Policy Address aims to invigorate city

I mention these stories because this Government firmly believes in growing the local economy. Only a strong economy can unleash the potential of everyone in Hong Kong – from big entrepreneurs to young school leavers looking for their first job.

 

Only a strong economy can give Government and the people of Hong Kong the financial capability needed to deal with the many longstanding social issues. The Government has a clear and indispensable role to play in enhancing the competitiveness of Hong Kong. 

 

We want to be proactive, tackle current issues and at the same time, stay ahead of the curve and plan for the longer-term.

 

In this year's Policy Address, I have again put the chapter on the economy ahead of all other subjects. In this chapter on economy, I listed out the potential of, and proposals to develop, 11 sectors and to make the best use of two new platforms.

 

One is the rapid economic development of the Pearl River Delta and the other is the "bridgehead economy" arising from the completion of the Hong Kong-Zhuhai-Macau Bridge.

 

Human capital, ‘hardware’ key

To realise Hong Kong's potential, I addressed in two other chapters the two factors that will underpin our economic growth – education, employment and whole-person development in one chapter, and land, housing and transport in the other.

 

These are the human capital and the hardware of Hong Kong – both of these factors are often the only constraints on our sustainable growth.

 

Let me start with the exciting opportunities concerning Lantau Island. Lantau was an outlying island before the completion of the Tsing Ma Bridge.Today it remains the far end of our west-bound land transport network.

 

When the 55-kilometre-long Hong Kong-Zhuhai-Macau Bridge is completed in 2016 and the entire 9km Tuen Mun-Chek Lap Kok Link in 2018, Lantau will become an essential link between Hong Kong and the vast west bank of the Pearl River Delta.

 

This biggest island of Hong Kong can provide sufficient new land for a lot more business activities and for new housing projects. We also plan to build modern logistics facilities on a 10-hectare site in Tuen Mun West.

 

Nearby, Hong Kong International Airport is the world's busiest hub for air cargo, and busier still since the third air cargo terminal became fully operational last year.

 

All this will contribute to the emergence of an East Lantau Metropolis as a new core business district with not just new buildings, but ones that are laid out and built to new standards, catering to the business needs of not just Hong Kong, but also those of the prosperous cities on the west bank of the Pearl River Delta.

 

Two days after the Policy Address, the Government announced the setting up a Lantau Development Advisory Committee to help plan and co-ordinate the economic and social development strategy for Lantau. We have appointed 19 non-official members representing different sectors of the community.

 

Opportunities widen

Over the past year, I have often been asked whether Hong Kong can remain competitive in view of the rapid development and liberalisation of the Mainland economy, including the setting up of new free trade zones, most notably in Shanghai and Guangdong.  

 

The country's gradual opening up and reform process is creating, and will continue to create opportunities for Hong Kong. The most pressing issue, I believe, is how to capitalise on these opportunities?

 

The Government is fully committed to strengthening Hong Kong's business-friendly environment; an environment that attracts foreign and Mainland Chinese companies to operate here, an environment that connects investors from around the world to the opportunities in the Mainland of China and Asia, and an environment that rewards hard work and brings the best out of our younger generation.

 

We also know that we have competitors and should not be complacent.

 

Over the past 18 months, my colleagues and I have spent a lot of time and effort nurturing our relationship with the Mainland of China with a strong focus on business. Through high-level meetings, working groups and business delegation visits we have emphasised the "win-win" factor of cross-boundary relations.  

 

More trade offices planned

Our determination is reflected in the Policy Address by our commitment to open more offices across the boundary, including a Hong Kong Economic & Trade Office in Wuhan in the second quarter of this year.

 

The Wuhan ETO and existing offices in Shanghai, Guangzhou, Chengdu and Beijing will each link up with their respective liaison offices to form a better network and better serve the growing number of Hong Kong businesses that now spread far and wide in the Mainland.

 

We have also been working with the Ministry of Commerce towards the goal of basically achieving liberalisation of trade in services between Hong Kong and the Mainland of China by the end of the National 12th Five-Year Plan period next year.

 

We have passed onto the National Development and Reform Commission, apparently ahead of all other local authorities in the Country, areas that we have initially identified for inclusion in the 13th Five-Year Plan.

 

In my Policy Address last year, I announced that we would establish a high-level Joint Working Group to improve implementation of the Mainland and Hong Kong Closer Economic Partnership Arrangement, or CEPA.  

 

CEPA measures multiply

The Joint Working Group held its second meeting in Shanghai last month on a wide range of issues.  It is worth mentioning that Supplement X to CEPA signed last August contained over 70 new liberalisation and facilitation measures, more than any previous Supplement to CEPA since its launch in 2003.

 

We are also working hard to strengthen Hong Kong's regional connectivity. Among other initiatives, the Government is considering opening more ETOs in Asia. We currently have 11 overseas ETOs in cities around the world, including three, yes only three, in the Asia Pacific region.

 

The ETOs do important work in identifying new markets for Hong Kong and promoting our city's advantages as an international business and financial centre and premier gateway into and out of the Mainland of China.

 

We look forward to beginning formal negotiations soon on a Free Trade Agreement  between Hong Kong and the 10-member Association of Southeast Asian Nations, or ASEAN.

 

An ASEAN-HK FTA will help Hong Kong become a stronger and more effective partner in this high-growth region.

 

11 sectors in spotlight

I would also like to mention here some of our initiatives in the Policy Address to facilitate the development of 11 sectors.  

 

Hong Kong has the need and the necessary conditions for a vibrant innovation and technology sector to create high-quality jobs and contribute more to economic growth. I have decided to re-initiate the setting up of an Innovation & Technology Bureau to provide more focus and energy in developing innovation, science and technology.

 

I sincerely hope that our business chambers and the Legislative Council will support the establishment of an Innovation & Technology Bureau so that we can move forward on this proposal soon.

 

A recent study on Hong Kong's maritime services has highlighted good opportunities for Hong Kong to build on its competitive edge in this sector. I am considering setting up a new statutory maritime body to help develop Hong Kong's high value-added maritime services.  We will consult the industry on the details in the year ahead.

 

Similarly, Hong Kong is a well-established aviation hub in Asia. We are considering setting up a civil aviation training institute to develop talent for the industry in Hong Kong and the region, and enhance the safety and efficiency of air services.

 

Service industries on rise

All together, services industries contribute over 90% of Hong Kong's GDP. Last year I set up the Economic Development Commission and the Financial Services Development Council.

 

These two expert bodies are working at full speed and government departments are giving all necessary support and taking follow-up actions.

 

Financial services alone contribute over 16% of Hong Kong's GDP and employ 6% of our workforce or almost 230,000 people. The council has put forward a number of good and concrete initiatives to develop financial services and we will examine and follow up on these in collaboration with financial regulators.

 

The commission’s working group on professional services has come up with a framework for promoting professional services. This includes closer collaboration with the Mainland of China, strengthening research and development and promoting the Hong Kong brand, among other areas.

 

According to the latest available figures, the professional services industry contributed $88 billion of our GDP in 2011. That is slightly higher than the tourism industry's contribution in the same year.

 

Professional services’ contribution swells

In the five years to 2011, the professional services' contribution to Hong Kong's GDP grew at an average annual rate of 11.3% while employment in the industry grew at an average annual rate of 3.3%. In other words, GDP per capita from professional services has increased significantly.

 

We look forward to studying and implementing further recommendations from the EDC and the FSDC on ways to build on Hong Kong's competitiveness as an international business and financial centre in Asia.

 

Matching the skills of our labour force to the requirements of industry is an ongoing challenge. I have always advocated that Hong Kong people should come first, and that includes job opportunities and career development.

 

I have laid out a new strategy for nurturing talent with a stronger emphasis on vocational training and greater collaboration with industry in terms of apprenticeships and training programmes.

 

Training opportunities promoted

The Government will launch a pilot training and support scheme targeting industries with a keen demand for labour. Under the scheme, the Government and participating industries will provide financial support for apprentices in the first year of training and the following three years of apprenticeship.

 

We will also allocate funding to the Vocational Training Council to provide industrial attachment opportunities for students. 

 

I encourage our business community to work with the Government to create more and better training and job opportunities. Hong Kong is first and foremost a city of commerce.

 

Our success story is written by those who have triumphed over adversity and, in many cases, people who have toiled hard to make something remarkable out of not very much.

 

By promoting vocational training and internships, we want to encourage firms to use their experience, knowledge and resources to help bring the best out of our young people and give them the skills, hope and opportunity to fully contribute to Hong Kong's remarkable evolutionary journey.

 

Tweaking land supply

Lastly, just a few words about the supply of land for more business space. I spoke about the shortage of business space at a joint-chamber luncheon a couple of months ago.

 

Today, I would like to highlight the Energising Kowloon East project which is progressing well. We expect the area to become a new central business district with a full range of residential, leisure, civic and transport facilities.

 

Kowloon East will eventually provide some 5.4 million square metres, yes square metres, 5.4 million square metres of office space, which is about twice the amount of office space in Central.

 

On Hong Kong Island, we will speed up the process of making Government, Institution or Community sites available for commercial use. These include Murray Road Car Park in Central and Rumsey Street Car Park in Sheung Wan.

 

As part of the longer-term supply of business space, the Government has commenced a study to identify districts with potential for developing urban underground space. The pilot study covers four selected strategic districts, namely Tsim Sha Tsui West, Causeway Bay, Happy Valley and Admiralty/Wanchai.

 

Diversification embraced

Since 2008 Hong Kong has been impacted by the fallout from the global financial crisis. The World Bank's relatively upbeat outlook for the global economy in 2014 is welcome news for Hong Kong. At the same time, we must not take our eye off the ball. 

 

Over the past year, we have worked hard to strengthen Hong Kong's connectivity at B2B (business-to-business) and G2G (government-to-government) levels in the Mainland of China and with our trading partners across Asia.

 

Through different expert advisory bodies, new opportunities have been identified for economic development and diversification.My colleagues and I are grateful to all the business advisory bodies and chambers for your encouragement and advice on a wide range of issues.

 

I sincerely hope that you will support the business initiatives in the Policy Address and that our legislators will work together with us for the early implementation of measures that will strengthen Hong Kong's competitiveness as a free, open and vibrant economy.

 

As much as Hong Kong businesses tend to focus on the present and play it by ear, I believe we should broadly envision the future of our various economic sectors, in say 20 years time.

 

How to maximise advantages

What would be their relationships with the Pearl River Delta and other economies? Where would we stand in the country and in the world? What do we need to do today to position or re-position Hong Kong so that we can maximise our advantages?

 

Let's look at tourism as just one example. I envisage that we would focus more on high-spending visitors, and that we should build more five-star hotels instead of two- or three-star hotels to achieve this goal.

 

To meet the expectations of these high-spending visitors, we would need to provide better services to our visitors, which, in turn requires more training to upgrade the skills of our tourism staff. All this will have to be factored into our land-use planning, education and vocational training.

 

My Policy Address has made some early attempts to address these questions. But these questions are too important to be addressed just by the Government. We need help.

 

In the run-up to the Policy Address, I invited separately the many chambers of commerce to lunch in Government House to listen to your views about the business environment. Thank you for your input. In the new year, I shall continue to stay in close touch with the community of local and overseas businesses.

 

Last but not least, I must also take this opportunity to wish you all a very happy and prosperous Year of the Horse – let's hope that is a galloping success for one and all.

 

Chief Executive CY Leung gave this address at the Joint Business Community Luncheon 2014 held at the Hong Kong Convention & Exhibition Centre.