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Mr (Jose Luis) Gonzalez, Ambassador Zhu(Bangzao), Distinguished Guests, Friends, Ladies and Gentlemen,
I am delighted to be here for the first time in the wonderful city of Madrid, and in fact the first time in your country. The history and vitality of Madrid is truly inspiring.
My only slight regret is that my visit comes at a difficult economic time for Spain, and indeed the Euro zone. I sincerely hope that Spain can reverse its economic fortunes soon and return to the growth and prosperity that the Spanish people are eager to achieve.
Since Re-unification with China 15 years ago, the Hong Kong Special Administrative Region has gone through several crises which had a major impact on our economy. But through the perseverance of our people and the stance support of the Mainland authorities which "One Country, Two Systems" has brought us, Hong Kong has weathered those storms and much close economic partnership has been built up between Hong Kong and the rest of the world. Today, I hope I can shed some light on those opportunities through closer business partnership and collaboration between Spain and Hong Kong, and by extension between Spain and the Mainland of China.
First of all, my thanks go to the Hong Kong Trade Development Council and to our Economic and Trade Office in Brussels for bringing us together today.
Let me start by updating you on the latest developments in Hong Kong.
As you can see from this backdrop, 2012 marks the 15th Anniversary of Hong Kong's return to China. We have also seen the election of a new Chief Executive, the swearing-in of the Fourth Term Hong Kong SAR Government, and the election of a new Legislative Council under an expanded electoral system.
So what does all this mean for Hong Kong, and, more specifically, for our city’s relations with Spain and other countries around the world?
Our 15th Anniversary celebrations have been, above all, a celebration of the successful, "One Country, Two Systems" principle for our return to China in 1997. This and the Basic Law, a constitutional document, has underpinned our city’s vibrancy and energy, which in turn attracts people and businesses from around the world, including Spain. We have a free and open society under the rule of law, with a global outlook, clean and efficient government, a superb business environment, modern infrastructure and world-class services. All this on the doorstep of Mainland China, the world’s second largest economy, represents a huge opportunity, not only for Hong Kong, but also for foreign companies based in Hong Kong.
In this respect, Hong Kong is a team player. We have a level playing field for all businesses large and small, whether they are from Hong Kong, Mainland China, Spain or elsewhere. This includes our low and simple tax system. In Hong Kong, profits tax is capped at 16.5 per cent and our people pay no more than 15 per cent in salaries tax. There is no capital gains tax, no GST or VAT, no inheritance tax and no tax on wine as well. On top of this, only income sourced in Hong Kong is taxable in Hong Kong.
We also have a Comprehensive Agreement for the Avoidance of Double Taxation (CDTA) between Hong Kong and Spain. This agreement took effect in April this year. This CDTA brings tax savings to both Hong Kong and Spanish investors doing business in each other's jurisdiction. It also creates an environment of greater certainty and stability for bilateral investment and, hopefully, encourages a greater flow of investment, technology, talent and expertise between both sides.
I hope that more Hong Kong and Spanish firms will take advantage of this win-win situation.
Hong Kong's low taxes, efficient government, equal treatment of companies and effective rule of law have helped to maintain our city's ranking as the World’s freest economy for each of the past 18 years. That is according to both the Heritage Foundation based in the US and Canada-based Fraser Institute.
Spain is among our most important trading partners in the European Union. Last year, total trade between us reached 2.4 billion Euros, representing more than 12 per cent growth year-on-year. This, coming at a time of economic challenge for Spain, is a great encouragement for potential future growth.
A recent highlight of our bilateral trade has been a surge of Spanish wine imports to Hong Kong in recent years. This is not simply a coincidence. Spanish wine makers have been able to take good advantage of our initiative to eliminate wine duties, which we did back in 2008. Since then, Hong Kong has firmly established itself as a major wine trading and distribution centre in Asia. Spain’s excellent wines and cuisine are already very popular in Hong Kong and across Asia and we are glad to see more fine vintages enter the local market. The total value of wine imports to Hong Kong has increased from 149 million Euros in 2007, before the tax exemption in 2008, to 903 million Euros last year. This represents a six-fold increase.
We also have a Memorandum of Understanding on Co-operation in Wine-related Businesses between Spain and Hong Kong. The MoU was signed back in 2008 which of course reflected the foresight of the Spanish businesses. We are delighted to have Spain on board as a key partner in developing the wine industry in Hong Kong and across Asia.
Beyond famous Spanish wine, we also have some of Spain's top fashion brands in Hong Kong. Zara is a great example, with the company expanding to include 11 shops across our city. Spanish leather and gourmet food items are also extremely popular among Hong Kong people, as well as with our tens of millions of visitors each year.
Currently, more than 100 Spanish companies are operating in Hong Kong. They are among 7,250 Mainland and overseas companies that have a base in our city. Many of these firms are keen to use Hong Kong as a springboard to reach the vast markets in Mainland China. I hope more companies from Spain will come and take advantage of Hong Kong's location and free and open economy to do business in our region.
You don't have to be a big company to make good in Asia. In fact, in Hong Kong our companies are predominant by small and medium enterprises (SMEs) which accounts for 98 per cent of our firms. In most cases, they see an opportunity in Asia and regard Hong Kong as the best location for success. Importantly for SMEs in Hong Kong, they have easy access to a full range of professional and financial services that all companies depend on to succeed.
In the World Bank's 2013 Doing Business Report, Hong Kong continues to be ranked as the 2nd easiest place in the world to do business. Add to this, Hong Kong’s closer integration with Mainland China markets over the past 15 years, and you have a great recipe for business success.
Part of our closer cross-boundary integration includes a unique free-trade pact with the Mainland, what we call the Closer Economic Partnership Arrangement, or CEPA. This pact allows Hong Kong companies – and that includes overseas companies incorporated in Hong Kong – to enjoy preferential access to the Mainland market for goods and services.
Basically, CEPA provides tariff-free access to the Mainland for Hong Kong-made products and enhanced access in 48 service sectors, including banking, tourism, construction, legal, medical, accounting, convention and exhibition and logistics, to name a few. Because CEPA rules are nationality-neutral, Spanish firms with Hong Kong subsidiaries can take full advantage of this preferential access.
This is important because it not only provides new business opportunities for Hong Kong companies, it also helps to upgrade the services sectors in the Mainland in a systematic and gradual way through the addition of new players and access to international best practices.
Hong Kong's further development as an international financial centre, and as China's global financial hub is another feature of our city's development under "One Country, Two Systems". As an open economy with no capital restrictions and our own freely convertible currency, Hong Kong has a unique and irreplaceable role to play in the globalisation of the Mainland currency, the Renminbi. This financial liberalisation process has already gathered pace in tandem with the shifting centre of gravity of the global economy towards Asia since the onset of the financial tsunami in 2008.
Hong Kong is now home to the largest pool of RMB funds outside the Mainland. This has provided the foundation for Hong Kong to develop into a global centre for offshore RMB trade settlement, financing and asset management. Spanish companies doing business in China can leverage on Hong Kong’s Renminbi experience to raise capital, settle trade with Mainland companies and expand their Renminbi investment portfolios.
I would like to mention Hong Kong's new administration as well. The administration under Chief Executive, Mr CY Leung, is very much committed to enhancing our links with the Mainland. Here, we see important opportunities for finance, business services, transport and logistics and tourism. There are also opportunities for our emerging sectors such as education, healthcare, innovation and technology, testing and certification, creative industries and "green" industries. That's why in my short trip to Madrid I will meet with the relevant officials.
Last year, around 8 per cent of trade between Spain and Mainland China was routed through Hong Kong. I am confident that there is great potential for our city to become an even more important entrepot for trade between our two nations.
Ladies and gentlemen, I have focused my comments today mostly on the great potential to expand business and financial links between Spain and Hong Kong.
I would like to conclude by providing some more insight into the direction of Hong Kong's new Fourth Term Government that took office on July 1. We are fully aware of concerns in the international business community about some areas such as the environment, especially our air quality, availability of international school places, support for SMEs and the cost of doing business. We are moving forward with plans on all of these fronts.
Property prices, including office rents, have been rising quite quickly in Hong Kong. This is due to a "perfect storm", generated by a combination of ultra-low interest rates and hot money inflows that have resulted from quantitative easing measures in the US. There is also strong demand for office space in our Central Business District (CBD) from a growing number of local and international companies.
To address this concern, we are developing a new CBD at Kowloon East, which includes the former site of our old airport at Kai Tak. This prime area will eventually add about 4 million square metres of floor space to Hong Kong's commercial real estate stock. This new CBD will not only provide more office space options and an alternative business and commercial hub on our Kowloon peninsula. It will also re-energise adjoining neighbourhoods and add to the vibrancy of our world-famous Victoria Harbour. New modern high-rise buildings at this new CBD are already becoming popular with local and overseas companies. It is an attractive proposition for new businesses to consider, including those from Spain, who are keen to establish or expand their operations in Hong Kong.
Another priority for the new administration is to vigorously improve air quality in our city, which has become a concern in recent years. We are considering a number of initiatives such as the eventual phasing out of old buses and commercial diesel vehicles, regulating the use of marine fuels, and promoting a polluters pay policy.
This is just part of an overall policy commitment to make Hong Kong an even better city to live, do business and raise a family.
In my short chat with Mr Gonzalez, I understand that many of you are infrastructure contractors and consultants. In fact, Hong Kong is embarking on a very ambitious infrastructure plan, which is what we call "a golden era". The Government's investment in public infrastructure has increased from 20 billion Hong Kong dollars in 2007 to over 70 billion dollars now, and is due to rise in the coming years because of those infrastructure that we have rolled out, from high speed train to domestic rail lines to building of offices that I have just mentioned, and also interesting projects that we have not done for a while including water desalination. So I really hope that we could see some Spanish contractors and consultants coming to us or coming back to us and take part in some of these very exciting projects.
We would certainly like more Spanish companies and people from Spain to come to Hong Kong for business and for pleasure. Please accept this as an invitation to bring some of Madrid's culture, vitality, diligence and creativity to Hong Kong and to become a part of the economic growth cycle in Asia.
Thank you very much.
Ends/Friday, November 16, 2012
Issued at HKT 00:10
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