SCED's speech at 29th AGM cum luncheon of Hong Kong Retail Management Association
Following is the speech "How the Government Supports the Continual Growth of the Retail Sector" by the Secretary for Commerce and Economic Development, Mr Gregory So, at the 29th annual general meeting cum luncheon of the Hong Kong Retail Management Association today (October 12):
Ms (Caroline) Mak, distinguished guests, ladies and gentlemen,
Thank you for inviting me to the 29th AGM of the Hong Kong Retail Management Association (HKRMA). First of all, let me congratulate the Association on its 29th anniversary.
The retail sector
Hong Kong's retail sector is strong and dynamic. As at the end of the first quarter this year, we have more than 40,000 business units engaged in retail trade in Hong Kong, employing more than 310,000 people, which accounted for around 9 per cent of our total employment. Retail sales value exceeded $400 billion in 2011. In terms of direct value added, the sector contributed to 3.2 per cent of Hong Kong's GDP in 2010.
The retail sector has seen remarkable growth in recent years. During the five-year period between 2006 and 2011, retail sales had grown by an average of 13.1 per cent each year, far outpacing the 5.2 per cent annual growth of the entire economy in nominal terms. The sector has also shown great resilience during difficult times. In 2009, when we experienced an overall economic downturn after the global financial crisis, with the real GDP seeing a 2.5 per cent contraction, retail sales fared relatively well and only recorded a mild 0.8 per cent drop in terms of sales volume. More recently, while the local economy has been growing at a tepid pace, our retail sales volume still sustained a solid 7.8 per cent year-on-year growth in the first seven months of 2012.
Excellent services are a key competitive advantage of Hong Kong. We have all along enjoyed the reputation as an international shoppers' paradise. We have achieved this success not only because Hong Kong offers an extensive variety of products for consumers, but also because of our dedicated and professional retail workforce. In the past few years, many renowned global brands have set up flagship stores in Hong Kong. Our proximity to the Mainland has provided a strong impetus to the continuous growth of our retail sector, with Hong Kong being an ideal platform for retailers from around the world to test the waters, promote and establish their brands, and get prepared before they develop the Mainland market.
Tourism as the growth impetus
The vibrancy of our inbound tourism in the past few years has provided a strong impetus to the growth of our retail trade. A record high of 42 million visitors came to Hong Kong in 2011, amongst which 28 million were from the Mainland. In the first seven months of 2012, visitor arrivals rose remarkably by 15.2 per cent over the same period last year to 26.7 million, and Mainland visitors increased by 22.6 per cent to 18.8 million, taking up 70 per cent of the total visitor arrivals.
With Hong Kong being a shoppers' paradise, shopping is undoubtedly one of the favourite activities of our visitors. In the first half of 2012, the average overnight visitor spending rose by 7.8 per cent year-on-year to $7,736. On average, 60 per cent of the overnight visitor spending was made on shopping. By comparison, the Mainland overnight visitors spent more: they spent an average amount of $8,568 and 70 per cent was spent on shopping.
To attract more tourists to Hong Kong the Government has been enhancing our tourist infrastructure and adding new attractions. The Ocean Park has undergone a major facelift, and we are working closely with its management on another ambitious plan of adding an all-weather water park. Two new themed areas within the Hong Kong Disneyland were completed last year, and the new attraction "Mystic Point" is planned for opening early next year. The cruise terminal building and the first berth in Kai Tak are expected to commence operation in mid-2013. We expect that our inbound tourism and hence our retail sector would continue to keep up the robust performance.
The Government is committed to maintaining a vibrant and business-friendly environment. To relieve the burden of our business sector amidst the slowing economy, we have announced a series of relief measures, including waiving the business registration fees for 2012-13 to benefit all business operators, and reducing profits tax for 2011-12 by 75 per cent subject to a ceiling of $12,000.
The ongoing funding schemes operated by our Trade and Industry Department have also provided strong support for the sustainable development of our SMEs, in the form of loan guarantee or funding support to assist the SMEs in developing export markets, including the Mainland and the emerging markets, and for the non-profit-distributing organisations to carry out large-scale projects to enhance the competitiveness of Hong Kong businesses in general or in specific sectors. To assist SMEs in tackling potential financing difficulties due to a possible credit crunch under the prevailing uncertain external economic environment, the Government has provided a total loan guarantee commitment of $100 billion for the Hong Kong Mortgage Corporation Limited to introduce a special time-limited guarantee product. This is offered at a concessionary guarantee fee rate under its existing SME Financing Guarantee Scheme. This special 80 per cent guarantee product, open for applications for nine months starting from the end of May 2012, has been well received. More than 3,500 applications have been approved as at the end of September 2012, involving a total loan guarantee amount of more than $13 billion. Wholesale and retail is the second largest group of beneficiary accounting for about 8 per cent of the total loan guarantee amount.
Despite the slowdown of the global economy, we are prudently optimistic that consumption would still keep its momentum of growth in the Asian region. This is partly attributable to the fast-growing consumer market of the Mainland with a population of 1.3 billion. Most important of all, the Mainland is determined to transform from its traditional export-driven mode of growth to one of boosting domestic consumption as a growth engine. The National 12th Five-Year Plan places strong emphasis on expanding domestic consumption. To help Hong Kong enterprises capture the opportunities thus arising and tap the Mainland market, the Government has launched a five-year dedicated fund of $1 billion on branding, upgrading and domestic sales (the BUD Fund) on June 25, 2012. The BUD Fund provides funding support of up to $500,000 for each eligible enterprise to undertake projects for developing brands, upgrading and restructuring business operations and promoting sales in the Mainland domestic market so as to help them enhance their competitiveness and explore and develop the Mainland market. The Fund also provides funding support for non-profit-distributing organisations to undertake large-scale and longer-term projects that can help Hong Kong enterprises in general or in specific sectors to enhance competitiveness and explore the Mainland market. The maximum amount of funding for each approved project is $5 million or 90 per cent of the approved project expenditure, whichever is less. I encourage the HKRMA and its member enterprises to make good use of the BUD Fund to move up the value chain and open up domestic sales in the Mainland market.
Last but not least, to sustain growth, healthy competition and strong consumer confidence in the retail market are indispensable. Two important bills were passed in the last legislative session to enhance competition in the market and to regulate unfair trade practices.
- Enhancing competition
The Government has always been a staunch supporter of a free market, and it is our strong conviction that a level playing field is the key cornerstone for the success of the Hong Kong economy. Our competition policy is to enhance economic efficiency and the free flow of trade through promoting sustainable competition to bring benefits to both the business sector and consumers. Free and fair competition in a market ensures effective distribution of economic resources, facilitates continuous innovation of products and services, enhances efficiency in supply, and induces more rapid responses from product and service providers to the needs of consumers.
In order to provide a legal framework to curb anti-competitive conduct in various sectors, the Competition Ordinance was passed by the Legislative Council in June 2012. The introduction of a competition law represents a major milestone in the development of the competition policy in Hong Kong, signifying the determination of the Government in maintaining fair and free competition in the market. We will implement the Ordinance in phases so as to provide sufficient time for the business community and the general public to prepare for its operation.
- Against unfair trade practices
Second, the Trade Descriptions (Unfair Trade Practices) Amendment Ordinance was passed by the Legislative Council in July 2012. The Amendment Ordinance seeks to tackle various common types of unfair practices that may be deployed by rogue traders against consumers. It will buttress the consumer protection regime in Hong Kong and thus help maintain a fair market and benefit both consumers and honest traders.
We are very grateful for HKRMA's advice and contribution during the legislative process. We will continue to work with stakeholders and consult them on the draft enforcement guidelines, with a view to bringing the Amendment Ordinance into operation next year.
Hong Kong is a small and open economy. We have felt the impact of the Eurozone's debt crisis and the sluggish economic growth of the United States. Retail sales growth has moderated in recent months. For 2012, the economy is forecast to attain only a modest 1-2 per cent growth, far below the average growth of 4.5 per cent in the past 10 years. The Government will stay vigilant amid the changes in the economic situation and introduce measures to provide timely and adequate support for the trade.
I would like to thank the HKRMA for the invaluable support over the years in promoting the development of the retail sector. I look forward to continuing to work hand in hand with the HKRMA for the better development of the retail sector to benefit both the trade and the wider community. I wish that the HKRMA would grow from strength to strength in the years ahead. Thank you very much, and I am happy to take your questions.
Friday, October 12, 2012