Speech by FS at Joint Business Community Luncheon (English only)(with photos/video)

     Following is the speech by the Financial Secretary, Mr John C Tsang, at the Joint Business Community 2013-14 Budget Speech Luncheon at the Hong Kong Convention and Exhibition Centre today (March 18):

Distinguished guests, ladies and gentlemen,

     Good afternoon.

     I am pleased to join you all today.

     It's always a great pleasure for me to meet with our business community at this annual post-Budget gathering. This is round number six for me, and it is quite comforting for me to still see so many familiar faces here even after the previous five.

     This is also a special time of the year for Hong Kong. Later this week, the city will host the world-famous Hong Kong Rugby Sevens.

     Over the next few days, the rugby teams will be arriving from around the world, and fans will be preparing their fancy dress outfits as the festivities get under way. Friends told me that they work hard all year so that they can afford to enjoy the Sevens weekend.

Challenges and opportunities ahead

     In many ways, the Rugby Sevens captures the spirit of Hong Kong. It is an exciting international event that draws players and spectators from all corners of the globe. The seven-a-side game is an exciting, fast-flowing and open form of rugby.

     Similarly, Hong Kong thrives on our free, open and fast-paced business environment. Our city provides a dynamic platform for companies, local and overseas, as well as for multinationals to compete on a level, business-friendly playing field.

     Our international flair for business gives Hong Kong its competitive edge in the world, and complements our role as the gateway to the markets in the Mainland.

     After a long and occasionally painful recession in the past few years, there are now some fresh signs that the global economy is on the mend. In January, the IMF forecast global GDP growth of 3.5 per cent this year, up from 3.2 per cent last year. The IMF expects growth to be led by emerging economies, including China which recently predicted 7.5 per cent GDP growth in 2013.

     At the same time, we need to be aware that there are still significant downside risks in major economies in Europe and the US. Specifically, the IMF expects economic stagnation to continue in major Eurozone economies. It also warned of risks to the US recovery from excessive fiscal consolidation.

     Hong Kong is torn between these two trends. On the one hand, we are a city in China. Our economy benefits directly from the fast-growing Mainland economy. On the flip side of the coin, we are an international city with strong trade and investment links around the world. The US and the EU are among our largest overseas trading partners. Hong Kong will continue to feel the effects of economic shocks emanating from these regions.

     Our economy grew a relatively modest 1.4 per cent last year. I have forecast only slightly faster growth this year of between 1.5 and 3.5 per cent. Reading between the figures, I believe we should proceed with both confidence and caution.

Promoting economy and creating jobs

     By far, the largest section of my Budget this year was devoted to "Developing the Economy and Increasing Employment". This section alone ran for 67 out of the 163 paragraphs in this nearly two-hour-long speech. This is no accident. Rather, it is a clear indication of the Government's focus on promoting the economy and creating jobs in the months and years ahead.

     Russell Crowe's lead character, Maximus Aurelius, in one of my favourite films, "Gladiator", said, "What we do in life echoes in eternity." I would like to paraphrase in a less dramatic manner that better suits me as well as the situation here in Hong Kong by saying, "What we do now will have a long-term impact in the future."

     Fortunately for us, the days of the ruthless gladiator are consigned to history books. But we still face battles on different fronts, not least currency and trade wars as well as geopolitical conflicts.

     Promoting business from the Government's viewpoint is all about creating jobs and opportunities for the people of Hong Kong, for our fresh graduates, for experienced professionals, and for those who may change their career paths whether out of choice or out of necessity.

     Developing the economy is the most effective pathway to improving the standard of living and enabling sustainable investments in key sectors such as education, and health care, improving the environment and helping those in need.

     We must also look at achieving sustainable growth in the wider context of our ageing population. In the long run, to counter a shrinking workforce, businesses and employees will have to become more efficient and productive through upgrading and training.

     Not only do we need to create more employment opportunities, we also need a greater variety of high-quality jobs. Today's graduates, in general and certainly in terms of magnitude, are better educated and have higher expectations than previous generations. They have wider exposure to the global economy. Many have studied overseas or have taken part in internships with big corporations that will have broadened their horizons.

     They are eager and willing to put their qualifications and ideas into practice in the work environment. We must take full advantage of our most valuable resource, the well-educated and hard-working men and women of Hong Kong.

Pillar industries

     Similar to teams preparing for this weekend's Rugby Sevens tournament, our strategy for developing the economy is built around our strengths.

     While a rugby team may have particularly strong forwards or fast sprinters in the back line, Hong Kong's economic strengths lie in its pillar industries. These industries are highly competitive and have clear advantages internationally. They did not become pillar industries overnight. The strength of these industries has taken years - decades, in fact - to accumulate, and many generations of workers have contributed to making them what they are today. We must look for opportunities for these industries to continue to grow and diversify in order to sustain our economic development.

     Together the four pillar industries employ almost half of our total workforce, and contribute nearly 60 per cent of our GDP. I shall talk about a couple of them today.

     Trade and logistics alone employs some 770 000 workers in a wide variety of jobs that require different qualities, skills and qualifications.
     Trade and logistics firms in Hong Kong enjoy many advantages, including a great location, a world-class transport system, robust intellectual property protection and minimal red tape. We have reserved two pieces of land, one in Tsing Yi and one in Tuen Mun West, for modern logistics services in the coming years.

     The Government will continue to spend heavily on infrastructure development. Capital works expenditure is expected to exceed $70 billion in 2013-14. Spending will remain high for the next few years as major projects, including the strategic 29-kilometre Hong Kong-Zhuhai-Macao Bridge, approach completion.

     When completed in 2016, the bridge linking Hong Kong with Zhuhai and Macau will further open up transport links and market access to the western part of the Pearl River Delta and strengthen our city's position as the key logistics hub in the region.

     Turning to financial services. We recently established the Financial Services Development Council, or some have affectionately called it the "Blonde Council", to help steer the industry in new directions for expansion and diversification.

     Hong Kong is well established as an international financial centre in the Asian time zone. Our fund and asset management business is the second largest in the region, behind only Japan in terms of fund assets under management. We have a critical mass of international banks in the city and a deep pool of local and international financial talent.

     Importantly as China's global financial hub, we have free flows of capital and a transparent regulatory regime that is fully in line with international standards.

     Given the Mainland's fast-growing economy and liberalisation of its currency, we can expect to play an even more important role in the internationalisation of the Renminbi. Bond issuance, trade settlement and banking in the national currency in Hong Kong have made clear and steady progress in recent years. The potential to further develop Renminbi business is enormous.

     The Central Government has placed its full confidence in Hong Kong as the testing ground for new initiatives for offshore Renminbi business. We have lived up to everyone's expectation thanks largely to the enthusiasm and vision of our financial services professionals and the expertise of our regulators.

     Earlier this month, the China Securities Regulatory Commission, the CSRC, relaxed rules for the Renminbi Qualified Foreign Institutional Investor pilot scheme, or RQFII. This fresh development will enable us to launch a wider range of Renminbi investment products in Hong Kong and attract a greater variety of participants to the market.

     Going forward, Hong Kong will be able to use its strong connectivity with financial centres around the world to promote the use and circulation of Renminbi in different markets. Our experience has shown that demand for offshore Renminbi funds and financial products is growing rapidly. We shall continue to strengthen our market infrastructure to take advantage of these developments and promote the internationalisation of our national currency.

Emerging industries

     While focusing on our tried and trusted strengths in the form of the pillar industries, we must also search for "new industry heroes" to lift the economy and take it in new and exciting directions in future years.

     By "new industry heroes", I refer to new and emerging industries that have great potential and multiple advantages to develop further. Several of these industries have shown good progress lately, including innovation and technology, cultural and creative industries and testing and certification.

     The Government will continue to sweep away obstacles to growth for these and other industries. We shall also provide the necessary environment, resources and training opportunities to suit the needs of emerging industries.

     In the Budget, I have set aside $12 million for each of the six local universities which have technology transfer offices. This will assist them in commercialising their research and development results. I notice that some people have mistaken this sum for research and development and sought to reinforce my wiser caricature. I must clarify that this sum is different from the $23 billion that we have invested in the Research Grant Council for specific research and development purposes.

     Phase 3 development at the Hong Kong Science Park is making good progress. Zone A of this expansion programme is expected to be completed by the end of this year, providing more space for cutting-edge research and technology companies in Hong Kong.

Small and medium-sized enterprises

     Beyond the new and emerging industries, I think you will agree that the real heroes of our business sector are the small and medium-sized enterprises (SMEs) that provide the backbone to our economy. We depend on SMEs for over half of our jobs in the private sector. Often, start-ups and SMEs are at the cutting edge of innovation and entrepreneurship.

     The Government will continue to support SMEs. We have various schemes and programmes in place that have benefited SMEs during the global economic crisis. Exporters, who have been particularly hard-hit by weak external demand, are a primary concern of the Government.

     My Budget proposals strengthen assistance to SMEs in raising capital and reaching new markets.

     This includes extending for a year the SME Financing Guarantee Scheme until the end of February next year. I also propose to increase the grant for SMEs under the SME Export Marketing Fund by $50,000 up to $200,000. This will provide more support for promotion activities. Also, next month, the Hong Kong Export Credit Insurance Corporation, the ECIC, will introduce a "Small Business Policy" scheme.

Concluding remarks

     Ladies and gentlemen, what we do now will shape Hong Kong's development in the years to come.

     Few places enjoy the same advantages as we have in Hong Kong. Our proximity to the Mainland markets, our international competitiveness and connectivity, our fiscal health and our economic freedoms under "One Country, Two Systems" combine to provide a sound platform for growth.

     Key indicators of Hong Kong's development over the past five, 10 or 15 years are mostly positive. More Mainland and overseas companies are coming to Hong Kong all the time, our schools and universities achieve consistently high rankings globally, we continue to be ranked as the world's freest economy, and we are rated among the best cities in which to live and do business.

     I know we are not the sort of arrogant people who love to brag about ourselves, but we should be rightfully proud of our city's achievements, and we should not just take these achievements for granted. These are results of a lot of hard work by many generations of Hong Kong people. They have made many sacrifices to enable our society to live the life that we can afford today.

     The various business and professional groups represented here at this joint chambers luncheon have done a great job in promoting the interests of Hong Kong.

     Please do keep up the good work.

     The Government will continue to lay strong foundations for economic development by strengthening our G2G contacts with the Mainland and overseas markets. We shall continue to invest heavily in infrastructure development so that Hong Kong maintains its edge as an efficient and modern services hub. And we shall continue to promote Hong Kong around the world as the best place in Asia to do business.

     I would like to thank you all, our business community, for your strong support over the years, and wish you all a successful and prosperous year ahead.

     Thank you very much.

Ends/Monday, March 18, 2013
Issued at HKT 16:19