Speech by the Secretary for Trade and Industry,
Miss Denise Yue, at the General Assembly of the Intercontinental Group of Department Stores

Monday, November 10, 1997

Ladies and Gentlemen,

I am delighted to have this opportunity to welcome so many top level executives of major department stores worldwide to Hong Kong, for the 51st General Assembly of the Intercontinental Group of Department Stores. Nineteen ninety-seven is a very special year for Hong Kong because we are reunited with China. And I am pleased that the IGDS have chosen Hong Kong for their 1997 assembly meeting.

Department stores are an essential infrastructure for shopping. And shopping is not only a favourite pastime of, but a must to, modern day living. Over the last century, we saw the evolution of shopping facilities, from the most basic bazaars and markets in the open, to shops, department stores, chain stores, satellite shops housed in shopping malls, mail order and virtual shopping through the Internet. This evolution process notwithstanding, people's liking for shopping at department stores has remained consistent. The reason is simple, nowhere can one find a richer and more stimulating collection of consumer products than in a department store.

We enjoy shopping in department stores not just because of the comprehensiveness of their product coverage, the convenience of a one-stop facility, but also the ambiance, in particular, the clean and bright environment, the colourful display, and the courteous customer service.

Shopping is one of the most popular activities in Hong Kong. It has become an integral part of our social life as we become more affluent. According to a World Bank study, Hong Kong's per capita income was US$24,600 in 1996, amongst the top ten in the world. According to the World Competitiveness Yearbook of 1997, Hong Kong ranked 15 in the world's retail sales on a per capita basis, reaching US$4,254, second only to Japan in Asia. The tourist industry also contributes to our flourishing retail business. For the 10 million or so tourists who visit Hong Kong each year, shopping is high on their list of things to do in Hong Kong.

In 1996, there were over 20 medium to large department stores in Hong Kong, owned by local, mainland Chinese and overseas investors. Competition is extremely keen, which is good for the consumers, but also good for the department stores as competition induces them to achieve greater productivity and higher standard of service. This is also why tailor-made software packages on ordering, invoicing, inventory keeping, delivery and payment; and modern management techniques are the order of the day for the successful department stores.

As consumers in Hong Kong become more sophisticated, we have seen, especially in recent years, some radical transformation of the style of department stores. For example, in addition to their main-stream operation, we have seen specialty corners inside department stores, catering for niche markets such as the youth, the food connoisseurs, etc. The movement of population from the crowded old districts to the new towns has also induced department stores in Hong Kong to expand beyond the traditional shopping areas to the new towns, and the shopping complexes in major housing estates, offering more opportunity for the retail business.

Department stores are an important facet of the retail sector, and the retail sector is an important contributor to the economy of Hong Kong. The retail and wholesale industry is the second largest service sector in Hong Kong in terms of sales turnover, number of establishments and employment. In 1996, the retail sector alone employed some 200,000 people in some 52,000 establishments. Total sales reached US$28.7 billion last year.

As I see it, the robust retail sector is engendered by Hong Kong's free and open business environment, in particular, by the provision of a level playing field where foreign and local investors are treated exactly alike; by the absence of any restriction on the right to establish retail operations in Hong Kong; by our free port policy where no tariffs are levied on imports and no non-tariff measures are imposed to restrict the import of merchandise; and by the absence of any sales tax in Hong Kong.

On top of these, our tax regime is one of the lowest and simplest in the world - profits tax at 16.5 per cent only. And there is no restriction on foreign exchange. The excellent and cost effective physical and telecommunications infrastructure guarantees quick delivery of goods and keeping up with world market trend. Linkage support is also adequate in terms of customised information package, merchandising, advertising, creative design and market research.

The retail industry in Hong Kong also benefits from Hong Kong's role as the gateway to Mainland China. Mainland China is gradually opening its retail market to foreign investment at designated cities in the form of joint ventures with import rights. For these ventures, the local partner being the licence holder will provide floor space, while the foreign partner will contribute capital and management expertise and be responsible for day-to-day supervision of the retail establishments. Mainland China particularly welcomes the development of chain stores which will enable it to develop economies of scale for sourcing and distribution, to unify quality standards and promote the development of branded products. Department stores having business experience in Hong Kong are well-placed to tap these opportunities.

Notwithstanding the recent financial turmoil, Asia remains the highest economic growth region in the world. In the medium term, the spending power of almost half of the world's population will continue to rise, generating an insatiable shopping demand for department stores to meet. I am confident that the many department store representatives present this morning will not let this opportunity slip from your fingers.

Finally, I would like to take this opportunity to wish you all a very productive year ahead. Likewise, I would also like to wish the 1997 General Assembly of Intercontinental Group of Department Stores every success, and all of you a fruitful and pleasant visit to Hong Kong. Thank you.