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Following is the speech by the Financial Secretary, Mr John C Tsang, at the HSBC luncheon in Jakarta, Indonesia today (March 23):
Distinguished Guests, Ladies and Gentlemen,
Selamat siang (meaning "good afternoon" in Indonesian).
It is my great pleasure to join you all for lunch.
My thanks to HSBC for organising this event and to you all for your warm hospitality.
My visit to Jakarta has certainly got off to a flying start.
I arrived in Indonesia just this morning. I have been in the country for about three hours.
That is just a little longer than the 2 hours, 47 minutes and 35 seconds, it took an Indonesian runner to win the women's Hong Kong Marathon last month.
The victory by Triyaningsih was a first for Indonesia and cause for great celebration among our large Indonesian community.
I mention this because my talk today is all about being competitive, resilient, rising to a challenge and grasping opportunities. All the qualities needed to win a marathon.
These are also some of the qualities that have helped Hong Kong tackle the global financial crisis.
We have come through the worst of the economic pain barrier in the past year or so, and we are ready to capitalise on the opportunities ahead. These opportunities include closer financial integration in our region, promoting Islamic finance and helping to develop the financial potential of our nation, China.
The potential of our nation, and indeed our region, is among the well-documented reasons that HSBC chief executive, Mr Michael Geoghegan, cited for his relocation to Hong Kong from London earlier this year.
He has made no secret of HSBC's ambition to grow its business in the Mainland of China. On arriving in Hong Kong in January, Mr Geoghegan said his move to Hong Kong was, and I quote: "a symbolic move that shows that the commitment and the focus of the bank is on Asia and China." End quote.
As well as our proximity to the Mainland of China, we have open markets, a fully convertible currency, free flow of information, and a deep and broad pool of local and international talent.
We also have a stable and diverse financial services sector that reflects our status as a global financial centre in the Asian time zone.
Promoting new and diverse opportunities is the main reason for my visit to Indonesia.
One such opportunity, that I have already touched on, is Islamic finance.
Since, 2007 we have been working to establish Hong Kong as a platform for Islamic finance. Skeptics point to our relatively small Muslim community, a lack of relevant experience and strong competition from around the region.
On the flip side of the coin, we have a transparent and open financial system and sound legal framework that is perfect for Islamic financial products. We have top-notch international financial talent, including Islamic financial talent in Hong Kong. And we are a financial gateway to the vast markets in the Mainland of China.
These are some of the key ingredients required for a strong and robust Islamic financial sector.
So far, we have launched Islamic bonds or sukuks, as well as Islamic funds, Islamic indices and Islamic banking windows. The response to Islamic financial products in Hong Kong has been encouraging. There is a great potential for Hong Kong to become a niche market for sukuks in East Asia.
At the same time, competition among international financial centres for a share of the Islamic finance business is indeed intense, particularly in the wake of the global financial crisis. An article in Newsweek magazine last September (September 21, 2009) described Islamic finance as a "crisis buster". The article went on to say, and I quote: "It (Islamic finance) eschews many of the risks that brought conventional finance to its knees ¡V it mandates risk sharing between lenders and borrowers; prohibits interest, barring debt spirals; and bans speculating." End quote.
My colleagues in Government are currently working on amendments to relevant tax laws to provide a level playing field for Islamic financial products vis-ˆj-vis conventional products.
We look forward to launching more Shariah-compliant products, and opening up opportunities for investors in the Mainland of China and throughout East Asia.
Indonesia is the world's largest island nation with the fourth largest population and the largest Muslim community. Hong Kong is strategically placed on the southeastern tip of China ¡V the world's fastest growing large economy and home to the world's largest population.
Developing Islamic finance is one way to add breadth and depth to our financial markets and strengthen Hong Kong's role as our nation's global financial centre.
Another key area for us is to facilitate the development of the Mainland's financial system. Here, we have made great strides in the past year.
Last July, a pilot scheme was launched for Renminbi trade settlement. Also, Hong Kong banks on the Mainland were given the go ahead to issue Renminbi bonds in Hong Kong for the first time. And the Central People's Government in Beijing launched the first Renminbi sovereign bonds in Hong Kong totalling 6 billion Renminbi (8 Trillion Rupiah).
We will continue to fine-tune Hong Kong's role as the testing ground for the regionalisation and internationalisation of the Mainland currency. This includes developing other Renminbi business, such as Renminbi financing and promoting direct investment in Hong Kong.
We will continue to streamline the two financial systems in Hong Kong and the Mainland for our mutual benefit and through mutual co-operation.
On the subject of financial co-operation, I am also pleased that we are strengthening links with Indonesia. In January, we launched a new payment-versus-payment (PvP) link between Hong Kong's US Dollar real time gross settlement system (RTGS) and Indonesia's Rupiah RTGS system.
The link ensures the simultaneous delivery of US Dollars in Rupiah in Indonesia and Hong Kong. It eliminates risk in delivering the two currencies in different time zones.
This is important because it promotes co-operation and financial stability. And given the economic turmoil of the past couple of years, few can doubt the benefits of greater financial co-operation and stability.
Our banking sector has weathered the global financial crisis in pretty good shape.
Our banks are well capitalised, with strong liquidity. None of our banks have required rescuing during the financial crisis. We have even benefited from a migration of financial talent to Asia from the traditional hubs in the US and Britain.
Ladies and Gentlemen, we will continue to promote closer relations between Indonesia and Hong Kong.
In my annual Budget last month, I forecast full year GDP growth for Hong Kong at between 4 and 5 per cent this year. This would represent a healthy recovery from the 2.7 per cent GDP contraction last year.
Throughout the economic downturn, Hong Kong has remained the world's freest economy. Both the US-based Heritage Foundation and the Fraser Institute in Canada have ranked Hong Kong as number one for each of the past 16 years.
Hong Kong is committed to providing the best possible business environment based on free trade and open markets. We have low taxes with profits tax capped at 16.5 per cent and salaries tax capped at 15 per cent. An independent judiciary underpins our common law legal system; we have a transparent regulatory regime and zero tolerance of corruption.
These qualities have helped to see us safely through various economic crises including the Asian financial crisis a decade ago, the bursting of the dot.com bubble and during the SARS outbreak of 2003 when confidence was particularly low.
Today, our economy is getting back on track following the global financial crisis. No doubt there will be many lessons to learn from this unprecedented crisis that began in the US and quickly engulfed the global economy.
The economic turmoil has highlighted the inter-connectivity between our economies and financial systems. However, the opportunities of globalisation far outweigh the risks.
Now is the time to forge an even closer financial and economic co-operation to make the most of the early stage economic recovery, and better protect against the risks that surely lie in our path.
I have highlighted some of the ways I believe closer links between Indonesia and Hong Kong can make us both more competitive, resilient and better able to grasp the opportunities ahead.
Thank you very much.
Ends/Tuesday, March 23, 2010
Issued at HKT 17:44
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