Email this article
Speech by FS at 7th ASEAN and Asia Forum (English only) (with photo)

     Following is the speech delivered by the Financial Secretary, Mr John C Tsang, at the 7th ASEAN (Association of Southeast Asian Nations) and Asia Forum in Singapore today (August 1):

Professor Tay (Chairman of the Singapore Institute of International Affairs, Professor Simon Tay), Your Excellencies, distinguished guests, ladies and gentlemen,

     A very good morning to you all. It is always a great pleasure for me to visit the Lion City and to see it in such roaring form.

     First of all, congratulations to the Singapore Institute of International Affairs on organising this important ASEAN and Asia Forum for the seventh year. I am delighted to join you all today.

     Our world is undergoing profound changes, not least in the shift of economic focus to the East. The recovery of advanced economies in the West from the game-changing 2009 financial crisis, which we so earnestly await, has so far been slow and elusive. Yet, Asia remains dynamic.

     Asia now accounts for one third of global GDP. Our vast region is home to two-thirds of the world's population. So we have an ample supply of labour as well as an expanding middle class consumer market. Our growth potential is immense, and there are enormous untapped opportunities to be explored.

     Despite the largely positive attributes, Asia is also facing some critical issues in the current stage of development. Many of our neighbours are encountering issues of economic volatility, inflation, capital flight and currency depreciation. Old problems as well as new challenges need to be addressed holistically, and continually. As fellow members of the Asian community, our interests are closely intertwined. It is in everyone's interest to make good use of our comparative advantages and complementary strengths to create success in which we can all share.

     The focus of today's forum is the new dynamic of business and investment in Asia. You have chosen the right time and place to discuss this very important subject because ASEAN is a major force behind this new dynamism, and I believe that ASEAN is the platform from which the new business and investment dynamism in Asia will spring.

     Hong Kong is eager to enhance economic ties with ASEAN economies. I am delighted to see the start of negotiations on the ASEAN-HK Free Trade Agreement (FTA). I am convinced that an early and successful conclusion of this process will benefit all concerned. I shall return to this topic later.

     Meanwhile, allow me to share with you what Hong Kong can bring to the ASEAN table, in particular how Hong Kong can contribute to the economic development of our region.

Hong Kong: More than the Gateway to China

     As they say in the real estate business, the key is location, location and location. Hong Kong's strategic location makes it the natural gateway to the Mainland of China. Indeed, our city enjoys a unique and well-justified reputation as the pre-eminent gateway to China. As the biggest single investor in all the Mainland provinces in recent decades, we know better than anyone else the incredible evolution of the China market, following the unprecedented economic reform since the late '70s.

     Hong Kong is also the premier platform for Mainland capital and enterprises to reach out to world markets. Currently, some 60 per cent of foreign direct investment into the Mainland originates from Hong Kong, and more than 50 per cent of the Mainland's overseas direct investment is destined to or channelled through our city.

     So, if you are looking for expertise or business partners in China, Hong Kong should certainly be your first choice. This is particularly the case for SMEs which cannot afford a second shot.

     But Hong Kong is actually more than just the gateway to China. As a global business centre and a global financial centre, as well as a global aviation and logistics centre in Asia, we offer an attractive package of advantages for the entire Asian community, and indeed the entire global village, to do business in Hong Kong, with Hong Kong and through Hong Kong. I shall deal with each one of these three centre roles in turn.

Hong Kong: Global Business Centre

     Hong Kong has long been a global business centre. We trade with almost every economy in the world. Our annual trade volume is several times our GDP. UNCTAD (United Nations Conference on Trade and Development)'s World Investment Report ranks Hong Kong the fourth largest FDI recipient in the world in 2013, after the three giant economies of the United States, the Mainland of China and Russia. This is the result of strong relations with our trading partners. Our city also hosts some 7,500 overseas companies, including about 4,000 regional headquarters and offices.

     Hong Kong's standing in the business world is clearly echoed by numerous other leading indices and surveys. The McKinsey Global Institute ranked Hong Kong second in their new Global Connectedness Index, which took into account the total flow of goods, services, finance and people, as well as data and communications, in the 131 economies they surveyed. For 20 consecutive years, the Heritage Foundation has ranked Hong Kong as the world's freest economy. A survey by the Fraser Institute came up with the same result. The World Bank's latest Doing Business report ranked Hong Kong the second easiest place in the world to do business. Hong Kong was again selected as the Best Business City in the World in a readers' poll by Business Traveller Asia-Pacific magazine.

     I am not citing all these findings in the great city-state of Singapore just to be provocative. Not at all. These surveys also list Singapore, along with Hong Kong, as a leader in its fields of strength. They highlight the simple fact that Hong Kong, like Singapore, is one of the best places to do business as well as a good partner for ASEAN firms to do business jointly in our region and beyond.

     Hong Kong has a low and simple tax system. We have no VAT, no GST, no inheritance tax, no capital gains tax, no withholding tax on dividends or interest. We don't even tax our wine imports. Even with such a liberal regime, we still managed to complete the last decade with fiscal surpluses in every single year. The secret is simple. We maintain a small public sector which is only a quarter of the size of the private sector.

     We have a strong tradition of rule of law, underpinned by an independent judiciary. We have an efficient, robust and transparent regulatory environment. We are a duty-free port, and we encourage free flows of people, capital and information.

     Perhaps more importantly, we have a nationality neutral policy when it comes to foreign businesses. No one gets preferential treatment irrespective of size or place of origin. No firm will face a disadvantage against a local competitor, giant multinational or an enterprise with government interests. Every firm is treated on an equal basis - a real level playing field.

     What's more, foreign companies incorporated in Hong Kong can take advantage of our trade agreements with other economies. For example, ASEAN investors can also enjoy the benefits accorded under CEPA, the Mainland and Hong Kong Closer Economic Partnership Arrangement. This unique free trade pact offers any qualified company registered in Hong Kong, irrespective of country of origin, preferential access to the Mainland market, including tariff-free exports to the Mainland for all goods made in Hong Kong, as well as over 400 preferential benefits to Hong Kong service providers engaged in a wide array of services.

     These are the fundamentals that make Hong Kong a good place to do business, and these principles apply equally to large multinationals as well as small startups. So I encourage the entrepreneurs among you to consider Hong Kong as your business platform. You are sure to benefit from our business-friendly environment as well as the enormous opportunities that are available.

Hong Kong: Global Financial Centre

     Let me now turn to Hong Kong's role as a global financial centre. Although Hong Kong also had to weather several financial crises since reunification in 1997, our financial market has repeatedly demonstrated remarkable resilience. Since then, our stock market capitalisation has grown almost sevenfold to some US$3 trillion. The number of securities intermediaries has increased almost threefold to some 40,000. At the same time, the number of listed companies on our stock exchange has more than doubled to some 1,600.

     With a vibrant and well-regulated market, the Hong Kong Stock Exchange has become an ideal place for IPOs. Last year was rather difficult for business. Still, we managed to achieve number two ranking globally in terms of funds raised. Thanks to the international best practices that Hong Kong stringently abides by, companies that comply with our listing rules earn huge respect among international investors for their transparency and governance. If you are looking to raise capital in a market with a decent daily turnover to expand your business and enhance your brand equity or corporate governance status, a Hong Kong listing would be just the ticket.

     The robust economic growth in Asia in recent years, particularly in the Mainland, has generated huge wealth accumulation in the region. According to the latest Capgemini survey, there were 3.7 million high net worth individuals in the Asia-Pacific region in 2012. This has contributed to the rapid development of Hong Kong's asset management industry, which is now on top of the league table in Asia, with some HK$16 trillion being managed from Hong Kong at end-2013.

     With the Mainland's ongoing financial liberalisation, Hong Kong's asset management environment is becoming even more attractive. The Shanghai-Hong Kong Stock Connect programme, announced earlier this year, will not only help strengthen the two securities markets, but will also help increase the participation of overseas investors in the Shanghai market, and enable Mainland investors to invest in overseas markets in an orderly manner. It will also catalyse the two-way Renminbi (RMB) fund flows between onshore and offshore markets.

     Whether you are an experienced fund manager or looking for expertise and channels to enhance returns of your assets, Hong Kong is the place that you should turn to.

     With our triple A rating, we have built on our first-mover advantage as the first and largest offshore RMB business centre. At the end of last year, Hong Kong's RMB deposits accounted for 70 per cent of the total offshore liquidity in the world. Last year, RMB trade settlement conducted through our city's banks recorded a 45 per cent increase year on year.

     The outstanding amount of dim-sum bonds stood at some 400 billion yuan at end-June 2014, representing a 23 per cent increase over end-2013. Big global companies like McDonald's, Caterpillar and Renault have issued RMB bonds in Hong Kong to finance their Mainland operations.

     The Ministry of Finance of China also issues RMB-denominated sovereign bonds in Hong Kong regularly. Such bond issues, with a tenor of up to 30 years, have enabled the development of a benchmark yield curve for RMB bonds in Hong Kong, which facilitates the pricing of RMB products. The regular bond issues also demonstrate the Mainland's strong support for developing Hong Kong as an offshore RMB business centre.

     I am sure many of you already do or plan to do business with China. Settling your trade in RMB or issuing RMB-denominated bonds in Hong Kong are good options that can often reduce your exchange risks and financing costs.

     These are some of the unique features of Hong Kong as a global financial centre.

Hong Kong: Global Aviation and Logistic Centre

     Now I want to say a few words about Hong Kong's advantages as a global aviation and logistics hub. Hong Kong enjoys a strategic location in Asia. Passengers and goods from Hong Kong can reach all major Asian cities within four hours, and half of the world's population is within five hours' flying time.

     Over 100 scheduled airlines operate regularly at our award-winning airport. There are over 7,000 flights every week connecting Hong Kong with some 180 destinations worldwide. Every day, around 270 flights operate direct from our airport to and from 20 ASEAN cities.

     Our extensive flight network also makes Hong Kong the world's busiest air cargo hub. Our airport handled over 4.1 million tonnes of high value cargo in 2013, from precious metals to high fashion, watches to consumer electronics, art treasures to sport horses, deluxe chocolate to pharmaceuticals, flowers to sea food, and spare parts to product samples, and a large quantity of wine from different parts of the world. Our customs clearance procedure is efficient. Cargo inspection, if required, is done within 80 minutes. As a former Customs and Excise Commissioner, I can attest to that.

     Hong Kong is also well served by about 80 international shipping lines with some 380 services per week to some 550 destinations worldwide. Our container port is among the busiest in the world.

     We are also very well connected to the Mainland by land. Over half a million passengers cross the boundary points every day. We are building the mega Hong Kong-Zhuhai-Macao Bridge. When ready, this bridge will improve our road connectivity to the Western Pearl River Delta region, and through which, to the southwest provinces of the Mainland, and even as far as Indochina.

     Apart from our advantageous location, extensive multi-modal transport networks, highly efficient customs procedures and "free port" status, Hong Kong is also well known for security, quality assurance and intellectual property protection. These attributes make Hong Kong an ideal place for regional distribution and inventory management centres for high value goods. Brands like LV, Burberry, Tiffany, A&F, Philips, Canon, Timberland and Schneider Electric have set up regional bases in Hong Kong to enable "just-in-time" delivery to the region.

     Hong Kong is also home to the largest community of shipping, freight forwarding and logistics operators in Asia, including Japan's Mitsui O.S.K Liner, a large shipping company that operates a fleet of over 100 container vessels and recently relocated its global headquarters to Hong Kong.

     Apart from moving and warehousing goods, our logistics operators offer high value-added services, such as labelling, price-tagging, pick and pack, as well as packaging on behalf of clients. They also provide tailor-made supply chain solutions and match buyers and sellers, without even physically moving anything into and out of Hong Kong.

     I believe that our ASEAN friends will find our logistics services handy, whatever you make and wherever you sell them.


     Ladies and gentlemen, Hong Kong is keen to deepen and broaden our involvement in the economic development of Southeast Asia. Our bilateral trade with ASEAN has seen a steady growth of 10 per cent per annum from 2009 to 2013. ASEAN is now our second largest trading partner in terms of goods, fourth largest partner in terms of services, fifth largest destination for foreign direct investment from Hong Kong, and sixth largest source of FDI into Hong Kong.

     So what does Hong Kong bring to the ASEAN table? ASEAN friends are welcome to benefit from Hong Kong's multiple roles as gateway to China, global business centre and global financial centre as well as global aviation and logistic centre. On top of all these, Hong Kong entrepreneurs are pioneer investors in individual ASEAN economies. We have been investing in ASEAN economies for as long as we can remember.

     Just last year, I led a large business delegation to Cambodia and Myanmar to explore new opportunities for business and investment. Earlier this year, a dozen Hong Kong textile companies signed deals to rent close to half of the 400-hectare Thilawa Special Economic Zone near Yangon to build factories and create thousands of jobs. Infrastructure projects to supply power and water will follow. These are important projects that would benefit all concerned in these ASEAN economies.

     I believe that it is important for Hong Kong and ASEAN to work together in every aspect to create an even bigger pie, instead of competing for larger slices. What we should strive for is an even larger market for all to share.

     By eliminating trade barriers, the Hong Kong-ASEAN FTA will help facilitate the flow of goods, services and investment among all parties concerned. That will enhance the co-operation of ASEAN and Hong Kong in the essential global supply chains and raise our collective competitive edge on the global stage.

     I look forward to the early and successful conclusion of the FTA negotiation to enable entrepreneurs in our region to fully reap their rewards. This is the win-win result that we seek.


     Ladies and gentlemen, I would like to thank you for your patience today and your continuing support for Hong Kong in the past decades. A wise man said a long time ago, a journey of a thousand miles begins with a single step. We have now taken that first step, and we shall soon embark together towards a great new vista offered by the new dynamic of business and investment in our region.

     Thank you.

Ends/Friday, August 1, 2014
Issued at HKT 14:37


Print this page