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Map of Asia |
CIAO DATE: 12/02
Antony Leung, Finance Secretary, Hong Kong Special Administrative Region
Opening Remarks at the Asia Society Hong Kong Center Dinner, May 9, 2002, Hong Kong
Antony Leung
May 9, 2002, Hong Kong
Ladies and gentlemen,
I believe the arrangement has been changed really to ensure that I shorten my remarks, but on the other hand, since the trend right now is for slimming down, and if you actually look at any magazine, there are all kinds of advertisement on how to be slimmer, at least using myself as a benchmark. I thought that maybe a very long remark would be appropriate, but obviously it would be impossible to cover all the areas that you are interested in so I would actually welcome questions at the end of the remarks.
It is indeed my first public speaking engagement since, to a certain extent I celebrate, or not celebrate, my first anniversary as the Financial Secretary, so what I'll do is really, in a way, take this opportunity to recap what I've been doing or not doing, to explain some of the philosophies and the thinkings behind, and then kind of set out the priorities going forward.
Now obviously in the last one year, a lot has happened. In the United States, we have seen a recession, now stated as far back as March and now we maybe seeing actually a recovery. But then we have the 9-11event which makes obviously everybody's lives a lot more difficult, and clearly Hong Kong joins the other economies and territories in fighting terrorisms of all kinds.
On the other hand, the market that is very close to us, the Mainland market, had a lot of good news. We have the Mainland joining the World Trade Organisation (WTO) formally, we have seen Beijing successfully getting the 2008 Olympics Games, obviously we also have the soccer game, the Chinese soccer team getting into the finals. Closer to home, we have the entire Asia, obviously still trying to recover from the Asian financial crisis, but then clearly affected by what had happened in the United States and elsewhere. And in Hong Kong, we had our second recession since 1997, since the Asian financial crisis, and we have unemployment rate reaching as high as 7% and in the short-term may even go higher.
So clearly, high on everybody's mind in Hong Kong is how do we somehow revive the economy as well as provide job opportunities for everybody. And indeed I remember quite vividly that was, exactly what I set out to do. I was asked when I was first in office, by some friends and some media as to what my priorities were as Financial Secretary. I remember that I said my task, and one of my key tasks, was really to help Hong Kong to restructure its economy, and to provide opportunities for everybody. So really that was my priority and indeed that is, I believe, the expectation of the community. How can we help the economy to somehow regain the vitality, and resume growth as well as providing opportunities for everybody, particularly employment opportunity for everybody.
Now the way that I look at economic development is that, I believe that the market actually can do a better job than the Government, but clearly the Government has a role. The Government's role is to enable the market. Obviously when I stated that label, I attracted a lot of controversy and there were a lot of debates. And I actually welcome those debates, because as the entire world changes, and as we enter the knowledge economy, it is appropriate for us to really redefine what the Government should or should not do. And such debate I think is healthy, particularly for a place like Hong Kong where we treasure free flow of information, and we treasure diversity.
Now the best proof in enabling the market is not so much what we should invest or not invest in, because investing is not just about the market, investing is about projects or companies. But what I meant to enable is to enable the market. It's really to allow more opportunities for the market to thrive and allow the market forces to take its course, and I believe that, that is actually the most effective way in trying to develop the economy. In enabling the market, the most concrete example of what I meant is look at what I've announced in the Budget. And as the Financial Secretary, the Budget is actually one of the key occasions if not the occasion for the Financial Secretary to really spell out his beliefs and also his actions.
In the Budget, you have noticed that I have set very clear goals, and one of the clear goals is to reduce the size of the public sector expenditure. As you know, we have been increasing the share of public sector expenditure as a percentage of GDP in the past years, from around 16% to 17% in the 80's and 90's and this year we'll be over 23%. And I've set the target that in five years' time, by 2006-07, I would like to see the size of the public sector expenditure be at or below 20% of the GDP.
The second thing that I laid out that would somehow enable the market is that, despite record Budget deficit, I've chosen not to introduce new tax or increase the tax rate but chose to reduce Government expenditure. It is because I think one of the most important success formulas for Hong Kong is our low and simple tax system, and I'm trying very hard to maintain it. Obviously when I say I'm trying very hard, it seems like I'm kind of hedging the bets. But in a way, I'm hedging a little bit because in case some of the fiscal assumptions that I made in the Budget is not achieved, then obviously I may have to do something more, either in raising revenue or by cutting expenditure. So that is yet another measure to really so-called enable the market, in the sense that through a low and simple tax system, we allow the market to take its effect more efficiently and also by reducing the size of the public sector, we would leave more room to the private sector.
Another thing that I've announced in the Budget, which actually is in line with what this Government has been doing all along is that we would like to continue to re-organise, re-engineer and re-prioritise what we are doing and the way that we are doing things in the Government, and also to use the private sector a lot more in achieving some of our policy objectives. And it's again another measure which is clearly somehow designed to so-called enable the market. So these are all very concrete measures that illustrate my belief in the market.
Besides somehow making sure that the market would have a bigger share of the economy, besides making sure that we have all the institutional arrangements including a low and simple tax system to allow the market to flare, another role that this Government has been doing particularly in the last one year is to see how we can help the economy to improve its market access. And as we all know, right now one of the markets, or the market that has the biggest opportunity for Hong Kong is the Mainland market. A lot of people may say that, well Antony, since you came on board, you have been turning the economy much closer to our motherland. And I would say that, well that maybe true but on the other hand, that is not just because of patriotism. That is because, whether we like it or not, the Mainland market is the fastest growing market in the world, and a very large one, and since we are right next to it, we should be doing our bit to somehow gain access.
So for the last one year, we've been working very hard to improve the flows between our economy and the Mainland economy, and many of you have heard me talking about the five flows: improve the flows of people, cargo, capital, information and services. Now I'm not going to go into the details, but I'm sure most of you are aware that in terms of people flows, we have gained the support of the Central Government by allowing more tourists to come to Hong Kong. Those of you who stayed in Hong Kong in the last one week have seen that. We have seen a lot more tourists coming from the Mainland. Actually the first quarter of this year versus last year, we have seen the tourists flow from the Mainland increasing by 42%, and obviously we'll see more.
We have also asked the Mainland authorities to lift the quota on the business travellers. Another thing that I'm working very hard on is to see how we can allow the individual travellers to come to Hong Kong much easier than now. Because I think if we have to maintain our position as a regional business centre, we have to allow the visitors from the Mainland to come to Hong Kong more easily, because after all, we are a free port and we allow easy access for everybody from around the world right now except from the Mainland. And since there will be a lot more people in the Mainland that have all kinds of reasons, particularly business reasons, to come to Hong Kong, if we do not facilitate them to come here easily, then we actually will be losing out as a business hub and that is something we are working on very aggressively.
Besides on the people front, on the cargo front we are working very hard to see how we can help our Hong Kong companies enlarge their cargo catchment area. We are working very hard to improve the border crossing while keeping Hong Kong as a separate customs territory and retaining our "One Country Two Systems". Obviously a lot of work needs to be done, and we are making all kinds of investments in improving the boundary crossing and we are investigating to see whether we can do actually the so-called "two checkings in one place" so that we facilitate even quicker movements of cargo between the two sides. Right now, we are making some progress. You may or may not know that right now for 25% of our trucks, the drivers actually are crossing the boundary twice a day and some of them are actually doing four trips a day. That is actually an improvement from the past, but we are not satisfied with that because if our truck drivers can cross the border many more times a day, it would reduce the unit cost, and it will reduce the freight cost. It would obviously help our logistics business quite a bit more.
On the capital side, we have been working very hard to see how we can, by using our position as a financial centre, help both the issuers as well as investors in the Mainland, because such capital flows or such collaboration between the two markets would not just help Hong Kong. I sincerely believe that it would help the Mainland too, because with our excellent position as an international financial centre, with our much accepted corporate governance standards by international investors, I believe we have a very positive role to play to help our Mainland investors as well as issuers, and obviously there are reports that there are all kinds of schemes and that we are talking about, jargons or acronyms such as QDII, CDR... There are talks about Hong Kong's banks being able to take deposits in Renminbi, so on and so forth. We are working on all of these now. Obviously many of these involve very complex issues from both sides, and we may not be able to achieve quick results. Nevertheless we are working very hard so that we can improve the flows of capital between Hong Kong and the Mainland.
In improving the five flows, obviously one should not ignore the Closer Economic Partnership Arrangement that Hong Kong is discussing with the central authorities, which is, to some of the media people, they rather choose to call it FTA (Free Trade Agreement). This is obviously a very complex issue, because usually a Free Trade Agreement would cover a lot of areas - goods, services trade, as well as protection of invcstments. We have to recognise that China took 15 years to enter the WTO. They are very cautious not to, because of this Closer Economic Partnership Arrangement, somehow jeopardise the agreements that they have made with the other WTO members. So do have patience but rest assured that this Government is working very hard to ensure that we'll see some progress and hopefully we will see some progress soon.
The Government is working very hard to improve the business environment so that the market, you as businessmen, you as consumers, and you as investors, will benefit. And I believe that with such measures by the Government, with an improved business environment, you will be able to do the right thing, and you will be able to revive the economy, because you, the market, are the better allocator of resources, you are the better employer, you are the much more efficient user of resources.
Now clearly, it doesn't mean that the Government would just therefore do nothing. In moving Hong Kong further into the knowledge economy, and given the fact that we have a relatively higher cost base comparing to our neighbouring regions, we have to ensure that whatever we do, we create higher value so that at least we'll be able to cover the cost, and hopefully we'll still have some surplus so that we can move our economies forward. And so we have also been working with the market to ensure that we would add value in everything we do, and in particular, there are a number of industries that I believe we already have some strengths, and that we can build on our strengths and create more value for Hong Kong.
We've been working on a number of industries, particularly financial services, tourism, logistics and supplies chain management so on and so forth. Besides those areas that I have just talked about, when I talked about increasing the collaboration with the Mainland, you have noted that in the financial services area, we've been improving our infrastructure, we've been increasing protection of the consumers, lowering our thresholds on entry of banks. I'm not going to go through those points in detail, otherwise you would really, instead of having dinner, have to have breakfast right here.
On the tourism side, besides getting more tourists from the Mainland, we are working very hard with the industry and with the Tourism Board, in trying to offer more tourist spots. There are already five clusters that the Chief Executive has announced and I'm working very hard through my chairmanship on the task force within the Government to see how we can move this forward and on top of that, we are making sure that the Disneyland will be completed in time and right now I'm happy to report that we are on track.
But on the tourism side, let me just say one thing. Now that we are seeing a lot more tourists coming to Hong Kong, obviously we are feeling the pressure and the strain on our physical facilities as well as on our software, and I'm going to review with my colleagues very soon the experience that we can gain from last week so that we can make sure that the tourists that are coming to Hong Kong would really get value for money and would have much more improved facilities for the future tourists and ensuring that Hong Kong could become the tourist spot, or the top tourist destination in this region.
On the logistics side, besides improving the cargo flows between the Mainland and Hong Kong, you know that we have a very comprehensive report called the "McClier Report" which you can get from the website. We have set up a number of institutional arrangements and I'm chairing a logistics committee within the Government, to make sure that all of the work will be well co-ordinated and we are tackling both the physical side, the electronic side, meaning data-sharing platform, the human resources, the manpower, so on and so forth. Actually all of these that I talked about , all these initiatives, all these projects, I also have set out and I announced it in May last year that the five things that I've been working on, in order to improve the Hong Kong economy, were exactly these five, meaning the financial services, tourism , supplies chain management and logistics, the forth one is streamlining the Government and the fifth one is improving our relationship with the Mainland. All of these I'm working on.
The only one new thing that actually that you did not hear from me last May that I was going to work on was something called the Local Community Economy. Because while last year, my belief was that by pushing and thriving on these high value-added activities, it would have the trickle down effect to provide opportunity for the so-called less skilled people. But because of the changes in the labour force, right now I believe that we should also be focusing on the Local Community Economy, so that we can provide employment to the less skilled people, as well as bringing up the uniqueness of Hong Kong.
Let me explain what Local Community Economy is. It really is the sector that you can broadly say that would focus on the Hong Kong residents, particularly on local consumption, as well as somehow promoting the unique features of Hong Kong, particularly those cultural activities that would enable our uniqueness to show to our visitors. So it broadly covers a lot of activities including sports and cultural activities, social as well as personal services, a very broad spectrum. This kind of activities would exist in any economy. Whenever you have a large economy, you have things like these. For example, the trainers in gymnasiums, hairdressers, small shops and hawkers on the streets, all of these will actually be classified under this Local Community Economy. All these activities have existed in Hong Kong for a long while, and the Government obviously has been promoting. I thought that especially since we have a continuous influx of people mostly from the Mainland and some from outside, that may not, at least in the beginning, be as experienced and high skilled, the Government should focus on this sector, and make sure that we somehow provide employment opportunities for them. Now the Government is not going to create employment by engaging ourselves in say, hairdressing and that kind of things. The Government's role really is to deregulate, to co-ordinate, to facilitate and promote activities so that again the market, meaning the market participants can have more room to exercise their talents and their hard work. In so doing, they can create opportunities for themselves as well as for others.
So the Government's role again is to facilitate, to deregulate, to promote, and I'm again chairing a task force to ensure this is happening. A lot of the ideas would have to come from the market, actually all the ideas will have to come from market and the focal point for collecting these ideas is through the District Council and in future our officials will be explaining to the public exactly what we mean. But I've listed out in a way my basic beliefs, that I believe in the market, I believe in enabling the market, the Government should have a role. I believe that we should go towards the higher value-added activities, but I also believe that we should through Government's facilitation, promote Local Community Economy. But it's not just the result that matters. I personally believe that the process itself is also very important. And I'm a great believer in communications. So for the last one year, I've been trying very hard, obviously learning from my colleagues in the Government, how to really have a very active dialogue with the community, through the media, through direct meetings with various quarters in the community about what the Government should be doing, particularly what my side of the Government should be doing. I believe that we should have an open agenda. We should be discussing with the public before we make the decision; and also after making the decision, communicating with the public why we have made such a decision, because it is important in Hong Kong. If we believe that market is important that we share this information, it is also important that as an open and accountable Government, we should be communicating and communicating very actively with the public, and I hope that you will have at least noticed that I've been trying very hard, and I'll be working with my colleagues to ensure that we try very hard to communicate with the public. To a certain extent, it is exactly what the Accountability System that we are trying to promote will achieve. The Accountability System hopefully will somehow result in a much more active dialogue with the community because after all with a group of principal officials that are political appointees, they will have terms, shared vision and responsibilities in a way identical with the Chief Executive and since we have now these principal officials and we have a set of permanent secretaries working with them, we'll have more senior people having more time to communicate with the public, so that we can grasp the agenda of the community well, as well as engaging the community in the decision making process. So I hope that in the next one year, I can work with this group of principal officials who are all political appointees to pursue our goal.
Now after talking about the last one year, and the last one year as I said has been very busy, and personally for me has been very challenging, but I must say, very enjoyable. What is my agenda for the next one year? I'm not going to keep you for another one hour. But the agenda is actually very simple, it's exactly the same as that I've set out to do last year. And that is to help the Hong Kong economy to restructure, to regain growth as well as to provide opportunities for everyone in the community. I hope that you all at least have listened to the things that I've set out to do. And it's not just the projects, it's really the thought process behind the philosophy. And I hope that you will support it, and your support is not just in agreeing with me, but many times, it's really telling me how wrong I am. Because it again is through very active dialogue, through a very open communication that this Government, and by the way, this Government belongs to all of you, can help the community and provide services to our people.
Thank you very much.
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