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Following is the speech by the Financial Secretary, Mr John C Tsang, at the Hong Kong Trade Development Council business luncheon in Santiago, Chile today (December 2, Santiago time):
Distinguished Guests, Ladies and Gentlemen,
Buenas tardes, estoy muy complacido de estar aqui con todos ustedes (Spanish – means – Good day, I'm delighted to be here with you all).
It is my great pleasure to be back in beautiful Santiago. This is the first full day of my visit here. Although it was a long trip, I was able to break it up with a one-day stopover in New Zealand.
My last visit to Chile was for the APEC Summit in 2004. At the time I was Secretary for Commerce – and Hong Kong was preparing to host the 2005 WTO Ministerial Conference.
I remember being impressed by Chile's commitment to open markets and free trade. I am pleased to see that commitment remains as strong today as it was six years ago.
Ladies and Gentlemen, my first order of business is to thank the Hong Kong Trade Development Council, or TDC, for organising today's lunch.
Secondly, I would like to thank Chile for providing the most incredible "good news" story of the year.
In October, the successful rescue of 33 miners trapped in a San Jose copper mine had people around the world, including us in Hong Kong, glued to their television sets.
The determination of the rescue workers, the faith of the families and the survival skills of the miners were an inspiration to us all.
I am delighted to be leading a high-level Hong Kong business delegation to Chile. We are all eager to experience the dynamism, the culture and spirit of Chile – what might be described as "La Fuerza".
The rescue of the miners was also a great example of teamwork between nations. Experts from the US, Canada, Australia and even NASA pitched in to help their Chilean counterparts with the rescue operation.
Chile's openness to the world in this hour of need also opened many hearts and minds to Chile.
Not only is international teamwork important in life or death situations, it is also key to promoting global trade and investment. This is the overriding purpose of my visit to South America.
As two of the world's freest economies, Hong Kong and Chile have a unique role to play in trade liberalisation. This, at a time, when the economic centre of gravity is shifting from West to East, from developed economies to emerging economies and from established markets to new ones.
My talk today will focus on four key areas where stronger co-operation between Hong Kong and Chile can boost our bilateral trade and investment, promote free markets in the Asia Pacific and create jobs, wealth and even stronger links between us.
According to the US-based Heritage Foundation, Hong Kong is the world's freest economy. We have been ranked Number One for each of the past 16 years. The same study this year ranked Chile as the freest economy in Central and South America (and the tenth freest in the world).
Remember also that Hong Kong – with our prime location and international connectivity – serves as China's global financial centre and the premier gateway for business into and out of Mainland China.
As free, open and outward-looking economies, Chile and Hong Kong have an opportunity and an obligation to promote free trade and investment in the Asia Pacific region and beyond.
This also fits with pledges made during the APEC Summit in Yokohama earlier this month.
Hong Kong, unlike Chile, is a relatively small and compact place with a population of seven million people. What we lack in size we make up for in other departments.
Hong Kong is the world's eleventh largest trading entity and the thirteenth largest exporter of commercial services. We have one of the largest stock markets in the world. Our city also attracts the second largest stock of foreign direct investment, or FDI, in Asia behind only Mainland China.
Our economy has bounced back strongly from the global financial crisis. In the first three quarters of this year, it has expanded by 7.1 per cent year-on-year. This has prompted us to revise upwards our GDP growth forecast for this year to 6.5 per cent.
Our business-friendly environment is built on the rule of law, transparent regulation, world-class services and low taxes. In Hong Kong, profits tax is capped at 16.5 per cent – in the same ballpark as Chile's 17 per cent corporate tax.
Also in Hong Kong, people pay no more than 15 per cent salaries tax and there is no VAT, no GST, no capital gains tax and no inheritance tax.
In my budget in 2008, I also eliminated duties on wine – an initiative that has captured the attention of Chile's wine merchants. I will talk more about this a little later.
As well as our low – or NO – taxes, Hong Kong enjoys a free flow of information, ideas and capital. An independent judiciary underpins our common law legal system and we have a fully convertible currency. The Hong Kong Dollar has been pegged to the US dollar since 1983.
Our unique characteristics are made possible by the "One Country, Two Systems" principle for our reunification with Mainland China in 1997. "One Country, Two Systems" ensures that we maintain our individual member status of international bodies, including the WTO and APEC under the name, Hong Kong, China. We also negotiate our own bilateral agreements on trade, investment, culture and many other areas.
The first area where Hong Kong and Chile can team up to promote and benefit from closer links is through bilateral accords.
Chile already has a number of Free Trade Agreements or FTAs, including one with China.
Last year, Hong Kong and Chile concluded a joint feasibility study on a FTA. Both sides are in favour of further strengthening bilateral trade and investment. I believe that there is no better time than now for both Governments to this mutually-beneficial subject.
This will demonstrate to our friends in APEC that free trade is a two-way street with benefits that far outweigh the risks.
In terms of our bilateral accords, I have signed a new Memorandum of Understanding or MOU, between Hong Kong and Chile.
The MOU promotes co-operation between us on wine related business – a great speciality of Chile. I have already mentioned Hong Kong's free wine port status. Combine this with a business friendly environment, modern infrastructure and proximity to Mainland China, and you have an ideal platform for Chilean wine businesses to expand in Asia.
Eliminating duties on wine is aimed at opening up new opportunities for our city as a trading and distribution centre for wine. This is a timely development, given the growing prosperity and new-found appetite for wine in our part of the world.
Since eliminating wine tariffs in my Budget in February 2008, our wine imports from Chile have soared 44 per cent. Chile is our seventh largest source of wine imports. In the 2009-10 financial year, our imports of Chilean wine rose to US$14 million. In just the first six months of this year, this figure reached US$8 million, a 19 per cent increase year-on-year.
The success of our bilateral wine trade – and conclusion of an MOU on wine – serve as an example to other industries of how Chile and Hong Kong can synergise their competitive advantages.
The second area where we can grow our bilateral ties is through a greater two-way flow of investment.
Chile has long and strong connections in Asia. Your country was the first South American nation to establish an office in our neighbouring city of Canton in 1845. Back then Hong Kong was little more than a fishing village with big plans for the future.
Today, our region is at the heart of global trade and Hong Kong is right in the thick of the action.
Some 6 600 Mainland Chinese and overseas companies have a base in Hong Kong. According to the World Investment Report 2010, Hong Kong attracted US$48 billion worth of FDI last year. Hong Kong is also by far the single largest investor in Mainland China.
Investors are attracted by our location on the southeastern tip of China and on the doorstep of the dynamic Pearl River Delta region. This region is often referred to as "the world's factory" because of its incredible manufacturing output.
It represents a vast hinterland that connects to Hong Kong by an efficient infrastructure network covering land, sea and air.
As Hong Kong has evolved from a fishing village into a manufacturing hub and now a global financial centre, we have gained a great deal of experience and know-how in doing business with Mainland China.
We also share the same culture, speak the same language and have a mutual goal of establishing the Pearl River Delta as one of the world's most competitive regions.
Chilean companies can also take advantage of our Trade Development Council's close contacts with Mainland businesses. The TDC has a great deal of expertise in matching overseas companies with the right partners in the Mainland. I know the TDC's representatives here today will be happy to share their insights with you.
My third point today is financial collaboration.
Hong Kong's position as China's global financial centre can open up a number of opportunities for companies overseas, including here in Chile.
The Mainland's financial clout and economic growth has been a feature of the global economic recovery.
One way that Chilean firms can tap into our nation's growth trend and liquid capital markets is by listing on our stock market. This can also raise the profile of a company and enhance its prestige in our part of the world.
Last year, Hong Kong led the world in funds raised through Initial Public Offerings. In 2009, total funds raised through IPOs exceeded US$31 billion. This year, the figure has already passed the US$40 billon mark.
New listing rules and our deep financial links with Mainland China are prompting more resources companies to list in Hong Kong.
Chile is a major exporter of resources, especially copper and iron ore. The Mainland is a major consumer of mining commodities. I encourage Chile's resources sector – as well as other sectors – to consider the capital-raising potential of listing in Hong Kong.
Despite the global financial turmoil, our stock market is the seventh largest in the world and third largest in Asia by market capitalisation. At end-October total market cap was almost US$2.7 trillion.
Another significant development is the growing internationalisation of the Mainland currency, the Renminbi. As China's premier city for global finance, Hong Kong has an important role to play in this liberalisation process.
Our Renminbi experience already covers a number of areas, including Renminbi banking, bond issues and trade settlement.
Since June this year, overseas companies have been able to settle trade with the Mainland using Renminbi, instead of a third currency, such as the US Dollars.
Chilean enterprises can leverage on Hong Kong's expertise as a centre for offshore Renminbi business to settle their Mainland trade in Renminbi. This would offset the risks of exchange rate fluctuations and give more certainty to business transactions.
The fourth and final area that I will touch on today is services.
After Hong Kong's manufacturing strength peaked in the 1980s, our city turned its attention and its energy to developing the services sector.
Today services account for over 90 per cent of our GDP. Last year, we exported more than US$86 billion worth of services.
My talk has already covered a number of areas where high-quality services make all the difference for Hong Kong. Financial services, trade and logistics, port services and legal services are some key areas. TDC knows all about the world-class services that support our transportation, tourism, conventions and exhibitions and telecommunications sectors.
Here, I would like to introduce our unique free trade agreement with Mainland China, what we call the Closer Economic Partnership Arrangement, or CEPA for short. CEPA was launched in 2004 and has been expanded each year since then. It is an ongoing commitment to break down barriers to trade between Hong Kong and the Mainland.
CEPA is relevant to your businesses because its rules are nationality blind. In other words, companies from around the world, including Chile, that are incorporated in Hong Kong can enjoy the full benefits of CEPA in accessing markets throughout Mainland China.
Companies in no fewer than 42 services areas now enjoy a first-mover advantage and enhanced access to Mainland markets under CEPA. These include banking, insurance, mining services, trade and logistics and shipping services.
Above all, CEPA is another example of how teamwork between different economies can open up markets and promote free trade.
I should also mention that we signed a Closer Economic Partnership Agreement with New Zealand in March this year. This was our first free trade agreement with an economy overseas. I am sure more such agreements will follow.
Ladies and Gentlemen, Chile and Hong Kong may be separated by almost 20 000 kilometres of Pacific Ocean, but we have all the right connections to deepen our bilateral ties.
I look forward to exploring new ways to strengthen further our connectivity during this trip.
Together, Chile and Hong Kong can enjoy the fruits of stronger bilateral trade. We can also shine a light on the opportunities that free markets bring to our economies, our APEC region and to the rest of the world.
Muchas gracias!
Ends/Friday, December 3, 2010
Issued at HKT 10:31
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