Hong Kong: Speech by CS at the Institute of Directors City Branch Meeting in London (English only)
Following is the speech by the Chief Secretary for Administration, Mrs Carrie Lam, delivered at the Institute of Directors City Branch Meeting on November 14 (London time):
Distinguished Guests, Ladies and Gentlemen,
It is a great pleasure to be here in London, a city with such strong links to my home, Hong Kong.
First of all, I would like to thank the organisers and sponsors for making this event happen and for bringing us all together today. Thank you all for coming.
I am delighted to have this opportunity to discuss with you the opportunities for services, not only in Hong Kong but also in Mainland China via Hong Kong.
Allow me to get the ball rolling for our discussions with a few words about the state of play for our professional and legal services in Hong Kong.I will also highlight Hong Kongs gateway role for overseas firms to reach markets in Mainland China.
To borrow a well-used phrase from our friends in the real estate sector, Hong Kong has three great advantages, they are: location, location and location.
Our city emerged from humble beginnings by serving as a key port at the crossroads of trade between Western and Eastern markets. Our natural deepwater harbour was, is, and will continue to be one of the busiest seaports in the world.
At the same time, we are situated on the southeastern tip of China. Our immediate hinterland is the Pearl River Delta region, which is often referred to as the worlds factory because of its enormous industrial output.
As you may know, Hong Kong has a knack of being able to move with the times, and this includes our cross-boundary infrastructure development. Currently, there are several major infrastructure developments under way. They include a massive 29.6-kilometre bridge that will connect Hong Kong with Macau and Zhuhai in the western part of the Pearl River Delta. Also under construction is a 140-kilometre express rail link (the Hong Kong section of the XRL is 26 kilometre.) which will take one from its terminus at West Kowloon to Shenzhen in 14 minutes and Guangzhou in 48 minutes and more importantly, plug into the high-speed rail network in Mainland China.
To provide more convenient access to the half a million cross-border passenger trip by land, a 7th land crossing point on the eastern part of the eastern part of New Territories will be completed by 2018. On the aviation side, Hong Kong International Airport is the worlds busiest cargo gateway (which handled 3.9 million tonnes of cargo in 2011) and among the 10 busiest airports for passenger traffic (which welcomed 54 million passengers in 2011). It connects with around 170 destinations worldwide, including about 45 destinations in Mainland China. The Airport Authority Hong Kong (AAHK) is pursuing the midfield expansion project to increase the handling capacity of the airport to 70 million passengers and 6 million tonnes of cargo, which is expected to cope with air traffic demand in the medium term, i.e. up to 2020. To cater for the air traffic demand in the long run, we have given in-principle approval for AAHK to adopt the three-runway system as the future development option for HKIA for planning purpose. Under the three-runway system, the practical maximum capacity of the airport can reach 620,000 flight movements per year, accommodating about 97 million passengers and 8.9 million tonnes of cargo a year.
I mention all this, not just because it highlights how Hong Kong is making the most of its great location, but because it shines a light on our citys plans for the future and, we predict, the huge potential for our services-oriented economy.
According to our latest figures, some 7,250 overseas and Mainland firms have operations in Hong Kong. Over half of these companies use our city as a base for their operations throughout Asia. Hong Kong is their front office providing a full range of services that underpin business success regionally.
Hong Kong is also an international financial hub in the Asian time zone. We are consistently ranked alongside London and New York in the top three of the City of London Global Financial Centres Index.
Naturally, we could not have come this far, nor could we expect to meet our citys future goals with bricks and mortar alone. Our focus is on developing a highly-competitive services-oriented economy. Under the principle of One Country, Two Systems, Hong Kong has a unique opportunity to become Mainland Chinas services gateway to the world.Under One Country, Two Systems, Hong Kong maintains its own currency.The Hong Kong Dollar has been pegged to the US Dollar since 1983. We have our own common law legal system which is based on the English system. We also have free flows of capital, information and ideas. All this generates business activity and raises the quality of living.
Allow me to zero-in on the opportunities for legal services. Hong Kong has established itself as a leading centre for dispute resolution in the Asia-Pacific region. This has been achieved on the foundation of a sound legal system and deep and broad pool of legal expertise. We also have full support from the Central Government in Beijing in promoting our legal services across the boundary in Mainland China.
Hong Kongs strong legal framework has its roots in the common law system which we inherited from the British more than 150 years ago. Since Hong Kongs return to China in 1997, we continue to practise the tried and trusted common law system in Hong Kong. In fact, our city is the only common law jurisdiction in China. This advantage is made possible by the One Country, Two Systems formula. It is also enshrined in our constitutional document, the Basic Law.
Over many years, our judiciary has gained a well-earned reputation for quality, independence and respect for the rule of law.
The legal profession as a whole in Hong Kong comprises almost 8,600 local lawyers and 1,300 foreign lawyers from 28 jurisdictions. Many renowned international law firms have set up branch offices in Hong Kong. As you would expect in a vibrant and diverse city such as ours, legal expertise covers all areas from commerce and finance, to maritime and civil law, to intellectual property and commercial contracts.
In 2009, the Judiciary introduced the Civil Justice Reform. This has helped to make court proceedings more cost-effective and less complicated, and improve efficiency of the justice system.The reforms promote greater use of alternative dispute resolution, including arbitration and mediation.
We recently enacted a new Mediation Ordinance and the new Arbitration Ordinance, which are in line with international best practices. They provide a strong legal framework for resolving commercial and contractual disputes in a cost-effective, fair and speedy manner.
The new Arbitration Ordinance reinforces the advantages of arbitration, including respect for the parties autonomy. It also protects confidentiality in arbitration proceedings and related court hearings.
Importantly, arbitral awards made in Hong Kong can be enforced in over 140 State parties to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. We also have an arrangement with Mainland China on reciprocal enforcement of arbitral awards that has been in place since 1999.
We are currently finalising an arrangement on mutual recognition and enforcement of arbitral awards with the Special Administrative Region of Macau.We are also exploring the possibility of concluding a similar arrangement with Taiwan. These initiatives would complete Hong Kongs enforcement network covering Greater China.
The Hong Kong International Arbitration Centre is our home-grown arbitration body. It was established in 1985 and is fully independent and free from government interference.
We also received a huge vote of confidence from the international legal community in 2008. That is when the International Court of Arbitration of the International Chamber of Commerce, which is based in Paris, opened its first branch of Secretariat in Hong Kong.
And in September this year, the China International Economic and Trade Arbitration Commission (CIETAC) established its first branch in Hong Kong, and the first anywhere outside the Mainland.
With these three institutions, Hong Kong offers excellent choices as an arbitration venue.
Now, allow me to expand on the opportunities in Mainland China.
As well as our close proximity to the Mainland, we also have a one-of-a-kind free trade pact called the Mainland and Hong Kong Closer Economic Partnership Arrangement, or CEPA. Under CEPA, Hong Kong is an ideal neutral venue for settling Mainland-related disputes.
CEPA is the only case of a city having such a pact within its own country. This is possible because, under One Country, Two Systems, both Hong Kong and China are separate members of the World Trade Organisation.
CEPA has opened a main door to the legal profession in Hong Kong. Hong Kong lawyers enjoy preferential treatment in their associations with Mainland law firms and can gain access to the vast legal services market in provinces throughout China.
For example, under CEPA, Hong Kong permanent residents, who are Chinese nationals, may sit the National Judicial Examination (NJE).On passing the NJE, they can apply for a certificate of legal profession qualification and may go on to engage in non-litigation legal work in Mainland law firms.
We are exploring new initiatives to further develop closer co-operation between the legal professions of the Mainland and Hong Kong.Under the latest Supplement to CEPA, Hong Kong law firms that have set up representative offices in the Mainland are allowed to operate in association with up to three Mainland law firms. Currently, there are 71 representative offices established by Hong Kong law firms in 14 Mainland cities.
I have gone into some detail on this topic because I want to emphasis how CEPA works and the thinking behind it.It is not just about lowering barriers to trade (which of course CEPA does), it is also about exchanging knowledge and ideas, bringing opportunities to people, promoting understanding and raising industry standards.
CEPA is also nationality-blind. In other words, foreign firms including British companies that are incorporated in Hong Kong, can enjoy the same benefits as local Hong Kong firms.
CEPA covers a total of 48 services areas.As well as legal services, they include other key areas such as trade, logistics, mining, conventions and exhibitions, banking and accounting, just to name a few.
Now, let me introduce another initiative that we expect will have a profound influence of the development of services in Hong Kong and in Southern China. This initiative is the Central Governments Qianhai Development Plan. Qianhai is an area in the Pearl River Delta that is within an hours commute from Hong Kong, Macau and Guangdong.
The Qianhai Development Plan designates Qianhai as a Hong Kong/Guangdong modern service industry co-operation zone.This arrangement could facilitate early implementation of services co-operation to be implemented in Qianhai, before being expanded to the rest of the country.
This is a relatively new initiative that is picking up pace through ongoing construction and by firms setting up in Qianhai, so my advice is to watch this space!
This brings me to my final topic, which is financial services.
As I mentioned a little earlier, Hong Kong is an international financial centre alongside London and New York. Our strategic advantage is our location in the Asian time zone, midway between the trading day in the US and here in Britain.We are an important fixture in todays global 24-hour trading cycle.
Around 70 of the worlds 100 largest banks have operations in Hong Kong. They bring a great deal of financial expertise to our city from around the world.This has been particularly the case in recent years, amid the global financial crisis. We continue to see more finance professionals seeking opportunities in Hong Kong. Many of them come from the US or euro zone countries where the financial services sectors continue to feel strong effects of the economic downturn.
As the focus of the global economy continues to swing towards Asia, we are exploring fresh financial opportunities. A trend that is attracting attention here in the UK is the internationalisation of the Mainland China currency, the Renminbi. Hong Kongs transparent regulatory system, liquid capital markets and close links to Mainland China have placed our city in the hot seat for developing offshore Renminbi business. Hong Kong is Chinas most important city for international finance. We have grasped an opportunity in recent years to successfully introduce offshore Renminbi banking, Renminbi bonds and Renminbi trade settlement.
We have also linked up with London, through the Hong KongVLondon Forum to help develop offshore Renminbi business in western markets. May I also suggest that this collaborative approach to international financial development could be a sign of things to come in the post-financial crisis world.If so, Hong Kong will be a ready and willing partner.
Our financial services sector employs over 225,000 people, or just over 6 per cent (6.1%) of our total workforce. In 2011, the share of managerial and professional positions in the sector was relatively high at 36.7 per cent. That is compared to just over 17 per cent (17.6%) across all industries.
There are close to 5,000 Chartered Financial Analysts (CFAs) in Hong Kong.We have the largest society of the CFA Institute in Asia and fourth largest in the world.
The Hong Kong Institute of Certified Public Accountants (HKICPA) has around 32,000 members. More than 3,800 members hold practising certificates issued by the Institute.
Ladies and gentlemen, Hong Kong is fully engaged in promoting world-class services as a key to our citys competitiveness. This year, we retained our number one ranking in the International Institute for Management Developments (IMD) World Competitiveness Yearbook 2012. We scored particularly highly in the areas of business friendly environment, access to capital, openness to trade and effective rule of law.
These are some of the qualities that underpin the strengths and opportunities for our services sector in the months and years ahead.
I look forward to hearing your views on the topic and those of our distinguished speakers today.
Thank you very much.