January 23, 2013

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Chief Executive CY Leung

Eleven years ago, I and the heads of the 10 major professional bodies in Hong Kong co-founded the Coalition of Professional Services. We had a clear mission. That mission was to market Hong Kong-based professional services to the Mainland.
 
More than a few commentators were sceptical. They said that Hong Kong did not have any competitive advantage over our Mainland counterparts. But we ploughed on. In the following year, the principal CEPA, or Closer Economic Partnership Arrangement, agreement was signed. In each of the nine annual supplementary agreements, more doors were opened for Hong Kong professionals.
 
Ten years ago, I was sent by the then Chief Executive CH Tung, to Beijing. We wanted to explore with the Central Authorities the possibility of allowing residents in the more affluent cities in the Mainland to come to Hong Kong as tourists without having to join tour groups.
 
Some commentators were again sceptical. They somehow believed that these tourists would not have the spending power, that they would pose a risk to law and order, and might even become illegal immigrants. But again we ploughed on.
 
The rest is history. Today, the Mainland is the biggest market for our professionals and the biggest source of tourism income. The sceptics were wrong on all counts. These two sectors of our economy have seized on the opportunities and confronted the many challenges by working with the Government. Both sectors have benefited from CEPA.
 
In the past 10 years Hong Kong has benefited from CEPA in other ways too. As at the end of December last year, the total export value of goods that enjoyed zero tariff treatment under CEPA exceeded $47 billion. Tariff savings up to the end of last November amounted to RMB3.3 billion.
 
CEPA now covers 48 service sectors. Over 2,600 Hong Kong Services Supplier certificates have been issued.
 
Proactive policies benefit all
I want to use these experiences and results in the past 10 years to highlight two points. First, all sectors of the economy, and not just professional services and tourism, benefit from proactive Government policies and support. This is true in the Mainland and equally true in overseas markets. Second, we can achieve rapid results, particularly in the Mainland, if we set the right targets and strategies.
 
Before I move on, I want to repeat a key message in my Policy Address. Economic development is of particular importance to Hong Kong because we will only be able to properly address our housing, poverty, ageing population and environmental issues with robust and sustained economic growth. 
 
In the Policy Address, I have set out what the Government will do to support Hong Kong businesses.
 
CEPA expands
I announced that we had agreed with our Mainland counterparts to set up a new joint CEPA working group under CEPA to help Hong Kong businesses to fully utilise the CEPA privileges, and to have wider market access by unlocking the small doors after the big doors. The group will be led by the Ministry of Commerce and the Hong Kong Trade & Industry Department.
 
As announced in the Policy Address, the Government will re-organise the Greater Pearl River Delta Business Council and rename it the Consultative Committee on Economic & Trade Co-operation between Hong Kong & the Mainland.
 
One of the main functions of the Committee is to provide feedback from Hong Kong businesses to the Hong Kong SAR Government, so we can effectively perform our G2G, government to government, role properly – something I promised in my election campaign.
 
Mainland co-operation key
This committee will also cover the implementation of the National 12th Five-Year Plan and listen to industries' views about our aspirations for the 13th Five-Year Plan.
 
Look a little closer at our cross-boundary economic relations and you will see the positive impact of our "early and pilot implementation" arrangements with Guangdong.
 
My suggestion to extend the "early and pilot" arrangements to include not just Guangdong but all eight of the Mainland provinces plus Guangxi that make up the Pan-Pearl River Delta region has received a favourable response from the Central Authorities. We will follow up on it in the months ahead.
 
Cross-boundary economic relations between Hong Kong and the neighbouring cities in the Mainland will continue to develop, probably at a faster rate in the next 10 years compared to the last 10.
 
The completion of the Hong Kong-Zhuhai-Macau Bridge, the Guangzhou-Shenzhen-Hong Kong Express Rail Link as part of the extensive national network, and the Liantang/Heung Yuen Wai Boundary Control Point in the next few years will enlarge our markets and economic hinterland. They might even change our social landscape in Hong Kong. We can stand aside and watch. Or we can try to influence the outcome to our benefit.
 
What will our markets look like, for our retailers, hotels, professional services, financial services providers and traders 10 years from now? Do we have any capacity constraints, in particular manpower constraints? These are the very real issues that I shall ask the Commission on Strategic Development to look into.
 
EDC to find answers
The National 12th Five-Year Plan offers Hong Kong crucial support, and I quote, "to support Hong Kong to consolidate and enhance its status as an international financial, trade and transportation centre".
 
What is the meaning of enhancement in this context? How can Hong Kong as an international financial centre move up the value chain and broaden its footprint? Similarly, what can we do on the trade and transportation fronts?
 
To answer these questions, I announced the formation of the Economic Development Commission, EDC, the day after the Policy Address. And we have launched a similar initiative for the financial sector, namely the Financial Services Development Council, FSDC.
 
I have asked members on these bodies to offer not just commentaries or analyses. I need recommendations from these business leaders to tell me exactly what they expect this government to do to make things happen. While the Policy Address has set out the broad objectives, I want the industry representatives in the working groups and sub-groups to take the lead in formulating policies.
 
To strengthen Hong Kong's representation in the Mainland, I have proposed setting up a new Hong Kong Economic & Trade Office, ETO, in Wuhan to give Hong Kong a greater presence in the rapidly developing central part of the country. I have also proposed setting up more liaison offices in different Mainland cities to provide extra support for Hong Kong companies and people working in the Mainland.
 
Overseas agreements sought
I have centred my comments today mostly on the potential for Hong Kong to sustain economic growth by improving business relations in the Mainland. After all, this is our strong suit. But that does not mean turning a blind eye to Hong Kong's other economic partners.
 
We will continue to explore Free Trade Agreements, Investment Promotion & Protection Agreements and double taxation agreements with partners around the world. Just last week we signed a Comprehensive Double Taxation Agreement with Italy. It was the 27th such agreement that Hong Kong has concluded so far.
 
I also look forward to promoting Hong Kong as the best place to do business during official visits abroad.
 
Pollution-fighting measures
At my many meetings with the business community while preparing the Policy Address, air pollution was a frequently raised issue. To make notable improvement to air quality, I propose in the Policy Address setting aside $10 billion as subsidies to owners of over 80,000 diesel commercial vehicles in order to progressively phase them out.
 
On vessel-emission reduction, we launched an incentive scheme to encourage ocean-going vessels at berth to switch to low-sulphur diesel. We are also considering bringing in new legislation to enforce the requirement of fuel switch at berth.
 
We are also stepping up our efforts with the Guangdong Provincial Government in exploring the feasibility of requiring ocean-going vessels to switch to low-sulphur diesel while berthing in Pearl River Delta ports.
 
I will turn now to the issue that is uppermost on people's minds, namely housing and land.
 
Housing, land initiatives ‘realistic’
I am confident that the housing and land initiatives that I announced last Wednesday, despite some challenges, are practical and realistic initiatives for our housing development in the short, medium and long term.
 
All the production figures announced in the Policy Address were definite as of last week. Since last Wednesday, we have successfully increased the plot ratio of four residential sites. One of these sites will provide HOS (Home Ownership Scheme) units. In a couple of months, in March, another site will be presented to the Town Planning Board for rezoning to public rental housing. This will be one of the estates that will add to the present target of 75,000 units in the next five years.
 
We have also expedited the approval process of pre-sale applications submitted by private developers. In the last six months, cases involving around 8,000 units have been approved. We are now processing another 12,000. By comparison, in the last five years, the annual average figure was less than 10,000, and that's 10,000 a year compared to 12,000 that we are processing and 8,000 that we processed in the last six months.
 
We shall also increase the supply of commercial space in different parts of Hong Kong. In the prime areas of Central and Wan Chai, we are proceeding with plans to convert government offices and other Government, Institution or Community sites for commercial use.
 
In the process of planning and rezoning, there will be many options. But none will be perfect. We shall have to make hard choices.
 
Energising Kowloon East as a project will supply another 4 million square metres - and it's 4 million square metres, not 4 million square feet - of office space.
 
Economic, livelihood issues intertwined
Finally let me re-state two overriding messages. First, it is imperative to pursue livelihood and economic issues at the same time and with the same vigour.
 
Second, in pursuing economic development, we must seize the opportunities that come our way. We must also take timely action to address the pressing needs of the community. Action is required on both fronts.
 
Over the next two months, I shall initiate frequent visits and bilateral meetings with top leaders of key cities and provinces in the Mainland, in the presence of Hong Kong business leaders whenever possible.
 
I stand ready to conduct "nei jiao" or "internal diplomacy", and to lobby on your behalf, as I have done a few times already in the past six months. Later in the year, I shall begin my foreign visits, very much with economic relations on the agenda.
 
I believe that you as business leaders will find this Government to be pro-growth and proactive and forward-looking, pragmatic, responsive and approachable. We shall have our fair share of sceptics. But we shall plough on.
 
Chief Executive CY Leung gave this address at the Joint Business Community Luncheon 2013 at the Hong Kong Convention & Exhibition Centre.