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Speech by SLW at 5th APEC Human Resources Development Minister Meeting (English only) (with photo)

     Following is the keynote speech by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, titled "Sustaining and Expanding Employment - Hong Kong's Experience" under the sub-theme "Devoting priority attention to maintaining and expanding employment and adopting employment-oriented macro-economic polices" at the 5th APEC Human Resources Development Minister Meeting in Beijing today (September 16):

Minister Yin, fellow ministers, ladies and gentlemen,

     It gives me great pleasure to have this opportunity to share with you Hong Kong's macro employment policies and short-term and medium-term strategies in maintaining and expanding employment.

     Let me start by saying that Hong Kong is a small and open economy with few natural resources. With a population of just over seven million and a workforce of some 3.7 million, our hard working, dedicated and adaptable workforce is our most treasured and only asset. The Hong Kong Special Administrative Region (SAR) Government spares no effort in ensuring that our workers stay motivated and competitive. At the same time, we adopt multi-pronged strategies to improve our business environment, create jobs and enhance labour market efficiency.

     As we all know, employment is the bedrock of people's livelihood and the key to social harmony. On each job depends a family with mouths to feed. I cannot emphasise more the importance of maintaining and expanding employment for all governments. In this respect, I would like to describe how Hong Kong coped with the impact of the global financial crisis and weathered the storm.  

The global financial crisis - counter-cyclical measures

     The financial crisis battered Hong Kong in late 2008.  The general pessimism over the global economy led to notable curtailments in business investment plans as consumption spending dropped along with worsening labour market conditions.  Hong Kong's Gross Domestic Product (GDP) dropped sharply by 7.7% in the first quarter of 2009 over a year earlier, whereas the unemployment rate rose to a three-year high of 5.1%, with increasing downward pressures on wages and earnings.

     By way of background, it is noteworthy that over 98% of all enterprises in Hong Kong are small and medium enterprises (SMEs). These 285,000 SMEs now employ more than 1.2 million people or about one third of our working population. With the opening up of Mainland China in the 1980s, many of our manufacturers were attracted by the enormous opportunities and advantages of our hinterland and moved northward into the Pearl River Delta. Since then, Hong Kong's economy has become increasingly service-oriented. The services sector has become the dominant driving force behind our overall economic growth, employing at present some 88% of our workforce. This major economic restructuring, together with the compelling influence of globalisation and advent of the knowledge-based economy, have materially altered Hong Kong's labour landscape and posed a formidable challenge for us.

     Specifically, we see increasing polarisation of low-end and high-end jobs in the labour market. The unemployment rate of lower-skilled workers stands at 4.9% (114,900) while that of the higher-skilled at 2.5% (32,500). In fact, for professionals it is as low as 1.6% (3,700). The ageing population also generates a manpower problem for some industries. The construction sector is the one that causes the most concern. You may be interested to know that, according to a report by Japan's Ministry of Health, Labour and Welfare in July, Hong Kong people have the second highest life expectancy in the world, with female at 86.1 years old and male at 79.8, just after Japan and Qatar.

     To contain the adverse impact of the global financial crisis, the Hong Kong SAR Government has adopted a series of counter-cyclical measures to protect employment and arrest economic decline.  A three-pronged strategy - namely "stabilise the financial system, support enterprises and preserve jobs" - was launched.

Three-pronged strategy

     On the financial front, among other things, we announced in October 2008 the use of Hong Kong's Exchange Fund to immediately guarantee repayment of all customer deposits held with all authorised institutions in Hong Kong.  This temporary precautionary measure is designed to reinforce depositors' confidence in placing deposits with banks well before doubts develop, thereby stabilising the local financial system.

     To support local enterprises, we enhanced the pre-existing Small and Medium Enterprises Loan Guarantee Scheme and introduced a US$12.8 billion (HK$100 billion) Special Loan Guarantee Scheme to help businesses secure commercial loans from financial institutions to tide over the immediate cash flow problem.  By end-August, some 19,700 companies, employing over 320,000 people, had benefited from these loan schemes. In other words, 320,000 jobs have been secured, thus avoiding a significant 8.7% percentage point increase in unemployment in the worst-case scenario.
     On job preservation, we have created over 120,000 jobs and internship opportunities by making use of exceptional fiscal measures and financial incentives, focusing on the hard-hit construction sector and young people.  We also integrated and enhanced our existing employment services to provide seamless and comprehensive training and employment support to job-seekers.  

     Since 2008, the Hong Kong SAR Government has introduced a whole range of fiscal, relief and employment measures amounting to some US$14.1 billion (HK$110 billion), equivalent to over 6% of our GDP. This is estimated to have lifted our GDP by around 2 percentage points last year and around 1.3 percentage points this year.

Latest economic performance

     I am pleased to say that our robust response has substantially cushioned the effect of the most severe global recession in more than 60 years.   Our economy is steadily coming out of the woods after recording a positive year-on-year growth of 2.5% in the fourth quarter of last year. Our GDP grew markedly by 8% and 6.5% in real terms respectively in the first quarter and second quarter of this year.  The unemployment rate, having gone up notably early last year and peaked at 5.5%, came down gradually to 4.3% now. Present indications are that the unemployment rate is likely to remain broadly stable in the near term. There are signs that companies are in a better hiring mood and the downward pressure on labour earnings has also abated.

     However, there is simply no room for complacency.  Given the Eurozone sovereign debt problem and the weak global recovery, we need to remain vigilant and closely monitor the situation.

Medium-term strategy - general and targeted approach

     As a relatively mature and developed economy, Hong Kong can no longer compete with regional economies on labour and land costs.  We must continue our transformation into a high value-added, knowledge-based economy in order to compete on quality and productivity, while leveraging our increasing integration with the Mainland economy.

    In fact, the longer term development of Hong Kong will hinge on the success in the "flow" of five key elements: funds, people, goods, services and information.  Hong Kong's success depends much on its connectivity with the Mainland and the outside world. The global financial crisis served as a wake-up call for us to continue to build for the future. We have hence accelerated a number of major infrastructural projects with strategic importance.

     Work has begun on the construction of the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link, the Hong Kong-Zhuhai-Macao Bridge and the Kai Tak Cruise Terminal. These, together with other construction projects, will push our annual estimated capital work expenditure in the next few years to an all-time high of US$6.4 billion (HK$50 billion). Besides, we have earmarked US$2.8 billion (HK$21.6 billion) for the development of a world-class integrated arts and cultural hub in West Kowloon. We are also speeding up our urban renewal programme. The "Operation Building Bright" project will give a facelift to around 2,500 old buildings and create some 50,000 jobs.

Investing in education

     In an era of globalisation, talent is one of the most sought-after commodities. We need to nurture and attract talent.  We need to develop relevant skill sets in our manpower market.    This explains why Hong Kong has been investing heavily in education.  Education accounts for a hefty 23.4% of the Hong Kong SAR Government's total recurrent expenditure - the largest share among all policy areas.  

     Our universities are of good quality. Three of our 13 universities were ranked among the top 50 in the world in 2009 by the Times Higher Education Supplement, with another two within the top 200. In the QS Asian University Rankings 2010, the University of Hong Kong ranked first, the Hong Kong University of Science and Technology second and the Chinese University of Hong Kong came fourth. There are now some 9,300 Mainland students studying in our world-class higher education institutions.  Many of them are top performers at home. They can and, indeed, are welcome to stay and work in Hong Kong after graduation.

     Nurturing home-grown talent aside, as an international, pluralistic, and open economy, our door is always open to professionals, managers and talent from overseas and the Mainland. Since Hong Kong's reunification with the Mainland in 1997, more than 260,000 professionals from all over the world have been admitted to work in Hong Kong through various channels.

Training/re-training, skills-upgrading and continuing education

     As I mentioned earlier, the Hong Kong SAR Government leaves no stone unturned in promoting the overall quality of our local workforce, and supporting the sustainable development of different economic sectors.  We will continue to work closely with different stakeholders, including industry and academia, to upgrade the employability of the workforce, in particular the low-skilled workers, through enhancing and consolidating training and retraining, continuing education and various employment services.  This helps our workers adapt to the changing skills requirements arising from economic restructuring.

     Our full spectrum of training programmes is mainly provided through the Employees Retraining Board, the Vocational Training Council and the Construction Industry Council Training Academy.  Together, they provide a multitude of courses in meeting the needs of young people and the middle-aged with lower education level, as well as apprentices and in-service elementary workers of various industries.

     To encourage our workforce to pursue continuing education, a total of US$795 million (HK$6.2 billion) has been injected into the Continuing Education Fund.  So far, over 520,000 residents aged between 18 and 65 have benefited under the Fund.

     And to respond to the manpower problem in the construction sector, we have set aside US$12.8 million (HK$100 million) to step up promotion and publicity, including a training programme with substantial cash allowance, among the younger generation, and strengthen the training and re-training programmes for construction workers to help them with their career development.

Labour market efficiency

     With rapid changes in the economy and increased flexibility of the labour market, employment has become less stable and workers are facing more frequent job changes.  In view of the increasing demand for targeted employment support, we have made relentless efforts to speed up the circulation of job vacancies and match them actively against job- seekers. This has helped bolster labour market efficiency and reduce frictional unemployment.

     Our job centres offer the latest vacancy information and free referral service to job-seekers.  Two dedicated recruitment centres have also been set up for the catering and retail industries. These industries are best known for their high staff turnover and large number of job vacancies.  This new initiative is widely welcomed by both employers and employees as it effectively minimises the time in job search and hiring.

     The popular use of the Internet has allowed us to serve a larger clientele more efficiently through an interactive employment service website that we launched 11 years ago. This website has established itself as the second most frequented government website, only after the Hong Kong Observatory. The daily average hits stand at 3.2 million.

     We have also started to pilot the sharing of vacancy search terminals connected to a giant vacancy database with non-governmental organisations in some remote districts to further enhance public access to our vacancy information network.  The result has been promising.  The number of vacancies posted and job-seekers placed last year were about four times of those 12 years ago.  

     Job fairs and employment promotional activities remain the major components of reaching out to job-seekers, particularly those living in remote areas.  We expect the number of large-scale job fairs staged this year to double over that of 2008.  As a further boost, we are piloting the use of short message service (SMS) to notify interested job-seekers of such events promptly.  

Tailor-made employment programmes

     Investing in inclusive growth is important, as social harmony and stability underpin our economic success.  In this light, we provide tailor-made employment programmes for vulnerable groups such as youths, the middle-aged and the disabled with pre-employment training. We also offer financial incentives to encourage employers to hire them and provide on-the-job training.

Statutory minimum wage

     Let me digress here and update you on our progress in putting in place a statutory minimum wage in Hong Kong. We pride ourselves on the freest economy in the world. The US-based Heritage Foundation has ranked Hong Kong as the freest economy in the world for 16 consecutive years. We know full well that as an externally oriented economy with a linked exchange rate system, flexibility of wages and prices is crucial to our economic competitiveness and resilience to external shocks. But as a responsible and responsive government, we are acutely aware that safeguarding the interests of the vulnerable and enhancing social harmony are equally important social policy objectives that we should pursue. Hence, our bold and conscious decision to go for an across-the-board statutory minimum wage. This marks a breakthrough in the protection of our workers at the grassroots and a significant milestone in Hong Kong's labour history.

     The Minimum Wage Bill was passed two months ago on July 17 after a 41-hour debate in our Legislative Council. Our aim is to arrive at an optimal minimum hourly wage floor to forestall excessively low wages without, at the same time, unduly affecting our labour market flexibility, economic growth and competitiveness as well as causing significant loss in low-paid jobs. I am sure that we will be able to get this fine balancing act right.

     The Provisional Minimum Wage Commission will submit its recommendation on the initial wage rate to the Hong Kong SAR Government for consideration in the next few weeks. If everything goes smoothly, the statutory minimum wage will come on stream in the first half of next year.


     There is one lesson that we have learnt from the global financial crisis. That is:  we cannot afford to stand still.  To do so is to stagnate.  The crisis has reminded us of the need to diversify our economic base and constantly evolve in order to keep abreast of the ever-changing labour landscape.

     Hong Kong has been relying traditionally on its four pillar industries, namely financial services, trading and logistics, tourism, and professional services, as the driving force of our economic growth. In the wake of the financial tsunami, we have identified six industries where Hong Kong enjoys clear advantages to build on the strengths of our well-tried pillar industries. We will also enhance our business environment and step up regional cooperation on all fronts.

     The six industries are: educational services, medical services, testing and certification services, innovation and technology, cultural and creative industries and environmental industries. At present, the private-sector part of these six industries directly contributes about 7% to 8% of GDP, and employs around 350,000 workers, or nearly 9.6% of the total workforce.

     With appropriate policy support and favourable market strength, we believe that these industries will develop further and generate new jobs on a sustained and stable basis as Hong Kong moves forward as a knowledge-based economy.

     Ladies and gentlemen, I hope that I have given you a pen picture of our employment policies and would appreciate your feedback in our subsequent discussion.  Thank you.

Ends/Thursday, September 16, 2010
Issued at HKT 16:39


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