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Speech by Chief Executive at 12th Hong Kong Forum

Following is the speech « Preparing for the Worst, Planning for the Best and Grasping New Opportunities » by the Chief Executive, Mr Donald Tsang, at the 12th Hong Kong Forum organised by the Federation of Hong Kong Business Associations Worldwide on November 30 :

Distinguished guests, ladies and gentlemen,

I am a bit overwhelmed by Georges’ introductory remarks, which make me feel exceedingly humble in front of all of you for what I have done over the past years as a public servant of Hong Kong – a mission from which I have derived enormous satisfaction, also a comparable measure of frustration. But, it is an honour to serve Hong Kong. Ladies and gentlemen, I am delighted to join you for this 12th Hong Kong Forum. A warm welcome to all our visitors who have come from afar to be here today.

As members of the Federation of Hong Kong Business Associations Worldwide, we are all part of the family – foon-ying !

This is an especially poignant meeting for me because it will be the last time I have the honour of addressing the Hong Kong Forum as Chief Executive. My term will end on June 30 next year. So please accept my heartfelt thanks, personal thanks, for all that you have done – and all that you will continue to do – for Hong Kong.

Over the past 40-odd years in public service, I have had the privilege of visiting many countries covered by the Federation’s umbrella. I deeply appreciate your hard work and commitment to building and maintaining strong links with Hong Kong.

Apart from being our friends and partners, you are our eyes and ears across the continents. You let us know when we are doing a good job and, perhaps more important, you also let us know when we need to do better.

There is always room for improvement. In a city which is so open, we are always looking for ways to improve our trade, investment, innovation, arts and cultural links with our partners worldwide.
And this is one of the reasons why Hong Kong has been able to weather the storms that have come our way, and flourish in the global village. This is what I want to talk about today. I also want to share with you some of my experiences over the years, and my hopes for the future of Hong Kong.

Your Federation was established at the turn of the century – which I have to remind myself was the year 2000 and not the year 1900 !
If we cast our minds back just 11 years ago, it was a time of great optimism despite all the misplaced anxiety about the Millennium Bug. It was a new century. And a new century warranted a new start.
Some predicted it would be the Asian Century, the China Century, or the APEC Century. But whichever way you look at it, Hong Kong was at the centre of the action – in the right place at the right time.
But things don’t always go as planned, and the first decade of the new century was very much a mixed bag for Hong Kong, and the rest of the world.

None of us have a magical crystal ball with which to predict the future, but it would certainly be nice and useful if we could foresee how the Euro Zone crisis will pan out over the next few months.

A magical crystal ball could also tell us when the US economy will be back and running full steam ahead. And it would be very nice to know how Mainland China’s economy will develop over the next few years.

We can’t rely on magic so we have to rely on what we always do in Hong Kong – that is, prepare for the worst, plan for the best, and be ready to grasp all opportunities that come our way at the time of crisis in particular.

Let me start with preparing for the worst.
As a relatively small and completely open economy, Hong Kong will never be immune to the swings and roundabouts of the global economy.
Three years after the start of the first wave of the financial tsunami, downside risks to the global economy remain. And if, as some economists predict, things get worse before they get better, Hong Kong will inevitably feel the pinch.

We know from experience that Hong Kong is a resilient and dynamic economy. Much of this is down to our highly versatile and well-educated workforce – people who were born and bred in Hong Kong and people from overseas and the Mainland of China who have come here to live, work and make Hong Kong their home.

In my final Policy Address last month, I devoted many column inches to the challenges ahead of us. On the home front, these include providing affordable housing, coping with an ageing population and ensuring smooth constitutional development.

All of these areas are vital aspects of maintaining our economic dynamism, social stability and progress as a community. I am not going to talk about these in great detail, but I am confident we are making headway.

Home prices have been easing gradually after recent historical highs. Government initiatives to cool the property market have included tightening mortgage borrowing ratios and increasing land supply.

We are providing ample resources to caring for the elderly and making sure the less well off will also benefit from our city’s prosperity.

On constitutional reform, the Chief Executive and Legislative Council elections next year will be more democratic than before, and will lay the foundations for us to achieve universal suffrage for the Chief Executive election in 2017 and the LegCo election in 2020.

Many of you represent small and medium-sized enterprises, or SMEs. The 300 000 or so SMEs in Hong Kong are the backbone of our economy. They account for 98 per cent of our businesses and employ almost half (48 per cent) of the private sector workforce.
Given the uncertain global economic outlook, we have been paying particular attention to the difficulties SMEs may face going forward, such as obtaining credit, insurance loans or start-up loans.

In 2008, we were quick to introduce a special Loan Guarantee Scheme for SMEs at the height of the financial tsunami. This and other initiatives helped to keep business ticking over during the worst of the financial tsunami. We have a variety of other SME funding initiatives that cover areas including research and development, innovation and technology, design, and export promotion.

As a result of the Asian financial crisis more than a decade ago, we have worked hard to shore up our financial services sector. Our banks are very well capitalised and meet or exceed the latest Basel Accords for liquidity risk management and capital adequacy ratios.
We also have a $500,000 deposit guarantee to maintain public confidence in the banking system.

Most of all, my Administration runs a robust and clean fiscal system – tight on taxes and meticulous on government spending with balanced budgets, a healthy reserve and zero debt. We keep our powder dry and are prepared for the worst.

These are some of the ways we are preparing for the worst – if a double-dip recession materialises unfortunately or if we run into future economic and financial crises down the line. We remain alert and we stand ready to devise effective counter measures to keep our economy afloat and relief measures for our businesses and people at the grass roots to overcome short-term difficulties.

This brings me to planning for the best. This is all about taking full advantage of our unique strengths and deploying our resources wisely.

Compared to many other economies, Hong Kong is in a relatively strong position. Our city’s strengths and advantages help us stand out from the competition, we are prosperous enough to build on these strengths and we have the talent and experience to pull it off.

In many ways, Hong Kong’s raison d’être in the business world is to help unlock the full economic potential just across the boundary in the Mainland of China.

So it’s little surprise that we invest heavily in cross-boundary infrastructure.

Construction is under way on the massive Hong Kong-Zhuhai-Macao Bridge. Despite its name, this project is more than a bridge – it is a 50-kilometre corridor of bridges and tunnels that will open up the less developed western part of the Pearl River Delta region, or PRD as we call it.

When completed in 2016 it will link major cities in the PRD, bringing goods, services, people and ideas to new markets more efficiently and cost-effectively.
Think of it as a « Pearl Corridor » connecting places with the hottest prospects for growth in our region.

Another exciting cross-boundary project under construction is the Express Rail Link. The key aspect of this express line is that it will plug Hong Kong into the vast high-speed rail network in the Mainland. The system will be up and running sometime in 2015.
In making such large investments in our city’s infrastructure and future, it is vital to have the right soft infrastructure in place too.

One major vehicle for our cross-boundary soft infrastructure is the Framework Agreement on Hong Kong-Guangdong Co-operation, which was signed in Beijing last year.

It supports stronger cross-boundary co-operation in a range of areas including trade and finance, innovation and the environment, as well as quality living and town planning. The overarching goal is to establish the PRD region as one of the most competitive regions in the world by 2020.

This brings me to my final point – grasping new opportunities. This has become a common theme for economies around the world as they seek ways out of the current economic turmoil.

I have always thought of Hong Kong as a small place with a very big heart. We don’t shrink from challenges regardless of their size and nature. If we take a hit, we get right back up and start again.
This is all part of the advantage of being a small and nimble economy with our own style and cultural flair. It is also the reason why almost 7 000 Mainland and overseas companies have a base in Hong Kong today. Together with local firms, these international and Mainland companies are always on the lookout for the next opportunity.

It is our job in government not to pick winners, but to provide the best environment for our businesses to succeed. That means listening to you, our business experts. That is important.
And these are some of the things the business community likes about Hong Kong, and which we also treasure.

First, our low and simple tax system. It means businesses and the people they employ get to keep most of what they earn. Businesses have more profits to reinvest in their companies, in R&D and in innovation and technology. It also means they don’t have to spend excessive amounts of time and money on compliance and complicated tax returns.

Second, our tried and trusted common law legal system, underpinned by an independent judiciary.

Then our no-nonsense approach to tackling corruption, because it provides a level playing field for everyone in business.
Our efficiency, and the way we try to cut through red tape as much as possible which, again, saves time and money.

Companies also like the fact that we have a stable government that values its people and their freedom. They like our free flows of capital and information and world-class services and information communications technology.

They like that Hong Kong is well connected and fully engaged with the rest of the world.

All of this gives our business community confidence and stability ; it helps them remain flexible and responsive ; it allows them to save time and money and to invest in the future ; and it gives them space to see and seize new opportunities.

Ladies and gentlemen, this is just a broad overview of how Hong Kong has developed and the foundations on which we will build future success.
I do hope that you enjoy your stay in Hong Kong, sample our great food, indulge yourself in the huge variety of wines now on offer in our city, and celebrate the cultural diversity that makes us Asia’s world city.

You will also see that our city is once again festooned with the beautiful lights of the festive season, which means that Christmas and then Chinese New Year are around the corner.

So please remember, there is no other better place to do your Christmas shopping. Nothing would make me happier than to hear that your credit cards are getting a very good workout with some retail therapy !
30 NOVEMBRE 2011