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Following is the speech by the Chief Executive, Mr Donald Tsang, at the luncheon hosted by the Hong Kong Economic and Trade Office in Berlin, the Hong Kong Trade Development Council and the Swiss-Hong Kong Business Association, in Zurich, Switzerland, today (January 27, Zurich time):
Dr Moser (Kurt Moser - President of the Swiss-Hong Kong Business Association), Distinguished Guests, Ladies and Gentlemen,
I'm very grateful for the introduction of Dr Moser. He described me as a friend of Switzerland. I now take this opportunity to tell you honestly that Switzerland has always been the role model as I govern Hong Kong. We have similar size in terms of population of about 7 million. Your per capita GDP is twice of ours. You concentrate on services in excellence and we try to do the same. You have a rich culture of serenity, democracy, openness. This is something we want to imitate as well. And I continue to admire your achievement over the years despite ups and downs in global performance whether it's economic side or during war times. This is something which many people tend to overlook. This is a great place on earth and you have lots of admirers particularly from the East involving myself. To me it is a great pleasure to be back in Switzerland although I travelled here quite frequently in my previous incarnations. Now with my new job as the Chief Executive, I'm supposed to look after the house, so I'm very much bound in Hong Kong and I travelled less, but my heart is with you. I admire your achievements particularly how you handled various crises, particularly the free spirits of the people whom we try to imitate in Hong Kong. I wish particularly to take this opportunity to thank the Swiss-Hong Kong Business Association for its work in promoting strong links between our two economies, and of course the Hong Kong Trade Development Council for its sterling work in promoting our manufacturing and services sectors abroad.
Some of you may know that we have just a few days ago celebrated Chinese New Year. This year heralds the return of the most noble and auspicious of the celestial creatures, that is, the dragon. The dragon, unlike the western dragon, is considered a symbol of strength, a symbol of imperialism and a symbol of great power. It will be the Year of the Water Dragon. We have Fire Dragon, the Water Dragon but this one is the Water Dragon.
Water has a calming effect on the dragon's fearless temperament and fiery spirit. Those born in the Year of the Water Dragon are said to be better equipped to take a step back, re-evaluate a situation and understand the art of patience. Given the state of the global economy at the moment, it sounds like we need a few Water Dragons to help chart a smooth course through this extremely uncertain period in the fiscal and monetary worlds.
We are just four days away from the end of January and it is hard to know where the first month of the year has gone. I am just on my way to take part in the annual pilgrimage to Davos for the World Economic Forum meetings, but one thing is already obvious ¡V we are going to need all of the Water Dragon's patience, courage and resilience if Europe is to survive in its current shape and form, and for the US to return to a more robust and sustainable growth trajectory. I am sure it is going to be an extremely busy year for governments on both sides of the Atlantic.
Those of you who have been to Hong Kong will know that life in our neck of the woods is also often busy ¡V some might even say frantic at times. We are fully plugged into the world economy, so we are watching the developments in Europe and the States with great interest and anticipation.
At the same time, we are not the kind of people or economy to stand around and wait for the things to get better ¡V we have survived and prospered over the past 50 to 60 years because we are restless for progress in good times and bad.
That drive to succeed has taken on a new dimension since Hong Kong's return to our Motherland in 1997. Over the past 15 years we have been able to play a much fuller role in the development of our country ¡V we have been able to utilise our unique strengths and advantages as the most free and open city in China to help our economy grow and to help our country continue along its path of opening up and reform.
With this in mind, I would like to reflect on some of our achievements over the past 15 years, which I hope will be able to give you a better idea of where Hong Kong is heading in the future.
For a start, Hong Kong recently retained its position as the world's freest economy. Earlier this month, the US-based Heritage Foundation named Hong Kong as number one for economic freedom for the 18th year in a row. I know this will resonate with the business community here in Zurich because Switzerland was ranked as the freest economy in Europe.
This recognition highlights Hong Kong's competitive edge globally, but especially in Asia. We have free flows of capital, information, talent and ideas. We maintain a low and simple tax system. Salaries tax is capped at 15 per cent and businesses pay no more than 16.5 per cent profits tax. We have no inheritance tax, no VAT, no GST and no capital gains tax. Our clean and efficient government, unfettered media and zero tolerance of corruption help to ensure that all companies compete on a level playing field. This includes some 190 Swiss companies operating in our city.
Reunification in 1997 not only brought a transfer of sovereignty, but also significant legal, political and social change to our community ¡V which I have to say, was change for the better.
We have weathered not one but two major financial crises ¡V the Asian financial crisis in 1998 and the more recent global financial tsunami; our economy was affected by the bursting of the "dot.com" bubble just over a decade ago; and we have endured three major health scares in Avian influenza, SARS and swine flu.
Any one of these challenges would have tested the mettle of the most resilient economy and society. But the fact that we have endured ¡V and continued to prosper ¡V after so many trials and tribulations speaks volumes about the type of people you will find in Hong Kong and the type of society in which we live.
Given all the economic and social challenges of the past 15 years, which are rather extraordinary and looking back in the one and a half century, I cannot recall any single period of 15 years where there are so many major trials and tribulations. And we did that. We overcame that and we dealt with that. We continue to prosper. But all along we remained firmly committed to promoting open markets, free trade and business-friendly policies ¡V and we welcome with open arms investors and business people from around the globe. We have thrived as an open economy and there is no reason to fiddle with a winning formula, even if we hit a rough patch now and then.
Under "One Country, Two Systems", Hong Kong has maintained its own currency. The Hong Kong Dollar is fully convertible and has been linked to the US Dollar since 1983. This currency link continues to be a source of stability for our monetary and fiscal systems.
We have maintained our own common law legal system, which is underpinned by an independent judiciary. And, our Independent Commission Against Corruption has an international reputation for rooting out corruption.
Also under "One Country, Two Systems" Hong Kong remains an individual member of international bodies such as the World Trade Organisation, World Customs Organisation, APEC and the Asian Development Bank. We look forward to taking part in the London Olympics this summer in our own right under the name of 'Hong Kong, China'.
As a city of China but outside the Mainland system, we enjoy many unique benefits ¡V some of which I have just mentioned.
Another is the fact that because we remain a separate Customs territory, we have been able to negotiate a free trade pact with the Mainland of China, what we call the Closer Economic Partnership Arrangement, or CEPA.
Under CEPA, all Hong Kong products that meet some straightforward rules of origin can enter the Mainland market tariff-free. For example, Hong Kong's watch and clock industry has been able to take advantage of CEPA to tap the vast Mainland market. And because CEPA rules are nationality-neutral, foreign companies including Swiss firms can enjoy the full benefits of CEPA. I am not just referring to Swiss watch-makers but companies in a wide variety of industries.
More importantly, CEPA provides preferential and enhanced access to the Mainland market in the services sector. CEPA was recently expanded to cover 47 services areas, so there are plenty of opportunities for Swiss companies to take advantage of this arrangement. I am sure our friends at the Hong Kong Trade Development Council will provide all the information about CEPA that you need.
Like Zurich, Hong Kong is a major international financial centre. We ranked number one in the World Economic Forum's Financial Development Report 2011. Hong Kong leapfrogged the US and Britain to become the first Asian market to achieve this top ranking. Not only does this reflect the growing prominence of Asia in global finance, it also highlights Hong Kong's competitiveness as a global financial centre.
The WEF report specifically noted the development of our non-banking services including insurance, and Initial Public Offerings, or IPOs.
We have led the world in funds raised through IPOs for the past three years. Last year, total IPO funds raised in Hong Kong reached US$36 billion.
We were pleased to welcome the first listing of a Swiss-based company, the commodities giant Glencore, which completed a successful dual listing in Hong Kong and London last May. The company raised some US$10.3 billion or about 9.8 billion Swiss francs.
A favourable combination of attractive valuations, world-class financial services and access to wealthy Asian investors are behind the surge in company listings in Hong Kong.
We are actively promoting Hong Kong's position as China's global financial centre. This includes fine-tuning our role as a centre for offshore business using the Mainland currency, the Renminbi. Last year, offshore Renminbi banking, trade settlement and bond issuance performed strongly in Hong Kong. In fact, Hong Kong is a crucial element of China's plans to internationalise the use of the Renminbi ¡V and again it's all because of our unique strengths and advantages and because we have decades of experience dealing with international markets, as well as the Mainland market. I do encourage you to explore how these offshore Renminbi services in Hong Kong can benefit your companies ¡V particularly in regards to trade settlement.
May I say a little bit more about Renminbi because I'm pretty excited about this development? A few years ago, Hong Kong handled very little Renminbi trade and indeed the entire trade portfolio of our nation, China, was conducted and denominated in US dollars. But a few years ago, major trading partners of China have begun to test out the use of Renminbi as a medium for trade and Hong Kong has been helping them. From almost nothing, last year in 2011, Hong Kong handled 1.9 trillion Renminbi in terms of trade settlement and clearances. This represented more than 90 per cent of the total trade conducted in Renminbi by the whole nation. In other words, at the moment, there is a huge trade portfolio of China, about 8-9 per cent of it is done in Renminbi, and no longer in US dollars or Euro. And of that 8 or 9 per cent, almost entirely was cleared and settled in Hong Kong. And Hong Kong becomes quite clearly the offshore money changer for the nation as a whole. And this is very important, particularly for foreign firms who want to operate extensively in the Mainland of China and running short of Renminbi. They can of course raise it in the Mainland itself, but sometimes it's not very easy. And they tend to use the Hong Kong market, so in Hong Kong, people tend to raise Renminbi. They use bonds and they use the banking services as well for that purpose. Many firms have done that, particularly American firms and foreign firms. And I'm sure there will be opportunities for Swiss firms, particularly global operators who have extensive operations in China, your pharmaceutical firms and so on who want to raise Renminbi. Try the Hong Kong market. We are liquid for that purpose and we provide good service.
Allow me now to give you a quick overview of the current economic situation and the prospect for Swiss-Hong Kong relations in the year ahead.
As a highly open and internationally connected city, Hong Kong's economy will inevitably be affected by events around the world. As I mentioned earlier, these include the eurozone crisis and the sluggish US recovery.
However, Hong Kong's location in Asia and our deepen links with the dynamic Mainland Chinese economy will continue to support Hong Kong¡¦s growth trend.
The Asian Development Bank has forecast healthy GDP growth for the Emerging East Asia region of 7.2 per cent in 2012. This forecast covers Association of South East Asian Nations as well as Hong Kong, Mainland China, South Korea and Taiwan. We expect Hong Kong's GDP growth for last year to come in at around 5 per cent.
The financial crises of the past 15 years taught us that we need to diversify our economic base, which in Hong Kong has traditionally been supported by financial services, business and professional services, transport and logistics and tourism. We will continue to promote and develop these pillar industries.
At the same time, we have been exploring ways to develop industries with good potential and where Hong Kong enjoys clear advantages. We have identified six industries for special attention, namely: medical services, testing and certification, education services, innovation and technology, creative and cultural industries and "green" industries.
The government is taking steps to help these sectors grow and prosper and I encourage Swiss entrepreneurs and businesses to look for opportunities in these sectors.
You can also take advantage of the new Free Trade Agreement (FTA) signed between Hong Kong and members of the European Free Trade Association, including Switzerland.
This FTA was signed last June and will come into force in the middle of this year. It covers trade in goods and services as well as investment and other trade-related issues. This is our first such agreement with European economies so please do make full use of this milestone in our trade relations. Coupled with slow growth in US, your major market, very turbulent situation in Europe generally and a major strong growth in the Mainland market together with the Free Trade Agreement at your favour, this is a golden opportunity you should not miss.
Ladies and gentlemen, although Hong Kong and Switzerland are relatively small places, we are each other's very significant trading partners. We share the same free-market philosophies and values of fair play. We each have important roles to play in the development of our respective regions.
By forging closer links between Hong Kong and Switzerland, we can combine our strengths and empower our economies in the face of uncertain economic times ahead.
Once again, thank you very much for the opportunity to speak with you today. I do hope that you can come and visit us in Hong Kong soon and enjoy all that we have to offer in Asia's world city.
Thank you very much.
Ends/Saturday, January 28, 2012
Issued at HKT 01:02
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