none
Financial Secretary John Tsang
Hong Kong has been regarded as one of the best cities in the world to do business.
In May this year, Hong Kong was ranked the most competitive economy in the world by the International Institute for Management Development in Switzerland. Just last month, Hong Kong topped the annual Economic Freedom of the World Report published by the Cato Institute and the Vancouver-based Fraser Institute. Hong Kong has done so, by the way, every year since the report first came out back in 1996.
And the Washington-based Heritage Foundation did the same earlier this year – naming Hong Kong the freest economy in the world. If you are counting, that's 22 years in a row now.
HK success not accidental
Such success, year after year, decade after decade, is not an accident. Rather, it speaks of the resourcefulness and tenacity of the people of Hong Kong.
It speaks, also, of Hong Kong’s advantage, built on our free and open market, the rule of law and an independent judiciary, our extensive trading and logistics network, our world-class professional services, as well as our money prowess as an international financial centre.
All of these, together with our level playing field and our simple and low tax regime, make Hong Kong the ideal breeding ground for start-ups. By the way, our profits tax is capped at a modest level of 16.5%, while the salaries tax at 15%. There is also no VAT, capital gains tax or inheritance tax.
Hong Kong is developing fast into one of the world's most popular start-up hubs. Young and energetic entrepreneurs from around the world come to Hong Kong every day to look for opportunities to fulfill their aspirations and put their audacious ideas to test. Today, more than 1,600 start-ups in various stages of development are flourishing in Hong Kong. That is a 50% increase over the past two years.
We are working hard to build on those smart numbers and to maintain a vibrant and favourable ecosystem for start-ups.
Pro-startup measures in place
A host of measures, from precious seed funding to affordable office space, and from sound business advice to valuable access to investors, are in place to help kick-start these new companies to grow and to thrive.
The Hong Kong Science Park and the Cyberport, two major agencies promoting the development and application of innovative technologies in Hong Kong, are offering incubation programmes as well as seed funding for start-ups.
The Science Park is now home to more than 600 companies, from multinationals, SMEs to start-ups, and more than 40 of them are US companies. Many of the start-ups focus on robotics, development of smart cities as well as promotion of healthy ageing - all of which are areas of significant interest to Hong Kong.
We are moving ahead with a US$560 million expansion of the Science Park to provide more space and facilities for startups and technological companies.
We are fully aware of the vital importance of funding for start-ups. We are creating a US$260 million Innovation & Technology Venture Fund, partnering with venture-capital funds to invest in local technology start-ups. The fund is expected to get going in the first half of 2017.
Government aside, the angel investment scene is also gathering steam in Hong Kong. As an international financial centre, Hong Kong has been attracting a world of investors and capitalists looking for good investment opportunities and to tap the ever-expanding China market. They are here, for opportunities that are simply not available elsewhere in the world.
This is evident in the fact that Hong Kong is the world's second-largest recipient of foreign direct investment in 2015, next only to the US, according to a UN report.
And the flow of institutional venture capital investment into Hong Kong is also encouraging. Last year, we took in US$325 million, according to the Hong Kong Venture Capital Association. That's well more than double the US$139 million available in Hong Kong in 2014. Start-ups with good potential are certainly one of the investment targets of these venture capital.
HK’s bid to develop Fintech
Apart from start-ups, we are also focusing on the development and application of Fintech, that would serve to ensure that Hong Kong remain a major international financial centre in this pervasive digital age.
I believe all of you in this room know all too well about how Fintech is creating a whole new world of possibilities for banks, for insurance companies, for traditional financial institutions, and even for telecommunication companies and e-commerce enterprises.
Some studies have predicted that global investment in Fintech will surge from US$12 billion in 2014 to more than US$46 billion in 2020. Just in the first quarter of this year, investors put some US$5.3 billion into Fintech ventures globally - that's a 67% increase over the same period last year.
I also believe that you would agree that, given our deep talent pool of over 200,000 professionals with profound knowledge of financial services of the day, as well as our world-class infrastructure on information and communications, Hong Kong has what it takes to become a worldwide hub for Fintech.
And for all of you who are interested in joining us in building that hub, I am pleased to tell you that InvestHK, the government agency responsible for promoting foreign investment in Hong Kong, has just set up a dedicated team to assist overseas Fintech start-ups, investors and R&D institutions in establishing a presence in our city.
A dozen of overseas institutions, innovation labs, incubators and accelerator programmes have already found their way. And we expect to see good things coming out of their operations.
For example, Accenture, one of the leading global professional services companies in the world, has established a Fintech innovation lab in Hong Kong in 2014, following similar programmes that the company established in New York and London. And both the Commonwealth Bank of Australia and the Wearable IoT World Labs from San Francisco launched their innovation labs in Hong Kong at the beginning of this year.
I should also mention that the Massachusetts Institute of Technology, my alma mater, has just launched the world-renowned MIT Innovation Node in June this year in Hong Kong, to make good use of our capital rich and global network, and at the same time to harness the manufacturing prowess of neighbouring Pearl River Delta in southern China. The very same reason why so many technological Fintech and start-ups have chosen Hong Kong.
We have also rolled out a number of measures to boost Fintech R&D. Among others, we shall be creating a dedicated working space to support 150 Fintech start-ups over the next few years. We are also organising training camps in overseas universities to nurture the next generation of Fintech talent, and to drive development of various technologies, from cyber security to blockchain.
In creating a favourable and enabling environment for development of Fintech, we are at the same time putting in efforts to ensure that we maintain the right balance between facilitating market growth and protecting investors' interests. Our financial regulators have established communication platforms with the local and international Fintech community, to better understand the views of Fintech users, developers as well as investors, and to facilitate collaboration among different parties.
The Fintech Facilitation Office, the FFO, is one such platform established by the Hong Kong Monetary Authority, our regulator for the banking sector. The FFO has been supporting the development and application of Fintech in Hong Kong through various initiatives.
Just last month, it launched the Fintech Innovation Hub that will be focusing on exploratory and experimental Fintech solutions, through the application of Big Data Analytics, biometric authentication and more. The Fintech Innovation Hub provides a controlled testing ground for Fintech users, such as banks, to work directly with the developers and explore together practical Fintech solutions that can meet their business needs in the actual operating environment.
Through collaboration of multiple parties, we envisage the Innovation Hub can help accelerate the R&D process of Fintech.
The Fintech Facilitation Office also launched its Cybersecruity Fortification Initiative earlier this year, which seeks to raise the level of cybersecurity of financial institutions using financial technologies. The finance sector and the law enforcement agencies will jointly develop risk assessment framework, intelligence-sharing platform as well as training programmes for cybersecurity practitioners under this Initiative.
There is still more from the HKMA. We have just announced the launch of a Fintech Supervisory Sandbox. The Sandbox is designed to facilitate financial institutions in Hong Kong to conduct trials of Fintech and other pioneering applications on a pilot basis, with some relaxation in the usual supervisory requirement. The real-life data and user experience gathered during the trials will provide valuable feedback for Fintech developers in refining their products or services before formal launch.
Fintech Week forthcoming
There is so much happening in Hong Kong right now, and that we are tempted to call 2016 "The Year of Fintech". Don't take my word for it. Check it out for yourself next month, from November 7 to 11, when Hong Kong hosts its first ever Fintech Week. There are lots to look forward to, including the Finovate Asia on November 8, which is a day-long, demo-presentation of some of the hottest banking and financial technology innovations out there.
Coupled that reassuring reality with technical expertise and start-up passion, I am confident that Hong Kong’s Fintech business will soon be making global waves.
Financial Secretary John Tsang made these remarks at the Fintech Breakfast Meeting in New York on October 12.
