|10 September 2011 (Saturday)|
STH's speech in San Francisco
Following is a speech entitled "Expanding your Asian Reach through Hong Kong" delivered by the Secretary for Transport and Housing, Ms Eva Cheng, at a business luncheon in San Francisco on September 9 (San Francisco time) while leading a Hong Kong Logistics Development Council delegation on a visit in the city to promote Hong Kong logistics services:
Distinguished guests, ladies and gentlemen,
Good afternoon. Thank you all for joining me at this luncheon. It is an honour to have this opportunity to speak to the business leaders of the logistics and related sectors of beautiful California. I was going to begin by saying something on how Hong Kong and California share many similarities: we are both strategically situated on the East-West trade route and have over the last one hundred years established ourselves as key trading centres. Being home to three of the top five US ports, California is the gateway to North America just like Hong Kong is to Southern China. It is therefore all the more meaningful for us to be here today to renew friendship and to consolidate the close economic partnership we have nurtured over the past decades.
But since President Obama delivered his very passionate speech yesterday, I thought I could throw away what I have prepared and just say two things. First, Hong Kong has been practising what the President mapped out yesterday - concentrate on economic growth that will create jobs, get on with essential infrastructure and actually we did one more thing, we paid for all these from reserves from surpluses accumulated through years of prudent public finances. Second, Hong Kong can certainly help market and ship those made in America, grown in America - products and produce to the growing Asian and especially Mainland markets. I am not too sure about the Chevies, Fords and Chryslers, but certainly the apples, whether real or electronic ones. Let me explain why Hong Kong is your best partner when it comes to logistics.
Hong Kong's positive outlook given China's growing economic importance
Economically, the world is of course not living through the best of times. I notice that inbound container cargo handled at Port of Long Beach and Port of Los Angeles dropped by 1.2% and 3.17% in July year-on-year. This reflected the cautious sentiment of retailers and consumers against the economic uncertainties. As a small and open economy, Hong Kong is not insulated from global calamities. The super-loose monetary environment after the global financial tsunami in late 2008 has induced price pressures for many Asian economies, including Hong Kong. When we hear the acronyms that start with QE, we have rather mixed feelings; we think of the surge in asset prices, consumer price inflation and the increasing cost of doing business. With Hong Kong dollar linked to the US dollar, inflation pressures in Hong Kong picked up notably this year. In July, headline consumer prices in Hong Kong shot up by 7.9% from a year ago, which is the most drastic increase in nearly 16 years. Yet, buoyed by the solid growth among Asian and emerging economies as well as the near-full employment at home, the performance of our external and domestic sectors remains robust. Global investors' strong confidence in Hong Kong is reflected in our being the world's third largest foreign direct investment recipient in 2010. This is quite something for a city with a population with seven million. A considerable number of US companies have also cast their vote of confidence in Hong Kong through the setting up of some 1,270 regional headquarters and offices in our city. Indeed, US firms topped our list of regional offices in Hong Kong. Above all, our financial sector has been resilient throughout the recent financial turmoil. This provides stable and strong support to the Hong Kong economy, which is projected to grow by 5 to 6% in 2011. Meanwhile, unprecedented opportunities have been opened to Hong Kong through China's 12th Five Year Plan for the National Economic and Social Development, promulgated in March this year. The Plan strongly supports Hong Kong's development as a high-value goods inventory management and regional distribution centre. That means the Central People's Government of China fully recognises Hong Kong's importance and achievements as a regional logistics hub in its further economic development, serving the mutual interest of both China and the Hong Kong SAR. It also points to the immense room for the Hong Kong logistics sector to participate in the Mainland market.
US exports growth means more use of logistics services
On this side of the Pacific, President Obama's National Export Initiative aims at doubling exports in five years for job creation and has further expounded his plan yesterday. In the 12 months preceding July 2011, your export grew at an annualised rate of about 17%, a rate which, if maintained, is more than enough to reach that goal by 2014. So seen from the Pacific, the silver lining for economic rejuvenation is much more apparent. We believe US demand for logistics services especially targeting Asian and the China market will continue to grow and Hong Kong is ready to be your partner in grasping the opportunities.
Hong Kong best able to manage flow of goods, in particular for those to and from China
Located at the southern doorstep of China, Hong Kong is well-equipped and strategically located to provide quality logistics services for US traders. Hong Kong International Airport is the world's busiest cargo airport, having handled 4.13 million tonnes of cargo in 2010 and overtaking Memphis International Airport for the first time, even taken into account domestic cargo. With 6,000 flights every week to 160 destinations, its connectivity is world renowned. Meanwhile, Hong Kong Port is the third busiest container port globally in terms of cargo throughput and is known for its high frequency of sailings - there are about 400 sailings per week to 480 destinations. It handled 23.7 million TEUs of containers last year, with particular strong growth in transhipment given our role as a regional hub port. On top of the above, we also have convenient and fully multi-modal transportation links with the South China region by road, river and air. Indeed, about one-fifth of China's external trade in goods goes through Hong Kong and around 90% of our re-exports are related to China.
Hardware aside, we are mindful that we must also maintain our institutional strengths in order to provide a level playing field and certainty for all enterprises, local and foreign alike. Our free port, simple and low tax regime - corporate profits tax is just 15% - and the most efficient and transparent customs procedures save time and money for all businesses here. Rule of law is underpinned by an independent judiciary, a clean government, free flow of capital and information, and a truly convertible currency linked to the US dollar. Hong Kong has been consistently recognised the freest economy of the world by the Heritage Foundation and Fraser Institute. Our long history as a trading hub has enabled logistics service providers to accumulate knowledge and experience in handling all sorts of goods, from art treasures to sport horses, and now diversifying to wine and high value consumables like California strawberries and plums, to fill demanding niche markets in Southern China.
Hong Kong no longer competes on volume alone; sure, the number of TEUs do provide an indication of how vibrant a port is, but equally if not important, the next generation of shipping and maritime centre must provide high value-added and tailor-made logistics services, such as pick-and-pack and inventory management services. Apart from that, our reliable security, quality assurance and strong intellectual property protection have made us an ideal place for the distribution of high-value products and brand-name goods, from aviation spare parts to electronics and luxury luggage pieces. Just last month (August), TNT Express opened the TNT Asia-Pacific Fashion Hub in Hong Kong, which offers "just-in-time" and "just-enough" supply chain solutions for fashion companies and distributes to countries including Japan, Korea, China and Singapore. The Li & Fung Group, the Hong Kong-based leader in sourcing, distribution and retailing, handles sourcing for Wal-Mart Stores, has its Asia regional headquarters in Hong Kong to oversee operations in China, India and Japan. By next year, a new DHL multi-purpose facility is expected to commence operation in Hong Kong to meet the demand of customers particularly in the technology sector. The list can go on. Nokia, Philips, LV, Tiffany and Timberland have set up their regional distribution centre in Hong Kong. As for H&M, another popular apparel brand, its regional headquarters for supply chain management is also based in Hong Kong.
There is one unique advantage I must point out. Hong Kong's logistics service providers can benefit from our Closer Economic Partnership Agreement with China, or CEPA for short. This free trade agreement gives Hong Kong service providers preferential treatment in 44 services sectors, including logistics. Hong Kong logistics operators are keen to expand their business across the boundary. The China market may seem unfathomable and difficult to access by some, but leveraging on a common language and culture with Mainlanders, Hong Kong logistics players have acquired the necessary expertise and established the necessary networks to ensure the efficient movement of goods to and from the Chinese market. It is important to underline that CEPA is nationality neutral. Overseas logistics service providers can benefit from CEPA by opening offices here or partnering with Hong Kong companies to acquire the status as Hong Kong service providers. So, through CEPA, international businesses can readily capture the ample opportunities in China.
Government support for logistics sector bring new opportunities
The Hong Kong SAR Government is committed to facilitating the logistics sector to expand. How can we not talk about wine when we are in California? The trading of wine is a fine example of how this can be achieved. Since wine duty was exempted in February 2008, Hong Kong is fast becoming a regional hub for wine trading and distribution. In 2010, we surpassed New York and London and became the world's largest wine auction centre. We have also signed 12 Memoranda of Understanding on wine with different economies. Two of which are with the US, the third largest source of our wine imports in 2010. In view of the strong demand of wine in the Mainland, a pilot facilitation measure has been implemented to expedite customs clearance of wine imported into the Mainland through Hong Kong. No doubt that this would open further opportunities for traders and logistics service providers in Hong Kong and overseas. We certainly look forward to further collaborate with the US in expanding the wine market in our part of the world.
National support for Hong Kong logistics sector
I have mentioned earlier that at the national level, China's 12th Five-Year Plan unequivocally supports Hong Kong to develop into a high-value goods inventory management and regional distribution centre. To examine the opportunities and challenges arising from the 12th Five-Year Plan, the HKSAR Government and the Hong Kong Trade Development Council will be holding the first Asian Logistics and Maritime Conference in Hong Kong on November 25, 2011. Please come to Hong Kong to meet the leading players in the region's logistics and maritime industries, and benefit from the latest intelligence and insights.
Hong Kong's infrastructure will continue to improve
In terms of hardware, we are committed to strengthening Hong Kong's position as the leading hub port by ensuring that the necessary infrastructural facilities are provided in a timely manner to meet the demand from increasing cargo throughput. On the port side, we are conducting a feasibility study on developing our 10th container terminal. We are also proceeding with a project to dredge the Kwai Chung Container Port and its approach to 17 metres to cater for the new generation of ultra-large container vessels at all tides. On the air side, a third general air cargo terminal is being built so that our cargo handling capacity will be increased by 50% by 2013. We are also looking into the development of a third runway to provide the necessary passenger and cargo handling capacity for the forecast growth in traffic up to 2030 and possibly beyond. A public consultation has just been completed and we are now reviewing the comments received with a view to deciding on the way forward. On the land side, the Hong Kong-Zhuhai-Macao Bridge, now under construction, will, on completion in 2016, expand Hong Kong's immediate cargo catchment area to the western section of the Pearl River Delta region. This cross boundary link will be the world's largest bridge cum tunnel, 29.6 kilometres in total. Separately, to cater for the provision of high value added services and help anchor more third-party logistics operators in Hong Kong, we are releasing permanent sites with tailored terms for the development of modern logistics facilities in areas close to our port and airport. So whether air, land and sea, the Hong Kong SAR Government is determined to provide the best infrastructure possible to enable the logistics industry to flourish.
Ladies and Gentlemen, I hope I have convinced you that we value the US as our logistics partner. With the close and long-standing relationship between our business communities, and for all the reasons I have just described, there can be little doubt that enhanced co-operation on the expanding logistics front will bring mutual benefits. I hope that you will reap those advantages very soon, and remember, when you think growth, think Hong Kong.