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Following is the speech by the Chief Executive, Mr Donald Tsang, at the HK-Kuwait Business Luncheon in Kuwait today (January 28):
Your Excellencies, Distinguished guests, ladies and gentlemen,
It is a great pleasure to be here in Kuwait. This is the first visit to Kuwait - and indeed the Gulf States - by a Hong Kong Chief Executive, but I know it won't be the last. The renowned Kuwaiti hospitality has helped make our delegation feel very much at home since we arrived here on Saturday. And yesterday I had extremely positive and friendly meetings with a number of leading Kuwaiti officials.
Let me begin by wishing you all a belated Happy New Year - for the Islamic New Year, which you celebrated on January 10; and also for the Western New Year on January 1, which was celebrated in our city with the usual fireworks and parties.
In Hong Kong, we celebrate festivals from the East and West with equal enthusiasm. That's part of the great attraction of our city - we welcome people from all over the world to become a part of our community.
And very soon - on February 7 - we will ring in the Chinese New Year, which is the most important and popular holiday for Chinese people. This year we welcome the "Year of the Rat", which is said to be auspicious for new opportunities and good prospects. So, with this in mind, I'd like to talk about new opportunities and good prospects for Kuwaiti business and investors in Hong Kong, in China, and in East and Southeast Asia too.
First, let me give you an update on what has been happening in Hong Kong. Last year we celebrated the 10th Anniversary of the establishment of the Hong Kong Special Administrative Region of China. As with any anniversary, it provided a timely opportunity to reflect on the past, to take stock of the present, and to chart the best course for the future.
Reunification in 1997 was an enormous task that impacted on all areas of our life. After a long separation - and after 10 eventful years - we now have a new sense of belonging and purpose. And, we have come to understand more deeply the special role that Hong Kong plays as an integral part of China. It is a role full of promise and opportunity.
This does not mean that Hong Kong has lost any of the characteristics that set us apart in Asia. Although an integral part of our country once again, we grew up in a different way, and with a different economic and legal system. The "One Country, Two Systems" formula of our reunification, and our constitutional document the Basic Law, protect these unique attributes and our way of life.
Since 1997, Hong Kong people have been running Hong Kong with the promised high degree of autonomy. We remain a capitalist society fully plugged into the global village. We remain a separate member of international organisations such as the World Trade Organisation and the World Customs Organisation, to name just two. We continue to negotiate our own air services agreements, and we maintain our own shipping register. We have our own immigration procedures, and our own passport. We maintain our own tax system, and we have our own freely convertible currency, which has been linked to the US Dollar since 1983.
Earlier this month, Hong Kong was ranked as the world's freest economy by the US-based Heritage Foundation, for the 14th year in a row.
We have maintained our own tried and trusted legal system, based on the English common law system and underpinned by an independent judiciary. We have a level playing field for business - we do not have any restrictions based on nationality or domicile. Any company from any country is welcome in Hong Kong. We have a clean, efficient administration. We have a world-class anti-corruption regime. And, our highly trained Police Force ensures that we remain one of the safest large cities in the world.
We also believe in the free and unfettered flow of information, goods and capital. Hong Kong people jealously guard their freedoms, which include freedom of speech, freedom of assembly and freedom of religion.
All of these attributes combined have helped Hong Kong to remain at the forefront of international cities. That is why we remain the location of choice for international companies doing business in Asia - at last count some 3,900 international companies maintained regional headquarters or offices in Hong Kong. That's 55 per cent more than we had in 1997.
Hong Kong is already a market of first choice for Middle Eastern companies. We welcome Kuwaiti firms to establish a base in our city so they can better leverage our strengths as a business and financial hub in Asia.
Although our institutional strengths have not changed over the past decade or so, our outlook has. Reunification has brought us much closer to our sovereign country and has allowed us to play a role that would not have been possible previously. So, there has been change - but change for the better.
We continue to invest heavily in infrastructure to enhance the efficiency and competitiveness of our economy. The new airport, new road and rail links to the Mainland of China and new shipping terminals have all come on line since 1997 - though all were planned well in advance, which underscores our determination to continue upgrading and improving our connectivity.
Far-sighted planning and infrastructure development are vital to a city the size of Hong Kong, with about seven million people on a landmass of roughly 1,100 square kilometres. This is not much larger than the combined area of Kuwait's chain of islands, which is around 920 square kilometres. In the next five to 10 years we will have even more projects coming on line including new bridges and highways serving our port; a bridge more than 30 kilometres long linking Hong Kong to Macao and the Mainland of China; a new express railway line that will link in with the national rail network; a new cruise liner terminal to boost tourism; and, enhanced links between Hong Kong International Airport and Shenzhen Airport. All of this is designed to significantly boost the inter-connectivity between Hong Kong and the prosperous Pearl River Delta region - and beyond. As you can see, Hong Kong is not a place to stand still.
This rapid infrastructure development has also expanded the horizons of engineering in areas such as reclamation, construction and transport. It has given our engineers unique experience and skills that may be useful to other cities, including here in Kuwait, which is also investing heavily in infrastructure. By extension, we have devised new and imaginative ways to enhance the management of properties, hotels and hospitals as well as improving logistics and port systems and technology. All of this is a resource that can be tapped here in the Middle East.
New infrastructure is just one of the ways we are significantly deepening our economic engagement within our own country. As well as boosting the physical connectivity with our neighbouring province of Guangdong and beyond, we are also working on a range of other initiatives.
Our country's 11th Five Year Plan, covering the period from 2006-2010, gives clear support for Hong Kong's core sectors such as shipping and logistics, tourism, as well as business and information services. Significantly, it affirms Hong Kong's irreplaceable position as China's global financial centre.
This is an enormous opportunity for Hong Kong, and one that we are seizing with both hands. Hong Kong already has a world-class financial services sector with a trusted and transparent regulatory regime, a liquid market, a high concentration of international banks, and a broad, deep pool of local and international expertise.
There are some 140 licensed banks, including 68 of the world's top 100 banks in Hong Kong. Our stock market is the world's 7th largest in terms of market capitalisation, and the 3rd largest in Asia. We are the largest funds management centre in Asia, as well as a leading insurance centre and one of the world's top gold markets. Hong Kong ranked 4th in the world for IPO funds raised in 2007. The 80 IPO listings last year raised total funds of more than US$37 billion. But we can and will do better. There is considerable upside.
For us, this will mean working harder to more closely align the two financial systems in Hong Kong and the Mainland of China. One example is the growing number of banks providing services in Renminbi. Most of our 37 retail banks offer Renminbi banking services and total deposits were more than 30 billion yuan last year. Last year, Hong Kong became the only place outside the Mainland to have a Renminbi bond market. There are also plans to allow individuals in the Mainland to invest directly in Hong Kong. Qualified institutional investors in the Mainland are already doing so.
Improving our attraction as a global financial centre also means moving into new markets, and developing new products and services. That is why Hong Kong is working hard to develop an Islamic finance platform.
We believe Hong Kong is well placed to become a centre for Islamic finance in Asia. Our legal system is flexible and well adapted to supporting Islamic financial transactions. It permits freedom of contract subject only to certain public law restrictions, none of which should inhibit Islamic financial instruments for legitimate purposes.
A unique advantage for Hong Kong is our unrivalled role in bridging the Mainland, the world's fastest growing large economy, to the international market. The potential requirement for capital in the Mainland, especially for infrastructure development projects, lends themselves well to Shariah-complaint financial structures. Hong Kong can play a significant role in structuring and financing Islamic investment products to meet the needs of Mainland Chinese borrowers.
Islamic financial products appeal to both Muslim and non-Muslim investors and issuers. There is evidence that a large part of the demand for Islamic bonds comes from non-Muslim investors who have found the yield and structure of these products attractive. Hong Kong is a good platform to service these investors.
A significant number of leading international banks in Hong Kong have already devoted considerable resources to the creation and servicing of a variety of Islamic financial products. In some cases, this has taken the form of Islamic "windows", which are specialised units that provide banking and financial services to retail clients.
Recently, the first Islamic retail fund in Hong Kong was launched. By December last year, the fund had already attracted some US$45 million worth of orders.
Today, I invite Kuwaiti banks and financial services companies to extend and diversify their global reach through Hong Kong. For all the financial services that you may need in a mature and liquid market within the Asian time-zone, halfway between Wall Street and London, you will hardly find an equal to Hong Kong. Meanwhile, we can learn a great deal from your expertise in the provision of Shariah-compliant services.
We also welcome investment by sovereign wealth funds, which are becoming more prominent in financial markets and are a positive force for global markets. Our sound financial services infrastructure and well-established legal system make Hong Kong an attractive location for such investments.
We are interested in expanding trade, investment and tourism links too. Bilateral trade with Kuwait has grown significantly over the past few years - in 2006 it was worth US$264 million. Between 2002 and 2006 average annual bilateral trade grew by 20.5 per cent. That is pretty impressive, and we can build on this momentum.
One way to further deepen the trading relationship is for Kuwaiti companies to capitalise on Hong Kong's special status within China. One of our biggest advantages is a unique free trade pact between the Mainland and Hong Kong, what we call our Closer Economic Partnership Arrangement, or CEPA for short. This is possible because, as I mentioned earlier, Hong Kong remains a separate member of the World Trade Organisation. This is an excellent example of "One Country, Two Systems" at work.
CEPA now covers 38 service sectors - 11 more were added at the beginning of this year - in key areas such as banking, advertising, accounting, legal services, logistics and freight forwarding, and management services. Service providers incorporated in Hong Kong enjoy enhanced access to the vast market in the Chinese Mainland in those sectors.
And because Hong Kong has a nationality-neutral policy, foreign-owned firms incorporated in Hong Kong can enjoy the same benefits of CEPA as local enterprises.
CEPA applies nationally, across the whole of China, covering 1.3 billion potential customers, including in particular the Pearl River Delta (PRD) region that has a relatively prosperous population of around 50 million - a ready-made testing ground for those wishing to offer products and services in China.
Another initiative that also holds great promise is what we call the Pan-PRD grouping, or 9+2 economic co-operation. This involves breaking down trade and investment barriers in the nine southern provinces of China, plus the two Special Administrative Regions of Hong Kong and Macao. This is the first step - and it is a big step - to establish a common market in our country that still has many internal barriers to trade and investment that will take time to change.
Pan-PRD aims to lead by example. Our mission is to show that breaking down barriers is better than keeping them in place. The Pan-PRD economic caucus covers an area of some two million square kilometres with a population of about 470 million, which is close to that of the EU, and bigger than NAFTA. It is also more than ten times bigger than the population of the Gulf Cooperation Council common market (approx 35.8 million). The 9+2 grouping also accounts for roughly 40 per cent of China's total GDP, which was US$2.7 trillion in 2006. Hong Kong will act as a knowledge bank of international best practice in this undertaking.
The scale of this can appear daunting, especially for small businesses testing the water in the China market for the first time. That is why a base in Hong Kong comes fully equipped with all the assistance needed to get a good start. Our Trade Development Council has the resources and expertise to link firms up with the most suitable business partners in manufacturing and services. And InvestHK, a government department, specialises in problem solving and practical advice for companies wishing to set up in Hong Kong. You will also find a well-educated, hardworking and entrepreneurial labour force that is always up to the challenge. The world famous 'can do' spirit of the Hong Kong people is very much alive and well.
Taken together, all of our long-held fundamentals, our open door policy for trade and investment, our prime position in East Asia, our key role as a global financial centre in China, and the enormous potential of the China market is a recipe that is hard to beat. Hong Kong is a city of unlimited potential - potential that we invite Kuwaiti businesses to explore with us.
Ladies and gentlemen, as many of you will know, this year will be an historic one for China with Beijing hosting the 2008 Olympic Games. We in Hong Kong will also play a role in this once-in-a-lifetime opportunity by staging the Olympic and Paralympic Equestrian events. Our preparations are well advanced, and we are determined to stage the best-ever equestrian events. We know that the grace and precision of equestrian sport is well appreciated in the Middle East, which has a long tradition of excellent horsemanship and is home to one of the world's finest and most noble breed of horses. We look forward to welcoming competitors, officials, spectators and visitors from the Middle East later this year. So, please, come and help us celebrate the Olympic Spirit in 2008; and if you can't make it then, well, come and visit us anyway.
I am confident my visit will lay the foundation for greater engagement between Hong Kong and Kuwait. And I hope that you can come to Hong Kong to see for yourselves what we offer, and to learn more about the considerable opportunities in Hong Kong, Asia's world city.
Thank you.
Ends/Monday, January 28, 2008
Issued at HKT 19:33
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