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Chief Executive CY Leung
In 2014-15, profits tax and salaries tax receipts both reached new highs. It says something about the state of the economy. And hence, the Government was able to further fund the various measures to improve the quality of life in Hong Kong. This Government knows the importance of the economy to society. So we always put the economy first, not only in setting out the Policy Address, but also in our daily operation.
This year, more than the past few years, we, the Government and the business sector combined, have all the more reason to watch over the changing economic tide and respond as a team.
The Hong Kong team should be confident. We should take confidence in the International Monetary Fund (IMF)'s observation. Just over one week ago, the IMF released its yearly report on Hong Kong, emphasising that: "While the economy is entering a potentially testing period ahead, the risks are manageable with the strong buffers in place, thanks to deft policy management and ahead-of-the-curve regulatory standards."
Encouraging words from the IMF. The Government part of the team, including the Hong Kong Monetary Authority, is monitoring the financial markets closely. And after all, we have overcome such challenges before.
The Hong Kong team should know that we operate in the right neighbourhood. The Mainland of China, our ASEAN partners and Asia in general are all doing better than the world average. We enjoy the combined advantages of "one country" and "two systems". We are the singular super-connector that connects the rest of China and the rest of the world. For the short, medium and long term, CEPA, the Guangdong agreements, the 13th Five-Year Plan, Belt & Road, our closer ties with ASEAN, including the Free Trade Agreements with all the 10 member countries that we look forward to signing this year, will provide new opportunities for Hong Kong businesses and other businesses based in Hong Kong.
That was the background against which I prepared this year's Policy Address. Many of the policies in this Address will continue to drive the growth of the economy long after the end of this Government's term of office. It will drive not only the growth, but also the diversification of the economy.
For many years, we bemoaned the fact that we relied too much on low-tech manufacturing. No matter how lucrative this business was, Hong Kong can no longer compete on costs. We have to compete on value and hence on value-addedness.
Hong Kong needs to grow new and sustainable economic sectors. We need them to power up our economy, and to create opportunities for all, especially our young people who cry out for diverse job opportunities and upward mobility.
InnoTech gains traction
Innovation and technology is one such sector. Soon after my election, I tabled before LegCo, courtesy of the then outgoing government, the proposal to create an Innovation & Technology Bureau (ITB). Four years later and four years too late, it is finally up and running. And it is gaining traction.
Whatever this Government is capable of doing, we can never dictate to the media. But lately, the media have been carrying interviews with scientists, innovators, venture capitalists and of course our new Secretary for Innovation & Technology. So science, innovation and technology are getting media interest and public attention, and we are, as a community, getting traction.
The bureau, ITB, will co-ordinate the science and technology efforts of our universities. It is co-ordinating not only research, but also development efforts. It will work with the Science Park, Cyberport, the Productivity Council, the Applied Science & Technology Research Institute and other research and development centres.
In addition to the establishment of the ITB, 2015 should be remembered as the year for science, innovation and technology in Hong Kong.
Last February, Sweden's Karolinska Institutet, which selects the Nobel Laureate in medicine, agreed to establish a regenerative medicine research centre in Hong Kong. This will be its first overseas centre in its 200-year history. The centre will be located in the Science Park and is expected to open this summer. In November, the Massachusetts Institute of Technology announced that it would set up an Innovation Node in Hong Kong - its first such overseas initiative, leveraging on the capabilities of our neighbours: fast prototyping in Shenzhen and manufacturing in other parts of the Pearl River Delta region.
Then, early last month, I was pleased to take part in the formal establishment of the Academy of Sciences of Hong Kong. The Academy will provide independent advice to the Government. It will also seek co-operation with scientists and entrepreneurs from all over the world. And that can only boost our profile as a centre of scientific excellence.
The 2016 Policy Address builds on this year of progress, and promise, in technology and innovation. We take a holistic view, and we will support and nurture the whole ecosystem of innovation and technology - from ideas to business venture, and from products to profits.
In the Address, I pledged to create a $2 billion Innovation & Technology Venture Fund to invest with private venture-capital funds on a matching basis. The fund will bring much-needed capital to our local innovation and technology start-ups.
Last year, the flow of institutionalised venture-capital investment into Hong Kong reached US$324 million - more than double the institutionalised venture-capital investment flowing into Hong Kong in 2014.
Judging from the response of the industry, there will be more, much more, to come. At the Startmeup event organised by InvestHK, close to 1,000 turned up to listen to Elon Musk, founder of Tesla and SpaceX. Last week, I invited 14 young venture capitalists to Government House to discuss their business. I and your Government know that in the end it is not what the Government wants to see, it is what investors want to invest in.
At last count, the number of incubation and co-working locations funded and operated by the business sector has increased from just a few six years ago to over 40 now. Some 1,600 start-ups are run from these incubation and co-working locations. That's in addition to incubation programmes at Cyberport and the Hong Kong Science & Technology Parks.
To build on Cyberport's ICT concentration, the Cyberport will allocate $200 million for a Cyberport Macro Fund, the money to be invested in ICT start-ups.
Cyberport will also expand its quotas for incubation schemes, adding new clusters in areas such as financial technology and e-commerce.
When the third phase of the Science Park comes on stream, later this year, it will house 240 start-ups in a variety of clusters, including biomedical technology and electronics and green technology. The Science Park corporation will focus on three things: robotics, smart city and healthy ageing.
Infrastructure for communications technology. Hong Kong has topped the world in technology infrastructure over the past the five years, according to the World Competitiveness Yearbook. In the Policy Address, I promised to double over the next three years - to 34,000 - the number of Wi-Fi hotspots offering free Wi-Fi services.
Innovation and technology is not just about the economy and employment. It is also about convenience, safety and efficiency in our daily life. So we have also set aside $500 million for an Innovation & Technology Fund for Better Living to support such projects.
Belt & Road connectivity
This year's Policy Address also mapped out the prospects in the Belt & Road Initiative.
Our economy relies heavily on our external relations. Belt & Road is about building stronger external ties. As part of our high degree of autonomy, we have the unique advantage of being able to conduct, on our own, external relations with other countries.
Belt & Road is about connectivity, namely unimpeded trade, heightened financial integration, enhanced policy co-ordination and expanded cultural co-operation.
As the world's Chinese financial centre - and China's major international financial centre - Hong Kong is a natural hub for the capital that will be needed to fund the Belt & Road's ambitious infrastructure plans.
As the Belt & Road Initiative gains traction, the Renminbi will become more widely accepted and used. We are the world's leading offshore Renminbi centre, complete with an established Renminbi payment and settlement system.
Our professional services sector has been growing in and outside Hong Kong. The Government will allocate $200 million to support our professionals in their activities in Belt & Road and other countries.
People-to-people ties along the Belt & Road will be important for business-to-business deals. The Government will step up its promotion of Hong Kong's tertiary education in Belt & Road countries. We will inject $1 billion into the scholarship fund to offer 100 scholarship places to Belt & Road students. Two days ago, I invited some 60 ASEAN students and their Consuls-General to Government House for tea. In each and every one of them, I saw friendship and future partnership, including future business partnerships.
There will be a Belt & Road steering committee and an office. We shall start with two sheets of paper, one listing the sectors for co-operation and the other the priority countries that we should focus on. Merging the two sheets, we shall have a work plan to get started.
Economic benefits
A growing economy brings more jobs, more profits, higher salaries and wages, and generally a better life for all.
Housing still tops our priorities. This Government will continue to pump new supplies of housing land into the market and the Housing Authority. And we shall continue to curb non-occupational demand.
The long-term supply of land is important. We will set up a Lantau Development Office to take forward the planning and development in Lantau. We are also formulating "Hong Kong: 2030+" strategy to work out a blueprint for our long-term development.
We will continue to enhance our connectivity with the world, and in doing so, facilitate our logistics sector to move up the value chain. The Airport Authority will establish a civil aviation academy. The MTR Corporation will also set up an academy to train personnel in rail management and operation. We will, in Government, form a new Maritime & Port Board to develop high value-added maritime services.
Connectivity also includes government-to-government relations. A new Economic & Trade Office, ETO, will be set up in Indonesia this year and another in Korea as soon as possible. These two will make the number of ETOs, Hong Kong Government ETOs, in foreign countries to 13.
This Government believes in access to quality education. We will provide free and quality kindergarten education for up to 80% of the available places in non-profit-making half-day kindergartens, and improve the teacher-to-pupil ratio to 1:11. This will mean an additional and recurrent annual expenditure of about $2.6 billion. We will also set up an $800 million Gifted Education Fund to nurture exceptionally gifted students.
By way of manpower training, we will earmark the site to develop a VTC campus with state-of-the-art facilities. $100 million has also been earmarked to implement a three-year pilot scheme on manpower training in the insurance sector and asset and wealth management sector.
In healthcare, we will implement our $200 billion 10-year hospital development plan. They will provide some 5,000 additional public hospital beds and over 90 new operating theatres. We have also reserved a site to develop a traditional Chinese medicine hospital, and are establishing a testing centre for traditional Chinese medicine.
The Government wants to support businesses. But there is one that we could do without. We will legislate to ban the import and export of elephant hunting trophies, and to further ban the import and export of ivory and phase out the entire local ivory trade.
We are making progress, but there is no room for complacency, and we should not take economic growth for granted. The world economy is one concern. Within Hong Kong, we are being slowed down. The Government, for example, is ready to launch 72 capital works projects with a total estimated value of $67.5 billion, not including the Express Rail Link. These projects include hospital development projects in Kwai Chung and Tuen Mun, as well as youth hostels. As of today, only one among these 72 projects, with a project value of about $100 million, has been approved by LegCo. Any funding proposal not passed before this summer will have to go to the newly elected LegCo from scratch in the autumn. These projects mean jobs for a wide range of sectors. LegCo members should be made aware of the consequences.
This Government believes in growing a bigger economic pie. The people of Hong Kong are self-reliant. They want to pull themselves up by their bootstraps. Given any reasonable opportunity, and some government incentives, the people want to earn their own keep. They don't want handouts. That's why the number of unemployment cases under the CSSA has been falling for more than 70 consecutive months.
Chief Executive CY Leung gave these remarks at the Joint Business Community Luncheon 2016.
