HK to take on challenges

Chief Executive Carrie Lam

The economy is doing well so far this year. In the first half of this year we have recorded a 4% real growth year-on-year, which is visibly higher than the 2% in 2016, and it is expected to exceed 3.5% on a whole-year basis. I always like what Paul Chan, my Financial Secretary said, when he referred to this “likely to exceed 3.5%”, he has this Chinese phrase “已無懸念” –  in other words, there is no doubt that it will exceed 3.5%; just how much excess we’ll have to await Paul to tell you when his next Budget comes. This exceeding 3.5% real growth in a year is the fastest growth since the year 2011 and higher than the average trend growth rate of 3.3% since 1997. So, that’s a very good piece of news.


Second figure is inflation. Business people are always very worried about inflation. Inflation has remained tame so far in the first nine months averaging 1.7% compared to 2.3% in 2016. Exports of goods and services are doing extremely well, picked up significantly, increasing by 6.5% year-on-year in the first half of this year compared to a modest 0.9% in 2016, with exports to Asian markets providing the main growth impetus. So you understand why this Government is putting a lot of attention on the ASEAN region because Asia is going to be another strong impetus for growth in the coming years.


Now, domestically, retail sales volume, after falling consecutively since August 2015, resumed growth in March this year and picked up further more recently with a year-on-year growth of 3.9% for the months of July and August. I’m sure you will notice some of the positive sentiments amongst consumers, both local people as well as visitors. Coming to visitors, tourist arrivals, after falling for two consecutive years also rebounded, registering an increase of 2.2% for the first nine months from both Mainland and non-Mainland markets. Worthy to note was an even higher growth in overnight arrivals of 4.5%.


More companies

The number of overseas and Mainland companies in Hong Kong has also risen. I notice that there are a lot of international chambers in the audience. The latest survey by the Census & Statistics Department together with Invest Hong Kong indicated we now have 8,225 Mainland and overseas companies which have set up in Hong Kong, representing an increase of 3% year-on-year. I’m very gratified to know in particular that those overseas and Mainland companies using Hong Kong as their regional headquarters have risen to 1,413, reversing the declining situation and registering an increase of 2.5% over 2016. And for those of you who are anxious to know which country tops the league in terms of total number of overseas companies, the winner is here, Ambassador (Kuninori) Matsuda of Japan.


Now, number of startups. This place is very welcoming for small enterprises, for people with strong entrepreneurial spirit, so number of startups now stood at 1,926, involving both local and foreign founders. It has surged 24% year-on-year, and has almost doubled the situation in 2014.


So, those are the very promising figures that I want to share with you, but not without worries. Let me quote another set of figures, which are concerns to many of us. Private residential prices continued to surge with a year-on-year increase of 18% as at August 2017. Office rental, better, grew by a lesser extent at 5% per cent for all offices and 6% for Grade A offices. But I’m sure you remember this land sale, with the Murray Road Car Park site sold at $23.28 billion, representing an overall AV of over half a million Hong Kong dollars per square metre. So the supply of Grade A offices remains very tight.


Now, coming to tightness, the tight labour market tightened slightly further with unemployment rate at 3.1%, signifying full employment. Indeed, private sector vacancies hovered around 70,000 and acute shortages were seen in residential care services, F&B services and accommodation services. Anecdotal evidence suggests that the acute shortage in construction sector has somewhat subsided, which may have something to do with LegCo filibustering. If you don’t believe me, you ask Jeffrey Lam. In the 2016-17 LegCo year, that is before the summer recess, public works projects at a total value of $71 billion put on the agenda of the Finance Committee could not be approved before members went on their summer holiday, so it is a delay of at least six to 12 months.


Thanks to a modest labour force growth of 0.5% year-on-year, latest projections project a plateau in labour force in 2019 to 2022 as compared to labour force peaking in 2018 based on previous projections a few years ago. When I was the Chairman of the Steering Committee on Population Policy, the then projection was by next year Hong Kong’s labour force would peak and thereafter it would decline. Now it’s a slightly better situation.


Opportunities, challenges

Now, these two sets of “promising” and “worrying” figures, when put together, echo my key message to the people of Hong Kong contained in my maiden Policy Address. In the coming few years, Hong Kong is entering a period when opportunities and challenges co-exist. We must leverage our unique advantages under “one country, two systems” and inject new and continuous impetus to Hong Kong’s economy through a new proactive style of governance, strong commitment embodied in the new roles of the Government and a new fiscal philosophy to manage our finances wisely. Only by so doing and with the strong support from the Central Authorities will Hong Kong be able to seize the many opportunities available to us under the Belt & Road Initiative and the Guangdong-Hong Kong-Macao Bay Area development.


Let me say at the outset that a proactive government approach to economic development does not mean we are deviating from the free market principle. We will continue to respect the rules governing the economy and market operations and promote free trade. But doing all we could to raise Hong Kong’s competitiveness is a duty of my Government.


My Policy Address has contained a whole range of initiatives to boost our economic vibrancy through efforts in various areas. These areas include providing land, nurturing and recruiting talents, strengthening government-to-government business, giving clear policy directions, providing investment, enhancing business-friendly environment and offering tax concessions where justified. I do not wish to go into details of each of these areas, but will only wish to highlight three measures to illustrate that we are serious and determined and will not shy away from making difficult decisions.


First, right here we are in the Hong Kong Convention & Exhibition Centre (HKCEC). We all know that the convention and exhibition industry is crucial to Hong Kong as an international centre for trade and commerce. By attracting world-class and the most prestigious international conventions and exhibitions to Hong Kong, we have reinforced our position as an international hub. Many large-scale fairs and shows now organised in Hong Kong are the largest in Asia or even in the world, but the shortage of space is a pressing concern. In order to maintain our position in the convention and exhibition industry, we could no longer delay a decision on finding extra venues. We have concluded, and I have announced in my Policy Address that the new facilities should be built in the proximity of the existing Hong Kong Convention & Exhibition Centre, right here in Wan Chai. The new venue must be connected to and integrated with the existing HKCEC in order to maximise the benefits. We have therefore decided that we will demolish and redevelop the three government buildings opposite the HKCEC into a new wing that can be connected to and integrated with the existing HKCEC. We will take the opportunity to relocate the Harbour Road Fire Station and improve the traffic arrangements, particularly the pedestrian walkway network in the area. When completed, Wan Chai North will become a convention and exhibition hub not only for Hong Kong but also for Asia. Such a major project is clearly not without difficulties. Several new government office buildings and a new court complex will have to be built to decant the existing tenants. It will also take time. But unless we make up our mind and press ahead, we will not succeed and Hong Kong will lose the many opportunities in front of us.


My second example is our determination for Hong Kong to catch up in the innovation and technology race and to become an international innovation and technology hub. My Government will concurrently step up efforts in eight areas, namely dedicating more resources for R&D, nurturing a pool of talents, providing and promoting venture capital, building infrastructure, reviewing obsolete legislation, opening up data, updating government procurement and enhancing popular science education. I recognise that the window for us to catch up is small. But opportunities are plenty, especially with the Guangdong-Hong Kong-Macao Bay Area and Hong Kong and Shenzhen joining hands to create an international I&T centre. We cannot afford to take small steps. We have set a goal to double the GDP expenditure on R&D from the current 0.73% of GDP to 1.5% within the current term of Government. I’m holding myself accountable for progress made by personally chairing an internal Steering Committee on Innovation & Technology to take forward these measures identified and steer collaboration amongst bureaus and departments.


My third example, which naturally should be music to your ears, is our plans to reduce taxes. In order to further enhance the competitiveness of Hong Kong, we have demonstrated determination in our taxation policies. The Financial Services & the Treasury Bureau has made proposals on the two tax measures put forward in my Election Manifesto, with a rate of tax reduction even deeper than what I had proposed, and will strive to implement them within 2018, provided there is no LegCo filibustering. On the two-tiered profits tax system, the profits tax rate for the first $2 million of profits of enterprises will be lowered to 8.25%. That is half of the standard profits tax rate instead of 10% as proposed in my manifesto. Profits above that amount will continue to be subject to the standard tax rate of 16.5%. To ensure that the tax benefits will target SMEs, we will introduce restrictions such that each group of companies may only nominate one enterprise to benefit from a lower tax rate. To encourage research on R&D investment by enterprises, we propose that the first $2 million eligible R&D expenditure will enjoy 300% tax deduction with the remainder at 200%. This is likewise a more generous proposal than the single deduction rate of 200% mentioned in my manifesto.


Let me appeal to you all to have confidence in Hong Kong. Last weekend, I went to the annual Wine & Dine Festival at the New Central Harbourfront and officiated at the cross-harbour swim from the vantage point in Tsim Sha Tsui. Looking at both sides of the Victoria Harbour and under a clear blue sky – which happens to be my campaign colour and now the colour of my maiden Policy Address, I notice that this event has also used my clear blue sky colour as the backdrop – I feel so much attached to this city I call home. I talked to people, took selfies, and promised to be back next year. I suddenly realised that this is exactly what that succinct closing remark in my Policy Address envisions. Let us connect for hope and happiness.


Chief Executive Carrie Lam gave these remarks at the Joint Business Community Luncheon on October 31.

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HK a Belt-Road hub

Financial Secretary Paul Chan

The Centre (the Research Centre for Sustainable Hong Kong) and the Hub (the International Hub for the Belt & Road) were inaugurated at a very timely moment, just when the grand and visionary Belt & Road Initiative is gaining momentum. Since the Initiative was announced in 2013, until now more than 100 countries and international organisations have shown their support for the initiative, in one way or another. In May this year, more than 1,200 delegates from these countries and international organisations gathered at the Belt & Road Forum for International Cooperation in Beijing to exchange ideas and discuss plans to realise the massive potential of this unprecedented development strategy.


If the promise of the Belt-Road is all but boundless, the challenges are by no means insignificant. Insufficient market information, enormous financing gaps, vast differences in legal systems and cultural environments, as well as the fast-changing geopolitical situation are just a few of the many issues that will need to be addressed in considering Belt & Road projects, partners and investment.


Given the complexities, a collaborative approach is essential. This is where academic bodies, such as the International Hub for the Belt & Road, can make a difference. 


To be sure, the Hong Kong SAR Government is also sparing no effort in bringing Belt & Road players and projects together, and in connecting Hong Kong’s professional services with business opportunities in many emerging markets along the Belt & Road.


Last month’s Belt & Road Summit, co-organised by the Hong Kong SAR Government and the Hong Kong Trade Development Council is one such example.


The summit attracted some 3,000 participants, including senior government officials and high-profile business leaders from economies around the Belt & Road corridors.


The summit’s business-matching sessions highlighted investment opportunities in transport and logistics, as well as in energy and natural resources, public utilities and urban development. 


Bridging role

Over 170 investment opportunities were featured through project presentations and networking sessions, attracting more than 600 participants. In addition, one-to-one business-matching meetings were arranged for more than 200 project owners, investors and service providers.


In short, the summit demonstrated Hong Kong’s critical bridging role in connecting governments, companies, investors and other players keen to realise the potential of the Belt & Road.


The Government has also been partnering with the HKTDC in organising trade missions to Belt & Road economies, to help open doors and create opportunities for Hong Kong businesses and professionals.


Infrastructure connectivity, of course, is at the forefront of the Belt & Road Initiative. A study by the Asian Development Bank estimates that developing Asia would need to invest US$1.7 trillion annually in infrastructure from now until 2030 to maintain growth momentum, reduce poverty, and address climate change.


And Hong Kong has what infrastructure needs. As Asia’s international financial capital, Hong Kong has the experience, expertise and international connections to serve as the fundraising and financial management hub for those mega projects.


We run one of the most advanced financial markets in the world that offers deep liquidity and a wide range of financial services, from initial public offerings and loan syndication to private equity as well as Islamic finance. For the past 15 years, Hong Kong has been ranked among the top five globally, and in fact in the past two years ranked number one globally, in terms of the amount of funds raised through IPOs. And we enjoy unique mutual access to each other’s investors capital market through our Stock Connect and Bond Connect initiatives with the Mainland of China. 


AIIB participation

Besides, Hong Kong became a member of the Asian Infrastructure Investment Bank, the AIIB, in June this year. Through participation in the work of the AIIB, Hong Kong shall be able to contribute in many ways to a variety of infrastructure projects in the region.


Last year, we set up an Infrastructure Financing Facilitation Office under the Hong Kong Monetary Authority. The objective of this office is to provide a designated platform bringing together interested stakeholders to facilitate the exchange of market information and to enhance collaboration in infrastructure investment. To date, close to 80 key stakeholders, including multilateral banks, pension funds, insurance companies, commercial banks, project owners, project operators and professional services firms, have joined this platform as partners.


There is much more that Hong Kong can offer. Alongside our financial services prowess, we have a deep pool of multi-discipline and multicultural talent across different disciplines – in law, accounting, engineering, architecture, management and consulting. Our world-class professionals stand ready to participate in and lead the big ticket of the Belt & Road projects.


As a matter of fact, Hong Kong enterprises and professionals are already participating in quite a number of projects in regions along the Belt & Road. Notable examples include the metro system in Saudi Arabia, airports in Cambodia and Sri Lanka, power plants in Thailand and Vietnam, as well as a waste management system in Bangladesh.


Given the Belt & Road’s multilateral design, and the size and complexity of infrastructural projects, Hong Kong is perfectly positioned to serve as the Belt-Road’s hub for legal matters and for resolving business disputes. Under the unique “one country, two systems” arrangement, Hong Kong remains a common law jurisdiction. The international community is familiar with Hong Kong’s common law system, underpinned by an independent judiciary as well as a very robust intellectual property protection regime. Arbitration awards made in Hong Kong are enforceable in over 150 jurisdictions including the Mainland of China.


In short, Hong Kong is singularly well-positioned and well-prepared to manage the Belt-Road’s services and capital needs. To realise that promise will demand long-term commitment from all concerned and that is one of the key messages underlined by the International Hub for the Belt & Road: collaboration. Let’s work together, let’s partner together, to realise this potential.


I’m talking about our business and service sectors, as well as our institutions and research bodies. Together, we can turn vision into reality. Together, we can create a rewarding future for all of Hong Kong.


Financial Secretary Paul Chan gave these remarks at the Research Centre for Sustainable Hong Kong Inaugural Seminar at City University on October 31.

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Gov’t committed to sports development: CE

Chief Executive Carrie Lam

Over the years, the Hong Kong Schools Sports Federation has been working with the Government on the development of local sports. Thanks to the tireless endeavours and dedication of the federation, our talented student athletes are given precious opportunities to develop their potential to the full and excel in competitions. I sincerely look forward to our continuous collaboration with the federation and hope to see our student athletes cherish every opportunity that comes their way in both local and international sports events.


The Government has consistently promoted the development of sports through a three-pronged approach, namely to promote sport in the community, to support elite sport and to make Hong Kong a centre for major international sports events. In recent years, our elite athletes have achieved remarkable results in international sports events and inspired many young people with their passion, commitment and hard work. And we’re doing all we can, on the sidelines, to help these elite athletes. That includes injecting HK$1 billion next year into the Elite Athletes Development Fund with a view to reinforcing the coaching team and training partner arrangements, and enhancing scientific and medical support for raising their standards.


Apart from taking forward the mega Kai Tak Sports Park project to provide modernised and multi-purpose facilities to support major sports events and holistic sports development, the Government has earmarked HK$20 billion in the coming five years to launch 26 projects to develop new or improve existing sports and recreation facilities, including sports grounds, football pitches, swimming pool complexes and open space. These facilities when completed will help boost Hong Kong’s sports development in all the three aspects I have just mentioned. They will definitely help enhance the image of Hong Kong as an Asian sports city. They will also help promote healthy lifestyles, encourage social interaction and foster a strong sense of community identity.


Chief Executive Carrie Lam gave these remarks at the Inter-School Swimming Competition 2017-18 award presentation ceremony on October 27.

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HK a wine-trading hub

Financial Secretary Paul Chan

It gives me great pleasure to be here this evening, to launch this year’s Hong Kong Wine & Dine Festival. Our annual reminder to take life one sip, one bottle, at a time – and my considered prescription for good life.


That’s what you can count on at the Wine & Dine Festival: four days and nights of fine wine, fabulous food and great memories in the making.


For that, my sincere thanks to the Hong Kong Tourism Board, and other wine-loving departments, plus our spirited sponsors and co-organisers.


Together, they’ve been bringing the Wine & Dine Festival to Hong Kong, and a world of happy consumers, since 2009, showcasing world-class food, wine, entertainment as well as the magnificent Victoria Harbour of our city.


Hong Kong, to be sure, does a bang-up job of that year-round. Last year, our wine imports, as well as re-exports, experienced healthy growth.


Indeed, in 2016 we imported a record $12 billion worth of wine from more than 55 countries and regions. And as the Asia-Pacific wine market continues to soar, Hong Kong – the region’s wine-trading hub – can only benefit.


And with more than 14,000 restaurants in Hong Kong, eating may be our major sport. It’s certainly our consuming passion. Yes, Hong Kong has it all, from street food that sizzles to more than 60 Michelin-starred restaurants covering some 50 cuisines.


Once you’re all wined and dined, it’s time to step out. To see the delights of Hong Kong, Asia’s world city. From culture to heritage, country parks to theme parks and harbour-night light shows, we’ve got it all.


So, too, does the Wine & Dine Festival. This year’s show features 21 countries and nearly 300 wine booths in five separate wine zones, from Bubbly Gala to the Robert Parker Wine Advocate Pavilion, both brand new here. Plus, feast on well over 100 food booths, including 10 fab restaurants in Feedme Lane, Tasting Room dining courtesy of three of the world’s top chefs, and Hotel Delicious.


And in honour of Hong Kong, which this year celebrates its 20th anniversary as a Special Administrative Region of China, enjoy the Festival’s 20 Hotspots – everything from a craft beer and whisky zone to a superlative sake stop and, new this year, the Concept Store.


Financial Secretary Paul Chan gave these remarks at the opening ceremony of the 2017 Hong Kong Wine & Dine Festival on October 26.

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Boosting HK-Canada ties

Chief Executive Carrie Lam

Good afternoon. Let me first express my gratitude to the Canadian Chamber of Commerce for issuing an invitation to me to meet with members of the chamber as early as July 6, 2017, and that is, within the first week of my taking office as the Chief Executive of the Hong Kong Special Administrative Region (HKSAR), so you have beaten all the other chambers in Hong Kong. That invitation mentioned that the Canadian business chamber would like to support the new government initiatives moving forward, and making Hong Kong the ideal international city for business and investment in Asia. I thank the chamber for the friendship and its confidence in the HKSAR Government which I have the honour and privilege to lead in the next five years.


But I was expecting, as also mentioned in that invitation, a private business luncheon for more dialogue and interaction, but today, this ballroom is filled up with almost 300 guests, and all the electronic media are there, and somehow because of the date chosen, which is less than two weeks since I announced my maiden Policy Address, the event was now described as one for me to discuss the reasoning behind my first Policy Address and for guests to know more about my blueprint for improving Hong Kong’s competitiveness in the years ahead.


Despite the changes in the theme of the luncheon and the attendance, I am equally thankful for the opportunity to share some thoughts about Hong Kong’s future with our Canadian business community. However, I should just add that the convention remains of the Chief Executive to attend a Joint Business Community Lunch hosted by several local chambers after the annual Policy Address, and this year it will take place on October 31. I hope to see some of you there as well.


Hong Kong and Canada share many close links, and one of which is the day of July 1, which marks our anniversaries. And the year 2017 is particularly memorable as Hong Kong is celebrating her 20th anniversary as a Special Administrative Region of the People’s Republic of China, while Canada is turning 150 years old as one of the great nations of the world.


And let’s not forget our good host, the Canadian Chamber of Commerce, now 40 years into making things happen for Canadian business here in Hong Kong. I am told that your membership, Lawrence, counts some 900 business people, making CanCham among the largest Canadian business organisations outside Canada, and certainly one of the busiest, most influential international chambers in Hong Kong.


Booming bilateral trade

We like to do business together. Last year, our bilateral trade was valued at C$4.7 billion (HK$30.3 billion). In 2016, Hong Kong was Canada’s eighth-largest export market, with food taking a big bite of that. Indeed, Hong Kong was Canada’s largest export market for frozen beef, fourth-largest for fish and seafood. Hong Kong is also a large source of investment for Canada. Foreign direct investment from Hong Kong to Canada was C$12 billion (around HK$76.8 billion) in 2016.


While our relationship is already close, I’m confident that our trade, and our investment in each other’s economies, will only grow in the coming years. And this is what I want to talk about from my Policy Address delivered on October 11.


Hong Kong’s unique advantages under “one country, two systems”, our core values featuring the rule of law, the independence of the judiciary, the free flow of capital and information, etc, our geographical advantage and free and open market make us one of the most competitive economies in the world. Canada’s own Fraser Institute has named Hong Kong the world’s freest economy every year since its first Economic Freedom of the World report came out, more than 20 years ago.


Nevertheless, with intensified competition from other regional and global economies, there is no room for complacency. With the rise of protectionism, challenges are even more pronounced. We – the Government and the business community – must therefore strive for innovation and develop a high growth and more diversified economy. We must seize opportunities from the Belt & Road Initiative, as well as the Guangdong-Hong Kong-Macao Bay Area development, to inject new impetus into the development of our traditional industries that have enjoyed distinct advantages and identified new emerging economic sectors. Instead of going into the detailed plans of my government to consolidate and enhance individual economic sectors, I would like to use the next few minutes to explain how we the Government intend to do it.


From the days of my election campaign, I have advocated that while upholding the free market principle, the HKSAR Government has to actively enhance her role in boosting our economic vibrancy through efforts in various areas, including increasing land supply, nurturing local talent and recruiting overseas talent, enhancing government-to-government business, providing clear and visionary policy directions, attracting inward investment and supporting outbound investment, facilitating a business-friendly environment and offering competitive tax measures. These are all very laudable objectives but I recognise that the real test lies in effective implementation. Let me give you a few examples to illustrate that we are serious and determined and will not shy away from making difficult decisions.


Expanding HKCEC

First, we all know that the convention and exhibition industry is crucial to Hong Kong as an international centre for trade and commerce. By attracting world-class and the most prestigious international conventions and exhibitions to Hong Kong, we have reinforced our position as an international hub. Many large-scale fairs and shows now organised in Hong Kong are the largest in Asia, or even the world. But the shortage of space is a pressing concern. For example, I visited the Electronics Fair (Autumn Edition) organised by the Hong Kong Trade Development Council earlier this month, which is the largest in the world. The fair has taken up all available space at the Hong Kong CEC (Convention & Exhibition Centre) and probably with some exhibitors turned away.


In order to maintain our position in the convention and exhibition industry, we could no longer delay a decision on finding extra venue, which will make good business sense. We have concluded, and I have announced in the Policy Address that the new facilities should be built in the proximity of the existing HKCEC in Wan Chai; the new venue must be connected to and integrated with the existing HKCEC to maximise the benefits. We have therefore decided that we will demolish and redevelop the three government buildings opposite the HKCEC into a new wing that can be connected to and integrated with the existing centre. We will take the opportunity to relocate the Harbour Road Fire Station and improve the traffic arrangements, particularly the pedestrian walkway network in the area. When completed, Wan Chai North will become a convention and exhibition hub not only for Hong Kong, but also for Asia.


Such a major project is clearly not without difficulties. Several new government office blocks and a new court complex will have to be built to decant the existing tenants. It will also take time. But unless we make up our mind and press ahead, we will not succeed and Hong Kong will lose the many opportunities in front of us.


The second example I want to give is our commitment to strengthen our bilateral and multilateral ties with the Mainland and overseas countries. We should make full use of Hong Kong’s high degree of autonomy in conducting her external affairs as provided for under the Basic Law with a view to opening new markets, attract more enterprises and talents to Hong Kong, and strengthen Hong Kong’s position as an international trade, commercial and financial centre. Relevant bureaus and departments have been given the clear mandate to negotiate for more FTAs – that is free trade agreements; IPPAs – investment promotion and protection agreements; and CDTAs – comprehensive agreements on the avoidance of double taxation. Noting that people-to-people bond is of no lesser significance, we are similarly eager to establish bilateral co-operation in arts and culture, education and youth activities. In this respect, I am confident that the Investment Promotion & Protection Agreement between Hong Kong & Canada which came into effect a year ago will usher in greater co-operation between our two economies.


Our airlines are certainly doing their part to promote business co-operation as well as people-to-people links. In June this year, Hong Kong Airlines started a new non-stop daily service between Hong Kong and Vancouver. Cathay Pacific has also increased the frequency of its flights connecting Hong Kong and Canada this year.


My third example, which should be music to your ears, is our plans to reduce business’ tax burden.


Lowering profits tax

As noted in the Policy Address, we will launch a two-tiered profits tax system. We will lower the profits tax rate to 8.25% – that is half the current rate – on your first $2 million in profits. Beyond that, the standard profits tax rate of 16.5% will remain unchanged. In short, Hong Kong’s already low tax rate is destined to get a good deal lower, which can only attract more Canadian companies, entrepreneurs and startups to Hong Kong.


We are keen, as well, to build a world-class innovation and technology sector. A healthy research and development environment is central to that goal. In my Policy Address, I proposed that the first $2 million in eligible R&D expenditure should enjoy a 300% tax deduction, with a 200% deduction for the remainder.


These tax measures are by themselves bold and innovative. They will also be put in place with speed. A bill is already ready to go to the Legislative Council to first implement the two-tiered profits tax measure. Our aim is for both proposals to take effect from next year.


I have said on many occasions that we cannot take pride in our economic progress if our people do not share the benefits. The extent of discontent and frustrations in society arising from disparity between the rich and the poor, and the lack of social mobility for the younger generation, are warning signals to the Government. Hong Kong is no exception. In my Policy Address, I have announced plans and allocated resources for education and many social programmes in housing, healthcare and social support. I want Hong Kong – this city we call home – to be not only competitive, but also compassionate.


Ladies and gentlemen, I can continue to speak for hours about my Policy Address, which in its published form runs into 34,000 words in English, and 49,000 characters in Chinese, about how I would make Hong Kong a better place for you to do business and to live in. But for now I suppose I should stop and leave some time for questions and answers. Before I close, my thanks again to the Canadian Chamber of Commerce for giving me this welcome opportunity to speak to you, and for the Consul General, Jeff, for his very enlightened and inspiring words about Hong Kong and Canada. I wish you all an enjoyable lunch. Thank you very much.


Chief Executive Carrie Lam gave these remarks at the Canadian Chamber of Commerce luncheon on October 23.

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HK to build talent hub

Chief Secretary Matthew Cheung

Supported by the Home Affairs Bureau and Commission on Youth under the Large-scale Youth Programme Funding Scheme 2017, this marathon and carnival is designed to broaden our youth’s horizons and knowledge as well as unleash their creativity and leadership. I would like to express my heartfelt gratitude to ESF and its project committee for organising such a meaningful event to tie in with this Government’s vision of promoting youth development to groom the future generations into leaders who are socially responsible and equipped with a positive outlook a sense of our national identity, a love for Hong Kong and of course international perspective.


Over the past 50 years, ESF has grown to become the largest provider of quality English-medium international education in Hong Kong, serving 17,500 students from more than 60 different nationalities. I agree entirely with the ESF’s vision to bring out the best in every student through a personalised approach to learning and by inspiring curious minds. This explains why more and more local parents find the ESF a preferred choice for their children. Indeed, I noted that some 70% of ESF’s students have parents who are permanent residents of Hong Kong.


Speaking of nurturing youths, the Government has spared no efforts in establishing Hong Kong’s position as a talent hub. The Chief Executive, Mrs Carrie Lam, proposed in her Election Manifesto an immediate increase of recurrent education expenditure by $5 billion a year. Various quality education initiatives funded by the initial allocation of $3.6 billion are being launched progressively starting from the current school year. We will continue to discuss with the education sector how the remaining $1.4 billion recurrent funding should be put to good use. We will also provide additional resources where necessary.


As announced in the Policy Address a week ago, the Youth Development Commission chaired by me will soon be set up in the first half of 2018 with a view to examining issues of concern to young people in a holistic and co-ordinated manner. To broaden the horizons of youngsters, we will continue to actively promote overseas internships arranged by our Economic & Trade Offices, offer more internship opportunities on the Mainland, the Belt & Road countries and other parts of the world, and proactively sign more Working Holiday Scheme agreements with suitable economies. Through these continuous efforts, I am sure that we can help our young people get connected and look to a future of hope and happiness.


Chief Secretary Matthew Cheung gave these remarks at the ESF 50th Anniversary Marathon.

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Gov’t to boost financial services

Chief Executive Carrie Lam

In my maiden Policy Address announced last Wednesday, I said, amongst many other things, my Government will strive to do our best in youth development work in the next five years by addressing their concerns about education, career pursuit and home ownership, and encouraging their participation in politics, as well as public policy discussion and debate. I am glad that we – the Government and many financial experts – are gathering here to address one aspect of my commitment, that is, to enlighten and inspire many eager young talents waiting to embark on your career, putting your knowledge to good use, and testing your limits and strengths.


I know many of you are considering a career in the financial services industry. I would say that that is a choice made in the right city and at the right time.


Why is Hong Kong the right city for a career in finance?


To start with, financial services is one of Hong Kong’s pillar industries, a major contributor to the city’s Gross Domestic Product, accounting for nearly 18% of our GDP and 6.7% of our total employment. This is a sector that is truly international and has put Hong Kong on the world map, which means that if you do it well here, you will have plenty of opportunities in other major financial centres.


Indeed, Hong Kong’s status as a leading international financial centre has long been recognised. In the latest Global Financial Centres Index, out last month, Hong Kong was ranked third, behind only London and New York.


A few statistics underline those kudos. For the past two years, Hong Kong’s stock market ranked first globally in funds raised through initial public offerings. Our IPO total last year came in at US$25 billion.


Hong Kong’s combined fund management business amounted to US$2.2 trillion in 2015, topping the league in Asia. Of the world’s top 100 banks, 75 operate in Hong Kong. And you can count that as 75 potential employers.


As part of China, Hong Kong has first-mover advantages open to no one else. In 2004, we were the world’s first market to conduct offshore renminbi business. Today, we are the world’s largest offshore renminbi business hub, handling 70% of all renminbi payment transactions and contributing to the internationalisation of China’s currency.


The launch of the Shanghai-Hong Kong Stock Connect in 2014, the mutual recognition of funds in 2015, the Shenzhen-Hong Kong Stock Connect in 2016 and Bond Connect in July this year, are all of groundbreaking significance to capital market access between Hong Kong and the Mainland.


Powered by the twin engines of China and the world, Hong Kong is the gateway, the multilateral bridge bringing together the Mainland and the rest of the world.


There’s another “why” to consider: specifically, why is this the right time?


The continuing reform of the Mainland’s financial markets, the internationalisation of the renminbi and the gradual opening-up of its capital account, together with the far-reaching Belt & Road Initiative, are attracting investors. And Hong Kong, tapping on its strengths as an intermediary, is particularly well positioned to support capital flowing into, and out of, the Mainland.


Hong Kong can provide Belt & Road countries with financial services for the investment, fund raising and asset management of infrastructure projects. We can also help expand their financing channels.


Hong Kong has, in short, what it takes to become an international financial hub, to play a key role in mobilising funds for the Belt & Road’s – and the region’s – infrastructure projects.


The Guangdong-Hong Kong-Macao Bay Area development adds another dimension to the Belt & Road Initiative and Hong Kong’s prospects. The development calls for closer co-operation and deeper economic integration within the bay area city cluster, which embraces Hong Kong and Macau, together with nine Guangdong cities, including Shenzhen and Guangzhou.


The bay area promises to enhance the global competitiveness of the Pearl River Delta region, while serving as an engine of the Belt & Road. That’s particularly so in financial connectivity, infrastructure development and innovation and technology.


Hong Kong and Shenzhen have already agreed to develop an innovation and technology park in the Lok Ma Chau Loop area. Close to the boundary with Shenzhen, it will drive I&T for the bay area, creating opportunities for local tech companies to go global.


The advent of financial technology has also created a new world of possibilities for the financial services sector. Fintech will enhance efficiency and change the way financial institutions operate.


My Government is working with the industry to promote the development of fintech here. Hong Kong and the UK recently signed a fintech agreement to collaborate in promoting financial innovation.


As Hong Kong’s home-grown fintech firms expand overseas, they will attract global players eager to use Hong Kong as a gateway into the Mainland and other Asian markets.


In my Policy Address delivered last week, while I emphasised the importance of diversifying our economy by developing innovation and technology as well as the creative industries, I also made it clear that the Government will reinforce and enhance our financial services sector. We will actively seize the opportunities brought by the Belt & Road Initiative and the Guangdong-Hong Kong-Macao Bay Area, so that the financial services sector can better serve our real economy. 


Specifically, as one of the policy initiatives put forward in my Election Manifesto, the Financial Leaders Forum chaired by the Financial Secretary has already been set up and the members are already putting their minds together in formulating strategic and forward-looking proposals to strengthen Hong Kong’s position as an international financial centre. We will allocate more resources to the Financial Services Development Council to enhance its role in promoting market development and nurturing talent like the Career Day today. We will also take the lead in arranging the issuance of a government green bond in the next financial year and promote the establishment of green bond certification schemes that meet international standards by local entities.


These are just some of the many initiatives that my Government are implementing or will implement, but I trust they should be sufficient in convincing you that the Hong Kong SAR Government is determined to promote the development of the financial services industry, that the industry is full of promise, and that pursuing a career in it will give you plenty of opportunities to realise your potential.


For those of you who are interested in such a career, I would encourage you to keep abreast of finance’s traditional services, from asset and wealth management, to banking, corporate finance and insurance. I would also emphasise such fast-rising areas as fintech, green finance and infrastructure financing. The future belongs to those flexible enough to adapt – indeed, to embrace – the sector’s emerging trends and market developments.


Chief Executive Carrie Lam gave these remarks at the Financial Services Development Council Career Day.

via Moroccan Trader Gov’t to boost financial services

I&T development boosts economy

Chief Executive Carrie Lam

As many of you know, I delivered my maiden Policy Address two days ago. I love to regard my presence at this I&T Symposium as a good post-Policy Address PR for two reasons : one is to reiterate the importance my Government attaches to development of I&T in Hong Kong, a subject which has been given prominence in my Policy Address and the other is to tell our symposium participants and exhibitors that my Government is committed to providing more convention and exhibition facilities to meet the ever growing demand for expos, symposiums, conventions etc. to be held in Hong Kong, as I have announced in my Policy Address the proposal to build a new wing of the Hong Kong Convention & Exhibition Centre on an adjacent site now occupied by three government office buildings. These initiatives fit in with my conviction that the best of Hong Kong is yet to come.


In the last month or so, I made two keynote speeches on I&T, first at a Hong Kong X Foundation event during which they launched a white paper on Hong Kong’s I&T development and then at the opening of the InnoTech Expo organised by Our Hong Kong Foundation. On both occasions, I confessed that I was on a sharp learning curve as far as I&T development was concerned since taking office on July 1 this year. As a result of that learning process during which I had interacted with local, Mainland and overseas experts and visited technology and entrepreneurship projects, I have drawn the conclusion that innovation and technology will help power Hong Kong’s future economy, improve people’s livelihood and create quality jobs for young people as well as opportunities for young entrepreneurs.


However, in a highly competitive environment globally and with fast advances in the Mainland, the above vision may only be realised by the Government adopting the right policies, investing the needed resources and connecting with talents and renowned research institutions. Thus, in my first Policy Address, I have set out eight major areas which my Government will step up efforts. I will briefly outline these efforts and will refer you to the Policy Address website to read the full text.


First is to increase resources for research and development (R&D). Here, we have set a goal to double the R&D expenditure as a percentage of the Gross Domestic Product from the current 0.73% to 1.5% by the end of the current-term Government’s five-year term of office. Apart from Government injecting more resources into the Research Endowment Fund under the University Grants Committee for allocation to the eight publicly-funded universities, we will take a bold step to provide super tax deduction for expenditure incurred by private enterprises on R&D, to the tune of 300% for the first $2 million and 200% for the remainder.


Second is to nurture local talent and recruit overseas talents. We will launch a $500 million Technology Talent Scheme to establish a Postdoctoral Hub to provide funding support for enterprises to recruit postdoctoral talent for scientific research and product development and another $3 billion to provide studentships for local students to engage in research postgraduate programmes. We will also invite world-acclaimed universities, R&D institutes as well as technology enterprises to collaborate and carry out forward-looking research projects with social benefits.


Third is to provide investment funding to support startups.  We have seen a number of venture capital funds setting up in Hong Kong in recent years. To further boost the momentum, we have just launched the $2 billion Innovation and Technology Venture Fund and are inviting private VC companies to joint hands with the Government to invest in our technology startups. I believe that, given time, local enterprises will be more willing and ready to invest in technology development.


Fourth is to provide the hardware in terms of technological research infrastructure and related facilities. At present, Science Park, Cyberport, Hong Kong Productivity Council and R&D Centres have been supporting local R&D activities. We have a number of infrastructure projects in the pipeline, including expansion of the Science Park, development of the Data Technology Hub and the Advanced Manufacturing Centre in the Tseung Kwan O Industrial Estate. We are also working in full speed to implement the Hong Kong-Shenzhen Innovation & Technology Park at the Lok Ma Chau Loop, based on an agreement we signed with the Shenzhen Municipal People’s Government in January this year. When completed, this will be the largest I&T infrastructure in Hong Kong. A residential building for talent called InnoCell is also being built at Science Park and should be completed in 2020.


Fifth is to review existing legislation and regulations, so as to remove those outdated provisions that impede the development of innovation and technology. To this end, I realise that there will be a lot of resistance within the Government, so I will task the newly formed Policy Innovation & Co-ordination Unit which works directly to me to spearhead this exercise.


Sixth is to open up government data for use as raw materials in technological research, innovation and development of smart city. I am happy to see that the Hospital Authority is taking steps to set up a big data analytics platform on health data, with other useful data in other areas to follow.


Seventh is to adjust government procurement methods to include I&T as a criterion in the selection process, with a view to encouraging local technological innovation.


Last but not the least is to step up our STEM education both at the school and community level. We will encourage fairs like this electronics fair to consider opening up a day for school visits so that students may be impressed by what technology could offer and inspire them to learn more. On the part of the Government, the Leisure & Cultural Services Department will update the permanent exhibitions of the Hong Kong Science Museum to further promote STEM education using the museum’s facilities.


I should just add that apart from the eight major areas to promote I&T development, my Policy Address also contains a section of promoting smart city development in Hong Kong and I&T, electronics and technologies all have an important role to play in various smart city initiatives, or what this symposium’s theme refers to – connected living.


In introducing my Policy Address in the Legislative Council, I said that in the coming few years, Hong Kong is entering a period when opportunities and challenges co-exist. This also applies to I&T development. The Guangdong-Hong Kong-Macao Bay Area will bring exceptional opportunity for Hong Kong to join hands with Shenzhen and other bay area cities to develop an international I&T centre very much like the Silicon Valley. Hong Kong is blessed with distinct competitive edges including our unique advantages of “one country, two systems”, geographical location, business environment, legal system, intellectual property protection, R&D capability, financial services etc. Also, the setting up of the Karolinska Institutet research centre and an innovation node of the Massachusetts Institute of Technology (MIT) in Hong Kong last year has also created more opportunities for us to work with and attract other renowned research institutes to Hong Kong. The challenge to seizing these opportunities naturally lies in how fast and how effective we are in pressing ahead with the initiatives I have committed to in my Policy Address.


Ladies and gentlemen, an innovation-driven economy will help enhance the competitiveness of Hong Kong and drive sustainable economic growth. We need all the stakeholders, that is, the Government, industry, academia and the research sectors, to collaborate and co-create to make this happen.


Chief Executive Carrie Lam gave these remarks at the Symposium on Innovation & Technology 2017 on October 13.

via Moroccan Trader I&T development boosts economy

Envisioning hope, happiness for HK

Chief Executive Carrie Lam

Today, with much relief, I present the first Policy Address in my term of office to the Legislative Council. During the past three months, the community has voiced a lot of expectations towards this Policy Address. I have listened to them all. I appreciate that many issues in the community require the Government’s attention. At the same time, I have accepted the suggestion of the Non‑official Members of the Executive Council that I should make use of the opportunity today to share with Hong Kong people my governance philosophy and to highlight some of the specific measures, rather than following the previous practice of spending two to three hours reading out the Policy Address. Without the constraint of a time limit, the Policy Address I deliver today runs to some 49,000 characters. It comprehensively covers such areas as good governance, diversified economy, nurturing talent, improving people’s livelihood, liveable city and connecting with young people. I hope that when you read it, you will get a better grasp of Hong Kong’s current situation as well as the vision of the Government. That said, I am fully aware that a lengthy Policy Address does not guarantee flawless policies or effective implementation. Together with my political team, I will continue to listen to the views of Honourable Members and members of the public with humility, so as to ensure that this Policy Address will set a new starting point for Hong Kong.


This year marks the 20th anniversary of Hong Kong’s return to the Motherland, a milestone for us to build on our achievements and begin a new chapter of development. In his keynote address delivered at the Meeting Celebrating the 20th Anniversary of Hong Kong’s Return to the Motherland and the Inaugural Ceremony of the Fifth‑term Government of the Hong Kong Special Administrative Region (HKSAR), President Xi Jinping said in all earnestness that the destiny of Hong Kong has always been intricately bound with the Motherland. In the last two decades, thanks to the support of the Motherland and with an international vision, Hong Kong has kept its distinct features and strengths. This fully demonstrates that “one country, two systems” is the best institutional arrangement to ensure Hong Kong’s long‑term prosperity and stability after our return to the Motherland. It is a workable solution and an achievable goal welcomed by the people. Thus, everybody with a passion for Hong Kong has the responsibility to ensure that, here in Hong Kong, “one country, two systems” advances in the right direction, the obligation to say “no” to any attempt to threaten our country’s sovereignty, security and development interests, as well as the duty to nurture our next generation into citizens with a sense of national identity, an affection for Hong Kong and a sense of social responsibility.


Furthermore, through immense contributions made by generations of Hong Kong people and countless challenges overcome, we have established our core values including an independent judicial system, adherence to the rule of law, a highly efficient and clean Government, freedom of the press, respect for human rights, pluralism and inclusiveness as well as the freedom of expression. Since our return to the Motherland, these institutional strengths, rights and freedoms have been protected by the Basic Law under the principle of “one country, two systems”. These constitutional bulwarks and cornerstones of a civilised society and our moral values are unbreachable. The HKSAR Government and myself will, with our utmost endeavours, implement the “one country, two systems” principle, uphold the Basic Law and safeguard the rule of law.


In the past three months, in my new capacity as Chief Executive, the honour as well as the immense responsibility of the office are most deeply felt. Some of the decisions cannot be delegated. Certain views must be stated in unequivocal terms. And some of the tasks have to be taken up by myself. What I find most encouraging and touching is the warm support I have received from numerous leaders in our community. Some of them have joined the Executive Council and various statutory bodies or advisory bodies, some have participated in outbound business delegations or summit meetings, and some have spoken in support of Hong Kong through their liaison with Mainland and overseas organisations. I will capitalise on this rich talent pool during my tenure in working on Hong Kong’s future.


Opportunities, challenges ahead
In the coming few years, Hong Kong is entering a period when opportunities and challenges co‑exist. The Belt & Road Initiative and the Guangdong‑Hong Kong‑Macao Bay Area development of our country will bring enormous opportunities for Hong Kong’s economy. We must leverage the unique advantages of the HKSAR and the support we receive from the Central Authorities. We will continue to respect the rules governing the economy and market operations and promote free trade. With a new, proactive style of governance, strong commitment embodied in the new roles of the Government as well as a new fiscal philosophy to manage our finances wisely, we will inject new and continuous impetus to Hong Kong’s economy.


Sound public finance and optimal use of public resources are key to good governance.  With years of practical experience in public finance, I fully appreciate the requirements stipulated in the Basic Law of keeping expenditure within the limits of revenues and avoiding fiscal deficits as far as possible. But the fact is the HKSAR Government last went into deficit in 2003‑04. Taking into account the investment return previously injected into the Housing Reserve, the Government currently has a fiscal reserve in excess of $1,000 billion. We are well positioned to use our accumulated fiscal surpluses, which are wealth derived from the community, wisely to benefit the community. On the premise of ensuring the health of our public finance, I will adopt forward‑looking and strategic financial management principles in making investment for Hong Kong and relieving our people’s burdens.


On people’s livelihood, meeting the public’s housing needs is our top priority. The Government has no magic wands, but in the past few months the Directors of Bureaux concerned have demonstrated their readiness to think out of the box in a bid to address the community’s pressing needs. We strive to meet public expectations by pursuing new directions and new initiatives. On care for the elderly, we do not see the ageing population as a threat to public finance. We have, instead, taken the opportunity to devise a variety of effective elderly care services. We will continue to devote resources to poverty alleviation as well as support for the disadvantaged in order to build a caring and inclusive society. On education, we will uphold the “Led by Professionals” principle and deploy the necessary resources to nurture our next generation.


If I am to put in simple terms the style of this Policy Address, I would say that it speaks of determination, boldness in innovation as well as a conscientious effort to address the needs of the people.


Our economy has been performing very well this year, expanding by 4% in real terms year‑on‑year in the first two quarters. Entering into the third quarter, our positive economic development has continued with export growing notably and domestic demand remaining firm, displaying an encouraging performance. The local labour market has continued to see full employment, with the employed population increasing steadily and the unemployment rate dropping to 3.1% in recent months.  This is the lowest level in almost two decades. Household income has generally recorded solid increases, with the earnings of full‑time employees in the lowest decile group increasing by 4.5% in real terms after discounting inflation. Inflation has dropped for six consecutive years. Barring abrupt negative shocks externally, our overall economic growth this year is expected to go higher than 3.5%, the mid‑point in the earlier forecast range of 3‑4%, and would fare better than the annual average of 2.9% over the past decade.


However, in order to sustain these favourable trends for our economy, diversifying our economy is the only solution. The current‑term Government is determined to boost the development of emerging industries in addition to our traditional industries, and considers that both innovation and technology (I&T) and the creative industries have a competitive edge and much potential. They will not only bolster economic growth, but also create quality employment opportunities for our young people.


For Hong Kong to catch up in the I&T race and to become an international I&T hub, the Government will step up efforts in eight key areas, viz. resources for research and development (R&D), nurturing a talent pool, venture capital, scientific research infrastructure, legislation review, opening up data, government procurement and popular science education, to propel I&T development and will put in necessary resources.


We have set a goal to double the Gross Domestic Expenditure on R&D as a percentage of the Gross Domestic Product from the current 0.73% to 1.5% within the current‑term Government’s five‑year tenure. We have set aside no less than $10 billion as university research funding, and will provide additional tax deduction for R&D expenditure incurred by enterprises. The Education Bureau will make available $3 billion to provide studentships for local students admitted to University Grants Committee‑funded research postgraduate programmes. The Innovation & Technology Bureau will launch a $500 million Technology Talent Scheme, including the establishment of a Postdoctoral Hub. Our aim is to encourage our young people to engage in research and product development. At the same time, I will strive to attract top overseas scientific research institutions to Hong Kong. In the past three months, several internationally renowned institutions approached me directly and expressed interest in setting up key technology collaborative platforms here. We will also invest $700 million to immediately take forward several projects to develop Hong Kong into a smart city.


To press ahead with I&T development at full steam, I will personally lead a high‑level, inter‑departmental Steering Committee on Innovation & Technology to examine and steer measures under the eight areas of I&T development as well as smart city projects. The Chief Executive’s Council of Advisers on Innovation & Strategic Development, to be formed by revamping the Economic Development Commission and the Commission on Strategic Development, will also offer ideas and advice to the Government on I&T development to maintain Hong Kong’s competitiveness in the global arena and enhance Hong Kong’s alignment with the development of our country.


Creative industries cover a very broad scope. Capitalising on Hong Kong’s established advantages and coupled with financial assistance, the Government will seek to promote the further development of these diverse sectors, in particular the design industry. We propose injecting $1 billion into the CreateSmart Initiative, and providing more resources to the Hong Kong Design Centre to implement a series of measures to reinforce Hong Kong’s status as a city of design excellence in Asia. The Commerce & Economic Development Bureau will identify more room for development through integrating design and industry. It will also foster closer links between Hong Kong’s design industry and Shenzhen and other design cities in the Mainland and overseas to open up new markets for Hong Kong.


Apart from fostering the development of the emerging industries, we will also reinforce and further enhance our financial services sector, transportation services and logistics industry, tourism, construction and related professional services sectors, legal services, etc. Through policy steer, allocation of resources and external promotion, we will seize the opportunities arising from the Belt & Road Initiative and the Guangdong-Hong Kong-Macao Bay Area development. Take the financial services sector as an example. The Financial Leaders Forum chaired by the Financial Secretary will put forward strategic and forward looking proposals, which will be followed up by relevant departments. The Government will allocate more resources to the Financial Services Development Council to enhance its role in promoting market development and nurturing talent. The Government will also take the lead in arranging the issuance of a green bond in the next financial year and promote the establishment of green bond certification schemes that meet international standards by local entities.


Competitive tax initiatives
In order to further enhance the competitiveness of Hong Kong, we will demonstrate greater determination in our taxation policies. The Financial Services & the Treasury Bureau has made proposals on the two tax measures put forward in my Election Manifesto, with a rate of tax reduction even deeper than what I had proposed, and will strive to implement them within 2018. On the two tier profits tax system, the profits tax rate for the first $2 million of profits of enterprises will be lowered to 8.25%, or half of the standard profits tax rate, instead of 10% as proposed in my Election Manifesto. Profits above that amount will continue to be subject to the standard tax rate of 16.5%. To ensure that the tax benefits will target small and medium enterprises, we will introduce restrictions such that each group of enterprises may only nominate one enterprise to benefit from the lower tax rate. To encourage research and R&D investment by enterprises, we propose that the first $2 million eligible R&D expenditure will enjoy a 300% tax deduction with the remainder at 200%.


In recent years, government departments have been shouldering an increasing workload, and might not have been able to fully meet public expectations in policy implementation. We are determined to improve the situation on several fronts. First, we will augment the civil service establishment by at least 3% in the next financial year to provide immediate relief to the workload pressure on colleagues and to respond to public aspirations. We will proceed to ask the Heads of Departments to streamline administration, foster innovation and collaboration, and leverage technology. We will revamp the Central Policy Unit into the Policy Innovation & Co-ordination Unit and place the Efficiency Unit under the Innovation & Technology Bureau to enhance inter departmental collaboration and assist departments in technology application. In the long term, I propose establishing a new civil service college with upgraded facilities in Hong Kong so as to better equip the civil service for various challenges. The Civil Service Bureau has already commenced project planning and site search.


Innovative approaches may also be applied to the formulation of concrete measures aimed at benefitting people’s livelihood. To relieve the burden of long distance public transport expenses on commuters, colleagues in the Transport & Housing Bureau, after three months of diligent effort, propose to introduce a non means tested Public Transport Fare Subsidy Scheme to provide fare subsidy, to an extent, for commuters if their monthly public transport expenses exceed a specified level. Our proposal is to set the line at $400 in the monthly expenditure on public transport, with the Government providing a subsidy amounting to 25% of the actual expenses in excess of this level, subject to a cap of $300 a month. We anticipate that over two million commuters will benefit from the scheme, which will cover the fares of MTR, franchised buses, green minibuses, ferries and trams. The scheme will be simple and easy to understand, and will not require any application. The Government aims to launch the scheme within one year after obtaining funding approval from the Finance Committee of the Legislative Council.


For quite a long time, a variety of problems have persisted in the community. Some of them have been set aside due to incessant arguments. Some of them have not been taken forward for fear of criticisms. The current term Government sets no easy goals and avoids no difficult tasks. With this style of governance, we will make every effort to solve these problems for our people.


Alleviation of housing needs
First, the difficulty in achieving home ownership and the poor living conditions. My housing policy comprises the following four elements:

    (1)     housing is not a simple commodity. Our community has a rightful expectation towards the Government to provide adequate housing. This is also fundamental to social harmony and stability. Therefore, while maintaining respect of a free market economy, the Government has an indispensable role to play in this area;

    (2)     we will focus on home ownership to enable our people to live happily in Hong Kong and call it their home. The Government will strive to build a housing ladder to rekindle the hopes of families in different income brackets to become home owners;

    (3)     focusing on supply and based on the Long Term Housing Strategy, we will step up our effort in increasing the supply of housing units; and

    (4)     with insufficient land and when new supply is not yet available, we will strive to optimise the existing housing resources to meet the housing needs of families that have long been on the waiting list for public rental housing (PRH) and to help residents in poor living conditions.


PRH is the first rung on the housing ladder. At present, there are about 756,000 households living in PRH, among which 19% are elderly persons and 16% are receiving Comprehensive Social Security Assistance. PRH is a long established safety net for the grassroots and low income families. The Government will strive to shorten the waiting time for PRH while stepping up our effort to help those relatively better off PRH tenants to move up the housing ladder and vacate their units for allocation to the needy.


One approach is to substantially increase the supply of units under the Green Form Subsidised Home Ownership Scheme (GSH), which specifically caters for PRH tenants. The Hong Kong Housing Authority (HKHA) launched the GSH Pilot Scheme in 2016 and selected a PRH project in San Po Kong to provide 857 units for sale at affordable prices to enable Green Form Applicants to become home owners. The project was nearly 18 times over subscribed and all units were sold. PRH units in different districts are in turn vacated for allocation to those on the waiting list.


From the perspectives of housing policy, utilisation and allocation of the HKHA’s resources, and public aspirations for home ownership, GSH has its merits and no shortcomings. In fact, apart from assisting PRH tenants to become home owners, PRH applicants who have passed the detailed eligibility vetting are also eligible for GSH and can thus more quickly fulfil their aspirations for home ownership. In view of this, I consider that our future public housing developments should include more GSH units instead of PRH units. I have requested the HKHA to complete the review on GSH as soon as possible, with a view to regularising the scheme and offering more GSH flats for sale. After a preliminary technical assessment, the Housing Department considers that some 4,000 new PRH units in Fo Tan, Sha Tin, can be converted into GSH units for sale in late 2018.


Newly constructed Home Ownership Scheme (HOS) flats on the housing ladder have all along been providing middle income White Form applicants with the opportunities to own subsidised flats. The Government will continue to increase the supply of HOS flats. In the past, HOS flats with premium unpaid used to be available for sale on the secondary market only to Green Form applicants. The HKHA launched two rounds of the Interim Scheme of Extending the HOS Secondary Market to White Form Buyers (Interim Scheme) in 2013 and 2015 respectively on a pilot basis to allow eligible White Form applicants to purchase HOS flats with premium unpaid. This allows tenants of private premises more opportunities to become home owners and at the same time facilitates the turnover of HOS flats.


Taking into account the Tenants Purchase Scheme flats with premium unpaid, there are a total of 380,000 flats available on the secondary market for purchase by White Form buyers. I propose that the HKHA regularise the Interim Scheme.


In my Election Manifesto, I proposed to introduce, on top of HOS, affordable “Starter Homes” for middle class families in Hong Kong, thus re-igniting the hopes of families with a higher income to own a home in the face of hiking private property prices. This has generated a lot of attention in the community. I must reiterate that given the limited land supply for public housing, the Government will provide the proposed “Starter Homes” units only on the premise that the existing supply of public housing will not be affected. It now appears that the land supply for “Starter Homes” will have to come from sites already owned by private developers or to be bought from the Government.


Our initial thinking is to incorporate provisions into the land lease to require developers to pursue mixed developments, i.e., to design, build and offer for sale a specified number of “Starter Homes” units in addition to private housing units, and to sell these units to target buyers who meet the eligibility criteria set by the Government. These criteria include, among others, Hong Kong residents who have lived in Hong Kong for seven years or more and have never owned any property here. Their income will fall between the income limits for HOS applicants and about 30% higher than the HOS limits. Based on the prevailing HOS income limits, the upper income limit for the new scheme will be set at not exceeding $34,000 a month for singletons and $68,000 for households with two or more members. The prices and sizes of such units will be determined having regard to the affordability of eligible buyers. The alienation restrictions may be tighter than those for the HOS. We need to further consider how to deal with the subsidy given to the buyers at the time of purchase, i.e., the issue of premium payment.


As “Starter Homes” is a new concept and a type of Government subsidised flats for sale, the implementation details will intertwine with those of HOS and GSH, which will see a notable increase in supply. The Government will discuss with the HKHA and relevant sectors and listen carefully to the views of the community. Details of the scheme will be finalised for announcement in mid-2018, so as to dovetail with our proposal to launch a pilot scheme by the end of next year using a residential site at Anderson Road, Kwun Tong, on the Government’s Land Sale Programme to provide about 1,000 residential units.


Even if our housing policy has broad community support, it takes time to find land for increasing the housing supply. The current term Government will think out of the box to facilitate the implementation of various short term community initiatives to increase the supply of transitional housing, with a view to alleviating the hardship faced by families on the PRH waiting list and the inadequately housed. Specific measures that may be considered include:

    (1)     optimising the use of idle government premises by providing rental housing units like those under the “Light Housing” project launched by Light Be in Sham Tseng;

    (2)     supporting the Community Housing Movement initiated by the Hong Kong Council of Social Service on a pilot basis, including encouraging the Urban Renewal Authority to participate by offering units in old buildings;

    (3)     facilitating the Hong Kong Housing Society in allowing the owners of its subsidised housing to rent out their flats with premium unpaid to needy families at below market rentals on a pilot basis;

    (4)     exploring the wholesale conversion of industrial buildings into transitional housing with waiver of land premium; and

    (5)     supporting non-profit making organisations to explore the feasibility of constructing pre-fabricated modular housing on idle sites.


Admittedly, these measures on transitional housing are unable to resolve the problem of insufficient supply we face today. Nevertheless, they will help us pool community efforts and resources and demonstrate our determination in tackling this priority livelihood issue together.


The determination to resolve problems together is precisely the consensus we need in tackling the issue of increasing land supply. Established in September this year, the Task Force on Land Supply (Task Force) will lead the community to examine the pros and cons of different land supply options in a thorough and macro manner, with a view to achieving the broadest consensus in the community. With an important mission to achieve within a tight time frame, the Task Force plans to launch a public engagement exercise in the first half of 2018. I appeal to all sectors of the community to consider the difficult issues of land supply in an inclusive, open and rational manner. We also look to the Task Force to draw up a comprehensive package of proposals and a visionary land supply strategy.


To maintain and consolidate the international status of our convention and exhibition industry, there is a pressing need for new venues. Otherwise, Hong Kong will miss the opportunities to host some of the large‑scale conventions and exhibitions that are either internationally important or newly launched. The current‑term Government is determined to tackle this long‑standing problem. After a detailed study, we consider that the priority is to build a new convention and exhibition venue of international standard in the proximity of the existing Hong Kong Convention & Exhibition Centre (HKCEC) in Wan Chai. The new venue must be connected to and integrated with the existing HKCEC to maximise the benefits. Therefore, we have decided that for the time being, we will give up the identified site at the Wan Chai Sports Ground announced by the Government earlier. Instead, we will demolish and redevelop the three government buildings next to the HKCEC in Wan Chai North into a new wing that can be connected to and integrated with the existing HKCEC. Based on an initial estimate, the project will add about 23,000 square metres of connected convention and exhibition facilities. Hotel facilities, which complement convention and exhibition activities, and Grade A office space, which can help alleviate the market shortfall, can be built on top of the new convention and exhibition venue.


The proposed new wing of the HKCEC will not be sufficient to make up for the venue shortage. We will continue with the development of a new convention centre above the Exhibition Station of the Shatin to Central Link to provide the market with an additional 15,000 square metres of convention space. As a longer‑term plan, when the reprovisioning of the Wan Chai Sports Ground is satisfactorily resolved, the site may be earmarked for the further development of convention and exhibition facilities so as to reinforce and enhance the status of Wan Chai North as a convention and exhibition hub in Asia. We will also continue to explore the feasibility of expanding other existing convention facilities.


Healthcare, retirement protection, education
With an ageing population, the challenges faced by public hospitals will be huge.  They will not be able to fully address the demand for healthcare services even with the Government’s allocation of additional resources for hospital development projects and for the Hospital Authority, not to mention that prevention is better than cure and that home care and community care services will better meet the aspirations of the elderly to enjoy their golden years. Through the Working Party on Primary Health Care led by Professor Rosie Young, the Government had put forward a proposal as early as 1990 to step up the development of primary healthcare in Hong Kong. I happened to be the secretary of this working party and was responsible for drafting its report. Twenty‑seven years on, while there has been advancement in disease prevention, health education and family medicine, our public healthcare services are still hospital‑oriented and a large portion of public resources is devoted to hospitals. The Secretary for Food & Health, herself an expert in primary healthcare, has been an advocate in this area for many years. I shall give her my full support in drawing up a blueprint for the development and delivery of primary healthcare services, and the setting up of the first district health centre with a new operation model on a pilot basis in Kwai Tsing District.


The “offsetting” arrangement under the Mandatory Provident Fund (MPF) Scheme is another issue that has beleaguered the labour sector. At present, over $3 billion of accrued benefits from employers’ MPF contributions is used each year for offsetting severance payment or long service payment, thus reducing the total amount of employees’ MPF benefits on retirement. The current‑term Government has made clear its stance that the “offsetting” arrangement should be abolished and is willing to increase its financial commitment to mitigate the impact of the abolition on enterprises, in particular micro, small and medium enterprises. The Secretary for Labour & Welfare will continue to discuss with the business sector and labour sectors, with a view to putting forward a proposal that takes into account the interests of both employers and employees in the coming months.


Under my new fiscal philosophy, the Government should make the right investments and in a timely manner so as to reduce the extra expenditure which may have to be incurred if action is delayed. Moreover, public resources should be used to address people’s most pressing needs. In my Policy Address, I pledge to reduce the waiting time to zero for two kinds of services: first, pre‑school rehabilitation services for children with special needs, such as those suffering from autism, hyperactivity disorder, language disorder or dyslexia; and second, appropriate home and community care services for the elderly in need of support, including those discharged from hospital. In the year ahead, we will increase the places for pre‑school rehabilitation services from 3,000 to 7,000 and the number of community care service vouchers from 3,000, as from early this year, to 6,000. The Government is ready to allocate more resources in order to achieve the target of zero waiting time.


Ageing and dilapidation of buildings is another issue that has plagued the public for a long time. At present, there are over 5,000 residential and composite buildings aged above 50 years in Hong Kong. Without timely inspection and maintenance, they will pose hazards to both the residents and passers‑by. To further safeguard public safety and to assist owners in need, the Government will launch Operation Building Bright 2.0 at a cost of $3 billion. The Government will devote another $2 billion to subsidise old buildings to meet the fire safety requirements under the Fire Safety (Buildings) Ordinance. The Development Bureau and the Security Bureau will take forward these two schemes in collaboration. The Urban Renewal Authority is setting up a one‑stop Building Rehabilitation Platform to provide comprehensive assistance to owners.


To secure public support for the Government, we must adopt a people‑oriented approach and be attentive to the needs of the people. Thus, we have put forward an array of initiatives in this regard in the Policy Address, including:

     (1) providing a recurrent Air‑conditioning Grant for public schools starting from the next school year so as to provide a more comfortable teaching and learning environment for teachers and students in hot weather;

     (2) providing more assistance for patients with uncommon disorders, including providing subsidies for specific drug treatments according to individual patients’ special clinical needs as well as subsidies for eligible patients to participate in compassionate programmes of individual pharmaceutical companies;

     (3) significantly enhancing the Low‑income Working Family Allowance Scheme whereby, for a four‑person household with two eligible children, the monthly payment will increase by 23% from the current $2,600 to $3,200 if the monthly household income is $19,000 or below and the total monthly working hours of all household members are not less than 192;

     (4) setting up a Special Needs Trust for parents in need so that they can rest assured that their children with intellectual or other disabilities will receive proper care through the use of the assets they left behind after their departure;

     (5) proposing to increase the statutory paternity leave from three days to five days and commencing a study and the related work on extending the duration of the 10‑week statutory maternity leave;

     (6) doubling the number of internship places in government departments for students with disabilities from 50 to 100 a year, thereby enhancing their competitiveness when they enter the work force;

     (7) conducting a comprehensive review on the entry requirements relating to Chinese proficiency for all grades in the civil service so as to increase government job opportunities for the ethnic minorities;

     (8) resuming the construction of new public markets to offer wider choices of fresh provisions to the public, and improving the facilities and management of existing public markets, including expediting the installation of air‑conditioners;

     (9) establishing a Countryside Conservation Office under the Environment Bureau, drawing on the experience of the countryside conservation efforts in Lai Chi Wo, to co‑ordinate conservation projects in remote countryside areas. The initiative will not only protect natural ecology and cultural resources, but also promote eco‑tourism; and

     (10)   taking the lead, including providing subsidies, to encourage telecommunications companies to extend the fibre‑based network to villages in remote locations. It is estimated that about 170,000 villagers in about 380 villages currently without high‑speed broadband network coverage will benefit.


During my election campaign, I pledged to connect with young people. As stated in the Policy Address, we will strive to do our best in youth development work by addressing their concerns about education, career pursuit and home ownership, and encouraging their participation in politics as well as public policy discussion and debate. Education is the key to nurturing talent, and Government expenditure on education is the most meaningful investment for our future development. I proposed during my election campaign an immediate increase of recurrent education expenditure by $5 billion a year. This was much welcomed by the community.  Various quality education initiatives funded by the $3.6 billion allocation are being launched progressively starting from this school year. As to how the remaining $1.4 billion recurrent funding should be put to good use, the Government will examine the relevant issues and continue to discuss with the education sector. We will also provide additional resources where necessary. We need to carry out in‑depth reviews on eight key areas of education, including professional development of teachers, curriculum arrangement, assessment system, vocational and professional education and training, self‑financing post‑secondary education, school‑base management, parent education and University Grants Committee’s funding on research and student hostels. The Education Bureau will set up task forces this year to take forward the reviews on these various areas. Under the principles of “Led by Professionals” and “Listening to Views Directly”, we will invite education experts, including professionals with good knowledge of the situation of frontline teachers and student learning, to participate in the work of the task forces.


As regards encouraging young people to participate in public policy discussion and debate, we will appoint more young people to various government committees with the aim of increasing the overall ratio of youth members to 15% within the current‑term Government. As a start, we will invite young people to become members of selected boards and committees in areas such as youth development, I&T and the environment by self‑recommendation through the pilot member self‑recommendation scheme. We will soon start the recruitment of 20 to 30 young people aspiring to pursue a career in policy research as well as policy and project co‑ordination to join the proposed Policy Innovation and Co‑ordination Unit on a non‑civil service contract basis, so that they can gain experience in public administration and the voices of young people can be heard at senior levels of the Government.


Conclusion with a vision
Honourable Members and fellow citizens, my vision is for a Hong Kong of hope and happiness – a city we are all proud to call our home. I see a vibrant international metropolis that is just, civilised, safe, affluent, enjoys the rule of law, compassionate and well‑governed. To achieve this vision, we need to have a society that is united, harmonious and caring. This vision is not, in reality, that far off. In fact, it has been Hong Kong’s way to success for more than half a century. We have not lost our intrinsic advantages. Hong Kong people are still brilliant and the Hong Kong spirit has not been eroded. As the lyrics of Hong Kong Our Home, the HKSAR 20th Anniversary Theme Song, go:

     “We’ve built wonders through hard work
     Believing in ourselves evermore
     That’s why I treasure Hong Kong
     That’s why I appreciate Hong Kong.”

As long as we can achieve consensus, and capitalise on our strengths, the best of Hong Kong is yet to come!


Let’s connect for hope and happiness!


This is a translation of the Policy Address speech delivered by Chief Executive Carrie Lam at the Legislative Council on October 11.

via Moroccan Trader Envisioning hope, happiness for HK

Celebrating HK-Japan ties

Chief Executive Carrie Lam

It is a pleasure to join you for the opening ceremony of the Japan Autumn Festival in Hong Kong. The festival was launched last year, and with great success. That inaugural festival brought Hong Kong together. More than 180,000 people took in the 140 events over the course of the festival’s two-month run last year.


This year’s festival gets going today and continues through in the next two months, when the legendary Japanese rock band Anzenchitai takes the stage at AsiaWorld-Expo as part of the group’s 35th Anniversary Tour. In between, we’ll get our full fill of Japanese culture, everything from art exhibitions and sports specials to events spotlighting the surpassing joys of Japanese food and beverages – the latter ranging from beer to sake to whiskey.


There’s more, including a film festival devoted to a dozen of the great Akira Kurosawa’s movies which delights me as I am an admirer of this great master’s films and have actually watched almost every one of them. And, of course, a wide range of Japanese brand products and services will be on show throughout Hong Kong.


For most of us, the Japan Festival never really ends. Japanese culture and lifestyle are embraced year-round here, and in so many ways – from the ever-popular sushi and ramen restaurants that call Hong Kong home, to Japanese performing arts groups, the automobiles that light on our roads, the appliances in our homes, and the wealth of Japanese food products that fill our fridges, tables and stomachs.


Our love for all things Japanese is visible, too, in the huge, and growing, number of Hong Kong people visiting Japan. Last year, more than 1.8 million of us took in the cultural delights of Japan.


That, I should add, was up some 21% over the previous year, which was up a remarkable 65% over the year before that.


Hong Kong is among the favourite destinations of Japanese travellers. In the first half of this year, we welcomed about 580,000 Japanese visitors, up 17%, year-on-year. This continuing stream only feeds the friendship and understanding that have long marked relations between our two peoples.


Business ties are no less important, no less rewarding. Last year, Japan was our fourth-largest trading partner and Hong Kong is Japan’s eighth. The trading of Japanese food is perhaps the most noteworthy. With a population of only some seven million, we have been Japan’s largest export market for food and agricultural products for 10 years, accounting for about a quarter of Japan’s total export.


And Japan was Hong Kong’s ninth-largest source of inward direct investment in 2015, with a value amounting to US$29 billion. That investment speaks of capital, of course. But also of business strategy. And with well over 650 Japanese regional headquarters and regional offices here, that strategy is clear: Hong Kong is their gateway to business opportunity in the mainland of China and throughout the Asian region.


Autumn is a brilliant time to visit Japan, with the leaves in flashing colours as we can see from the backdrop and the country’s popular hot springs that are much more alluring in the fresh seasonal air.


Autumn is no less attractive in Hong Kong. For hiking in the hills and along our seashores. For good-time events such as the international Wine & Dine Festival. For the return, in early December, of the Hong Kong ePrix, the opening event of the Formula E racing season. The Japan Autumn Festival in Hong Kong, the second year in a row, has naturally enriched our events calendar.


Chief Executive Carrie Lam gave these remarks at the Japan Autumn Festival in Hong Kong – Rediscovering Nippon opening ceremony on October 10.

via Moroccan Trader Celebrating HK-Japan ties