It is a great pleasure for me to be here in Napa Valley, one of the great wine producing regions of the world. Hong Kong is the first free wine port among major economies with unparalleled connectivity in Asia. We are one of the world's fastest growing markets for wine, and we aim to be one of the world's great wine trading and distribution centres.

Allow me to begin my talk with a few facts and figures that I hope will whet your appetite for our city's wine aspirations.

In my Budget in February last year, I reduced wine duties to zero.

In the 10 months that followed this move - from March to December 2008 - Hong Kong's global wine imports increased more than 80% year-on-year at the tune of some US$350 million.

In the same period, US wine exports to Hong Kong reached US$18 million, more than double that in 2007.

In the past year, we have hosted 10 wine auctions - the first such sales in the city for more than a decade. These included two sales each by US auction houses Zachys Wine & Liquor Store and Acker Merrall & Condit. One of the Acker sales set a new Asian record, fetching US$8.2 million.

We have signed Memoranda of Understanding on wine with France, Spain and Australia, and we are close to signing one with the US, as well.

Hong Kong may appear to be an unlikely partner for legendary wine regions such as Napa Valley. After all, we don't have a large population and we don't actually produce any wine. Indeed, our city is better known for our culinary creations, and we do have a nose for opportunity.

The premises is fairly straightforward. The wine industry predicts the Asia market to boom in the next decade. In the Mainland of China alone, wine imports are estimated to reach US$870 million by 2017. This would account for 58% of the projected market for wine in Asia, excluding Japan.

Hong Kong is well placed to facilitate the growth of the wine market in our region. We are situated on the southeastern tip of China with modern infrastructure and world-class services. Decades of experience have also furnished us with the contacts and know-how to crack the Mainland market.

For wine traders and collectors of fine wine, maintaining quality and value is paramount.

In the past year, we have tailored our customs procedures to suit the industry. Customs inspections for wine may now be done at the storage facilities in a temperature and humidity controlled environment instead of at the point of entry.

To tackle the threat of fake wine, Hong Kong Customs has teamed up with the industry as well as overseas enforcement agencies to exchange information on counterfeiting. No cases of counterfeit wine have been recorded in Hong Kong in recent years and we are determined to maintain a clean record.

For storing fine wine, we have some state-of-the-art facilities and more are being built. At the same time we are working to introduce an accreditation system for cellars to establish standards for storage. This would be a world first for the industry.

Local and US entrepreneurs have been quick to see Hong Kong's potential as a wine hub. Several US wine firms have set up offices in Hong Kong in the past year. They include wine trading - California Grape International, Vinx Asia, Zachys and Vinfolio - and wine-storage companies, such as Vinfolio.

One local firm owned by an American national has converted a historic underground munitions depot into the premier storage facility for fine wine in Hong Kong. Above ground at the venue is a fine-dining restaurant where visitors can enjoy a meal and take part in wine tastings. The site was declared a UNESCO Heritage Site in 2007, and it was the host of a successful wine auction last May.

The Hong Kong Government is keen to identify more venues of historic and cultural significance that may be suitable for wine-related activities. Developing the wine sector fits neatly with our ongoing programme of rejuvenating heritage sites across Hong Kong for people to enjoy.

One such venue - Haw Par Mansion on Hong Kong Island - will be put on the market this year. Uses could include a wine museum, a venue for auctions and wine appreciation as well as fine dining.

Training wine specialists including wine stewards and frontline sales people as well as industry specialists in logistics and warehousing is underway.

Here, co-operation with training institutions in wine-savvy countries is part and parcel for developing our wine sector. We welcome oenophiles from the US to visit Hong Kong and join our wine promotion efforts.

At the inter-government level, Memoranda of Understanding provide for greater co-operation on wine education and appreciation. These bilateral agreements also support collaboration on wine promotion, tourism, investment, conventions and exhibitions.

Our wine industry has come a long way in a short time. The results so far have been encouraging, but there is still much work to be done.

US entrepreneur Stephen Bachmann summed up nicely the impact of our elimination of wine duties. He said, and I quote: "It is a bit like New York City suddenly coming online overnight." End quote.

I could not agree more regarding the wine industry. Looking at the broader picture, Hong Kong has been online and open for business for many years. We are determined to rise to the challenge of adapting our tried and trusted business-friendly formula to match the specific needs of the wine industry.

Hong Kong already has a low and simple tax system. Salaries are taxed at the top rate of 15% and profits tax is 16.5%. In Hong Kong, there is no inheritance tax, no capital gains tax and only income sourced in Hong is taxable.

Our economy has been rated as the freest in the world for each of the past 15 years by the Heritage Foundation based here in the US. Providing a sound platform for business also requires a robust banking sector - especially in these fragile economic times.

Hong Kong is a well-established international financial centre with 70 of the world's largest 100 banks operating in the city. Our stock market is the seventh largest in the world and third largest in Asia by market capitalisation.

Hong Kong's location in the heart of East Asia, places the city within five hours flying time of half the world's population. We are also on the doorstep of the world's fastest growing large economy - the Mainland of China.

One of the ways we connect overseas markets to the Mainland is by staging large-scale events that bring together buyers and suppliers in a business-friendly environment.

Each year, there are about 300 international events in Hong Kong - allow me to tell you about a couple of new ones that are relevant to our topic today.

Last year, our Trade Development Council organised the inaugural Hong Kong International Wine & Spirits Fair with seminars, tastings and workshops. The fair helped to promote our new status as a free wine port. It was a great success and we have decided to turn it into an annual event. Please mark your diaries because this year's fair is set for the first week in November. I hope you will be able to come to Hong Kong for the fair and experience the atmosphere for yourselves. I'm sure you won't be disappointed. Last year, there were 240 exhibitors and almost 9,000 visitors from around the world. This year we expect the fair to be even bigger.

Another important event this year is our first "Wine & Dine Festival" kicking off at the end of October. As the title suggests, it combines fine wine with great food. It is a key event for us this year because we have designated 2009 as "Hong Kong Food & Wine Year".

The highlight of the Festival will be a three-day outdoor carnival along our harbourfront where you will be able to sip fine wine, enjoy exquisite cuisine and take in the sights of our world famous skyline.

It promises to be a treat for our visitors. Last year, we welcomed almost 30 million visitors to Hong Kong. Shopping in the city centre, hiking through our country parks and sightseeing are some of the things our visitors enjoy doing most. Wine tours are catching on fast.

On the culinary front, a wide variety of cuisine reflects Hong Kong's multicultural community. Naturally, Cantonese food is the home favourite. But with 12,000 restaurants to choose from there is something for all tastes from Thai, Indian and Japanese dishes to European, South American and of course US specialties.

For the more discerning eater, there are now Michelin-starred restaurants to try. The first Michelin Guide for Hong Kong was published last year - two years after the first "little red book" covering the San Francisco Bay Area & Wine Country. The Guide includes more than 200 establishments in Hong Kong and awards coveted Michelin stars to 22 of them. Most important, it recognises the global importance of Hong Kong cuisine.

I promised to whet your appetite for Hong Kong at the beginning of my talk and I hope I have done exactly that.

We will continue to establish Hong Kong as a wine trading and distribution centre in Asia, opening up new markets for the wine industry here in Napa Valley and around the world.

I hope you will pay us a visit soon to see first hand, the enormous opportunities for wine traders in our part of the world. And, of course, to sample our world famous gastronomic delights during Hong Kong's "Food & Wine Year".

Financial Secretary John Tsang gave this address at the "Hong Kong - Asia's Wine & Gourmet Centre" luncheon in Napa Valley, California.