2013 Policy Address by Chief Executive (2)
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II. Economic Development

19. Sustained economic growth is a prerequisite for us to tackle housing, poverty, ageing population, and environmental problems.  Promoting economic development is therefore the primary goal of the Government.  During my term, I am fully committed to the principle of keeping expenditure within the limits of revenues, and to maintaining a business-friendly environment with a simple and low tax regime.

Role of the Government

Appropriately Proactive Governance

20. To promote economic development, the Government must be "appropriately proactive".  The Government should refrain from intervention when the market is functioning efficiently, except to ensure a level playing field.  But in cases of market failure, the Government must take appropriate action to address the problem.  In the past six months, we have taken such actions in a proactive manner.  To address housing shortage, we have introduced and implemented the policy of "Hong Kong property for Hong Kong people" to give priority to the needs of local home buyers over non-Hong Kong residents.  We have also introduced the Buyer's Stamp Duty and, through administrative means, disallowed delivery bookings for expectant Mainland mothers with no ties to Hong Kong.  These measures are examples of "appropriately proactive" governance.  They have received public support and started to deliver results.

Economic Policy

21. There are currently two major trends in economic development.  First, the global economic gravity is shifting to the East.  Second, the implementation of the National 12th Five-Year Plan will usher in a new wave of development for the Mainland economy.

22. The National 12th Five-Year Plan explicitly supports Hong Kong in reinforcing and enhancing its status as an international financial, trading and shipping centre.  Over the past three decades, we have contributed significantly to the resounding success of the Mainland's reform and opening up.  Hong Kong has also benefited from this national achievement.  Our competitive edge, together with Government's "appropriately proactive" approach, makes Hong Kong well placed to diversify its industries to meet the needs of our people for start-up initiatives, investment, business operation and employment.  We must deepen and expand our industries.  For deeper development, we must play to Hong Kong's strengths to increase business volume.  To expand development, we must diversify the products and services of our existing industries, and identify new areas for development.

23. Our goal is to formulate a holistic industrial policy.  I will soon announce the establishment of the EDC.  From a high-level, cross-departmental and cross-sectoral perspective, the EDC will explore ways to make use of our long-standing advantages and the opportunities offered by our country.  It will focus on efforts to broaden our economic base, work on the overall strategy and policy to enhance our long-term development, and identify industries which present opportunities for Hong Kong's further economic growth.  Under the EDC, Working Groups on Transportation, Convention and Exhibition Industries and Tourism, Manufacturing Industries, Innovative Technology and Cultural and Creative Industries, and Professional Services will be set up to make concrete recommendations to the Government.

Economic and Trade Relations with the Mainland and Overseas Countries

Hong Kong and the Mainland

24. The Government will strengthen Hong Kong's external trade and economic co-operation.  For the Mainland, we will enhance G2G (Government-to-Government) co-operation and enhance our economic partnership with provinces and municipalities in the Mainland on all fronts.  Hong Kong will have a role to play as a "node" and part of a network for the Mainland.  By "node", I mean that Hong Kong will serve as an international financial centre and a business hub of our country.  As "part of a network", Hong Kong will foster its co-operation with other provinces and municipalities in the Mainland.  We will also take full advantage of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA).

25. I proposed in my Manifesto that a new joint working group be set up under CEPA.  We have reached consensus with the Ministry of Commerce on enhancing the existing mechanism for the implementation of CEPA by setting up an additional joint working group.  The Mainland side of the joint working group will be led by the Ministry of Commerce, with participation of relevant Central People's Government (CPG) ministries and municipal governments.  The Hong Kong side will be led by the Trade and Industry Department.  The joint working group will provide targeted assistance to sectors which have encountered relatively more entry barriers, according to the feedback from the sectors concerned, with emphasis on assisting small and medium enterprises (SMEs).

26. As neighbours, Hong Kong and Guangdong Province are mutually dependent and complementary to each other.  As such, there is far-reaching strategic significance in enhancing and deepening our co-operation.  The Government will seek to foster comprehensive co-operation between Hong Kong and Guangdong in the areas of finance, modern service industries, industry collaboration, international shipping, logistics, trade, convention and exhibition, tourism, environmental protection, building of a quality living area and social administration.  We will achieve this through different measures including ensuring effective implementation of CEPA and leveraging the early and pilot measures for Hong Kong service industries to tap the Guangdong market.  We will also take forward the Hong Kong/Guangdong Co-operation Framework Agreement.  In addition, we will promote better interface between the major transport infrastructure facilities of Hong Kong and Guangdong.

27. The CPG has adopted the "early and pilot implementation" approach in Guangdong Province to improve our service industries' access to the Mainland market.  This policy has proved successful in assisting Hong Kong in better capitalising on its advantages as a platform to provide funds, talents and technology to the Mainland.  During my duty visit to Beijing last month, I proposed to the CPG that this approach be extended beyond Guangdong Province to other provinces and municipalities in the Pan-Pearl River Delta region.  The proposal received positive feedback from the CPG.  We will take forward the proposal with the relevant CPG ministries and provinces as soon as possible.

28. Currently, the Government has four offices in the Mainland: in Beijing, Guangdong, Shanghai and Chengdu.  To take advantage of the rapid economic development in the Mainland's central region, we propose to set up another Economic and Trade Office (ETO) in Wuhan.  We are also looking into the feasibility of setting up liaison offices in various other cities.

29. Meanwhile, I have requested our Mainland offices to enhance their functions.  First, every office will have dedicated staff to strengthen liaison with Hong Kong people and groups in the Mainland, and provide them with information and assistance as far as possible.  Second, a new Immigration Division will be set up in the Chengdu ETO, in addition to those in our Beijing Office and the Guangdong ETO.  Third, we will step up our efforts in conducting policy research and gathering data related to Hong Kong people in the Mainland to better gauge their situation and service needs.  We will also analyse the opportunities and challenges for Hong Kong people arising from national policies.  Fourth, to strengthen "homeland relationship", we will enhance communication and publicity targeted at all sectors in the Mainland.  In parallel, to provide stronger assistance to Hong Kong people and enterprises in the Mainland, we will study ways to rationalise the working relationships between the offices of the HKSAR Government and those of statutory bodies, including the Hong Kong Trade Development Council and Hong Kong Tourism Board, in the Mainland.

30. We will re-organise the Greater Pearl River Delta Business Council.  The Council will be renamed the "Consultative Committee on Economic and Trade Co-operation between Hong Kong and the Mainland".  Its expanded terms of reference will cover economic and trade issues between Hong Kong and all regions in the Mainland.  It will make policy proposals and suggest implementation strategies for strengthening economic and trade co-operation between Hong Kong and the Mainland, including measures to assist Hong Kong enterprises in tapping the Mainland market.

Hong Kong and Overseas Countries

31. Hong Kong is an externally-oriented economy.  The Government will maintain ties with our trading partners and related international organisations around the world in order to expand our markets.  We will strengthen economic and trade exchanges with emerging markets and participate actively in the World Trade Organisation's negotiations to create a more favourable trade environment.  We will also endeavour to enter into more free trade agreements with our trading partners.  We are seeking to join the China-ASEAN Free Trade Area so that our goods, services and investments can access the ASEAN market under more favourable conditions.

32. We will also pursue Investment Promotion and Protection Agreements with overseas countries.  This will help secure better protection of overseas investments by Hong Kong business people and attract foreign investors to Hong Kong.  We have agreed with Russia and Chile respectively to negotiate such an agreement and will strive for early conclusion of the negotiations.

Development of Industries

33. I will now highlight the development of some major industries.

Financial Services Sector

34. The National 12th Five-Year Plan specifically states our country's support for Hong Kong's development as an offshore Renminbi (RMB) business centre and an international asset management centre.  Under "One Country, Two Systems", Hong Kong is an ideal "testing ground" for steady market reforms of our country's interest rate and exchange rate regimes, and its gradual realisation of the RMB capital account convertibility.  In the space of just a few years, Hong Kong has become the largest and most liquid RMB business centre outside the Mainland.  We will consolidate and expand our offshore RMB business, especially in the areas of cross-border RMB trade settlement, and issuance of offshore RMB bonds and securities products.

35. The Asian region has seen the fastest wealth growth globally.  We will consolidate our leading role as the asset management centre in the Asia-Pacific region, and strive to develop Hong Kong into a more comprehensive fund and asset management centre.

36. While consolidating our traditional strengths, such as providing a platform for initial public offerings, we will also look out for new growth areas, one of which is the development of the commodity futures market.  Hong Kong is also set to play a crucial role in the internationalisation of the Mainland's commodity futures market, given the Mainland's huge demand for commodities and the gradual internationalisation of its commodity futures trade.

37. In order to achieve these targets, I will establish the FSDC as proposed in my Manifesto immediately.  It will provide a high-level and effective platform for stakeholders to explore ways to complement the internationalisation of the financial market of our country.  It will also help facilitate the further development of Hong Kong's financial services industry, including advising the Government on areas related to diversifying the financial services industry and enhancing Hong Kong's position and functions as an international financial centre of our country and in the region.

Business and Professional Services

38. CEPA provides preferential treatment for our business and professional services sector to enter the Mainland market.  To achieve the goal of basically liberalising trade in services between the Mainland and Hong Kong by the end of the 12th Five-Year Plan period, the Government and the relevant CPG ministries have embarked on studies with a view to formulating as soon as possible a specific work plan.  The further opening up of the Mainland's services market to Hong Kong will facilitate our businesses and professionals to expand their presence in the Mainland.

39. "One Country, Two Systems", the rule of law and the advantages of CEPA stand Hong Kong in good stead in promoting arbitration and mediation services.  The International Court of Arbitration of the International Chamber of Commerce, the China International Economic and Trade Arbitration Commission and the Hague Conference on Private International Law have all set up their regional offices in Hong Kong.  We will strive to further attract suitable international legal organisations as well as arbitration and mediation institutions to set up offices in Hong Kong.  This will enhance our position as a legal services hub in the Asia-Pacific region and strengthen our role as an international legal services centre, in turn promoting our economic development.  Apart from recently forming the Steering Committee on Mediation, the Department of Justice will vigorously promote our arbitration and mediation services in the Mainland and abroad through various channels.

International Shipping Centre

40. In the National 12th Five-Year Plan, the CPG has made clear its support for Hong Kong to reinforce and enhance its status as an international shipping centre.  I would like to emphasise that the concept of "shipping centre" covers both aviation and maritime transport.  We will continue to improve our aviation, maritime and land transport facilities and their connectivity, and reinforce and enhance Hong Kong's role as a regional hub for passenger and cargo traffic.

41. We will build on the strengths of our existing terminal business to develop our international maritime services.  The business environment in Hong Kong is highly globalised with a sophisticated financial system, robust legal system and deep pool of well qualified professionals.  The development of affiliated maritime services in Hong Kong has been gaining momentum in recent years.  These include ship management, shipping agency, ship finance, marine insurance, ship registration and legal services.  We will take account of recommendations in a consultancy study to be completed later this year as we seek to reinforce the maritime service cluster and develop high value-added maritime services.  This is an example of how we may "expand" our industries.

Industries Where Hong Kong Enjoys Clear Advantages

42. When the previous-term Government suggested promoting the six industries where Hong Kong enjoyed clear advantages, the proposal gained support from the community.  In promoting the industries over the past four years, we have identified certain issues that need to be addressed.  For example, our medical sector is facing manpower shortage, and the public is divided as to whether education services should be regarded as an industry.  The need to meet local demand also clashes with the need to promote the growth of these two industries.  The EDC will review the overall industrial development strategies and policies in order to draw up relevant proposals.

Innovation and Technology Industries

43. We attach great importance to the significant contribution of innovation and technology to the development of the economy and industries.  There are a number of drivers for technological innovation in Hong Kong, including our rule of law, internationally acclaimed universities and sound intellectual property rights protection.  The Government will focus on the development of the highly competitive sectors of the innovation and technology industries in light of Hong Kong's strengths.  We will provide software and hardware support; foster co-operation among the Government, industry, academia and research sectors; forge closer collaboration with the Mainland; and inject additional resources when necessary.  All these will be conducive to the commercialisation of research and development results, which will in turn give impetus to the development of the industries.

44. In the National 12th Five-Year Plan, development of innovation and technology is elevated to a very important strategic level with explicit support given for Hong Kong to develop emerging industries.  We must seize the opportunity to build more platforms for enhanced scientific research collaboration between the Mainland and Hong Kong, so as to help the Mainland's technological enterprises to "go global" and attract foreign investment.  This will also entice more technology enterprises to set up offices in Hong Kong.

45. Universities have always been a major cradle of innovation and technological development.  We will work with them to promote their research and development results.  We are examining the future positioning of the patent system in Hong Kong, and will map out the way forward in the near future.  We also plan to set up a working group to study the overall strategy for promoting Hong Kong as a hub for intellectual property trading.  The working group will comprise Government representatives, industry stakeholders, and experts from different fields.

Testing and Certification Industry

46. Testing and certification is an industry with good development potential and a sector where we enjoy a clear advantage.  Over the years, the industry has established a good foundation, based on a robust accreditation system, high professional standards and an excellent reputation.  CEPA provides another favourable factor for the industry in that it allows testing laboratories in Hong Kong to undertake testing in collaboration with designated Mainland certification bodies of products processed in Hong Kong for the China Compulsory Certification System.  All these make Hong Kong well positioned to develop into a major testing and certification centre in the region.

47. The Government will focus promotion efforts on six selected industries with potential demand for testing and certification services, namely, Chinese medicine, construction materials, food, jewellery, environmental protection and information and communications technologies.

Development of Small and Medium Enterprises

48. SMEs are the pillar of our economy.  With the support of the Small and Medium Enterprises Committee, we have launched various multi-level support programmes for SMEs in different areas, such as loan guarantee, expanding export markets, export credit insurance, upgrading and restructuring, brand development, start-up support, technology research and development, and patent application.  The Hong Kong Productivity Council set up the "SME One" in 2012 to promote these programmes and explain programme details to SMEs.  We will continue to strengthen our communication with SMEs and render them more support in a timely manner.  SMEs have massive potential in tapping the Mainland market but often encounter obstacles in doing so.  We will attend to this priority issue.  The Government will continue to help SMEs tap the Mainland market by various means, including effective use of the Dedicated Fund on Branding, Upgrading and Domestic Sales, and supporting Hong Kong business associations in establishing sales and promotion venues in the Mainland for building the Hong Kong brand.

(To be continued)

Ends/Wednesday, January 16, 2013
Issued at HKT 11:30

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