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Following is the speech by the Financial Secretary, Mr John C Tsang, at the London Business School in London yesterday (November 19, London time):
Sir Andrew (Likierman), distinguished guests, students, ladies and gentlemen,
Good afternoon.
It's my great pleasure to meet with you here at the London Business School (LBS).
First of all, a heartfelt "thank you" to the Asia Club for organising this get-together, and I thank you all for coming.
I, too, have experienced the pressures of university life, albeit a long time ago, and so I really do appreciate that you are giving up valuable study time to be here, and join our discussion on Hong Kong today.
I also suspect that one or two of you may simply be here as an excuse to skip this afternoon's accounting class.
Whatever your motivations are for coming, I can assure you that you won't be disappointed. While I cannot guarantee that you will find my talk any more interesting than scrutinising profit and loss statements, I can guarantee that Hong Kong does, and will continue to offer exciting opportunities for business and finance professionals from LBS, and elsewhere around the world.
Hong Kong's successful formula for business is relatively straightforward. It is a strategy based on low taxes, high efficiency and a firm commitment to the rule of law.
For us, low and simple tax means a top salaries tax rate of 15 per cent calculated on a progressive scale and a flat profits tax fixed at 16.5 per cent. And that's all. In Hong Kong, we have no capital gains tax, no inheritance tax. We have no VAT, no GST. And in 2008, I even eliminated duties on wine and beer. You are right in guessing that that was a really popular initiative for all concerned, but it has also proved to be a highly effective incentive for Hong Kong to become the hub for international wine trade in Asia.
Over many decades, Hong Kong has been a particularly familiar and lucrative hunting ground for UK companies in Asia. Both English and Chinese are official languages in Hong Kong, with English being the predominant language of international business. Our common law system is based on the English system and underpinned by an independent judiciary. Hong Kong people cherish their personal and economic freedoms including free flow of capital, ideas and information, liberal immigration regime and an unfettered media.
All this has served Hong Kong well for many decades and continues to do so under the principle of "One Country, Two Systems". In the 16 years since Hong Kong's reunification with Mainland China, our city has continued to be ranked the world's freest economy by both the Heritage Foundation and the Fraser Institute. We are also recognised as the most competitive economy in Asia by the 2013 Institute of Management Development World Competitiveness Yearbook.
This seems good for Hong Kong, but in a fast changing world, it is not good enough. To borrow the words of the late American businessman Peter Drucker, "Standing still is the fastest way of moving backwards in a rapidly changing world." End quote.
Nowhere is the business world changing faster than in Asia. We have the rapid growth of Mainland China with its expanding middle-class and increasingly urbanised population. We have some of the most exciting emerging economies, such as Thailand and Malaysia, as well as dynamic, new markets with untapped potential, including Myanmar and Cambodia.
I would like to share with you some of the ways that Hong Kong is moving forward to capture the opportunities in our region – and we would like you to come and join the ride with us.
First of all, we are expanding Hong Kong's capacity as an international business and financial centre.
To make room for more companies, we are developing a whole new world class Central Business District (CBD) in the area of Kowloon East, which includes the site of our old Kai Tak airport. This area will provide an additional 4 million square metres of office space, which is double the amount of office space available now in our traditional CBD in Central.
We are planning to expand the Hong Kong International Airport by building a third runway and supporting facilities to cope with future demand. Cross-boundary infrastructure projects under construction include a 29 kilometers bridge-cum-tunnel link, connecting Hong Kong to the western part of the Pearl River Delta. And we are building the Express Rail Link that will plug into the high-speed rail network in the Mainland when it's completed in 2015. These projects will expedite our connection to new markets in China, and make Hong Kong an even more efficient trade and logistics centre.
In terms of "soft" infrastructure, we have a unique free trade pact with China called CEPA. This arrangement is the only case in the world of a city having such an arrangement with its own nation. It is made possible because Hong Kong and China are separate customs territories and separate members of the World Trade Organization under "One Country, Two Systems". CEPA is important because it gives preferential treatment for Hong Kong companies to access 50 services areas in the Mainland. It also contains over 400 liberalisation measures and provides Hong Kong-made products with tariff-free access to Mainland markets. The good news for foreign firms incorporated in Hong Kong is that they can all enjoy the full benefits of CEPA under our nationality neutral principle.
These are some of the reasons that almost 1 000 British firms have operations in Hong Kong, and more than half of these companies conduct their regional operations from our city.
As China's global financial centre, we have been at the forefront of the internationalisation of the Mainland currency, the Renminbi. This is one of the most exciting developments for international finance today. Hong Kong is the chief offshore Renminbi centre with the largest pool of Renminbi liquidity outside the Mainland. In the first nine months of this year, banks in Hong Kong handled about 80 per cent of total offshore Renminbi payments amounting to some RMB 3 trillion.
A strong focus of my trip to London and Paris this week is to discuss ways for our cities to collaborate more closely on promoting the Renminbi as an international currency. At the same time, we keep in close touch with the Central Government in Beijing to develop new Renminbi-denominated financial products for investors to expand their portfolios and finance their China operations using Renminbi.
Other new initiatives for our financial services include amending our tax laws to facilitate the development of Islamic finance in Hong Kong, particularly Islamic bonds or sukuk. We have also amended our trust laws, which will become effective on December 1, to develop the trust services industry in Hong Kong. We shall also launch an enhanced competency framework for our burgeoning private banking sector.
These are some of the ways that Hong Kong is moving forward amid Asia's rapidly changing business environment.
Yet, it still is not good enough for us. To maintain our competitive edge as a truly international business and financial hub, we need to attract the best and brightest talents to come to Hong Kong. We have great business opportunities, no doubt about it. But let's be honest, besides working hard, we still want to have a good time too. And Hong Kong can offer precisely that healthy balance that you seek. You will be able to find some of the best shopping areas, restaurants and nightlife on the planet in Hong Kong, but at the same time, country parks and amusement parks are easily accessible where you can relax and enjoy the great outdoors.
Ladies and gentlemen, I have mentioned a couple of the world rankings that highlight Hong Kong's strength as a free, open and competitive environment for business. So it is probably only fair that I congratulate LBS on being ranked ahead of INSEAD in the latest FT Global MBA rankings.
I should also mention that I shall be returning to Hong Kong on Friday to do some accounting work of my own as I begin to prepare my Budget for the 2014-15 financial year. This will be my seventh budget, and I can assure you that creating more opportunities to do business in Hong Kong will be among the top priorities in my deliberations.
So do take a fresh look at the exciting prospects in Hong Kong for business and financial professionals, such as yourselves, and I look forward to welcoming you to Hong Kong.
Thank you very much.
Ends/Wednesday, November 20, 2013
Issued at HKT 09:56
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