New HK economy emerging

Chief Executive CY Leung

Innovation has always driven us – our societies, our economies, our aspirations. The difference today, of course, is technology. The marriage of innovation and technology, its extraordinary growth and continuing spread into every aspect of our economic, business and social lives, is the dominant force in today’s global economy.

 

Indeed, a new Hong Kong economy has emerged – that has a large external component, and comprises a wide range of sectors with a much bigger geography. In the country and in the world, we are no longer playing the role that started 30 years ago.

 

We own much more than light manufacturing on the Mainland, and we no longer limit ourselves to the Pearl River Delta region. We now cover the entire Mainland of China, from the southern to northern provinces, and from the coast to the western regions. Hong Kong factories can now be found in other countries as well. We own enterprises ranging from mining, quarrying, fishery, agriculture and dairy farming; petrochemical plants, railways and heavy machinery; financial and professional services, telecommunications and retail sales.

 

A Hong Kong jewellery company has 1,000 stores in Mainland China – a good indication of the size of the market and more importantly the replication capability of Hong Kong businesses on the Mainland. And we no longer compete on costs. We compete on value, and this is where innovation and technology come in. 

 

Rising innovation tide

Innovation and technology has taken centre stage in national development under the 13th Five-Year Plan. And China encourages “mass entrepreneurship and innovation” in consumption, manufacturing processes, industries, investment, funding and many other aspects. Indeed, the strategic policies “Internet Plus” and “Made in China 2025” are underpinned by innovation.

 

There is no doubt that the Mainland of China has achieved spectacular success in promoting mass entrepreneurship. Last year, the number of newly registered companies reached 11,600 a day, which means that, on average, eight new enterprises were born every minute.

 

Zhongguancun, a high-tech home to dozens of universities and enterprises, has emerged as China’s Silicon Valley. The National Mass Entrepreneurship and Innovation Week was held there last October. The event will become an annual one, with exhibitions to be held in major cities throughout the country. In short, the Mainland’s innovation tide is rising. 

 

Ingredients for success

Hong Kong is perfectly positioned to ride on the tide of “re-industrialisation” – to develop high value-added innovation and technology industries. We are blessed with first-class technological infrastructure: our Internet connection speed is among the fastest in the world; our household broadband penetration rate, at 83%, is among Asia’s highest; and our mobile subscription rate, at an impressive 227%, is among the highest in the world.

 

We have other essential ingredients for success: a sound legal system, a robust intellectual property regime, innovative research personnel and, of course, sufficient financial resources. After all, we are the world’s China financial centre, as well as China’s global financial centre.

 

Perhaps even more important, Hong Kong holds the combined advantages of “one country, two systems”. As part of China, we enjoy the privileges that “one country” confers, including ready access to the vast markets of the Mainland. At the same time, Hong Kong is blessed with the benefits that come with a separate economic and social system – benefits that are available to no other city in China.

 

This unique duality has made Hong Kong what I call a super-connector. We bring the rest of China and the rest of the world together in so many ways – trade, finance, logistics, education and arts and culture. And we can do the same in innovation and technology. Indeed, we are well on our way.

 

InnoTech ties

Our innovation and technology ties with the Mainland are deep and long-standing. With the support of the Central Government, in particular the Ministry of Science and Technology, 16 Partner State Key Laboratories were already established in Hong Kong. They serve as a base for high-level research and development, as well as scholarly exchanges.

 

Hong Kong is also home to six Hong Kong Branches of Chinese National Engineering Research Centres. They provide engineering research and consultancy support to industry. My Government will continue to support these research and development activities.

 

Innovation and technology is among the top priorities of my Government. Last November, we set up a dedicated Innovation and Technology Bureau. It is led by Secretary Nick Yang, who is with us today. The bureau spearheads our drive in innovation and technology development.

 

Shortly after November, the Academy of Sciences of Hong Kong was established. It will serve to expand Hong Kong’s co-operative network with scientists, entrepreneurs and institutions from all over the world. I owe my gratitude to Lap-chee, to Professor Tsui, for leading the Academy, and I have no doubt many fruitful collaborations will come along.

 

Our efforts in promoting innovation and technology are beginning to bear fruits. The Hong Kong Science Park held its Career Expo earlier this month, offering about 1,000 openings. It was packed with hundreds and thousands of job seekers – many of them are bright young talents.

 

Meanwhile, local start-ups have embraced the incubation programme of the Hong Kong Cyberport – the number of applications received last year exceeded the quota by several times. Cyberport will double the quota and establish new clusters for areas such as financial technology and e-commerce. Also hugely popular are Cyberport’s Smart-Space – small offices and workstations designed for start-ups. Smart-Space facilities will be increased by 50% to meet rising demand.

 

Burgeoning start-up hub

Space aside, funding is a crucial element in nurturing start-ups.

 

In my Policy Address this year, I announced a number of new initiatives to support innovation and technology. These include a US$250 million Mid-stream Research Programme to promote translational research in our universities, as well as a US$250 million Innovation & Technology Venture Fund. The latter will invest in local technology start-ups together with venture capital funds on a matching basis. We have also earmarked US$60 million for an Innovation & Technology Fund for Better Living. It was designed to support projects that make our daily lives more pleasant, more efficient and safer – something we can all appreciate.

 

We will continue to work closely with all stakeholders, from academia and research to our industrial sectors and the rising start-up ecosystem. 

 

I invite you to join us, in Hong Kong, where we are creating a thriving and rewarding home for innovation and technology.

 

Chief Executive CY Leung gave these remarks at the “Innovation & the New Economy of Hong Kong” discussion session at the Boao Forum for Asia Annual Conference 2016.

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Embrace cultural diversity: CS

Chief Secretary Carrie Lam

The Hong Kong SAR Government is very committed in promoting racial equality in Hong Kong. Almost a decade ago, in my then capacity as the Permanent Secretary for Home Affairs, I was responsible for introducing the Race Discrimination Bill despite some reservations amongst relevant government bureaus and departments on whether equal access to public services would bring about significant resources implications and operational difficulties. The Racial Discrimination Ordinance was finally enacted in 2008, and the Equal Opportunities Commission has since been ensuring its effective implementation.

 

But tackling racial discrimination head-on is one thing; providing equal opportunities to ethnic minorities in a predominantly Chinese society calls for stronger government leadership and greater community efforts. In this term of the Hong Kong SAR Government, we are very much guided by the Chief Executive’s Election Manifesto that, and I quote from his Manifesto, “ethnic minorities are very much a part of the community”, “they share the same sense of affiliation to our society as the rest of Hong Kong people” and “it is incumbent upon us to ensure that they also share in our prosperity”. It should be our common goal to build a society that embraces cultural diversity and racial harmony. These values underpin peace and stability, which are so very important for Hong Kong – a place we call home.

 

While the some 200,000 ethnic minority people living in Hong Kong come from a diverse background, our own poverty situation analysis indicates that the South Asian community is in a more vulnerable situation. With the help of a Special Needs Groups Task Force under the Commission on Poverty, we accorded priority attention to address the needs of ethnic minorities, especially the younger generation, with a view to better integrating them into the local community. In January 2014, the Chief Executive announced in his annual Policy Address a package of enhanced measures involving over $200 million a year to strengthen support for ethnic minorities. These measures cover, amongst others, the areas of education, employment and community outreach. Through the various initiatives, we endeavour not only to meet the needs of the ethnic minorities, especially the younger generation and newcomers, but to unleash their potential and make Hong Kong a truly inclusive society for all. To ensure adequate dissemination of information to the ethnic minority community, a leaflet on those measures was produced in six ethnic minority languages and widely distributed. Indeed, this package of measures was well received by non-governmental organisations which are champions for the welfare of ethnic minorities in Hong Kong. 

 

In terms of education, the Government endeavours to facilitate ethnic minority students’ early adaptation of the local education system and mastery of the Chinese language. We have started implementing the Chinese Language Curriculum Second Language Learning Framework in primary and secondary schools from the 2014/15 school year, with a view to helping non-Chinese speaking students, notably the ethnic minorities, to overcome the difficulties of learning Chinese as a second language. The ultimate aim is to bridge these students to mainstream Chinese language classes. It is encouraging that initial evaluation findings indicate that the school-based measures have produced some positive outcomes – non-Chinese speaking students in general have shown more progress in reading and writing than before. But these same findings also confirm a phenomenon that I am sure we all agree on, and that is, if one starts learning a language at a young age, it is more likely that one can master the language much better. Therefore, the Government will, upon the implementation of free quality kindergarten education policy, provide additional assistance for kindergartens admitting a cluster of non-Chinese speaking students.

 

Besides, to facilitate ethnic minority students’ academic and career pursuit in future, we introduced the Applied Learning Chinese courses at senior secondary levels for non-Chinese speaking students to provide them with an additional channel to acquire an alternative recognised qualification. The Vocational Chinese Language courses for non-Chinese speaking school leavers will also be launched by the second quarter of this year to enhance their capability and confidence in Chinese and help them obtain recognised qualifications.

 

In terms of employment, we strive to ensure that people from different ethnic groups enjoy equal access to job opportunities as others, both in the public and private sectors. As far as government jobs are concerned, the Government had comprehensively reviewed and, where suitable, without undermining the satisfactory performance of duties, adjusted the Chinese language proficiency requirements and recruitment formats of relevant government jobs. I am delighted to see more and more ethnic minority faces in the civil service, particularly for some grades in the disciplinary forces such as the Correctional Services Department. Ethnic minorities are also engaged as Police Community Liaison Assistants to enhance liaison with the ethnic minority community. To date, there are 15 Police Community Liaison Assistant positions in 14 Police Districts. In the private sector, special efforts have been made, for example, in training programmes in construction industry in order to facilitate the ethnic minorities to play a part in our infrastructure projects.

 

On community outreach, we now provide funding grants for a total of six centres and two sub-centres, delivering a series of support services for ethnic minorities across the territory with a view to facilitating their integration into the community. We are also planning for a TV documentary series this year to help the public understand the cultures and customs of ethnic minorities, so as to overcome barriers and to promote inclusiveness. In addition, the Hong Kong Police Force, through the Junior Police Call, helps nourish the ethnic minority young people’s leadership skills and instil positive values through JPC activities and training. The JPC had a total of 3,500 ethnic minority members as at the end of last year, significantly increased from 1,900 in the year 2014. 

 

Of course, we need the support of all sectors of the community to complement the Government’s efforts in helping ethnic minorities fully integrate into society. It is therefore encouraging to see think tanks such as the Zubin Foundation propel studies and researches on the situations of ethnic minorities in Hong Kong and make recommendations for consideration by government bureaus and departments. I would also like to thank Shalini for her dedication in promoting the welfare of ethnic minorities, in particular women and children, and her persistent efforts in advocating corporate social responsibility. In particular, I welcome the launch of the Diversity List, which introduces us with ethnic minority friends who are interested in serving on government boards and committees.

 

Our advisory and statutory bodies serve the important objectives of engaging the public and getting the best possible advice in the early stage of policymaking and in the performance of various statutory or executive functions. In making appointments to our advisory and statutory bodies, we are minded to get the most suitable candidates from a wide cross section of the community. Each appointment is made on the merits of the individual, echoing what Shalini has said. I’m sure she is not expecting me to introduce positive discrimination, but really to draw from this talent list on merit, taking into account the candidate’s ability, expertise, experience, integrity and commitment to public service, and having due regard to the functions and nature of business of the board or committee concerned. We would also ensure providing equal opportunities to all people, including people from different ethnic groups.

 

Over the years, we have already had quite some notable examples of experienced and competent non-Chinese individuals serving in various boards and committees to show the ethnic diversity of such appointments. For example, we have Amirali Nasir, an Indian, and Qamar Minhas, a Pakistani, sitting on the Equal Opportunities Commission; Aruna Gurung, a Nepalese, sitting on the Women’s Commission; and Vivek Mahbubani, an Indian, sitting on the Commission on Youth. And I am pleased that Shalini herself is currently a member of the Transport Advisory Committee and the Business Facilitation Advisory Committee. I’m sorry to say that perhaps all of these names make up only the 0.4% that Shalini has just counted for us. They are all good team players who provide useful advice and assistance to the respective advisory and statutory bodies they serve.

 

With today’s launch of the Diversity List, I am sure more capable ethnic minority individuals will be appointed to our advisory and statutory bodies, thereby enabling us to consider policies and make decisions with the perspectives of ethnic minority community in mind.

 

With all these ongoing measures, together with the unfailing support from all ethnic minority organisations who are represented this afternoon and non-governmental organisations in Hong Kong, I am confident that more and more members from the ethnic groups will be able to unlock their potential and contribute to our city, a city with racial harmony.

   

Chief Secretary Carrie Lam gave these remarks at the launch of the “Race for Opportunity: Diversity List 2016” on March 21.

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Budget measures boost economy

Financial Secretary John Tsang

The 2016-17 Budget is my ninth. They say practice makes perfect. Well, judging from the commentaries in the newspapers and the feedback that I’ve got so far, it seems that more practice is still needed. And I should probably start planning my next Budget really soon. Probably before the passage of this one, which no doubt will suffer the pain of filibustering for some time.

 

Many people complained, well, sort of, that the Budget only features the usual old list of giveaways that they cannot benefit, and that it hardly created any surprises. Some even remarked that the most noticeable change was the colour of the Budget booklet.

 

So I therefore think that I should take this opportunity to share with you the many new surprises, at least to me, in my latest Budget. The new trend, the new ideas, the new challenges, as well as the new opportunities ahead for Hong Kong.

 

The New Normal

Let us first take a look at the global economy, which is displaying what we call the new normal. I believe – and I’m sure many of you will share my sentiment – that the volatile financial markets that we have been experiencing will continue, and the economies around the world will continue to show only unsteady and uneven growth.

 

And that global scene will continue to have an impact on Hong Kong’s economy. The exports as well as visitors’ arrivals have been declining since mid-2015, and the falling trend is likely to be more severe this year.

 

Local consumption and investor sentiment may also suffer. And the pressure could spill over into the job market and the business sector in general. I forecast Gross Domestic Product growth in real terms of 1 to 2% this year, and that’s a drop from last year’s 2.4% and the 3.4% that we enjoyed over the past decade.

 

New Economic Order

While the general outlook is gloomy, Hong Kong’s future needn’t be, amid the new economic order. Since the 2008 financial tsunami, the resulting economic shift eastward, and new breakthroughs in IT development offer us a new direction. And that brings with it new opportunities for both traditional industries as well as emerging industries.

 

No society can afford to ignore this new economic order. Certainly, the Hong Kong Government will be doing our part in nurturing innovation as well as promoting and commercialising the application of R&D results.

 

Our extensive trade network, our open market operating under the rule of law and total transparency, together with the resilience and resourcefulness of our people, provide the necessary conditions to flourish in this new economic order.

 

Nurturing Innovation

Innovation lies at the heart of economic progress in our time. Steve Jobs once said that innovation, and I quote, “is the ability to see change as an opportunity – not a threat”. Unquote. In short, the opportunity in front of us is ours to seize.

 

Application of R&D Results

Indeed, given our ageing population and shrinking workforce, the application of smart production technologies, particularly robotics, is vital for our future. And that is why it is important for us to continue to promote smart production, encourage R&D, and commercialise their outcomes.

 

In my Budget Speech last month, I announced that $8.2 billion would be set aside for a smart production and research centre at Tseung Kwan O Industrial Estate. $500 million would go into an Innovation & Technology Fund for Better Living. And another $2 billion would be earmarked for the Midstream Research Programme for Universities. And that’s in addition to an improved R&D Cash Rebate Scheme, the expansion of the Public Sector Trial Scheme, and the extension of the scheme that funds the technology transfer work of six universities.

 

A $500 million Pilot Technology Voucher Programme will soon be launched. This will promote the use of technology by small and medium-sized companies, to improve their productivity and upgrade their business processes.

 

Fintech

And then there is the application of technology in the financial services sector, or what we call Fintech. Some studies have predicted that global investment in Fintech will surge from US$12 billion in 2014 to more than US$46 billion in 2020. So the potential of the development of Fintech in Hong Kong is enormous.

 

And you will agree that we have what it takes to make Fintech successful here, and the Government is totally committed to this objective. A dedicated team will be set up, under Invest Hong Kong, to help start-ups, investors and R&D institutions establish a presence here in Hong Kong. The Hong Kong Monetary Authority, the Securities & Futures Commission as well as the Office of the Commissioner of Insurance will be establishing dedicated platforms respectively to enhance communication between regulators and the Fintech community.

 

Cyberport will also roll out measures to support Fintech start-ups, including setting aside a dedicated space of 3,000 square metres, supporting 150 start-ups over the next five years and arranging 300 university students to join Fintech training camps at overseas universities.

 

Start-ups

And there is the new wave of entrepreneurship, the new companies, the start-ups. Hong Kong has been one of the fastest growing start-up hubs in the world. We now have more than 1,600 of them in our city, which is up 50% since 2014, and we shall continue to make Hong Kong an attractive centre for these start-ups. Among other things, we are setting up a $2 billion Innovation and Technology Venture Fund, through which we shall be investing in local technology start-ups together with private venture-capital funds.

 

Cyberport is putting $200 million together in its start-ups as well, while the Science Park will continue to support start-ups through the Corporate Venture Fund and the incubation programmes. Science Park is also expanding to meet the increasing demand for office space for start-ups and other technology companies. The $4.4 billion expansion project will provide additional floor space of some 70,000 square metres.

 

Creative Industries

To sustain Hong Kong’s competitiveness and provide more diversified opportunities for our new generation of entrepreneurs, we have been promoting the development of creative industries as a new driver of economic growth.

 

In my Budget last year, I injected $400 million into the CreateSmart Initiative, for organising projects to support creative industries, including design, fashion as well as film production and digital entertainment.

 

For fashion industry, the resources will be used to follow up on the proposals made by the Advisory Group on Implementation of Fashion Initiatives, including, among others, the support for local designers staging shows in key fashion capitals, such as Paris and New York.

 

As for the film industry, I announced in this year’s Budget that we shall be injecting an additional $20 million into the Film Development Fund to subsidise the distribution and publicity of locally produced Cantonese films. The Guangdong Province, as you know, has a population of over 100 million people with box office receipts exceeding RMB4 billion in 2014, offering an extensive market for our locally produced Cantonese films for the Cantonese-speaking population in Guangdong.

 

Finding New Markets

Emerging markets is the other big driver of the new economic order. And we need to find new markets and to expand our trading ties, if we are to keep the wheels of Hong Kong turning.

 

Belt & Road

In particular, emerging markets along the Belt and Road are likely to provide new impetus for our longer-term development. This grand and visionary initiative will engender stronger economic and trade activities in the entire region, as well as soaring investment in infrastructure, such as railways, highways, ports and power plants. With a deep pool of talented professionals in the fields of engineering management, architecture, surveying, as well as in financial, legal and accounting services, Hong Kong can contribute to, and benefit from, the demand of professional expertise and services in consultancies, construction as well as management and operation of infrastructure projects.

 

To deepen our understanding of this promising market, the Government and the TDC (Hong Kong Trade Development Council) will organise a Belt and Road Summit in May this year. I shall also lead a Belt-Road business mission in the fall to Central Asia, following last year’s Belt and Road trip to Hungary, Poland and Germany. And I invite our chambers and businesses to join me to gain first-hand knowledge of the new markets and to explore business opportunities that these new markets can offer.

 

The Monetary Authority will establish an office to offer a premier financial services platform involving all the stakeholders to facilitate the funding and servicing of Belt and Road projects. And the Hong Kong Government’s third sukuk will be issued, at an appropriate time, to meet the financing needs of the Islamic markets. There are, to be sure, a good many of those along the Belt-Road.

 

Following the announcement on the commencement of operation of the Asian Infrastructure Investment Bank in January this year, we shall continue our discussions with the relevant authorities on Hong Kong’s participation in the Bank. We shall also seek to employ our strengths to service the Bank, particularly in capital-market financing, in asset management as well as dispute resolution.

 

Expanding our commercial and trade network is also a priority for us, and, to that end, we shall continue to pursue new trade and investment agreements with other economies. Negotiations towards a free trade agreement between Hong Kong and the ASEAN (Association of Southeast Asian Nations) bloc will be concluded this year. The resulting liberalisation measures will help expand prospects of Hong Kong businesses in ASEAN, which is our second largest trading partner with a population of over 600 million people, while enabling Hong Kong-based services opportunities among Belt-Road economies.

 

Logistics and commerce will continue to be the backbone of our economy. In line with international practice, we shall be implementing a single window for the lodging of trade documents and submissions to further facilitate trade in goods. The single window will connect with other governments’ systems as well as trade information platforms run by the private sector.

 

And the financial services sector is another key strength of Hong Kong. Together with the Mainland authorities, we shall continue to explore ways to open up new channels for the two-way, cross-boundary flow of renminbi funds, in order to tap the massive opportunities arising from the internationalisation of the renminbi.

 

The asset-management business in Hong Kong is burgeoning, too. By the end of 2014, the combined fund-management business amounted to $18 trillion, a year-on-year growth of 10.5%.

 

We want more multinational and Mainland enterprises to establish their corporate treasury centres here in Hong Kong. And to that end, we have introduced new legislation to reduce the profits tax of qualifying corporate treasury centres by 50 per cent. We shall also introduce an open-ended fund company structure to make Hong Kong that much more attractive to the corporate world.

 

On to more taxing matters: the scope of tax deduction for capital expenditure incurred in the purchase of intellectual property rights will be expanded, and this will assist in our evolution as a knowledge-based economy.

 

And the silver market – and I’m not talking commodities – continues to grow, continues to create opportunities for business and finance. And with that in mind, we shall issue a first-of-its-kind Silver Bond this year and next, targeting Hong Kong residents 65 and over.

 

Concluding Remarks

So, while these spring plans take root, we shall not lose sight of the winter months approaching.

 

In putting together the 2016-17 Budget, I reminded myself constantly that the contents should be so packaged to lighten the burden of the community, so shaped to fulfil a future of wide-ranging opportunities, and so crafted to realise the promises of an inclusive society.

 

I have in the Budget allocated nearly $39 billion in tax and short-term relief measures. These short-term measures, together with other spending initiatives in the Budget, will help stimulate the economy, support local business, in particular our small and medium-size companies, as well as safeguard employment, and are expected to bring about a stimulus effect of 1.1% of GDP growth.

 

As I have mentioned before, as the Government, we are not engaged in the business of building utopia. But we are definitely doing our utmost to maintain the free and open market of Hong Kong, which provides a dynamic platform for our companies, local and overseas, as well as for the many multinationals to compete on a level, business-friendly playing field.

 

And for Hong Kong to continue to flourish and to take advantage of the new economic order, we must maintain our home as the haven of progress, promise and harmony, a community shaped by social stability, decency as well as rationality.

 

And this can only be realised through dialogue, co-operation and understanding. And this can only be accomplished if we were to hold on to openness, diversity, freedom as well as the rule of law, the core values that are dear to our heart.

 

Financial Secretary John Tsang gave these remarks at the Joint Business Community Budget Speech Luncheon on March 16.

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Creative industries supported: FS

Financial Secretary John Tsang

Aside from this 12th edition of Entertainment Expo, we are marking also the 20th anniversary of the Hong Kong International Film & TV Market – better known as FILMART.

 

We are saluting, as well, the Hong Kong International Film Festival, which celebrates 40 years of bringing a world of fabulous films to Hong Kong. Over those four decades the festival has screened more than 7,500 movies. That includes 248 films this year. With a bottom line like that, I would say the Hong Kong International Film Festival is in the happiness business – and doing a bang-up job of it.

 

They are not alone, of course. The entertainment industry is the crown jewel of Hong Kong’s cultural and creative industries.

 

In 2013 the entertainment sector accounted for more than 10% of the value-added of our cultural and creative industries. And entertainment-related goods accounted for more than 70% of Hong Kong’s cultural and creative goods’ exports.

 

The entertainment industry also helps to shape Hong Kong’s image as a creative and cosmopolitan city. Despite Hong Kong’s modest size, our local film business has maintained a production output of some 50 movies a year over the past decade.

 

A quick look at the Chinese-language films released over the Lunar New Year holiday last month reveals many familiar names behind our entertainment industry.

 

They include, for example, Stephen Chow. I am told his new movie The Mermaid – a romantic fish tale, so to speak – has become the highest-grossing film of all time in the Mainland, and it has only been showing for five weeks. Stephen, of course, is an internationally celebrated comedian, actor, film director and producer, and no doubt, an unmistakable icon of Hong Kong’s local culture.

 

In fact, for many years now, some of the Mainland’s biggest box-office hits have been produced jointly by Mainland filmmakers as well as Hong Kong filmmakers together.

 

That successful partnership is testament to how CEPA, the closer economic partnership agreement, between Hong Kong and the Mainland works to everyone’s benefit.

 

Hong Kong itself often plays the role of the star turn. We continue to be a favourite location for overseas moviemakers, especially those from Hollywood. That’s thanks, of course, to the look and feel of Hong Kong and its myriad East-West location possibilities.

 

It’s thanks, as well, to our post-production professionals, from special-effects creators to digital animators.

 

We are also a centre for the business of buying and selling entertainment products. FILMART is, in fact, Asia’s largest marketplace for the entertainment industry. Last year, FILMART attracted some 800 exhibitors from 34 countries and regions, drawing more than 7,000 visitors from over 50 countries and regions. That is a potent and productive global mix of producers, investors, distributors, as well as creative and business professionals. And they are here in Hong Kong, year after year, to network, to do business and to take in the latest offerings from around the world.

 

To ensure that Hong Kong remains a key player on the regional and global entertainment stage, the Government will continue to support the Entertainment Expo.

 

In my Budget last year, I injected $400 million into the CreateSmart Initiative, to support creative industry projects, including those for TV, music and digital entertainment.

 

And in this year’s Budget, I am injecting an additional $20 million into the Film Development Fund to help subsidise the costs of distributing and publicising locally produced Cantonese films in the Mainland, focusing primarily on the 100 million people living in the Cantonese speaking Guangdong Province.

 

Financial Secretary John Tsang gave these remarks at the Entertainment Expo Hong Kong 2016 opening ceremony.

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More support for working women

Chief Executive CY Leung

Starting from April last year, all policy bureaus and departments are required to apply gender mainstreaming when formulating major government policies and initiatives.

 

We also aim to progressively increase the ratio for appointing women to government advisory and statutory bodies from 30% to 35%.

 

We are seeking to better support working women by enhancing child care centre services, and promoting family-friendly employment practices. The Social Welfare Department is proactively identifying suitable premises for building new child care centres.

 

We will also progressively increase the provision of extended hours service at child care centres and kindergarten-cum-child care centres.

 

Last February the Legislative Council passed the new law on granting three days’ paid paternity leave to employees, fulfilling the pledge in my election manifesto.

 

Chief Executive CY Leung gave these remarks at the Women’s Commission International Women’s Day 2016 reception.

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Budget embraces new economic order

Financial Secretary John Tsang

Sir Thomas More in his classic work Utopia offered us an “ideal” society set loose on a fantasy island. The book and the concept that he so famously coined is enjoying the global spotlight this year – the 500th anniversary of its publication.

 

I remember fantasising a great deal about that perfect world in the planning school, but when I got to the school of public administration, we were focusing more on the art of the possible, the art of responsible governing and the art of prudential public finance.

 

The professors taught us that politicians can mesmerise the populace with visions of a utopian society, but governments, generally, are not engaged in the business of building utopia. And after three decades of practicing public administration I have come to the realisation that even though we need to be practical and keep our feet on the ground, we should always maintain a touch of idealism in the formulation of public policies and delivery of services to the people.

 

In putting together the 2016-17 Budget I reminded myself constantly that the contents should be so packaged to lighten the burden of the community, so shaped to fulfill a future of wide-ranging opportunities, and so crafted to realise the promises of an inclusive society.

 

New economic order
Two dominant forces are now transforming the global economic landscape: the overwhelming application of technology and the influential role of the developing economies in Asia. Together they are responsible for the emergence of a new economic order.

 

The Budget for 2016-17 was prepared to help the Hong Kong community embrace some of these fast-evolving realities. To help businesses identify the opportunities that are available, and to help our people capture the rewards that these opportunities can offer.

 

We certainly have well in place the necessary foundation to reap the benefits that these opportunities can offer – the very same foundation that has enabled Hong Kong to rise as a global trading and commercial economy and one of the world’s major financial capitals.

 

We are a magnet for companies from all over the world. They are here in Hong Kong to explore the markets in the Mainland and throughout Asia. They are here because they have confidence in Hong Kong’s rule of law, our independent judiciary, and our robust regime for intellectual property protection.

 

They have faith in our consistent and persistent advocacy of economic freedom. They count on the investments that our financial services sector can render. They take advantage of the expertise that our professional services can provide.

 

But the new economic order demands much more than that. It demands that we turn the creative and the innovative into practical products and services that are commercially attractive. It demands that we transform these technological concepts into practical realities that would improve the way that we live in the future.

 

The Budget this year expands on that very innovation and technology focus. And it does so within the actual economic and social context of Hong Kong. It targets robotics, healthy aging and smart city as areas that our community, with its rapidly aging population and shrinking work force, must embrace – and sooner rather than later.
 

To that end, the Science Park is planning a $8.2 billion smart production centre at the Tseung Kwan O Industrial Estate with completion expected in five years.

 

We are earmarking $500 million for an Innovation & Technology Fund for Better Living.

 

We are allocating $2 billion for a Midstream Research Programme for our universities.

 

We are setting aside $2 billion for an Innovation & Technology Venture Fund to invest in local technology start-ups on a matching basis with private venture capital.

 

We are investing $200 million in our start-ups in Cyberport as we emerge as a global hub for these new ventures.

 

We are expanding Science Park to provide by the year 2020 an additional 70,000 square meters of floor space for more technology companies.

 

We are also offering measures to help promote Hong Kong as a hub for Fintech.

 

Linking Asian economies
Developing economies in Asia are also transforming business, powering, as they do, the new economic order. To take advantage of their rise, Hong Kong must expand our ties, explore new markets and seize the opportunities that they offer.

 

The Belt & Road initiatives spearheaded by President Xi surely offer a wealth of opportunities for us. Last September I led a business mission to Hungary, Poland and Germany. This year I shall be leading another delegation of business leaders to Central Asia to explore further market opportunities for Hong Kong.

 

I have asked the Monetary Authority to establish an office to facilitate the financing of infrastructure projects in these developing economies.

 

I have asked them to continue expanding our successful program of sukuk issuances to cater for the needs of shariah-compliant investors.

 

I have asked my colleagues to complete before the end of this year the negotiations for the free trade agreement with the ASEAN bloc, our second-largest trading partner.

 

Beyond ASEAN we shall continue to expand our commercial and trading networks to pursue trade and investment agreements where we can help create more opportunities for Hong Kong.

 

Nothing creates opportunity, offers hope and promises, more than education. That is why I have allocated $75 billion this year to education – our single largest recurrent outlay. Our education expenditure this year is 70% higher than it was a decade ago, while the student population in primary and secondary schools for the corresponding period dropped by 20 to 30%.

 

Benefiting the community
Total government expenditure for 2016-17 comes in at a hefty $487 billion, 14% over that of last year and 112% higher than it was 10 years ago.

 

It is the Budget’s standing measures – for education, to be sure, but also for social welfare and healthcare – that benefit the broadest reaches of the Hong Kong community. Social welfare, at $66 billion this fiscal year, and healthcare, at $57 billion, are up 106% and 90%, respectively over expenditures 10 years ago.

 

Welfare offerings include the establishment of a $2.9 billion annual outlay for the Low-income Working Family Allowance Scheme.

 

Healthcare measures include the setting aside of $200 billion to help finance the 10-year hospital development programme. That, of course, is in response to our aging population, and the necessity of planning for that reality.

 

The Budget provides also substantive short-term assistance – $39 billion in tax and relief measures – to help Hong Kong businesses, in particular our small and medium-size companies to bridge the difficult year ahead and to lend a helping hand to our tourism, catering, as well as retail sectors.

 

There are more initiatives in the Budget, but in the past two weeks I have received a great deal more responses about the increasing tension and sharpening polarisation in our society. Perhaps that is to be expected. Hong Kong is a community of varied interests, concerns and ambitions. And the people of Hong Kong have never been shy about speaking their minds on the harmonious and caring society that we so cherish and the well-being and civility that we so aspire.

 

We have encountered violent confrontations in the recent past and I hope everyone can pause for a moment and think about the Hong Kong that we are building for our future generations. We need to enhance communication and we need to reaffirm our determination to resolve the conflicts, so we can revert to the values that we share, return to our usual decency and rationality, and reignite our love for this home of ours. I do not believe there is anything that we cannot resolve. Anything that we cannot accomplish. All we have to do is to put our minds to it. Love will see us through.

 

This is Financial Secretary John Tsang’s Letter to Hong Kong broadcast on Radio Television Hong Kong on March 6.

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New maritime body to promote HK

Secretary for Transport & Housing Prof Anthony Cheung

Upon its inception in 1990, the Hong Kong Shipping Register had a mere 765 ships with a total gross tonnage of six million. According to a UN report in October 2015, Hong Kong accounted for 8.6% of the world’s total tonnage. Registries with good track record usually host younger fleets and keep a tight rein to ensure compliance with international regulations.

 

The Hong Kong Shipping Register currently ranks first in Asia and fourth in the world. It has the youngest fleet among the top 35 flags. Not only are we strong in numbers, Hong Kong-registered ships are also among the best performers in the world. The detention rate of ships flying the Hong Kong flag is only slightly above 1%, compared with the world average of 3.5%. We are delighted and indeed proud that the Hong Kong Flag is a reputable flag of choice and quality.

 

Maritime partners

The success of our shipping register owes a large part to our excellent partners in the maritime services sector. There are over 700 shipping-related companies operating in Hong Kong, providing a great variety of quality maritime services ranging from ship management, ship broking and chartering to maritime law and arbitration. We are also the leading international ship finance centre in Asia, with eight out of the world’s top 10 bookrunners setting up offices here.

 

The Hong Kong Port is one of the busiest container ports in the world. It provides frequent and comprehensive liner shipping services with about 340 container liner services per week connecting to around 470 destinations worldwide.

 

Our shipping industry has indeed achieved a lot in the past decades and we should perhaps all give ourselves a pat on the back for that. However, challenges are always just around the corner, one of which is the intense competition we are facing from emerging ports in the Asia-Pacific region.

 

New maritime body

The Chief Executive announced in this year’s Policy Address that the Government will merge the existing Maritime Industry Council and the Port Development Council to form a new Hong Kong Maritime & Port Board. The Board – to be chaired by me as Secretary for Transport & Housing – will be a high-level steering body to assist the Government in formulating strategies and policies to drive the growth of high value-added and professional maritime services in Hong Kong, foster talent development, and promote Hong Kong as an international maritime hub.

 

Three functional committees will be formed under the Board, respectively focusing on manpower development, promotion and external relations, and industry development. To strengthen industry participation, these committees will all be chaired by an industry person. The new Board will join hands with the Hong Kong Trade Development Council and Invest Hong Kong to expand our efforts in raising Hong Kong’s profile in the international maritime landscape.

 

The Hong Kong Maritime & Port Board will be serviced by the Transport & Housing Bureau. To strengthen our support to the Board, the Board Secretariat will be led by a Deputy Secretary carrying concurrently the title of Commissioner of Maritime and Port Development.

 

The Hong Kong Maritime & Port Board will be officially established in April 2016. With its establishment as a platform for the Government to work with the industry to devise strategies and oversee their implementation, I am confident that Hong Kong’s maritime and port development will enter a new era and continue to go from strength to strength.

 

Secretary for Transport & Prof Anthony Cheung gave these remarks at the “Hong Kong Shipping Register Crossing 100 Million Gross Tonnage” cocktail reception.

via Moroccan Trader New maritime body to promote HK

Pension plan must strike balance

Chief Secretary Carrie Lam

It has been slightly over two months since the Commission on Poverty which I chair issued the public consultation document Retirement Protection, Forging Ahead. The reason why the Commission on Poverty has prepared a weighty document and allowed for a period of six months to listen to public views is to stimulate and cultivate an informed debate on a matter which is so very important to Hong Kong.

 

Unfortunately, we have only limited success so far. At district public forums, the usual suspects representing radical activists were just yelling and throwing things at us; at forums organised by trade unions, workers’ representatives criticised us of adopting delaying tactics in fulfilling the Chief Executive’s pledge in his Election Manifesto to progressively reduce the proportion of accrued benefits attributed to employers’ contribution in the MPF account that can be applied by the employer to offset long service or severance payments – the so-called “offsetting” arrangement; at forums organised by usually pro-establishment business groups, we were accused of victimising SMEs by advocating abolition of the offsetting arrangement; and at forums organised by social workers, we were described as heartless bureaucrats who turned a blind eye to the plight of Hong Kong’s poor elderly.

 

So, by taking on this major challenge, which incidentally is the first one since the establishment of the Hong Kong Special Administrative Region, to engage the community on retirement protection, we seem to have pleased nobody.

 

Finding a balance

Our mission and task has always been to find a pragmatic balance amongst competing interests that will serve the greatest common good. On retirement protection, that common good is to ensure that our growing number of elderly people could live with adequate financial means, receive quality medical and care services and enjoy family support through a comprehensive retirement protection system. That common good is to confront our demographic and fiscal challenges while maintaining Hong Kong’s economic competitiveness. That common good is not to forsake Hong Kong’s long-term stability and prosperity for political expediency or populism. This is what I would regard as the big picture that any discussion on retirement protection must not lose sight of. And the community as a whole must not lose sight of this big picture.

 

Apart from urging Hong Kong people to discuss retirement protection within that big picture, I would like to reiterate the need to look at retirement protection comprehensively. Some people have expressed disappointment that the consultation document is issued by the Commission on Poverty as if retirement protection is a mere poverty alleviation matter. The fact is since its reinstatement at the beginning of this term of the Hong Kong SAR Government, as Chairman, I have stretched the Commission’s ambit to look beyond mere poverty.

 

The Commission is concerned, rightly so, about upward mobility of young people; it cares about the learning of Chinese by ethnic minority students; and through the Community Care Fund, we “trespass” into areas of better co-ordination for SEN students in mainstream schools and will shortly put in place pilots to provide better support to dementia patients through collaboration between the medical and social welfare sectors. So against that wider ambit, and with the benefit of the Chief Secretary for Administration as Chairman, four Bureau Secretaries as Members and non-official Members drawn from a wide spectrum of backgrounds and interests, I cannot think of a better body to undertake a major consultation on this important subject of retirement protection.

 

Multi-pillar approach

As anyone who has read the public consultation document would realise, instead of just focusing on one area of helping elderly in need, the Commission is inviting the public to address comprehensively the multi-pillar retirement protection system in Hong Kong, set against the World Bank model.

 

They include the zero pillar of publicly funded social security benefits now covering 73% of the total elderly population – these include the Comprehensive Social Security Assistance, that is CSSA, the Old Age Living Allowance (OALA), the Old Age Allowance and the Disability Allowance; the second pillar comprising a mandatory, privately managed and fully funded contribution scheme, now provided mainly through the MPF system covering some 2.8 million working population; the third pillar of voluntary contributions to the MPF schemes, retirement savings-related insurance; and the fourth pillar of a wide range of heavily subsidised public services including housing, healthcare, elderly care, public transportation to address the daily needs of the elderly, family support and personal assets. These pillars are complementary to one another in serving the needs of different groups of elderly, not just confined to those who are poor.

 

This multi-pillar approach is built upon the key principle that caring for our elderly is a responsibility to be shared by individuals, families and the community. But each pillar has room for improvement. Based on detailed research and backed up by facts and figures, we acknowledge the inadequacies in each pillar and have raised some ideas for discussion.

 

Social security

On the publicly-funded social security, we point out that despite the introduction of OALA at the beginning of this term of Government, which has addressed the usual complaints about CSSA in terms of low asset limits and household rules, our poverty statistics and surveys suggest that some elders are still in need of further financial assistance. We therefore provide a simulated option to provide a higher level of monthly allowance for those with financial needs.

 

On MPF, which I understand is quite well-represented in the audience, we concur with the prevailing view that fees should continue to be reduced and the offsetting arrangement gives rise to benefits leakage which weakens MPF’s retirement protection function.

 

We appeal to all to make use of this opportunity to address the offsetting issue and suggest, quite explicitly, that the role of the Government in helping to find a solution should be examined. In the long run, the feasibility of raising the contribution rates and achieving full portability should be explored.

 

On voluntary savings, while voluntary contributions to MPF schemes are increasing, we see the need to further encourage voluntary savings including the use of tax incentives and suggest that more financial products for retirement investment such as annuity plans and retail bonds of longer maturity periods should be developed.

 

On public services for the elderly, we demonstrate that expenditure on public medical services and community and residential care is bound to surge with the ageing of the population and financial sustainability will be a major challenge. We ask that measures be devised to promote family support of elders and to help the asset-rich income-poor elderly increase their retirement income.

 

Financial sustainability

The title of today’s forum sums up succinctly one of the core issues to be dealt with in this consultation: whether we should adopt universal pensions or targeted pensions in enhancing financial security of our elderly.

 

To facilitate an informed and rational discussion, we have put forward two approaches, termed “regardless of rich or poor” and “those with financial needs” respectively, in our consultation document. We have developed two simulated options to illustrate how much each approach will likely cost the community in the next 50 years as well as the tax increases or new taxes needed to pay for the expenses.

 

If we provide all elderly aged 65 or over a monthly pension of $3,230 this will cost an additional $22.6 billion in the first year. That will rise sharply over time and reach $56.3 billion by 2064 as the number of elderly persons increases rapidly in particular over the next 20 years. The total additional expenditure in the 50-year projection period would amount to $2,395 billion, almost 10 times that of the “those with financial needs” option.

 

Just to give you a feel of the magnitude of an additional $22.6 billion in annually recurrent expenditure, it will eat up all the “new” money available for allocation to new or improved public services across the entire Government under a 2% growth scenario for three years. It is equivalent to 90% of the annual expenditure of about $25.8 billion now spent on healthcare services for Hong Kong’s elderly. It is three times more than the current annual expenditure of about $6.8 billion on welfare services for the elderly.

 

So our main concern is one of financial sustainability. The key challenge is that in a rapidly ageing society, fewer people at work will have to support a growing number of retirees. We have a small tax-paying population – only 46% of our working population and 9% of registered corporations are paying taxes. The hefty expenditure is going to push up taxes too much – that will overturn Hong Kong’s simple and low tax regime which is the cornerstone of our economic development. This will hurt our competitiveness. It will also hasten our plunge into structural deficit, predicted to occur around 2029-30 in a report released by a working group under the Financial Secretary in 2014.

 

Some advocates of the “regardless of rich or poor” approach stress that a universal pension is every elderly’s right: it will enable them to live with dignity in retirement. But philosophically, we have to ask ourselves whether giving all elderly including those with no financial needs a pension is going to make our society more equitable or the rich-poor gap less glaring? With limited resources, isn’t it not more compassionate to help those most in need both in terms of financial support and medical and nursing care services?

 

Universal issue

Hong Kong is not the only place trying to find a better solution to address our elderly’s retirement needs. In making an important choice for Hong Kong, we must be wary of those pension policies which have proven to be problematic in other places. Experience in other developed economies shows that a pay-as-you-go universal pension system can become a bigger burden than anyone expects. Rising life expectancy has increased the number of recipients and duration of payment, while political pressure would force up the handout faster than economic growth or inflation. Many overseas places have introduced reform measures to restore the solvency of their pension schemes.

 

But pension reforms can be highly controversial. The extension of retirement age from 60 to 62 was one of the reasons leading to the series of general strikes and demonstrations in France in 2010. In 2014, Japan made an unusual move by increasing for the first time in 17 years the sales tax rate to fund its pension scheme. Its ruling government decided last year to put off the second-stage increase owing to adverse local reactions, amongst others.

 

The Government’s reservations on the “regardless or rich or poor” principle and a universal pension scheme are clearly stated in the public consultation document. I do not wish to repeat them here, except to reiterate our sincerity to provide further help to those elderly in need, and the $80,000 asset limit included in our simulated option for the “those with financial needs” principle is no more than a reference. Specific views on eligibility and payment levels are welcomed.

  

Chief Secretary Carrie Lam gave these remarks at the Business & Professionals Federation of Hong Kong “Universal Pensions or Targeted Pensions – An Important Choice for Hong Kong” forum.

via Moroccan Trader Pension plan must strike balance