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Following is the speech by the Chief Executive, Mr Donald Tsang, at a luncheon with political and economic leaders from Japan Business Federation, Japan Chamber of Commerce & Industry, and Japan Association of Corporate Executives, organised by the Hong Kong Economic and Trade Office in Tokyo of the HKSAR Government, in Tokyo, Japan, today (February 17):
Distinguished Guests, Ladies and Gentlemen,
Konnichiwa (good afternoon).
It is a great pleasure to be back here in the wonderful city of Tokyo.
This is my first official trip to Japan as Hong Kong's Chief Executive, although I have been a frequent visitor over the years.
Japan never fails to delight and surprise me. I am - as always - grateful for your exceptional hospitality.
It is easy to see why Japan is such a popular destination for Hong Kong tourists. They - or perhaps I should say "we" - are drawn by the diversity of attractions, great cities, great entertainment, great shopping and, of course great Japanese cuisine.
It is very encouraging to see so many of you here today - although I am not entirely surprised by the strong interest in our city. This is because Hong Kong and Japan have become good friends over the years with deep and mature relations in business, finance, tourism and cultural activities.
Last year, Japan was our third largest trading partner with bilateral trade worth more than US$54 billion. An impressive, US$37 billion worth of trade between Japan and the Mainland of China was routed through Hong Kong. Probably to the surprise of many, we are also the largest market for Japanese agricultural, forestry and fisheries products world, accounting for about 20% of your total exports.
Our ties will continue to grow as interaction of people from both places increase. To further promote youth exchange between Hong Kong and Japan, your Foreign Minister Mr Nakasone and I agreed yesterday to introduce a Working Holiday Scheme between the two places as soon as possible. This will give our young people a valuable opportunity to widen their horizons and better understand each other's culture, particularly during this critical time of economic instability.
This is a critical time for both our economies as we battle the worst global financial crisis in a generation. It is a time for sharing our experiences, strengthening bilateral relations and seeking out new opportunities that will certainly come our way once the financial storm is over.
This is exactly the reason for my visit on this occasion.
I look forward to learning more about Japan's experience in dealing with the global financial crisis and the steps you have taken to limit the impact of the economic downturn. I am also keen to hear your views on how Hong Kong can become a more effective partner for Japanese companies entering the vast China market.
This afternoon, I will outline our strategies for dealing with the economic downturn.
The number one issue for us all is to calm the storm at local, regional and global levels. We have learned from previous crises that taking protectionist measures will only prolong the global economic downturn. Instead, we should take this opportunity to promote free and fair trade between us and deepen our economic engagement for a swift economic recovery.
This message was echoed by the world leaders during the World Economic Forum in Davos a couple of weeks ago.
At the same time, we need to take a fresh look at our international financial architecture. We will have to reach a consensus on how to better regulate our financial markets in a globalised world. If there is one thing that this financial crisis has taught us, it is how quickly a problem in one economy can spread to others in an inter-connected world.
Retreating from globalisation is not an option, so we have to forge closer co-operation and collaboration among regulators in Asia and further afield. With a more transparent global regulatory system, we will be better able to identify future problems at the root and tackle them before they become widespread.
In Hong Kong, we have taken a series of measures to deal with the downturn. We have guaranteed bank deposits in Hong Kong and made more capital available to our banking sector.
And, because small and medium sized enterprises are so important to our economy, we have re-doubled efforts to help them by guaranteeing their loans, easing export credit insurance criteria, and assisting with promotional activities and information sharing.
So far, our efforts have paid off. Our economy remains stable, efficient and in a strong position to navigate through the financial storm. This is good for us, good for our country and good for our trading partners, including Japan.
I will now speak about four of our focus areas for making Hong Kong an even more efficient, reliable and vibrant partner for the region and for Japan.
Our first focus area is to strengthen our integration with the Mainland of China. This will help to create jobs and opportunities and make Hong Kong a more effective low-risk entry point to Mainland markets for Japanese firms.
Last month the Central Government in Beijing set out a framework for developing the Pearl River Delta Region into one of the most competitive regions in the world by 2020. Hong Kong has an important part to play in achieving this ambitious goal.
The framework supports the development of Hong Kong as the premier international financial centre in China. We will also enjoy greater co-operation with Guangdong in drawing up plans for joint projects to improve the environment, to provide better access to global markets through Hong Kong.
With full support from the Central Government, we will fast-track important cross-boundary projects for trains, planes and automobiles. This year, we will begin construction on a high-speed rail link to connect Hong Kong's rail system to the Mainland's high-speed network. Next year, construction will begin on a mega bridge linking Hong Kong, Macao and the city of Zhuhai in Guangdong. The 29-kilometre bridge will help unlock the full potential of the less developed and less accessible western part of the Pearl River Delta region.
We are forging greater co-operation between Hong Kong International Airport and Shenzhen airport. The better connected we are to the Mainland, the better connected our businesses will be to the largest developing economy in the world.
Our second focus area is to provide more opportunities for companies in Hong Kong to do business on the Mainland and around the region. This includes the more than 700 Japanese enterprises that have their regional headquarters and regional offices in our city.
Our unique free trade pact with the Mainland - what we call the Closer Economic Partnership Arrangement, or CEPA - was expanded last year. CEPA now covers 40 service sectors, including financial services, trade, logistics, tourism, conventions and exhibitions, and legal services.
Japanese companies incorporated in Hong Kong can take full advantage of CEPA and enjoy preferential entry to the Mainland market.
But CEPA is only one reason - albeit a very important one - for overseas firms choosing Hong Kong as a base in Asia.
Last month, Hong Kong was named as the freest economy in the world by the US-based Heritage Foundation for the 15th year in a row. And the Japan Centre for Economic Research - based here in Tokyo - ranked Hong Kong number one in the world in its Potential Competitiveness Ranking 2008. It is the fourth year in a row that the survey has rated Hong Kong as the economy with the highest potential competitiveness. This highlights our commitment to open markets and free trade under the principle of "Big Market, Small Government".
Last year, we lowered taxes to further improve our competitiveness. Profits tax is currently at 16.5% and salaries tax is 15%. There is no VAT, no GST, no death duties and no capital gains tax. In other words, you keep most of what you earn, which is music to the ears of our local and international business community.
Another of our focus areas is the environment.
I have made it a priority in my administration to improve the quality of our air, provide more green spaces and promote a low carbon economy. More environmentally-friendly vehicles, energy-efficient buildings and production techniques for all feature in our plans for sustainable development.
And because our future prospects are closely linked with those of our neighbours, we have joined with Guangdong authorities to turn the Pearl River Delta region into a green and high quality living area.
Together, we have set emission-reduction targets up to 2010. Beyond that, we will continue to work in tandem on environmental issues under the 2020 framework for the Pearl River Delta region that I mentioned a little earlier. We are investing in low carbon technologies as well as conservation and revitalisation programmes throughout our city. We are also in the process of adopting the latest WHO standards for air quality.
The fourth and final focus area that I will talk about today is financial services. Hong Kong has a clearly defined role to play as a global financial centre in the Asian time zone with free flows of information, ideas and capital. About 70% of the world's 100 largest banks operate in our city. The Hong Kong stock market is the seventh largest in the world and third most capitalised in Asia. That is not bad for a city of the size of seven million people - although we have some catching up to do with Tokyo.
In recent years, Hong Kong has proved to be an effective testing ground for the Mainland to launch new financial products and reach investors overseas. Most of our retail banks offer Renminbi services and Hong Kong is the only place outside the Mainland to have a Renminbi bond market.
We are exploring new opportunities for our financial services sector given the Renminbi's growing prominence in the international financial system and the Mainland's announced plan to use Renminbi for international trade settlement. Underpinning this goal, we continue to strengthen our capabilities in innovation and technology, international trade, telecommunications, manufacturing on the Mainland, logistical support, the full range of professional services, as well as development of arts and sport.
Ladies and gentlemen, although our priorities have shifted in the last year to deal with the global economic downturn, we have not, and we will not lose sight of our overall game plan. Our history and our experience give us an excellent opportunity to play a leading role in our nation's continuing reform and opening up to the rest of the world.
At the same time, we are a familiar, stable and dynamic launch pad for overseas companies - including Japanese companies - entering the mainland market.
One final point. In December we are proud to be hosting the East Asian Games. I look forward to welcoming the Japanese team to the Games, especially following your impressive performance at the Beijing Olympics last year. I hope you will be able to join us in December for what promises to be another memorable sporting occasion.
Once again, thank you for the wonderful hospitality. I am confident that, together, we can turn the current economic challenges into opportunities for greater co-operation and deeper relations between Hong Kong and Japan. Let's talk about opportunities and promises for the future. Let's tackle the problems at hand.
Thank you very much.
Ends/Tuesday, February 17, 2009
Issued at HKT 13:49
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