Sunday, 26 April 2015

HK-ASEAN ties continue to grow

Chief Executive CY Leung

The theme of this 12th Leadership Forum, "Forward ASEAN: One Community, One Vision, One People", smartly reflects the growing collaboration that has come to mark 21st century Asia.  I believe that co-operation - in our business and trade, in our political ties, and in our cultural development - is the only way forward. For ASEAN, for China, and for Hong Kong.


Expanding bilateral relations

That rock-solid certainty in the value, and rewards of co-operation, is the driving force behind the ASEAN-Hong Kong Free Trade Agreement, which has been under negotiation since last July.  The third round of negotiations concluded last month in Hong Kong.  All is progressing smoothly, and I look forward to a successful conclusion in the coming year.


Of course, Hong Kong and ASEAN have long enjoyed strong relations.  That is much in evidence in our trade ties. ASEAN is Hong Kong's second-largest trading partner in goods and our fourth largest in services.  Last year, the total value of merchandise trade between us exceeded US$106 billion - up 10% over the previous year.


Indeed, given our continuing growth in trade and our expanding bilateral relations in general, we plan to open a new Hong Kong Economic & Trade Office in the region.


Once our FTA is up and running, I'm confident it will boost our "super-connector" role between Mainland China and ASEAN.  Hong Kong is, after all, a trade and logistics hub, the world's Chinese financial centre and China's international financial centre.  When you are in Hong Kong, you are in China - a market with tremendous potential.  And, thanks to our "one country, two systems" arrangement, we share with our international business partners, and that definitely includes our ASEAN partners, the double benefits of "one country" and "two systems".


Liberalisation of trade

Take, for example, CEPA - our Closer Economic Partnership Arrangement with Mainland of China.  In effect since 2004, CEPA is Hong Kong's free-trade agreement with the Mainland. Since 2006, all Hong Kong products meeting CEPA origin rules gain tariff-free access to the Mainland market.  And, the vast services market of the Mainland has been gradually opening to Hong Kong services suppliers now for more than a decade.


CEPA is nationality neutral.  Which means that ASEAN investors can realise the same advantages that Hong Kong companies enjoy.  They only need to establish manufacturing operations in Hong Kong or partner with a Hong Kong company to take advantage of all that CEPA can offer ASEAN products and services.


And there's more good free-trade news on the way.  By year's end, I expect that Hong Kong will enjoy basic liberalisation of trade in services with the Mainland.  The first big step in that development was set in motion just last month, when basic liberalisation of trade in services between Hong Kong and the neighbouring, very prosperous Guangdong Province was achieved.


Guangdong has long been a major recipient of Hong Kong investment.  Indeed, in 2013, it accounted for about one third of our outward direct investment in the Mainland.  And the new agreement gives Hong Kong investors first-mover advantage in the opening up of Guangdong's services sectors.


The Guangdong Free Trade Zone, formally established earlier this week, is sure to supercharge Hong Kong business and investment in Guangdong, and that, I hasten to add,  will include Hong Kong-based ASEAN companies.  In particular, it will benefit our high value-added services. None more so, than our financial industry.


Renminbi business

In fact, Hong Kong has been in the offshore Renminbi business since 2004.  Today, we are the world's largest offshore Renminbi centre.  Indeed, the Renminbi may well be the best illustration of Hong Kong's "super-connector" role between the Mainland and the rest of the world.  Through cross-border trade, direct investment and portfolio investment, Hong Kong links offshore and onshore Renminbi markets, promoting the healthy circulation, and development, of Renminbi funds.


The development to date has certainly been promising.  Last year, Renminbi trade settlement handled by banks in Hong Kong reached RMB 6.3 trillion, up 63% year-on-year.  We have, as well, the world's largest offshore pool of Renminbi liquidity.  At the end of February, Renminbi customer deposits and outstanding certificates of deposit issued totalled RMB 1.1 trillion.


Our Renminbi financing activities are also buoyant, the amount of outstanding Renminbi loans increasing from 116 billion at the end of 2013 to RMB 188 billion at the end of 2014, an increase of 62% in a year.


From 2007 to February of this year, nearly 500 Renminbi bond issuances have taken place in Hong Kong, with an outstanding amount exceeding RMB 370 billion.  Hong Kong is also the world's largest offshore Renminbi investment product market. Renminbi investment funds, insurance, currency futures, real estate investment trusts, shares, derivative products and more are available through Hong Kong.


It's all supported by advanced infrastructure. The average daily turnover on Hong Kong's RMB Real Time Gross Settlement system reached RMB 960 billion at the end of February.  Today, more than 220 banks participate in the Renminbi clearing platform in Hong Kong.  They form a global Renminbi payment network covering some 40 countries and regions.


Perhaps the most telling piece of statistic is this: Hong Kong now handles about 70% of the world's Renminbi payments - that according to the Society for Worldwide Interbank Financial Telecommunication.


And we're only getting started.  We are strengthening our market infrastructure and financial offerings to enhance their market friendliness.  And we will continue to work with the Mainland to create Renminbi opportunities that reward us all, including ASEAN companies handling their Renminbi transactions in Hong Kong.


Shanghai connection

Our place as China's international financial centre is visible in other ways as well.  The most recent example of this is the Shanghai-Hong Kong Stock Connect.  Launched last November, the programme underscores our "super-connector" role between the Mainland and the rest of the world.


Through Stock Connect, investors from Hong Kong, and overseas, including ASEAN, of course, can trade in more than 500 Shanghai-listed shares through the Hong Kong Stock Exchange, directly, for the first time.  And Mainland investors can use onshore Renminbi funds to invest in shares listed on Hong Kong Stock Exchange. This unique connectivity with the Mainland stock market will bring huge opportunities to Hong Kong.


In fact, Stock Connect is already benefitting financial intermediaries in Hong Kong.  They're the ones offering investment management and market research, as well as custodian and brokerage services, to Hong Kong and international investors turning to the Mainland stock market.


It's all been smooth sailing since the November launch.  Actually, it's been high-speed cruising of late. Less than three weeks ago, both Shanghai-bound and Hong Kong-bound turnovers broke single-day records, with the highest combined daily turnover reaching approximately US$5 billion.


Shanghai-Hong Kong Stock Connect is only the beginning. We are now hard at work on the Shenzhen-Hong Kong Stock Connect - the next step forward in the harmonising of the Hong Kong and Mainland financial systems.


"One Belt, One Road"

There's more than finance in our future, thanks to China's Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives. Here, too, Hong Kong's "super-connector" role can help bring China and the world together.


"One Belt, One Road," as it's called, will promote closer co-operation with countries across Asia, Europe and Africa.  Connectivity is the magic word.  And we will see this unprecedented coming together in a great many areas, from the strengthening of infrastructural facilities to the enabling of unimpeded trade and investment, the deepening of financial integration and the building of people-to-people bonds among countries across the three continents.


Hong Kong is strategically located at the centre of Asia, perfectly positioned between the Mainland and overseas markets.  The world's eighth-largest trading economy, Hong Kong is a key regional trade and logistics centre.  The "One Belt, One Road" initiatives will only extend our reach.  Our advantages will bring us closer to ASEAN, the Middle East, Africa, Russia, Kazakhstan and other Central Asia countries.


Those advantages include our powerful competitive edge in services, from trade, logistics and finance to legal, accounting and other professional services, together with infrastructural project management, environmental and risk assessment, and transport and tourism services.  The "Belt-Road" initiatives will create immense demand for these and other high-level services.


Hong Kong is the world's freest port for trade and investment.  Capital, information, trade and people: they all flow freely in and out of Hong Kong. The US-based Heritage Foundation has ranked Hong Kong number one in its Index of Economic Freedom every year since 1994.


Hong Kong is also the easiest place in the world to do business.  We are, after all, blessed with a low and simple tax system and world-class logistics and communications infrastructure, all built on the rule of law, on judicial independence and on intellectual property protection regime.  And, let me add, ASEAN businesses can compete with other companies, local and overseas, on an equal footing in Hong Kong.


As the "Belt-Road" developments increase the flow of international investment, as well as investment in and out of China, Hong Kong is supremely placed to serve as the "super-connector".


The Silk Road Fund and Asian Infrastructure Investment Bank (AIIB) are integral to the "Belt-Road" strategy.  With a final funding target of US$40 billion, the Silk Road Fund will provide investment and financing support for infrastructure construction, industrial co-operation and other connectivity projects among countries along the "One Belt, One Road."  With 57 founding members, the AIIB will help address the region's infrastructure financing funding gap, estimated to be about US$780 billion a year between 2010 and 2020.


Hong Kong's financing and asset management professionals can support the AIIB in such areas as project financing, investment, financial management and foreign exchange management.  We can help it realise the huge infrastructural investment needed to connect the Belt-Road's ambitious blueprint.


In the long run, Hong Kong will benefit from the increasing intra-regional trade along the "Belt-Road." China is, of course, a major ASEAN trading partner. And it's expected that multilateral trade will soar as the Belt-Road's infrastructural and economic prospects become reality.


Hong Kong is already helping Mainland enterprises "go global" with a wide range of professional services in the financial and legal areas. In the coming "Belt-Road" era, that support will grow immeasurably. It will create unprecedented opportunities for Hong Kong's financial services industry and professionals - and our ASEAN partners.


Ladies and gentlemen, I am confident that economic and trade ties between ASEAN and Hong Kong will only continue to grow, indeed, to soar. Convinced that, for all of us here today, the best has yet to come.


Chief Executive CY Leung delivered this speech at the 12th Association of Southeast Asian Nations Leadership Forum in Kuala Lumpur on April 26.

Otmane El Rhazi
Department of Commerce
Economic Development
Text/Mobile, +44 7414 782 320

Saturday, 25 April 2015

A joint-effort on climate change

Chief Executive CY Leung

Few words have more impact nowadays than "sustainability". And there is no shortage of ways to consider the concept behind the word. One of the broadest and most popular definitions of sustainability speaks of development that meets our needs today without compromising the needs of tomorrow, and that includes tomorrow's generations.


Financial sustainability

Hong Kong is well known for its attention to financial sustainability, and for good reason. We are a leading international financial centre. We are also one of the world's greatest trading economies. And the future of Hong Kong depends on sustaining our advantages in these areas. If we are to maintain our hard-won place in the global economy, if we are to ensure that our community of some 7 million people continues to reap the benefits Hong Kong can offer, we must balance our short- and long-term growth. And we must do so without jeopardising the economic health of our future generations.


That said, we are no less committed to safeguarding our environmental advantages, to ensuring that the natural bounty we have been blessed with remains undiminished.


Environmental sustainability

Hong Kong attaches great importance to combating climate change, and we are putting in place the policies and programmes to do so effectively. Indeed, we have set a target to reduce carbon intensity by up to 60% within five years, compared to 2005 levels. This is, of course, easier said than realised. But I am pleased to say that we are on track to achieving it. We are doing so largely by implementing measures on both the demand and supply sides of electricity consumption, which accounts for some 70 per cent of our carbon emissions.


On the demand side, we are working hard to promote energy efficiency and conservation, alongside many others in the international community. We have tightened the energy standards of our buildings, which account for more than 90% of our electricity consumption. Noting that carbon audits are an effective means of understanding our carbon footprint and identifying appropriate carbon-reduction options, we have completed a three-year, energy-and-carbon-audit programme covering 120 government premises and public facilities.


We have also launched a carbon-footprint repository to help listed companies disclose their carbon-management experience and practices to the public. And, with funding support from the Environment & Conservation Fund, a CarbonSmart Programme was initiated three years ago in 2012. It provides matching funds for each private company to conduct energy-and-carbon audits. To date, more than 200 applications have been endorsed and the total approved incentive amounts to nearly US$450,000. A good start, and we will continue to develop the programme.


"Don't do as I do, do as I say." I'm sure we've all heard it and seen it in practice. But for my Government, we are determined to do as well as say. To lead by example. Over the past decade, we have achieved a 15% saving in electricity consumption in our government buildings. And we have recently bumped up that target - pledging to save another 5% over the coming five years.


To enhance energy-saving performance and green-building measures, we will conduct energy audits in major government buildings. We are also working with public and private organisations to expand our low-carbon and liveable built environment - to reduce, in short, Hong Kong's overall electricity demand.


On the energy-supply side, we have banned the construction of new coal-fired power plants since 1997. To achieve our 2020 target of carbon-intensity reduction, we will increase the proportion of natural gas in our fuel mix from the current 20% to 50% by 2020. The proportion of coal in our fuel mix will be reduced significantly.


We are also targeting our road transport, promoting the use of clean fuels for motor vehicles, as well as turning waste into energy.


There is a need, as well, to enhance our city's resilience to climate change. To that end, we are developing infrastructural facilities, together with the necessary institutional arrangements, to address the possible impact of climate change. We have comprehensive response plans in place to deal with extreme weather events and natural disasters. We have made strategic improvements to our sewage and drainage systems, launched scientific monitoring and research programmes, and established forecasting and warning systems to monitor changes to our ecology and our water resources.


Joint efforts

Climate change, of course, is a global issue. And we have long been working with the international community in this regard. Hong Kong is a member of the C40 Cities Climate Leadership Group and is now on its Steering Committee. We have also taken part in United Nations' climate-change conferences as part of China's delegation. To respond to climate change regionally, Hong Kong and the neighbouring Guangdong Province have set up a Joint Liaison Group on Combating Climate Change. The group's mandate includes promoting scientific research and technology development.


In Hong Kong, an Inter-departmental Working Group on Climate Change co-ordinates and directs the Government's efforts on climate change.


In short, we are working hard, and well, but we have much yet to do, much yet to learn. Which is why I'm so pleased that Hong Kong is hosting this symposium, and that several senior members of the Hong Kong SAR Government are participating.


Hong Kong prides itself on being a world city, on our openness, on our close ties with the rest of China and the rest of the world. We are committed to working with them in the global battle against climate change.


I hope that the climate negotiations at COP21 in Paris will result in an agreement we can all rally around. Rest assured that Hong Kong will do its part, today and tomorrow.


Chief Executive CY Leung delivered this speech at the 4th Nobel Laureates Symposium on Global Sustainability on April 23.

Otmane El Rhazi
Department of Commerce
Economic Development
Text/Mobile, +44 7414 782 320

Historic time for constitutional development

Chief Secretary Carrie Lam

Yesterday, the Government of the Hong Kong Special Administrative Region released its proposals for the election of the Chief Executive in 2017 by universal suffrage.


The proposals come after two rounds of public consultations that started back in December 2013 and ended in March this year.


But these proposals are not just the culmination of a 16-month period of discussion, debate and, at times, divisive protest.


They are the culmination of an 18-year journey for Hong Kong’s political system since our return to China in 1997.


They also represent a historic milestone for our country some 25 years after the election of the Chief Executive by universal suffrage was promulgated in our constitutional document, the Basic Law, by the National People’s Congress of China.


During our wide-ranging consultations, one thing was very clear: Hong Kong people eagerly look forward to casting their own ballots to elect the next Chief Executive in 2017.


To make this aspiration come true, our legislators must approve the proposals by a two-thirds majority – that is, 47 of the 70 seats. We hope the vote on this will take place before the summer recess in July.


Heed public opinion

This will be a hard task, since 27 lawmakers have repeatedly vowed to veto the package. I surely hope that they will change their minds, heed public opinions and seize their place in history.


When Hong Kong was under British administration, Governors were dispatched from London to govern this city. We had no say in the matter.


Since 1997, the Chief Executives have been selected by an election committee – initially 800 members but later expanded to 1,200.


Although these 1,200 members are from four different sectors and mostly returned by elections, Hong Kong people still have no direct role in selecting the Chief Executive. All we could do was watch the process on TV.


Now, we are proposing major changes to this process.


5m can vote

For a start, up to 5 million eligible voters will be able to tick the ballot for their preferred Chief Executive candidate for the first time. Hong Kong people will no longer be passive observers but active participants in the electoral process.


In the run-up to the polling day, Chief Executive candidates will have to hit the hustings to explain and promote their election platforms to the public. For the first time, we will have a full-fledged election campaign to be decided by your average Mr Chan or Ms Wong.


The nominating process has attracted much comment and criticism, much of which stems from ignorance about Hong Kong’s constitutional set-up.


Under the Basic Law, a nominating committee as a whole must nominate candidates for the public ballot. This is not a new requirement or an added restriction – it has been in the Basic Law all along. This nominating committee will mirror the 1,200-member election committee.


Competitive election assured

The Standing Committee of the National People’s Congress decided in August last year that there must be two to three candidates on the public ballot to ensure a choice and a competitive election.


Under the current system, potential candidates need to secure 150 election committee nominations to qualify as a candidate, and there is no limit on the number of nominations a candidate could receive. Then, as mentioned, the 1,200-member election committee makes the choice for Hong Kong’s 7.2 million residents.


We propose lowering this threshold to 120 and capping it at 240 at the members recommendation stage. This means up to 10 people could vie for the right to be one of the two to three nominated candidates - something akin to a primary runoff.


This primary runoff is also new, and will inject an additional element of competition. Those vying for a place on the public ballot will have to widely promote their platforms to nominating committee members as well as the public.


Package support urged

Hong Kong is now at a crossroads. We are urging Hong Kong people – especially our legislators – to take the road not yet travelled to support our political reform package.


We believe it will make a big difference to our political system and election culture. The whole electoral process will become more inclusive, transparent and competitive. And the Chief Executive will have a greater mandate and accountability to the whole Hong Kong population than ever before.


If we miss this golden opportunity, the election of the Chief Executive by universal suffrage would be further delayed. We would then retain the same electoral system we have now.


In addition, any chance of introducing universal suffrage for electing all members of the Legislative Council, possible only after the Chief Executive is elected by universal suffrage, would be further deferred.


It will be a crying shame if Hong Kong becomes stuck in such a political time warp.


This column by Chief Secretary Carrie Lam appeared in several local newspapers.

Otmane El Rhazi
Department of Commerce
Economic Development
Text/Mobile, +44 7414 782 320