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Following is a speech by the Secretary for Commerce, Industry and Technology, Mr Joseph W P Wong, at the HKSAR 10th Anniversary Symposium organised by the Japan/HK Business Co-operation Committee and HK/Japan Business Co-operation Committee in Tokyo today (May 31):
Chairman (Kunio) Suzuki, Chairman (Victor) Fung, ladies and gentleman,
I want to begin by expressing my gratitude to the Japan/Hong Kong Business Co-operation Committee and the Hong Kong Japan Business Co-operation Committee for organising this event -- and to all of you for joining us today.
Japan and Hong Kong have strong economic and cultural connections dating far back. Many companies from this city and indeed the whole of Japan are active in Hong Kong – and vice versa. And many Hong Kong people, myself included, count Japan as our favourite holiday destination, and at the same time, more than a million Japanese citizens visit Hong Kong each year.
Japan has contributed substantially to Hong Kong's growth and success. We have a long history of trade and investment in both directions. Our total trade reached some JPY5.8 trillion (HK$388 billion) in 2006. In fact, Japan was our third largest trading partner in 2006 and the second after Mainland China among Asian economies. Reciprocally, we are your sixth largest trading partner.
But bilateral trade is only a very small part of the Hong Kong/Japanese tie. The 26,000-strong Japanese community in Hong Kong, one of the largest expatriate communities, has been involved in business and professional organisations, charities, sports and other areas that have helped make Hong Kong a better place to live and work.
Introduction to Hong Kong
Let me now talk what opportunities that Hong Kong, and its hinterland in the Mainland of China can offer to Japanese and other international companies.
Hong Kong has come a long way since the British took it over 100 years ago when it was a "barren rock". We started as an entrepôt, then became a manufacturing base and prospered as such after the Second World War. We are still number 11 among the world's largest trade in goods economies, and number six if we count EU as one entity, mainly due to our enormous re-export trade with Mainland China.
But we have also developed into an important service-based economy -- accounting for over 90% of our GDP; and we are an international centre of commerce, finance and transportation, both passenger and cargo.
As a result, Hong Kong is attracting more investment, and more business than ever before.
Healthy economy
During 2006, our real GDP increased a very healthy 6.8% from 2005, and rose another 5.6% in the first quarter of this year. Forecasts remain favourable: around 4.5-5.5% this year.
Foreign investment has been particularly strong. Inflows of foreign direct investment (FDI) to Hong Kong in 2005 amounted to JPY1.97 trillion (HK$131.7 billion) -- second to Mainland China in Asia and one of the highest in the world.
These numbers underscore Hong Kong's strong appeal to a growing number of international companies, not just to operate in Hong Kong but also as a platform to reach Guangdong, the rest of the Mainland, as well as the Asia-Pacific region.
In addition, the number of regional operations in Hong Kong has continued to expand, demonstrating that Hong Kong remains the preferred base in Asia for foreign and Mainland companies to oversee their regional businesses. As of June 1, 2006, there were more than 3 800 companies which have set up regional headquarters or regional offices in Hong Kong, of which 731 are Japanese (212 regional headquarters, 519 regional offices).
Japanese investment in Hong Kong
The 731 Japanese companies in Hong Kong are a vibrant and diverse group, including the construction, securities aviation, IT sectors.
And there are more coming all the time. For example,
* Nissho Electronics, an Integrated IT solutions provider opened its regional headquarters in Hong Kong last year. To quote from a senior executive of the company, "the advantageous location of Hong Kong in the heart of the Asia Pacific rim will enable the company to conveniently access the markets where we have established our trading business, including South China, Taiwan and Singapore".
* Prime Polymer Co, the largest polyolefin producer in Japan, established a sales company in Hong Kong earlier this year to market in China and the rest of the region. They cited Hong Kong's excellent location and accessibility to the Mainland and other Asian markets, the availability of vital information for their business and the high quality workforce.
* Mine Sushi, a well-known sushi restaurant from Kumamoto (Kyushu), established its presence in Hong Kong because of our "cosmopolitan character and receptivity to different kinds of food". They will use Hong Kong as a base for all expansion outside of Japan. They chose Hong Kong.
These companies came to Hong Kong because they are convinced that it is the place for their line of business, and because Hong Kong is the best place in the world for doing business.
Hong Kong's competitive advantages
Why is Hong Kong doing so well in attracting Japanese and other foreign companies?
We have successfully preserved and strengthened our competitive advantages since our reunification with the Motherland in 1997. The unique "One country, two systems" is working well in the Hong Kong Special Administrative Region. All these factors that have made Hong Kong such an attractive place for foreign investors down the years -- rule of law; clean governance; a simple, low tax regime; unfettered flow of information and capital; level playing field; lack of government interference -- remain intact.
Let me also mention two specific distinctive competitive advantages. One is the "clustering" of professional services. We have more than 400 financial institutions and banks, probably more than any other place in the region except Japan. It is not just banks; there are lawyers, accountants, and all other support services that you need to manage your business in the region.
Another specific competitive advantage is in our hardware. Our efficient roads, railways, telecommunications network, airport and port are unrivalled in this region.
At a more personal level, Japanese and other foreign investors bringing their families will feel comfortable in Hong Kong which, like Japan, is one of the safest places in the world. We offer a year-round feast of exciting social, cultural and recreational activities. Expatriate children can choose among more than 50 international schools – including the excellent Japanese International School which was established for nearly 40 years and offers a comprehensive programme based on the Japanese education system. The fact that many Japanese find the adjustment to life in Hong Kong so smooth has something to do with the cultural mix they find in our city.
The Guangdong connection
I now turn to what I call the Mainland advantage. Hong Kong is blessed because of where we are. We are in the heart of Asia, which makes us the natural hub for doing business in Asia as a whole – and at the heart of the Pearl River Delta (PRD), the most economically dynamic region in China.
The interaction of Hong Kong and Guangdong Province, particularly in the PRD, has contributed greatly to prosperity on both sides of the boundary. This combination has resulted in the PRD developing into one of the world's leading manufacturing centres – with its clusters of industries and services reinforced by a continuous stream of start-ups and numerous small and medium enterprises. Each day, more than JPY36.4 billion (US$300 million) worth of goods are produced by thousands of factories in this region, some of which are still owned by Hong Kong enterprises.
During the past quarter century, Hong Kong and Guangdong Province have combined and leveraged our respective strengths to develop one of the world's most efficient and cost-effective manufacturing supply chains.
We provide the capital, management, technology, market knowledge and access to international markets while PRD cities offer world-class cost-effective manufacturing, and access to a new, demanding consumer base.
Pan-PRD
Since 1997, we have set our eyes beyond Guangdong and are now working more closely with the other provinces in the southern part of China. The Pan-Pearl River Delta (Pan-PRD) Regional Co-operation and Development Forum – begun in 2004 and encompassing China's nine Southern provinces, Hong Kong and Macau -- is a high priority for our Government as we work towards a unified and open market in this region.
Making up one-fifth of China's land mass, the Pan-PRD has grown exponentially over the past few years. It has a combined population of 450 million -- which is as big as the EU -- and GDP of JPY83 trillion (US$684 billion) – which is more than 40% of China's total output and larger than most of the world's economies.
The CEPA factor
And for the whole of Mainland China, Japanese and other international companies in Hong Kong are benefiting from the Closer Economic Partnership Arrangement (CEPA), essentially a free trade pact between two autonomous trading partners within the same nation, which came into effect on January 1, 2004. It represents one of the most significant steps we have taken to increase and enhance economic flows between Hong Kong and the Mainland.
CEPA covers three areas: trade in goods, trade in services, and trade and investment facilitation. It is WTO compliant but many benefits go beyond WTO commitments and are not being offered to other economies at this stage. Importantly, these benefits are available to people and businesses of ALL nationalities operating in or from Hong Kong.
All goods of Hong Kong origin, except for prohibited articles, qualify for zero tariff when entering the Mainland of China. CEPA also gives qualified companies based in Hong Kong greater access to the Mainland in 27 service sectors, with no regard to the nationality of the ownership of these companies. In fact, based on our estimate, 10% of the qualified companies are of Japanese interest.
CEPA is a dynamic arrangement, with extended benefits agreed and implemented every year. For example, the latest and fourth round of the CEPA benefits announced last June covers two broad areas: expanding market access for 10 services sectors; and extending trade and investment facilitation measures to include intellectual property protection. And I expect further liberalisation measures under CEPA to be announced this year.
CEPA works to attract foreign investment. More than 25% of the companies assisted by Invest Hong Kong, our investment promotion agency, say that CEPA was either the main reason or one of the factors in their decision to invest or expand in Hong Kong.
Conclusion
So with these promising prospects, I hope many more enterprises in Japanese -- including small and medium-sized companies – will want to be close to the action.
And you don't have to do this alone. Our Government is in business to help you do business. We can supply a step-by-step guide to setting up in Hong Kong; we can help link you with business partners, we can guide you through the government regulations and requirements; and we can provide sector-specific advice. And once you are up and running, we'll always be available to lend a helping hand.
If you are interested in doing business with Hong Kong or China, you can begin with our Economic and Trade Office – which is ready to provide you with what you need when you need it.
Thank you again for joining us today and making me feel so much at home. I look forward to welcoming you – or welcoming you back – to my home Hong Kong in the very near future.
Ends/Thursday, May 31, 2007
Issued at HKT 17:52
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