.
Vietnam is also an attractive destination for Hong Kong entrepreneurs, especially in the retail, property and telecom sectors. Vietnam's retail investment market was ranked No 1 in this year's A T Kearney Global Retail Development Index report. Vietnam's robust economic growth driven by a young and highly-skilled labour force makes the country an excellent business partner.
In Hong Kong, rapid economic development has inspired us to devise new and creative ways to enhance the management of properties, hotels and hospitals. We have also upgraded our infrastructure, logistics and port systems and technology. This is a valuable resource that can be tapped for use in Vietnam.
Last year, Hong Kong was the seventh largest contributor to Vietnam's Foreign Direct Investment and Vietnam was our 20th largest export market. I am confident our bilateral relations will continue to flourish.
As I mentioned earlier we signed today a Comprehensive Double Taxation Agreement, marking a new landmark in bilateral co-operation.
The agreement translates into tax savings for investors from both sides doing business in each other's area. It will also provide investors with more certainty on tax relief and encourage more two-way trade and investment activities.
The other piece of good news I touched on earlier, relates to travel convenience. In October, Dragonair launched a new daily passenger service to Hanoi, its first scheduled flights between the two cities.
Dragonair is based in Hong Kong and operates more than 400 flights a week to the Mainland of China in addition to destinations throughout the Asia Pacific. Our international airport is the world's busiest for air cargo and one of the busiest for passenger traffic in the world with flights to more than 150 destinations worldwide.
I encourage Vietnam's entrepreneurs to make the most of this opportunity to expand their business operations conveniently and efficiently to Hong Kong and through Hong Kong, to the Mainland and to the rest of the world.
Last year, our bilateral trade was worth more than US$3 billion. And in the first nine months of this year, there was a 25% increase in trade between us compared with the same period last year.
Also in 2007, more than 11% of trade between Vietnam and the Mainland of China was routed through Hong Kong, worth about US$1.7 billion.
Hong Kong remains the only place with a free trade pact with the Mainland, what we call the Closer Economic Partnership Arrangement, or CEPA.
Vietnamese companies incorporated in Hong Kong can take full advantage of CEPA in opening up new opportunities in trade, services and investment in the Mainland.
From January 1 next year, another two service areas will be added to CEPA bringing the total number of areas covered to 40. These include important sectors, such as financial services, trade, logistics, convention and exhibition, tourism and professional services.
Under CEPA, Hong Kong firms receive preferential treatment in doing business across the boundary. And because the Arrangement is nationality-neutral, overseas firms, including Vietnamese companies incorporated in Hong Kong, can enjoy the same benefits as local firms.
My next point is about the global financial crisis, and what we are doing to ride out the storm. Asia is feeling the full force of the crisis and Hong Kong is no exception. We expect full year GDP growth to come in at between 3 and 3.5% this year. This is significantly lower than the 6.3% growth last year.
As the financial crisis spread from the US to Europe and on to Asia, we remained vigilant to the dangers. We have taken a series of precautionary and temporary measures to lessen the impact of the turmoil and ensure the stability and smooth operation of our financial markets.
In the past three months, we have injected about US$ 10 billion into the market to restore investor confidence.
We have guaranteed all deposits held in banks in Hong Kong until at least the end of 2010, and we have established a Contingent Bank Capital Facility to make available additional capital to banks should they require it.
I am pleased to tell you that our financial services sector remains in pretty good shape.
Since the Asian financial crisis a decade ago, we have taken steps to shore up our financial markets through a more effective and transparent regulatory system and improved the risk management of our banks. This has helped to provide a solid platform from which to weather the current financial storm.
In the past decade, Hong Kong has continued to establish itself as an international financial centre on a par with London and New York. Our location in the Asian time-zone means that we have an important role to play in the 24-hour global trading day.
Our stock market is the seventh largest in the world and the third largest in Asia with market capitalisation of about US$1.2 trillion at end-October this year. We welcome Vietnamese companies to list on the Hong Kong stock market through depository receipts.
In terms of equity funds raised so far this year, Hong Kong ranks second in Asia and fifth in the world with almost US$8.5 billion raised by the end of October. We are one of the largest asset management centers in Asia, and we have the highest concentration of insurers in the region.
As China's only international financial centre, we have an important role to play in facilitating inflows and outflows of investment capital between the Mainland and the rest of the world.
Since 2004, we have been expanding the scope of Renminbi banking services in Hong Kong, and last year we became the only place outside the Mainland to have a Renminbi bond market. About 450 Mainland companies are listed on our stock exchange and they account for more than half of the total market capitalisation.
Ladies and Gentlemen, we will continue to focus all our efforts on maintaining financial stability and reinforcing Hong Kong's reputation as a great place to do business in Asia.
I also hope that more direct flights between us will encourage Vietnamese tourists to come to Hong Kong and enjoy the vibrant multi-cultural flavour of our city.
As well as some great shopping, dining and entertainment areas, we also have some spectacular walking trails in the country parks, which cover more than 40% of Hong Kong.
We also have theme parks for the young, and the young at heart, or you can play a round of golf or choose from the many cultural events that fill our "what's on" calendar each year. There is always something going on, and you can be sure of a warm welcome, great cuisine and efficient service.
I hope you will be able to come and visit us soon whether on holiday or business, or to take part in some of the more than 300 trade fairs in Hong Kong each year.
That way you will be able to see for yourselves why we like to call Hong Kong, Asia's world city.
Thank you.
Ends/Tuesday, December 16, 2008
Issued at HKT 14:57
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