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Following is the speech by the Chief Executive, Mr Donald Tsang, at the luncheon of Credit Suisse "Asian Investment Conference" at Conrad Hong Kong today (March 24):
Thank you Kai [Nargolwala]. Distinguished guests, ladies and gentlemen. Well, what an introduction. I still remember my infrequent travels, when I do travel overseas, and I have a similar experience. Over my two previous visits to the United States, making formal visits to the American Government, on one occasion when I arrived in Washington it happened to be 911 and I was stranded in DC for a week. I was able to see the then Secretary for State the other people I was appointed to meet. Then I went back three years afterwards and paid another visit and there was a big storm - Katrina, as a matter of fact - as a result the State Department was also closed but I managed to see the Secretary of State, it opened before me, and we had a good chat. I hope that my coming to this function would bear similar sort of symbols but hopefully they all connect to be a good ending.
It is a great pleasure to be back here at the Credit Suisse Asian Investment Conference (AIC).
The last time I spoke at the AIC was back in 2003. I am delighted to see how the Conference has continued to grow in size and stature since then. I warmly welcome all the overseas delegates to Asia's world city for this conference and, of course, to enjoy our world famous Sevens tournament later in the week.
I remember well the Conference six years ago. At that time I was Chief Secretary, and we were in the grip of the terrible SARS outbreak. I recall the fear among the community as the virus spread. People took to wearing facemasks, and there was even talk of cancelling the Rugby Sevens tournament that year.
In the end, the Sevens went ahead - without incident - and provided a welcome morale boost during one of our darkest hours. It did, however, take a few more months to bring the spread of the virus under control; and a few more months for the economy to recover fully after that. But, we did make a full and very strong recovery.
This year's Conference takes place in the midst of another crisis - the global financial tsunami. I certainly hope that does not mean I am the harbinger of bad news. Indeed, there's nothing more than I would love to do than wax lyrical about the strength and vitality of our economy.
The fact, though, is that we simply do not know what the state of the local, regional and global economy will be in a year from now, and that is a very sad confession for a politician like myself. No one knows for sure, and most predictions are bleak. But allow me to begin with a couple of more positive things that can be fairly safe in predicting.
First, the Sevens will go ahead as it has done for each of the past 33 years. I have no doubt it will be another fantastic festival of rugby - the best Rugby 7s tournament in the world. I am sure all the action on the field will help take our minds off our financial crisis, even if just for a weekend.
The second thing we can be sure of is that Hong Kong will bounce back from the current economic slump. This is not hubris; this is not idle talk. We have done it before - most recently after the SARS outbreak, and the Asian financial crisis in 1997 and 1998. We weathered the bursting of an asset price bubble, as well as the bursting of the dot. com bubble, and the uncertainty surrounding the 9-11 attacks in September 2001.
Not only are we fully confident of rebounding from this economic downturn, but we are also determined to become stronger and more resilient.
After all, it was American economist Paul Romer who said, and I quote: "A crisis is a terrible thing to waste."
Today, I will talk about our game plan for tackling the economic downturn and making sure we don't waste this opportunity to become an even more efficient and effective platform for investors and entrepreneurs.
As many of you are visiting from overseas, allow me to take a couple of minutes to update you on what we have been doing in Hong Kong to limit the impact of the global financial crisis. If you are familiar with the measures, I believe they still merit repeating, as they are crucial to our financial stability and economic recovery.
In the past year, in 2008, we have announced a series of stimulus packages and relief measures to shore up the economy; boost liquidity in the market; create jobs; and, to help the less fortunate in the community.
Last year's Budget, together with a stimulus package I personally announced last July, contained US$7.3 billion (HK$57 billion) worth of measures to bolster the economy as the financial storm approached our shores. That was rather exceptional because they represented about 3.5% of our GDP. For a government that has determined to spend no less than 20% of GDP as a whole.
As the credit crunch began to squeeze a little tighter, in October we guaranteed bank deposits and set up a Contingent Bank Capital Facility to make additional capital available to banks if required.
Another round of targeted measures in December provided US$12.9 billion in loan guarantees to small and medium sized enterprises. We also announced plans to create 60,000 jobs this year.
And, in this year's Budget announced last month, we earmarked another US$1.3 billion to create jobs and combat the crisis.
In addition, the Hong Kong Monetary Authority has conducted necessary operations in the market to maintain liquidity in the banking system. We have also activated a co-ordination mechanism among the Government and regulatory agencies to facilitate early exchange of latest information on market developments and potential issues of concern so that we can maintain effective oversight of the situation, here in Hong Kong, regionally and monitoring events elsewhere.
Of course, this is just a brief outline of our work so far. And, we stand ready to take further timely and targeted measures if and when required. We have got the resources to do it. This government administration of ours has zero debt and we have our reserves of a sizeable strength to be able to sustain our spending programme for nearly two years without any additional taxation.
A crucial feature of our economy during difficult times is its institutional strengths. For us this includes the rule of law, an independent judiciary, a transparent and resilient financial system, level playing field for business and a free flow of information and ideas.
We also have a freely convertible currency, low taxes and a deep pool of financial talent, and not to mention liquidity in our market.
Throughout the financial turbulence, our stock market has remained the seventh largest in the world and third largest in Asia by market capitalisation. We have operated throughout the crisis. We have no suspension day. No suspension of trading of a single hour. At end-January this year, market capitalisation was US$1.2 trillion. In terms of initial public offerings raised in 2008 we were second in Asia with total funds raised of US$8.4 trillion.
We have the highest concentration of insurers in Asia, and we are the third largest international banking centre in Asia with about 70 of the largest 100 banks in the world operating in the city.
In battling the financial crisis, Hong Kong will continue to focus on its strength as a global financial centre in the Asian time zone and as our nation's international financial centre.
In fact, we are already seeing some opportunities for greater financial integration with the Mainland emerging from the financial crisis.
One promising area is trade settlement using the Mainland currency, Renminbi. Last December, the Central Government in Beijing agreed to allow eligible companies to use Renminbi to settle trade transactions in Hong Kong. This initiative will reduce settlement risk, and help increase the scope of Hong Kong's financial services and enhance Hong Kong's role as the financial gateway to the Mainland. We will announce the implementation details very soon as they are finalised.
Since 2004, our banks have been offering Renminbi services, which today include Renminbi deposits, currency exchange, remittances, credit cards and personal cheques. As at the end of January, the outstanding amount of Renminbi deposits in Hong Kong banks was 54.4 billion Renminbi or about US$7.7 billion.
Since 2007, there have been seven Renminbi bond issues in the city amounting to 22 billion Renminbi, or about US$3.2 billion. Hong Kong remains the only place outside the Mainland with a Renminbi bond market.
We will continue to work in streamlining our two financial systems to become a more efficient and low risk corridor for investment into and out of the mainland of China. I am pleased to share with you that the multi-currency cross-border payment arrangements between the mainland of China and Hong Kong, which cover Hong Kong dollar, US dollar, euro and British pound sterling, has been in operation since March 16, 2009. This is an important move that increases the efficiency of cross-border multi-currency payments and reduces risks and costs. Nowhere else can deliver this service. It also marks the deepening of financial co-operation between the Mainland and Hong Kong.
Regarding new markets, Islamic finance is a particularly interesting area for us to expand our portfolio and make good use of our transparent regulatory system. We have witnessed the launch of an array of Islamic financial products since late 2007, including Islamic funds, indexes, banking windows and bonds, and sukuk in Hong Kong.
We are currently working on modifications to our tax laws to better accommodate Shariah-compliant products, in particular sukuk. This financial year, we aim to submit a proposal putting forward clarifications or changes to the arrangements for stamp duty, profits tax and property tax to facilitate the launch of such products.
Ladies and gentlemen, looking back on what has been an eventful year since your last Asian Investment Conference, we have seen the collapse of US investment bank Lehman Brothers last September. That was a turning point in the global financial crisis. Almost overnight, confidence in the global banking sector hit rock bottom. Some Hong Kong investors have also been caught up in the demise of Lehman Brothers.
Since then, we have drawn up an Action Plan with a view to improving our regulatory framework and enhancing investor protection.
We are now working with the regulatory body to start implementing measures including better regulation of business operations and codes of conduct for financial intermediaries. But we will be modest and we will be serious, balancing rights and opportunities in the process, ensuring Hong Kong's position as a global financial centre.
Our Securities and Futures Commission has also stepped up stress testing to ensure that our brokers can afford the risks they are taking.
Banks in Hong Kong have a good reputation for prudent risk management and remain fundamentally sound and robust. The capital adequacy ratio for Hong Kong banks, for our local banks is comfortably above the international standard of 8 per cent.
We have not had to "rescue" any of our banks, but we remain fully aware of the need to boost confidence in the sector and improve the efficiency, supervision and transparency of our financial markets.
Ladies and gentlemen, you don't have to look far to find examples of positive developments arising from difficult economic situations. This Asian Investment Conference which you are joining, was launched at the height of the Asian financial crisis in 1998. Incidentally, that was the same year that Credit Suisse took up its title sponsorship of the Rugby Sevens. We are grateful for your continued support and confidence in Hong Kong. The AIC has established itself as a dynamic forum for companies and investors to interact, share ideas and talk business during the good times and - perhaps more importantly - during the not-so-good times.
In parallel, Hong Kong continues to provide an efficient and vibrant launch pad for companies and investors in the region.
I would like to be able to stand here and successfully predict the winner of this weekend's Rugby Sevens, but picking winners is not a job for the Hong Kong government - regardless of whether it is in the sports world or the business world. Instead, our goal is to provide you with the right environment for you and leave it to you, the experts in the markets, and market forces to do the rest.
That's the recipe of our success in the past. I can assure you that Hong Kong will continue to provide a level playing field for business that is second to none, transparent and open to all in the dynamic heart of East Asia.
I wish you all a successful Conference and an enjoyable stay in Hong Kong. And I am sure you will come back next year.
Thank you.
(To be continued)
Ends/Tuesday, March 24, 2009
Issued at HKT 18:27
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