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Speech by CS at forum on "Hong Kong - ASEAN Regional Cooperation" (English only) (with photo)

     Following is the speech by the Chief Secretary for Administration, Mrs Carrie Lam, at the forum on "Hong Kong - ASEAN Regional Cooperation" in Kuala Lumpur, Malaysia, today (June 5):

Distinguished guests, ladies and gentlemen,

     I am delighted to be here today. I thank the Chinese General Chamber of Commerce, the Associated Chinese Chambers of Commerce and Industry of Malaysia, the Asian Strategy and Leadership Institute and the Hong Kong Economic and Trade Office in Singapore for organising this luncheon.

     Next month, we, or more specifically the Trade Negotiating Committee, will begin formal negotiations on an ASEAN-Hong Kong Free Trade Agreement (ASEAN-HK FTA). The ASEAN-HK FTA will have timely and significant implications for Hong Kong's trading relationship with ASEAN (the Association of Southeast Asian Nations). It will also have a positive impact on ASEAN's trading relations with our nation, China.

     ASEAN and China together represent a mega market of around 2 billion people with combined nominal GDP of over US$11 trillion. The GDP of developing Asian economies, including ASEAN and Mainland China, is expected to grow by 6.7 per cent this year, according to the latest International Monetary Fund (IMF) forecast. That is well above the IMF's global growth forecast of 3.6 per cent for 2014.

     New opportunities are emerging fast as living standards rise, purchasing power increases and the region becomes more closely integrated.

     As a free and open economy right on the doorstep of Mainland China, Hong Kong is firmly committed to promoting a level playing field for business with free flows of goods and services, capital, ideas and talents. This is recognised in the scope of the ASEAN-HK FTA agreed upon in April this year. The FTA will cover six specific areas, namely: trade in goods and related issues; trade in services; investment; intellectual property rights; economic and technical co-operation; and the sixth area is dispute settlement.

     I thank Malaysia and the other ASEAN member states for their support of an ASEAN-HK FTA, and I look forward to an early conclusion to the negotiations for a win-win result.

     Regional economic collaboration is nothing new for Asia. When ASEAN was first established in 1967, its mission was to create a more stable and dynamic trading environment among the five founding member states, including Malaysia. Since then, the ASEAN bloc has expanded to the current 10 member states today.

     More recently, the ASEAN-Plus-Three initiative has added Korea, Japan and Mainland China to the free-trade mix with positive results. Indeed, since the ASEAN-China FTA took effect in 2010, Hong Kong has played a larger role in trade and investment between ASEAN and Mainland China. I believe we can do more, much more. The ASEAN-HK FTA will help to unleash Hong Kong's full potential as a bridge for trade and investment between ASEAN and Mainland China.

     Since the Central Government in Beijing launched its economic reform and "open door" policies in 1978, Hong Kong has become the premier gateway into and out of Mainland China for international trade and investment across Asia and the world.

     With our free-market policies, global connectivity and many decades of experience, Hong Kong has been able to contribute to and benefit from the reform and rapid development of the Mainland China economy. Our cross-boundary integration has also become much closer since Hong Kong's return to China in 1997 under the principle of "One Country, Two Systems".

     Among other things, Hong Kong and Mainland China have a unique free trade pact called the Closer Economic Partnership Arrangement, or CEPA. CEPA was signed in 2003 and has been expanded each year since then. Including Supplement X to CEPA signed last year, it continues to be the most preferential trade pact signed by Mainland China. CEPA also has an international dimension. Foreign firms incorporated in Hong Kong can enjoy the same benefits of CEPA as local Hong Kong companies. This includes tariff-free entry for most Hong Kong-produced products to Mainland China markets and preferential access in a wide variety of services sectors across the country. These include the major services areas such as financial services, legal services, logistics, tourism, medical services and more.

     At the same time, Mainland Chinese companies are able to use CEPA to grow their business in Hong Kong and take advantage of our city as an effective stepping stone to reach Asian and global markets.

     CEPA is a good example of "One Country, Two Systems" in action. It is possible because, under "One Country, Two Systems", Hong Kong and Mainland China are separate members of the World Trade Organization (WTO). In fact, Hong Kong joined the WTO even earlier than Mainland China, and we continue to enjoy separate membership of other international bodies too, including APEC (Asia Pacific Economic Cooperation), the World Customs Organization, the International Olympic Committee and the World Meteorological Organization, just to name a few.

     Importantly for Hong Kong, the principle of "One Country, Two Systems" is more than just an ideology; it is inscribed in our constitutional document, the Basic Law.

     In terms of Hong Kong's international trade relations, Article 151 of the Basic Law says, quote: "The Hong Kong Special Administrative Region may on its own, using the name 'Hong Kong, China', maintain and develop relations and conclude and implement agreements with foreign states and regions and relevant international organizations in the appropriate fields, including the economic, trade, financial and monetary, shipping, communications, tourism, cultural and sports fields." End quote.

     In other words, Hong Kong has free rein to initiate and negotiate our own international trade accords, and we do so at every opportunity.

     The "Two Systems" part of "One Country, Two Systems" has helped Hong Kong keep its top ranking as the world's freest economy for the past two decades. The US-based Heritage Foundation has ranked Hong Kong number one in its Index of Economic Freedom every year since 1994.

     We have our own financial system with a freely convertible currency, the Hong Kong dollar, and no restrictions on the flow of capital. We have our own tax system based on low and simple taxes. Salaries tax is capped at 15 per cent and companies pay no more than 16.5 per cent profits tax. There is no inheritance tax or capital gains tax in Hong Kong and no VAT or GST either. We also have an effective rule of law with our own tried and trusted common law system underpinned by an independent judiciary.

     With our own financial system separate to that of Mainland China, Hong Kong is willing and very able to play a key part in the Central Government's currency liberalisation. For more than a decade, Hong Kong has provided a reliable testing ground for the internationalisation of the Chinese currency, the Renminbi. Today, our city is the largest centre for offshore Renminbi business including banking, investment, trade settlement and capital-raising activities. We have built up by far the largest pool of Renminbi outside Mainland China, amounting to over RMB1 trillion in deposits and certificates of deposit.

     Our city's international dimension also means that we work closely with our partners around the globe to promote the wider use of Renminbi in other major financial centres. This collaboration includes an agreement by the Hong Kong Monetary Authority and Bank Negara Malaysia to strengthen co-operation between Hong Kong and Malaysia on offshore Renminbi business. We are keen to expand Renminbi co-operation with other member states of ASEAN. We anticipate that, as Mainland China's economy continues to grow and catch up with the United States in terms of size, more international firms will be looking to expand their Renminbi portfolios and settle their Mainland China trade using Renminbi. It is an opportunity not to be missed by ASEAN.

     Although Hong Kong is outside the mainframe of the ASEAN umbrella, our city has become an important trade partner with each of the member states.

     Hong Kong and ASEAN have a long-established trading partnership that is growing stronger all the time. Last year, the ASEAN bloc was our second largest goods trading partner in the world, ahead of the United States and the European Union and behind only the Mainland of China. In 2013, the value of total bilateral trade between Hong Kong and ASEAN exceeded US$96 billion (HK$751 billion). Five ASEAN economies are among our top 20 trading partners, including Malaysia.

     In 2013, more than 10 per cent of trade between ASEAN and Mainland China, with a value of almost US$45 billion (HK$349 billion), was routed through Hong Kong.

     In terms of regional supply chains, Hong Kong is a node that connects investors to a huge network of buyers and suppliers, not just in our city but also in our immediate hinterland of the dynamic Pearl River Delta (PRD) region and across Mainland China.

     Hong Kong is one of the busiest and most efficient transport and logistics hubs in Asia. Hong Kong International Airport is the busiest in the world for air cargo and one of the busiest for passengers. Our seaport is also among the busiest in the world. We have advanced infrastructure to handle enormous trade flows in our region. Equally important, we have the necessary technology and skilled labour to ensure reliable and cost-effective services, as well as on-time delivery.

     Hong Kong is in the midst of large-scale transport infrastructure development which will expand the economic capacity of our city and open up new markets in our neck of the woods.

     Mega cross-boundary infrastructure projects include an Express Rail Link which will reduce traveling time between Hong Kong and the Mainland cities of Shenzhen and Guangzhou. It will also connect Hong Kong to the 16 000-kilometre high-speed rail network in Mainland China.

     Another major project is the Hong Kong-Zhuhai-Macao Bridge which will stretch a total of 55 kilometres deep into the less developed western part of the Pearl River Delta. When completed in 2016, the bridge will reduce road travel time from Zhuhai to our ports and airport by 80 per cent to about one hour. Other large cities will come within a three-hour drive of Hong Kong.

     The western PRD region has a population of more than 9 million and GDP of around RMB1,500 billion. The bridge will help to unlock the exciting possibilities for new business in this region, not just for companies in Hong Kong but also for our partners in ASEAN.

     Building on these strong foundations, the ASEAN-HK FTA will contribute to the economic integration and common prosperity of the region. It will facilitate the flow of goods, services and investment among all stakeholders.

     With its broad scope, including intellectual property rights and dispute resolution, the FTA will add to our region's competitiveness and attract more international investors to our region.

     Among the many wonderful natural resources in Asia, people always come first in my book. ASEAN has a combined population of more than 600 million people. This represents an enormous human resource and a great opportunity for closer people-to-people connectivity.

     In terms of nurturing talent, our Economic and Trade Office in Singapore has initiated an ASEAN Internship for University Students of Hong Kong Scheme. It provides internship opportunities for Hong Kong students in the 10 ASEAN member states. So far, more than 50 organisations have joined the scheme, offering more than 150 internship places. The scheme will be formally launched this summer.

     The Hong Kong Polytechnic University (PolyU) has launched a series of capacity building projects in countries throughout Southeast Asia. Under the programme, PolyU students will provide collaborative assistance to various communities by setting up mobile computing networks, and teaching local youngsters how to use and maintain equipment. Projects are planned in Myanmar, Cambodia, Indonesia and Vietnam this summer.

     We are also exploring new opportunities to promote arts and cultural collaboration in the region and boost tourism, which is a pillar industry for most Asian economies including Hong Kong and Malaysia. Last year, we welcomed almost 650 000 Malaysian visitors to Hong Kong, making Malaysia our ninth largest source of visitor arrivals. There are more than 130 flights between Hong Kong and Malaysia every week. Indeed, tourism is a strong focus of my visit to Malaysia, including a very fruitful trip to Malacca two days ago. Later today I will fly to Penang and take part in several events that promote tourism and cultural collaboration between the two communities.

     Ladies and gentlemen, we live in a highly diverse region with economies at various stages of development. We all have to adjust to challenges and capitalise on opportunities of globalisation. The recent global recession has also put more focus on Asia as a powerful engine for future global growth.

     Our aim is for Hong Kong to play a greater part in regional integration both as a gateway to the vast Mainland China markets and as a platform for Chinese investment overseas.

     With the establishment of the ASEAN Economic Community by the end of 2015, we are confident that a Free Trade Agreement between Hong Kong and ASEAN will provide a timely boost to markets across our region and add value to business activities.

     We must all remain outward-looking and work together to make the most of these opportunities for our region.

     I wish Malaysia a very successful term as the Chair of ASEAN in 2015. We look forward to the start of formal negotiations on the ASEAN-HK FTA next month. I hope that Malaysia will continue to be a champion within ASEAN for a smooth and successful conclusion to the FTA so that both sides can reap the benefits as soon as possible.

     Thank you very much.

Ends/Thursday, June 5, 2014
Issued at HKT 15:33


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