************************************************************
Following is the speech by the Chief Executive, Mr Donald Tsang, at the business luncheon co-organised by the Hong Kong Trade Development Council (HKTDC) and the Invest Hong Kong (InvestHK) in São Paulo, Brazil, today (April 17, São Paulo time):
Distinguished guests, friends, ladies and gentlemen,
I am delighted to be here in São Paulo. This is the last stop on my visit to Brazil before returning to Hong Kong. It has been a very fruitful trip for me and the rest of my delegation.
Thank you all for being here today and helping to round off my visit on a very high note.
I also thank the Hong Kong Trade Development Council (HKTDC) and Invest Hong Kong (InvestHK), for organising this luncheon and bringing us all together today.
This is what HKTDC and InvestHK do best. They connect business people around the world to Hong Kong, and bring Hong Kong closer to the global business community. Organising gatherings like this one is among their fortes. Other areas of expertise include international promotional campaigns and staging conventions and exhibitions of all sizes in Hong Kong.
Some of our best known annual trade fairs are among the largest in Asia and the biggest of their kind in the world. They cover a wide range of themes such as toys and games, gems and jewellery, food and wine, and gifts and premium products, just to name a few.
Large or small, each of these events links entrepreneurs to investment opportunities in Hong Kong and in Mainland China.
Staying with this theme of connectivity, allow me to talk about the opportunities to foster closer and deeper links between Brazil and Hong Kong. There are three main areas.
The first area is connecting with Hong Kong.
Our city has a highly open and diversified economy. We want to attract more international investors to come to Hong Kong and contribute, not only to our economic development, but also to our vibrant cultural diversity and high-quality lifestyle.
Brazil ticks all these boxes with its flair for business, rich culture and a way of life that is envied by many people around the world.
At the same time, Asia is a highly competitive region when it comes to attracting overseas investment. That is why we strive to nurture the best environment for our business community.
Top of the wish list for most entrepreneurs is a favourable tax system. Low and simple taxes give companies more time, and of course money, to focus on what they do best: business!
Hong Kong's corporate tax rate is capped at 16.5 per cent and people pay no more than 15 per cent salaries tax. There is no VAT or GST, no capital gains tax and only income sourced in Hong Kong is taxed in Hong Kong.
In fact, almost 90 per cent of our companies don’t need to pay any tax at all.
We also have free flows of capital and information. There is no restriction on investment or ownership of firms. Our common law legal system is underpinned by an independent judiciary and our civil service is clean and efficient. We like to cut through red tape at every opportunity.
These are some of the things that give Hong Kong its reputation as a level playing field for all businesses to compete on an equal footing. It has also earned our city its ranking as the world's freest economy for each of the past 18 years. That is according to both the US-based Heritage Foundation and the Fraser Institute in Canada.
Currently there are around 7 000 Mainland Chinese and foreign firms operating in Hong Kong. Many of the foreign companies use Hong Kong as their preferred base from which to reach the vast markets just across our boundary in Mainland China. For Mainland firms, Hong Kong is also a springboard to "go global".
Our city is the largest external investor in each and every province in Mainland China. At the same time, Mainland entities provide the largest source of external investment in Hong Kong. The total amount of this two-way investment at end-2010 was US$860 billion, which represents a huge financial commitment in each other's futures.
Fortunately, and perhaps inevitably, our seasoned entrepreneurs and professionals have acquired a great deal of expertise and know-how in doing business throughout our nation.
This brings me to the second area of my talk, connecting with Mainland China.
Under the principle of "One Country, Two Systems", Hong Kong enjoys all the advantages of a free and open business environment combined with close integration with Mainland China, the world's second largest economy.
We like to think of Hong Kong as a place where "global advantages" and "China advantages" converge.
The Mainland has taken huge strides in the reform and opening up of its economy over more than three decades. However, conquering a new and unfamiliar market is never easy for any business. Over the years, Hong Kong has fine-tuned its role as the premier international gateway to the Mainland.
Naturally, as a Chinese city, we have a deep understanding of the culture, language and ways of doing business in the Mainland. We have also worked hard to smooth out other potential obstacles in areas including financial, technical, marketing and branding development.
One of our biggest advantages is a free trade pact between Hong Kong and the Mainland. We call this the Closer Economic Partnership Arrangement, or CEPA. CEPA is unique because it is the only case of a city having a free trade pact with its sovereign. This is possible because, under "One Country, Two Systems", both Hong Kong and Mainland China are separate members of the World Trade Organization.
There are three main areas to CEPA: trade in goods, trade in services and trade and investment facilitation.
In broad terms, CEPA allows tariff-free entry of all products that qualify for the "Made in Hong Kong" label. This requires certain rules of origin to be met, which, in most cases is not a problem.
CEPA also offers enhanced access in 47 service sectors, including key sectors such as financial services, convention and exhibition services, transport and logistics and tourism, to name just a few.
Each year since its full implementation in 2004, CEPA has been expanded and strengthened to further break down cross-boundary barriers to trade and investment. We estimate that, up to the end of last year, the total amount of tariff savings brought about by CEPA amounted to US$426 million.
This is an ongoing and deepening commitment that is very relevant to Brazilian firms. CEPA is "nationality blind", which means that Brazilian firms incorporated in Hong Kong can enjoy the full benefits of this arrangement.
Our third area of connectivity relates to finance. As China's global financial centre, Hong Kong is the nation's financial front office for two-way investment.
There are several key avenues for Brazil to expand its financial connectivity with Mainland China and beyond, via Hong Kong.
One avenue is through our stock market. The Hong Kong Exchanges and Clearing Ltd is the sixth largest bourse in the world and the second largest in Asia. Market capitalisation is around US$2.5 trillion. That is larger than Singapore, Korea and Malaysia combined.
Over 40 per cent (42.8 per cent) of companies listed in Hong Kong are Mainland firms, which account for 55 per cent of total market capitalisation.
We are also attracting more overseas companies to launch initial public offerings, or IPOs, in Hong Kong. These include major international fashion houses from Italy (Prada), France (L’Occitane) and the US (Samsonite). Resources firms from Russia, Europe and Kazakhstan have also launched Hong Kong IPOs in the past few years.
I should also mention that Hong Kong has led the world in IPO funds raised for the past three years. Total IPO funds raised last year alone reached US$33 billion, so we must be doing something right!
Another way to take advantage of Hong Kong's location in the Asian time zone and links to wealthy investors in Mainland China and across Asia is through secondary listings or Hong Kong depository receipts. Brazilian mining firm Vale SA became the first overseas company to issue Hong Kong depository receipts in 2010.
Hong Kong is also front and centre in another exciting financial development, namely the rapid liberalisation of the Mainland currency, the Renminbi.
With our free flows of capital and information, strong international financial links and deep understanding of the Mainland's financial system, Hong Kong is the major centre for offshore Renminbi business.
An increasingly popular way for overseas firms to raise capital for operations in the Mainland is through Renminbi bonds. Hong Kong is the first and only place to have an offshore Renminbi bond market. These are often called "dim sum" bonds after a popular local dish in Hong Kong. Last year, there were 91 "dim sum" bond issues in Hong Kong. The total issuance value was almost RMB108 billion (RMB107.9 billion). I see good opportunities for Brazilian companies to raise Renminbi capital in Hong Kong to fund R&D activities or expansion in the Mainland.
Renminbi trade settlement is another effective mechanism for connecting with business partners in the Mainland. Since last August, Brazilian firms and companies around the world have been able to settle their trade with partners throughout the Mainland using Renminbi. Again, Hong Kong is at the centre of this financial action.
Last year, banks in Hong Kong handled 92 per cent of total Renminbi trade settlement. That amounted to over RMB1.9 trillion worth of trade. I encourage Brazilian firms to consider this option. Renminbi trade settlement reduces the additional costs and exchange rate risks of using a third currency. It is also attractive to Mainland partners who may prefer to use their own currency to settle foreign trade.
In closing, I will say a few words about a topic that is close to the hearts of people in Brazil as well as our friends back in Hong Kong. That topic is tourism, which is one of our four pillar industries alongside financial services, trade and logistics and professional services.
Last year, we welcomed over 42 million visitors to Hong Kong, which is about six times the size of our population.
In the past 10 years, visitors from South America have more than doubled while those from Brazil have more than quadrupled.
Although we cannot compete with Brazil's iconic beaches and rainforests and exquisite areas of vast open space, or even the Samba beat, Hong Kong has its own unique draw.
We have a culture which is part Western and part Eastern and a style that is uniquely Hong Kong.
We offer some of the most sought-after shopping and dining experiences in Asia and, similar to Brazil, the party never seems to stop in our top entertainment districts.
You may also be interested to learn that 70 per cent of Hong Kong is rural countryside with some magnificent secluded beaches and country parks. They are the "green lungs" of Hong Kong and a great escape from the hustle and bustle of the city centre.
We are also investing heavily in our tourism infrastructure. This includes a new cruise terminal. Once operational in 2013, the terminal will be able to handle the world's largest cruise liners and enhance our city's reputation as a cruise destination. We already have one of the best and busiest airports in the world, so getting into and out of Hong Kong is easy.
We would like to see more visitors from Brazil. Whether you come for a holiday or on business or with family or friends, there is plenty to keep everyone busy. I also encourage you to come and take part in some of our many annual trade fairs. That way you can combine business with pleasure.
No doubt you will be looking ahead to a huge influx of visitors in the next few years. So it just remains for me to wish Brazil every success in hosting the Soccer World Cup in 2014 and the Rio Olympic Games in 2016. I am sure both events will be a huge success.
Thank you very much.
Ends/Wednesday, April 18, 2012
Issued at HKT 01:43
NNNN
