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Budget Speech by the Financial Secretary (8)

Strengthening Pillar Industries

86. We have been strengthening Hong Kong's position as Asia's world city.  We are promoting our role as an international financial centre and as a hub of business, logistics and tourism in the Asia-Pacific region.  As a result of globalisation and the rapid economic growth in the region, Hong Kong's economy has been restructuring and upgrading.  Over the past 10 years, growth in our total labour productivity averaged 2.7 per cent per year.  The average growth rate in the past four years reached 4.8 per cent, showing that we have achieved notable results in this respect.

87. Hong Kong has become a sourcing, supply chain management, logistics and distribution centre in the region.  The direct contribution of the trading and logistics sector to our economy increased from 21.9 per cent in 1997 to 27.4 per cent in 2006.

88. Moreover, trade in services has become increasingly important to our economy.  In 2007, Hong Kong's export of services grew by more than 140 per cent in real terms compared with 10 years ago.  The value of these exports now stands at $645 billion.  This demonstrates Hong Kongˇ¦s strong competitive edge in the export of services including tourism, offshore trade, and financial, commercial and professional services.  At the end of last year, overseas and Mainland companies had set up a total of 3 890 regional headquarters or offices in Hong Kong, an increase of 55 per cent over 10 years ago.

Tourism, Convention and Exhibition Industries

89. Tourism is a pillar industry of our economy.  In 2007, there were over 28 million visitors to Hong Kong, an increase of 11.6 per cent over 2006.  Visitor spending is estimated to have exceeded $130 billion in 2007, an increase of 8.9 per cent year-on-year.

90. The development of a new cruise terminal at Kai Tak will help Hong Kong to develop into a leading regional cruise hub.  Tenders were invited last November.  We expect that the contract will be awarded in the second quarter of 2008.  The first berth will come into operation in February 2012. 

91. To continue to promote development of the tourism, convention and exhibition industries, I propose three measures.

Convention, Exhibition and Tourism Capital

92. First, in support of the objective given in the Policy Address to enhance the appeal of Hong Kong as an international convention, exhibition and tourism capital, we will seek to host more mega international conventions and exhibitions.  We will step up our efforts in overseas promotion.  We aim to attract more high quality convention and exhibition projects that will bring high value-added business travellers to Hong Kong.  I have earmarked an additional $150 million to carry out these activities in the next five years.

Hotel Accommodation Tax

93. Second, I propose to waive the Hotel Accommodation Tax.  This proposal will help to further promote tourism and enhance the competitiveness of our hotel industry.  It will also reduce the administrative cost of hotels and guesthouses.  This proposal, which will come into effect after the enactment of the relevant amendment bill, will cost the Government $470 million a year.

Hotel Sites

94. Third, to consolidate Hong Kong's status as an international convention, exhibition and tourism capital, we must have adequate hotel facilities.  In order to allow more hotels to be built, we will include sites "restricted to hotel use" in the 2008-09 Application List, and provide 10 sites to build different types of hotels.

Business and Financial Industries

95. The financial sector has huge potential.  It is the driving force for Hong Kong to move towards a knowledge-based and high value-added economy.  The direct contribution of the financial sector to our economy in 2006 was more than 50 per cent higher than in 1997.  The development of this industry has stimulated growth in many other industries, particularly professional services.

96. Our objective is to develop Hong Kong's strength as an international financial centre.  With the rapid development and reform of the Mainlandˇ¦s financial services industry, there is ample room for co-operation between the financial sectors of Hong Kong and the Mainland. 

97. TIME Magazine recently coined the term "Nylonkong" to highlight the extent to which New York, London and Hong Kong have become models of globalisation, while at the same time "lubricated the global economy".  These three cities are situated in different time zones, but are closely linked by air flights and communication networks.  This enables financial and business activities to be carried out on a 24-hour basis, forming a global commercial and financial network. 

98. The Government will take measures to enhance the competitiveness of our commercial and financial sectors and to improve the regulatory regime.  We will review the regulatory framework for the securities market to improve market quality and reduce compliance costs for the industry.  For instance, we have launched a comprehensive rewrite of the Companies Ordinance with a view to developing a set of modernised company legislation.  We will review the Trustee Ordinance in order to increase the competitiveness of our trust services industry.

99. The successful implementation of Basel II in Hong Kong last year enabled our banks to stay ahead in the quality of risk management.  To tie in with the implementation of Qualified Domestic Institutional Investor (QDII) arrangements by the Mainland, the Government and the regulatory bodies concerned will continue to liaise with the Mainland, improve market infrastructure, promote financial intermediary activities, encourage financial innovation and launch new financial products.

100. The Chief Executive has visited the Middle East recently and we are working hard to develop an Islamic financial platform in Hong Kong so as to tap a market with an estimated value of US$1,000 billion.  Furthermore, in the past few months, we have led financial sector delegations to visit Vietnam and India.  Last year, the Securities and Futures Commission and the Hong Kong Exchanges and Clearing Ltd. jointly issued a policy statement on the listing of overseas companies in Hong Kong so as to attract more overseas enterprises to list here.  The Government will continue to monitor and promote the development of the local financial markets in collaboration with the financial regulators.

Air Transport

101. As an international and regional aviation hub, Hong Kong has direct air links with more than 150 cities in the world, providing strong support for transnational businesses, the tourism industry, and the logistics industry.  The HKIA is the world's fifth busiest airport in terms of international passenger throughput and the busiest in terms of international cargo throughput.  Passenger and air cargo throughput reached new highs last year, with over 47 million travellers passing through the airport and 3.74 million tonnes of air cargo handled.

102. To enhance the competitiveness of the HKIA, the Airport Authority (AA) keeps upgrading the airport's infrastructure to increase its passenger and cargo handling capacities and strengthen transport links between the airport and the Pearl River Delta.  These measures can help to further consolidate Hong Kongˇ¦s position as an aviation hub.

Runway Capacity

103. As announced last May, the Government will increase the capacity of the two existing runways of the HKIA progressively from 54 movements per hour to 58 movements per hour in 2009.  With the support of the AA and the industry, we are confident that capacity of the existing runways can be gradually increased to 68 aircraft movements per hour by 2015.  In the long run, it is important that the HKIA can further increase runway capacity to handle forecast growth in air traffic.  The AA is preparing to start, within this year, the engineering and environmental feasibility studies for a third runway.

Container Terminal 10

104. Turning to the port, the latest forecast shows that container throughput will continue to increase in the future after reaching a handling capacity of 24 million twenty-foot equivalent units (TEUs) of containers last year.  The Government has been identifying suitable locations for the development of Container Terminal 10 to meet this demand.

105. Two sites have been identified initially.  Extensive reclamation is required for the site at Northwest Lantau, which may affect the ecological environment.  Consequently, the Government will study the other site at Southwest Tsing Yi.  Although this site will require the relocation of the existing oil depot, it can achieve synergy with the container terminals in Kwai Chung and Tsing Yi.

(To be continued)

Ends/Wednesday, February 27, 2008
Issued at HKT 11:55


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