Speech by SCED at "Hong Kong: Your Partner in Exploring New Business Opportunities" luncheon seminar in Vietnam (English only)
Following is the speech by the Secretary for Commerce and Economic Development, Mr Edward Yau, at the "Hong Kong: Your Partner in Exploring New Business Opportunities" luncheon seminar in Ho Chi Minh City, Vietnam today (March 21):
Mr Vo (Executive Vice President of the Vietnam Chamber of Commerce and Industry, Mr Vo Tan Thanh), Mr Chiu (Chairman of the Hong Kong Business Association Vietnam, Mr Michael Chiu), Ms Bui (Deputy Director General of the Vietnam Trade Promotion Agency, Ms Bui Thi Thanh An), Mr Pham (Director of the Investment and Trade Promotion Centre of Ho Chi Minh City, Mr Pham Thiet Hoa), Mr Burke (Managing Partner of Baker & McKenzie in Vietnam and Vice Chairman of the Hong Kong Business Association Vietnam, Mr Frederick Burke), ladies and gentlemen,
Good afternoon. It gives me great pleasure to join this distinguished group of guests today. I would like to first thank Chairman Vo and the Vietnam Chamber of Commerce and Industry for co-organising this seminar, which offers an excellent platform for friends from Vietnam and Hong Kong to meet and learn more about the business opportunities that are open to us.
I am particularly happy to tell you that we have come to Vietnam with a 41-member delegation from Hong Kong. In addition to my government team and the Executive Director of our Hong Kong Trade Development Council (HKTDC), Margaret Fong, we have an unprecedentedly strong delegation comprising presidents of Hong Kong's most widely represented Chambers of Commerce, the President of the Hong Kong Small and Medium Enterprises (SMEs) Association, as you know 98 per cent of our enterprises are SMEs, leading professional services including Presidents of the Law Society of Hong Kong, the Hong Kong Institute of Certified Public Accountants, prominent architects, designers, insurers, real estate developers, entrepreneurs, senior management of Hong Kong's MTR Corporation, and a group of industrialists who actually specifically joined as they are looking to establish new manufacturing bases here in your country. So, this is a delegation of investors and professional service providers from a wide spectrum of Hong Kong's top businesses, and most important of all, these are the key people who see very strong and promising prospects of a Hong Kong–Vietnam partnership. We also believe we have come at the right time, especially after the signing of the ASEAN (Association of Southeast Asian Nations)-Hong Kong Free Trade Agreement (FTA), and at the juncture where we see Vietnam and China both placing an emphasis on possible collaboration under the Belt and Road Initiative. This is a perfect window of opportunity for Hong Kong to take a crucial role in making all these factors connected.
Parallel to the Chief Executive of Hong Kong Mrs Carrie Lam's visit to Vietnam late last year, we saw the signing of dual agreements on free trade and investment promotion and protection last October. Hong Kong is grateful for the strong support given by the Vietnam Government on these two important agreements, which not only provide greater market access for Hong Kong into the fast-growing ASEAN market and vice versa, but also build a secure platform for a much closer partnership on all fronts.
During this visit, I will have the privilege of calling on your Prime Minister, the Minister of Trade and Industry, and the Minister of Planning and Investment. I will also call on the Chairmen of the People's Committees in Ho Chi Minh City and Hanoi. The direct dialogue between the two governments at your national and city levels allows us to put our heads together on issues of mutual interest and find ways to further strengthen ties and co-operation. I am sure my team and members of this trade delegation are all looking forward to these meetings.
Let us begin by taking a snapshot of how important we are to each other in terms of trade and investment. In 2016, Hong Kong was Vietnam's ninth largest trading partner, fifth largest export market and 17th largest source of imports. Bilateral trade in goods amounted to US$18 billion in 2017, representing a remarkable increase of nearly 12 per cent over 2016. And let us not overlook the equally strong growth of trade in services. Our trade in services amounted to US$800 million in 2015, representing a year-on-year increase of 7.3 per cent, while the average annual growth in bilateral trade in services was over 9 per cent from 2011 to 2015. Trade in services, professional services in particular, is something that has tremendous growth potential as we see more collaboration in cross-boundary joint investment and development. We are also delighted to note the bolstering of our trade relationship, with an average annual growth rate in bilateral merchandise trade reaching almost 10 per cent from 2013 to 2017. Vietnam actually ranked fourth among the 10 ASEAN countries in terms of our merchandise trade with the region in 2017. On investment, Hong Kong was one of the largest investors in the early years of Vietnam's economic development, and is still ranked in our top 25 outward direct investment destinations, with an outward direct investment total of US$1.6 billion. These are handsome figures, but honestly, I believe the best is yet to come.
First and foremost, I believe the potential for Hong Kong-Vietnam trade and investment is yet to be fully unleashed. Hong Kong and Vietnam are actually much closer than we thought. In addition to over 60 flights between Hong Kong and your major cities every week, the soon-to-open Hong Kong-Zhuhai-Macao Bridge will shorten the vehicular journey between Hong Kong and the China-Vietnam border down to within 20 hours, bringing Hong Kong's port and airport within easier reach of shipments from your country.
For your information, Hong Kong's airport is the world's largest and most efficient cargo hub - ranked first for eight consecutive years - and our container port continues to be in the world’s top five. Hong Kong actually connects with half of the world's population and the markets they represent within five hours' flying time. With Hong Kong being a free port, Vietnam's exports can go to and pass through Hong Kong to the world market without any tariffs or duties. As we speak, Hong Kong is expanding its airport with a third runway, multiplying its air mail centre capacity to cater for the increasing use of e-commerce, and adding purpose-built facilities for high-end logistic transshipment services. All of these projects are not just to cater for Hong Kong's population of 7.4 million, but to serve global trade including the fast-growing manufacturing and trading businesses in this part of Asia. This has indeed earned Hong Kong its exceptional status as the world's seventh largest trading entity in goods and 17th place in trade in services in 2016, according to the World Trade Organization. So, Hong Kong is bigger than its size suggests and a close and strong partner that Vietnam can leverage on.
It is well known that Hong Kong offers a unique gateway into the Mainland of China. This is simply because Hong Kong possesses something that no city outside China or any city within the Mainland can offer. This is the "one country, two systems" principle that Hong Kong operates under. We are part of China and enjoy the natural advantages of having a common language and culture. We have been a prime mover in the country's economic development since the start of its opening up in 1978, and we are still one of the Mainland's biggest investors and trading partners. We are also the biggest renminbi offshore centre, accounting for 76 per cent of total offshore transactions. The Central Authorities fully recognise Hong Kong's role as the nation's international financial, trading and navigation centre. Through the Closer Economic Partnership Arrangement (CEPA) which is a FTA with Mainland China, companies in Hong Kong, including Vietnamese companies if they are based in our city, enjoy greater market access and easier inroads into the world's biggest and fastest emerging market.
But the unparalleled advantage of Hong Kong is best demonstrated by the uniquely open and business-friendly system that we operate for all. This includes a legal system premised on the common law system; an international convertible currency; the free flow of people, capital and information; and business and professional services that are benchmarked with international standards and practices; and most important of all, a secure business environment, together creating a trusted partner one can always count on.
The Central Authorities fully recognise this distinctive advantage and also help in making sure that we get the best out of it. At a recently held summit organised by Hong Kong in Beijing on the theme of the Belt and Road Initiative, the Chairman of the Standing Committee of the National People's Congress said in the opening address that Hong Kong has an irreplaceable role in the Belt and Road Initiative, and that "the country will continue to need Hong Kong, as well as incorporate Hong Kong in the Belt and Road endeavour". If Vietnam sees the Belt and Road Initiative as a source of opportunities for more trade and joint investment in infrastructural development and stronger collaboration on other economic and social development fronts, Hong Kong is well placed to be the gateway, the springboard and the crucial link in all these ventures.
In seizing the immense opportunities emerging from the Belt and Road Initiative, Hong Kong's expertise is best displayed in its ability to strike deals between countries along the Belt and Road corridor. According to the Asian Development Bank, as much as US$1.7 trillion per year is needed for infrastructure development in the Asia area until 2030. In terms of trade volume, this represents US$10.9 trillion's worth of business just in 2016. Being an international financial, trade and logistics centre well-versed in cross-boundary transactions and projects, Hong Kong stands ready to partner with Vietnamese enterprises in grasping these opportunities. Typical services required in mega infrastructural investment projects include project financing, risk assessment and management, legal services, accounting, insurance, building, construction and architectural services, and last but not least, arbitration and dispute settlement advice that should be included in contract arrangements as safeguards. All these services are readily available and can be expertly provided in Hong Kong. Present today in my delegation are key players in the above services who stand ready to tell you what they can offer.
But Hong Kong's strength is not just built on its own success. We succeed by creating success together with our partners. Over the last few decades, we have witnessed the emergence of Vietnam together with ASEAN as a new growth engine in the Asia Pacific region. ASEAN as a group has emerged to become Hong Kong’s second largest trading partner over the last decade. Hong Kong has been fortunate to ride on this tide. This signifies again our closeness in doing business together. But we earn this by working hand in hand with our partners, and sharing our unparalleled advantage with whoever we do business with. In other words, we maintain a level playing field for all.
A level playing field for all businesses is vital to Hong Kong’s success. Hong Kong does not pick winners at will, nor do we elbow out losers. We treasure and respect the market as well as our partners through transparency, rule of law, protecting intellectual property rights, keeping a low and simple tax, and maintaining a clean and efficient Government. Nobody would even fear to take our Government to court because of the clear belief that our independent judiciary will act fairly without fear or favour. All these provide the greatest confidence and assurance for international businesses to choose Hong Kong as their home base in the region. It also explains the reason for the 8,200-plus international firms that use Hong Kong as their regional headquarters or offices, the largest number in Asia; and that 37 per cent of the mushrooming start-ups in Hong Kong come from outside our territory. And these are also the attributes that earned Hong Kong its status as the world's most competitive economy by the International Institute for Management Development; and as the world's freest economy consecutively for more than two decades by the Heritage Foundation, the Cato Institute, and others.
We believe an open, easy and facilitating market environment is vital, and hence we have recently introduced bold measures to reinforce these qualities. We have proposed, and will be putting into practice later this year, a major tax cut by trimming our already low tax from the current 16.5 per cent by half, i.e. to 8.25 per cent for all enterprises in Hong Kong for their first US$250,000 of profit, making Hong Kong a very low-tax regime - if not the lowest in the world.
We are also encouraging our businessmen, big and small, tradesmen and professionals, to reach out to the wider market and ASEAN in particular. We have long been supporting our SMEs to build brands, upgrade their products and services through trade promotion, and advertise in and join trade fairs and exhibitions outside Hong Kong. In our recently released Budget, we have injected a total of over US$300 million to help SMEs for such promotional activities, and one specific measure is to allow them to use this fund to go to ASEAN, in addition to Mainland China. I am sure many of them will find Vietnam the prime destination for their business promotion and market development.
What Hong Kong can offer in the professional services is abundant and deep. Commonly sought-after services include legal, accounting, insurance, business consultancy, risk assessment and management, arbitration, dispute settlement, project financing and funding, bond issuing, construction, architecture and transport, just to name a few. These are professional sectors that are highly specialised and sophisticated, and that are operating in Hong Kong but also serving the regional and global markets - particularly within our Asian time zone. Irrespective of their background as global firms or as home-grown companies, professional services in Hong Kong pride themselves on their knowledge of business at the local, regional and international levels, and they maintain high and international standards. For us, the Asian market is so important that no one can afford to miss out - and there is no better place than Hong Kong as a regional hub for professional services for this fast-growing market.
Ladies and gentlemen, the partnership between Vietnam and Hong Kong is one that is built on solid grounds of co-operation and collaboration, through successes we made together during our mutual development. Last autumn, I received Vietnam's delegation at the Belt and Road Summit in Hong Kong. We will be hosting the 3rd Annual Summit on June 28 this year and we look forward to seeing you again at this event.
Today's meeting marks a new milestone in our relationship. But this relationship is more than just business - and it goes beyond trade and investment. It is one that is solidified by people-to-people bonds, and cultural exchanges that can foster even closer ties. You, your company and the organisation you represent are key to all these. This process started long ago and it will continue. In a moment, you will see some young Hong Kong artists showing you their talents in a music performance. We believe this can also connect our souls and hearts beyond distance, language and culture. I take this opportunity to convey Hong Kong's best wishes to you all and I look forward to seeing even more connections, stronger partnerships, and tighter and unshakable bonds between Hong Kong and Vietnam.
Ends/Wednesday, March 21, 2018