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Following is the speech delivered by the Financial Secretary, Mr John C Tsang, at the Hong Kong Economic and Trade Office - Hong Kong Trade Development Council Business Luncheon in Phnom Penh, Cambodia, today (June 25):
Dr Prasidh, distinguished guests, ladies and gentlemen,
Good afternoon.
It's a great pleasure for me to be here in Cambodia. I would like to thank first of all the Hong Kong Trade Development Council (HKTDC) and our Economic and Trade Office in this region on co-hosting this luncheon. But most of all, my thanks to all of you for coming to this important event.
Your interest in Hong Kong is encouraging. Here in Phnom Penh we are in the right place at the right time to discuss the great opportunities for economic co-operation in our region.
On that note, I would like to begin by expressing our gratitude to Cambodia for its full support of Hong Kong's ambitions to play a fuller role in the economic development of the ASEAN region.
Cambodia's support of an ASEAN-Hong Kong Free Trade Agreement (FTA) shows that we are all on the same page when it comes to seizing the opportunities from free and open trade. In particular, an ASEAN-Hong Kong FTA will enable our city to contribute even more deeply to the economic integration of our region in two specific areas.
First, we shall be able to better share our advantage as a reliable and efficient gateway to the Mainland of China for trade and investment. Second, Hong Kong is keen to share its competitive edge as an international business and financial centre that is consistently rated as the world's freest economy.
I believe that Hong Kong has a great deal to offer Cambodian businesses and a great deal to contribute to the future development of this region.
Hong Kong entrepreneurs are among the earliest and most prolific investors in Cambodia. They bring not only capital investment to Cambodia but also a great deal of experience in manufacturing, in developing effective supply chains, in adopting new technologies and in identifying new growth opportunities.
We also have the HKTDC, which is active in connecting the business community in Hong Kong to partners here in Cambodia. In March this year, the HKTDC led two highly successful trade missions to Cambodia for the logistics and manufacturing sectors respectively.
Cambodia can make good use of Hong Kong's services expertise in these and other areas.
Today, I would like to share with you the characteristics that make Hong Kong the world's freest economy and how these characteristics have helped not only Hong Kong, but also the Mainland of China to grow and develop at a fast pace. I believe these characteristics will help Cambodia as well.
I shall also highlight areas where Cambodia can take full advantage of Hong Kong's position as a connector linking Cambodian entrepreneurs to the opportunities in Mainland China and around the world.
I think, first of all, you would like to know what makes Hong Kong the world's freest economy.
The most important thing, I believe, is our mindset. We have a long-standing commitment to promoting open borders and open minds. Hong Kong, throughout its history, has been a magnet for trade. The freer the trade, the better for Hong Kong. This has been our experience.
The Government's role is to facilitate business by reducing red tape, ensuring fair play and upholding the rule of law. For the most part, we leave our business people to do what they do best, business.
We maintain a low and simple tax system. For us, low taxes means profits tax of 16.5 per cent flat rate while the top rate for salaries tax is 15 per cent. There is no inheritance tax or capital gains tax in Hong Kong. We have no VAT or GST and only income sourced in Hong Kong is taxed in Hong Kong.
To maintain our transparency as a low-tax location, we have established a network of Comprehensive Avoidance of Double Taxation Agreements with over 20 jurisdictions worldwide.
We have an efficient and robust regulatory environment which makes it easy and fast to set up a business in Hong Kong. In most cases this can be done in just a day or two, with no minimum capital requirement.
We are a duty-free port, which also helps to save valuable time and administrative costs. Our financial sector is well-capitalised and highly competitive. We have free flows of capital and information. Our common law system is underpinned by an independent judiciary. We also welcome more international firms, including Cambodian companies, to come to Hong Kong and make good use of the spectrum of services that we provide.
These are some of reasons that Hong Kong is consistently rated as the world's freest economy by both the Heritage Foundation in the US and the Fraser Institute of Canada. Hong Kong is also one of the easiest places on earth to do business. We rank number two in the World Bank's latest ease of doing business index.
All this has attracted over 7,200 companies from the Mainland of China and overseas to establish operations in Hong Kong. Over half of these firms use our city as a base for their regional operations by setting up regional headquarters or regional offices.
This commitment to free and open trade has also helped Hong Kong contribute to and benefit from the opening up and reform policies of Mainland China since the late '70s in the last century.
In a relatively short span of 35 years, Mainland China has emerged as the world's second largest economy with huge fiscal reserves. Over the past three decades, Hong Kong has used its free trade experience and international connectivity to support the Mainland's opening up to the world. On the one hand, Hong Kong is the largest investor in Mainland China. On the other hand we provide a launch pad for Chinese companies and brands to go global.
In the past 16 years since Hong Kong's return to China under the principle of "One Country, Two Systems", our cross-boundary integration has gathered pace. Today, we have an initiative for pilot measures with our neighbours in Guangdong Province to fast-track the flow of investment, goods, services and innovation to and from the Mainland.
We are working to achieve full liberalisation in services trade with Guangdong by next year. We are also working with the Central People's Government to extend the pilot measures initiative beyond Guangdong Province to include the entire Pan-Pearl River Delta region which covers about one third of the nation's population and contributes about a third of the nation's GDP.
As a free and open economy, it is our mission - indeed, our responsibility - to share these advantages with our nation.
Perhaps the most vivid example of our role in China's development is currency liberalisation. Hong Kong, with its open capital markets, transparent regulation and international standards, is the best testing ground for the internationalisation of the Mainland currency, the Renminbi.
The first offshore Renminbi banking services were launched in Hong Kong in 2004. The first offshore Renminbi bonds were issued in Hong Kong in 2007. And in 2009, Hong Kong was the first place to conduct offshore trade settlement using Renminbi.
In a sign of strong support from the Central Government, the Ministry of Finance recently announced that it would issue RMB23 billion worth of sovereign bonds in Hong Kong this year in two phases. The first issue of RMB13 billion worth of bonds will take place tomorrow in Hong Kong. This will be the fifth such issuance by the Ministry of Finance so far.
Cambodian firms can take advantage of Hong Kong's position as an offshore Renminbi centre to raise capital by issuing Renminbi bonds or settle trade with Mainland business partners using Renminbi. Cambodia's financial institutions can build up their Renminbi portfolios and offer a range of Renminbi products to their clients.
Because Hong Kong strives to maintain a level playing field for business, local companies, Mainland China firms and foreign enterprises are able to compete on an equal footing side by side.
Cambodian companies incorporated in Hong Kong can also enjoy the same benefits as local firms from our unique free trade pact with our nation. This is called the Mainland and Hong Kong Closer Economic Partnership Arrangement, or CEPA for short.
CEPA provides tariff-free access to Mainland markets for goods that carry the "Made in Hong Kong" label. In most cases, meeting the rules of origin criteria is relatively straightforward. Also under CEPA, Hong Kong-incorporated firms enjoy preferential treatment in accessing 48 services areas in the Mainland.
Since CEPA was launched in 2003, over HK$50 billion worth of goods have received tariff-free treatment. This has saved companies a total of some HK$3.5 billion in tariffs. Please do investigate ways that CEPA can benefit your companies.
Ladies and gentlemen, similar to the Mainland of China, Cambodia has also experienced the benefits, and overcome the challenges, of shifting to a market-driven economy. As a member of the World Trade Organization and ASEAN, Cambodia is an important part of the new post-financial crisis economic landscape.
After 7.2 per cent GDP growth last year, the Asian Development Bank forecasts Cambodia's economy to continue to grow at a strong rate of 7.2 per cent this year and 7.5 per cent next year. This is a similar growth forecast to that for Mainland China.
Hong Kong is a reliable and efficient link between these two robust economies. Last year, about HK$6 billion worth of trade, representing about 26.5 per cent of total trade by value between Cambodia and Mainland China, was routed through Hong Kong.
Hong Kong business people are already well connected here in Cambodia. They bring to Cambodia not just financial investment but also a great deal of expertise in connecting Cambodia to the business opportunities in Mainland China through Hong Kong.
With your support, we look forward to successfully negotiating an ASEAN-Hong Kong FTA in the months ahead. In the meantime, we shall continue to strengthen links with Cambodia and promote free and open trade in our region.
This will benefit you and your companies. It will benefit your employees and their families. And it will help to make our region an even more vibrant and competitive place to do business.
Thank you very much.
Ends/Tuesday, June 25, 2013
Issued at HKT 17:45
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