Secretary for Transport & Housing Prof Anthony Cheung
Every year, we organise promotion missions to overseas economies to update our business counterparts on our latest logistics development. You may wonder why we have chosen Korea as the destination of this year's delegation visit. Well, the question should not be why, but why not.
Since the 1960s, our two economies have consistently maintained high levels of economic growth, fueled by increasing exports and rapid industrialisation, which enabled us to join the ranks of the world's developed nations and be dubbed as Asia's Little Dragons by the mid-1990s.
Hong Kong is now among the leading financial centres worldwide, while Korea is an important hub of global manufacturing in automobiles, electronic components and telecommunications equipment.
Some common characteristics of our two economies include an educated population and high savings rates. Our economies have also proven to be resilient enough to withstand regional and global economic crises, such as the Asian financial crisis of 1997-98 and the global credit crunch of 2008.
Resilience is important, in particular at a time when the global economy is uncertain. Last month, the International Monetary Fund revised down its global economic growth forecast for this year, 2015, to 3.1%, 0.4% lower than that made in January. Yet the economic sentiment in emerging Asian economies is still positive. The IMF estimated that developing Asia still maintains growth of 6.5% this year and China 6.8%.
Although Mainland China's exports and imports declined in the first three quarters of this year, its domestic demand still held up well. Contribution of domestic consumption to GDP rose from 51.2% last year to 58.4% in the first three quarters of this year.
This will continue to bring about demand for high-end products and create opportunities for Korean manufacturers and Hong Kong's services and logistics providers. In this respect, it is worth noting that Korea's exports of consumer goods to Mainland China rose by close to 30% per annum on average during the past five years.
Hong Kong and Korea are close trading partners. Last year, Korea was Hong Kong's sixth largest trading partner. The average annual growth rate in bilateral merchandise trade over the five years from 2009 to 2014 was 10.2%. Hong Kong was Korea's fourth largest export market and third largest investment destination, following the US and the Mainland of China.
Some 140 Korean companies have set up regional headquarters, regional offices or local offices in Hong Kong, including Korean Air and Hanjin Shipping. Hong Kong's logistics companies, such as Kerry Logistics, have also co-operated with Korean enterprises in setting up joint businesses in Korea.
Hong Kong has strong transportation linkage with Korea. The air services operated by our respective home carriers between Hong Kong and Korea increased significantly over the past years. To illustrate, this week (week of November 25), there are 194 passenger and cargo scheduled flights between Hong Kong and Korea, up 45% as compared with a similar week in 2011, just four years ago.
Nowadays, every week, we have 44 container vessel sailings to Korea, connecting Hong Kong to seven sea ports of Korea, including Busan Port and Incheon Port. Good connectivity facilitates further business investments and logistics co-operation.
Hong Kong people like visiting Korea and vice versa. Last year, Korea was Hong Kong's third largest visitor source market and we are your fifth. We received some 1,251,000 visitors from Korea, an increase of 15.5% over 2013, while over 558,000 Hong Kong people visited Korea, 39.4% more than in 2013. The annual quota of the Hong Kong-Korea Working Holiday Scheme for young people has also just been increased last week from 500 to 1000, to promote more cultural and educational exchanges among our younger generation.
If you've been to Hong Kong, I suppose you would have noticed that Korean TV dramas, movies, K-Pop artists and of course, Korean food are becoming more popular day by day.
I've just met your Minister of Land, Infrastructure & Transport and we both believe that there's more room for co-operation between Hong Kong and Korea.
Other than that, Korean electronic and cosmetic products are among the most sought-after brands in Hong Kong, as well as in Mainland China. These high-value products are time- and temperature-sensitive, the handling of which requires tailor-made supply chain solutions. And that is the reason why we are here, to share with you how Hong Kong can be your best link in your global supply chain.
Located at the southern gateway of China, Hong Kong is the best partner for Korea's companies to enter the South China market by providing quality shipping and logistics services.
The Pearl River Delta is one of the richest regions of China, alone contributing 9.1% of Mainland China's GDP last year. The merchandise trade between Korea and Guangdong Province (just next to Hong Kong) picked up by a rapid average growth of 19% per annum in the past five years. It is estimated that around 30% of such merchandise trade is routed through Hong Kong, generating notable demand for our logistics services.
In terms of product types, electrical machinery and telecommunications apparatus together accounted for 60% of our total trade with Korea last year. These products are usually shipped by air. Given Hong Kong's outstanding global connectivity and excellent aviation services, there is much room for Hong Kong-Korean logistics co-operation, especially in tailor-made logistics services for high-value goods.
Home to an international maritime community for over 150 years, Hong Kong plays a leading role in the global shipping industry. Our shipowners together own or manage about 9% of the deadweight tonnage of the world's merchant fleet.
There are over 700 shipping-related companies operating in Hong Kong, providing a great variety of quality maritime services ranging from ship owning, ship agency and management, ship finance, ship broking and marine insurance to maritime legal and arbitration services.
Of the top 10 ports in the world, seven are in China, including Hong Kong, and of course Busan Port is also among the top 10 in the world. And Hong Kong has what it takes to become an important international maritime services hub for China and the Asia-Pacific region.
Hong Kong is your good business partner also because we have very good fundamentals. According to the World Economic Forum's Global Competitiveness Report recently, Hong Kong ranks first in infrastructure out of 140 economies. From Hong Kong, we can reach all major Asian cities within four hours' flight time.
We have a highly skilled workforce and relatively low costs of doing business. Thanks to the ‘One country, two systems’ constitutional framework, Hong Kong is not just any Chinese city, because we practise "the other system", that provides us with distinct characteristics and advantages.
We enjoy a high degree of autonomy. We have our own currency, the Hong Kong dollar, which is internationally convertible. With our independent judicial system and our well-entrenched rule of law, Hong Kong is a prime centre for solving disputes by arbitration.
We are a free port with a simple tax regime and our tax is low, and we have been ranked by the Washington-based Heritage Foundation as the world's freest economy for the 21st consecutive year.
Hong Kong continues to enhance its multi-modal connectivity such that its position as a regional logistics hub is sustained. Hong Kong International Airport is the busiest cargo airport in the world and the third busiest international passenger airport in the world after Dubai and London Heathrow.
More than 100 airlines operate flights from our airport to over 180 destinations worldwide, including more than 45 in the Mainland of China. Last year, our airport handled 63.3 million passengers and 4.38 million tonnes of cargo. Currently, our airport operates on two runways, which are not enough.
In order to cope with the forecast air traffic demand in the long term, we are planning for a Three-Runway System involving capital investment of some $141.5 billion (or roughly US$18 billion). This will vastly expand the airport's capacity to handle around 100 million passengers and close to 9 million tonnes of cargo annually by 2030.
Air transport aside, Hong Kong is supported by extensive road and rail infrastructure, offering excellent connections to all major cities in China. Together with our neighbouring cities - Zhuhai and Macau - we are building the Hong Kong-Zhuhai-Macau Bridge. This mega bridge will extend Hong Kong's hinterland to the newly booming Western Pearl River Delta and beyond to Yunnan Province.
When the bridge is commissioned - in 2017 according to the latest assessment - the perk of having this link is a much shortened commuting time from one city to another. For example, a four-hour land journey from the city of Zhuhai to Hong Kong International Airport will be compacted to only 45 minutes.
In a world where time is of the essence and efficiency does matter, the completion of this bridge will further enhance Hong Kong's competitiveness.
Last year, Hong Kong Port handled some 22.2 million TEUs, ranking fourth in the world. We now operate about 350 weekly sailings to some 510 destinations worldwide. By next year, dredging works to deepen our Kwai Tsing Container Terminal Basin and its approach channel from 15 metres to 17.5 metres will be completed, enabling unrestricted access for new-generation ultra-large container vessels to Hong Kong.
All these infrastructural upgrades can enhance our multi-modal connectivity as well as our capacity to cater for growing logistics services demand, whether in China or the region.
With this connection, the newly launched Belt & Road initiative of China will promote wider regional connectivity and the free flow of goods among more than 60 countries spanning Asia, Europe and Africa, on a scale never seen before. Through upgrading the infrastructural links between the Belt & Road countries, connectivity can be strengthened and regional economic co-operation better facilitated. This will boost demand for international logistics services. With Hong Kong being a regional logistics hub and an international maritime centre, this is another golden opportunity for us to leverage on our comprehensive logistics and transportation network to play an active role in the Belt & Road initiative.
We look forward to closer partnership and collaboration with our Korean counterparts, to fully capitalise the opportunities to be brought about by the Belt & Road initiative of China.
Secretary for Transport & Housing Prof Anthony Cheung gave these remarks at a luncheon seminar on Hong Kong as a Regional Logistics Hub - The Link in Your Global Supply Chain in Seoul.