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LCQ14: Competitiveness of Hong Kong
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     Following is a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, to a question by the Hon Tony Tse in the Legislative Council today (June 4):

Question:

     It has been reported that as revealed by the Blue Book of Urban Competitiveness: Report on China's Urban Competitiveness (Report) published by the National Academy of Economic Strategy and the Social Sciences Academic Press of the Chinese Academy of Social Sciences on the ninth of last month, in 2013 for the twelfth consecutive year, Hong Kong ranked first in the Comprehensive Economic Competitiveness Index among the 294 cities including Hong Kong, Macao as well as cities on the Mainland and in Taiwan.  Yet, the Report has pointed out that Hong Kong "lacks strength to accelerate and sustain growth" and is gradually losing its edge in areas such as taxation, talents, as well as software and hardware facilities, while being over-reliant on a few industries such as the finance and the real estate industries.  Furthermore, Zhuhai has overtaken Hong Kong to become the most livable city in China, with Hong Kong's ranking dropping to the second place.  In this connection, will the Government inform this Council:

(1) targeting at the aforesaid problems faced by Hong Kong as pointed out by the Report, of the authorities' new plans and measures in respect of talents, industry development and taxation, so as to enhance the competitiveness of Hong Kong;

(2) whether it has explored the causes of Zhuhai overtaking Hong Kong to become the most livable city in China; if it has, of the outcome, and whether it will take corresponding measures to maintain Hong Kong's ranking in livable cities of China or even enable Hong Kong to regain the top ranking; if it has not explored the causes, the reasons for that; and

(3) whether it has conducted any analysis and assessment as to whether the Report's comment that Hong Kong "lacks strength to accelerate and sustain growth" is fair, as well as whether the Report has delivered a warning on the decline in Hong Kong's overall competitiveness and economic development; if it has conducted such an analysis and assessment, of the details and outcome, as well as the corresponding measures and follow-up actions; if it has not conducted any analysis and assessment, the reasons for that, and whether it will conduct the relevant analysis and assessment?

Reply:

President,

     The Government has been committed to enhancing Hong Kong's competitiveness in order to support the sustainable development of the economy, the society and people's livelihood.  Hong Kong's economic accomplishments over the years owe much to its competitive edges, including a free market policy; the free flow of goods, capital and information; a sound legal system and an independent judiciary; the protection of intellectual property rights; a simple tax regime; the prudent management of public finances; and a robust financial regulatory framework.  These are Hong Kong's core competitive advantages, which are conducive to maintaining a favourable business environment for enterprises.  In addition, strategically located at the heart of Asia, Hong Kong is an ideal investment platform for multinational enterprises, and has been attracting many enterprises to explore business opportunities.  In the Blue Book of Urban Competitiveness: Report on China's Urban Competitiveness (the Report), Hong Kong ranked first in the "Comprehensive Economic Competitiveness Index" among all the cities in the country.  That said, as an international city, Hong Kong is facing regional and global competition.  We must therefore make sustained efforts to enhance our competitiveness.  My reply to the three-part question is as follows:

(1) Hong Kong is a service-driven economy.  The four pillar industries, namely, trading and logistics; financial services; tourism; and business and professional services are well established and have clear advantages as well as high competitiveness internationally.  These traditional pillar industries have been the major driving forces of Hong Kong's economic development.  In the foreseeable future, there is still vast room for these industries to flourish and move up the value chain in pursuit of new areas of growth.  The Government will continue to provide support, explore new markets, and chart the direction for the development of these pillar industries so as to consolidate Hong Kong's position as an international business, financial, and logistics hub.  The Government will also seek to diversify the economy through supporting emerging industries, in particular, the creative industries and innovation and technology industries.  The Economic Development Commission, established by the Chief Executive in 2013, is to provide visionary direction and advice to the Government on the overall strategy and policy to enhance Hong Kong's long-term economic development, study ways to broaden Hong Kong's economic base, and explore and identify growth sectors or clusters of sectors which present opportunities for Hong Kong's further economic growth.

     The Government attaches great importance to investment in human capital.   The recurrent expenditure on education takes up the largest share of that of the Government.  The Government will continue to actively invest in education to nurture talents and promote social mobility.  On the other hand, the ageing population is a formidable challenge to Hong Kong.  The Government is examining the population policy with a view to addressing the impacts of the ageing population on the labour market in the long run.

     As regards taxation, the Government adopts a simple tax regime with low tax rates, and is committed to upholding the taxation principles of fairness and neutrality.  This is indeed one of the essential factors underpinning the success of Hong Kong.  Among the advanced economies, Hong Kong is also one of the places with the lowest overall tax rate for businesses.  The Government will strive to retain the strengths in this regard so as to maintain the long-term competitiveness of Hong Kong.

(2) As we understand, the Report's competitiveness ranking of the most livable cities has taken into account a number of core indicators including those relating to living conditions and the climate.  In fact, the Government has put in place various measures to help improve Hong Kong's living conditions and climate.

     For instance, to cool down the overheated property market and to address the home ownership needs of the Hong Kong people, the Government has launched demand-side management measures, including the introduction of the Buyer's Stamp Duty and the enhanced Special Stamp Duty in October 2012 and the doubling of the ad valorem stamp duty rates in February 2013.  These measures aim at ensuring a healthy and stable development of the property market and according priority to the home ownership needs of Hong Kong's permanent residents in the tight housing supply situation.  The Government has also adopted a multi-pronged strategy to increase land supply in the short, medium and long terms through the continued and systematic implementation of measures, including optimising the use of developed land and creating new land for development, so as to cater for the needs of the growing population in Hong Kong and improve people's living environment.

     Regarding the climate, the Government is committed to improving the air quality with a view to rendering Hong Kong a healthy and livable city.  In March 2013, the Environment Bureau unveiled "A Clean Air Plan for Hong Kong" to comprehensively outline the policies, measures and plans on tackling air pollution.  The Government's foci are on to improve roadside air quality, reduce marine emissions and collaborate with the Guangdong Provincial Government to improve regional air quality, with the goal of largely achieving the new Air Quality Objectives by 2020.

(3) The Government attaches great importance and has been committed to enhancing the competitiveness of Hong Kong.  Relative to most cities in the Mainland, Hong Kong is rather mature in terms of economic development.  Therefore, it is normal for Hong Kong to enjoy a relatively lower rate of economic growth when compared with the developing cities in the Mainland.  It is also understandable that the gap between other Mainland cities and Hong Kong has narrowed.

     In the Report, Hong Kong remains the top city in the country in the "Urban Comprehensive Economic Competitiveness Index", and continues to rank first in respect of "Sustainable Competitiveness" and "Business-Friendly City Competitiveness".  Moreover, Hong Kong has stable employment conditions and is now in a state of full employment.  This notwithstanding, we understand that when facing regional and global competition, we will lag behind if we do not make further progress.  Only by moving further towards a high value-added knowledge-based economy can we maintain our lead and create more quality employment opportunities.  We strongly believe that Hong Kong's competitiveness can definitely be further enhanced if different sectors of the community can work together and make concerted efforts to promote sustainable economic development in Hong Kong.

Ends/Wednesday, June 4, 2014
Issued at HKT 11:18

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