Building a Stronger Hong Kong
Outgoing Chairman Stephen Ng celebrates Hong Kong’s robust economy and welcomes the GBA and Belt and Road initiatives at the Chamber’s Annual General Meeting. Following is an abridged version of his speech.
What a difference a year makes. In Hong Kong, we have a new Chief Executive, a stronger economy, a record budget surplus, a hot stock market, a booming property market, a weaker currency, revival of the hospitality and retail sectors, the Belt and Road and the Greater Bay Area.
And to the world, with a trade war threatening, tension in the Middle East rising, that in the Far East morphing rapidly, interest rates creeping up, election surprises, and much more.
Back to your Chamber, at the start of 2017, we took the conscious decision to lobby the Government to go back to basics in our submission for the Policy Address and Budget. We were concerned that the onslaught of new regulations and populist demands were punishing businesses.
Against this backdrop, 2017 got off on a less than optimistic note. But the rapidly improving domestic economy and recovery of international business markets began to pick up steam. On the domestic side, the low headline inflation rate of 1.5% YoY helped to keep a lid on costs, and the lowest unemployment rate for 20 years buoyed local consumer sentiment. The growth of private consumption expenditure quickened to 5.4% in real terms in 2017. Our tourism sector also recovered, growing 3.2% to reach 58.5 million visitors.
Further afield, Hong Kong’s total exports of goods grew by 5.9% in real terms in 2017, while exports of services grew by 3.5%, after a decline of 3.4% in 2016. And more companies opened shop here, with 42,723 more businesses on the Companies Registry’s books compared to the previous year. For Hong Kong as a whole, the economy grew by 3.8% in 2017. We also finished the year with so much money in our coffers that the Government didn’t know what to do with it.
Our successes were not a result of luck alone. They were the fruit of hard work that we all put in day in, day out. Many economies around the world would love to have the same problems that we have, such as full employment, almost 60 million tourists, and overflowing coffers. We have worked extremely hard to build Hong Kong into the thriving, open and inclusive business and financial hub that it is today.
Yet worries about the uncertainties around the world have caused grave concerns for many, and threaten to jeopardize our progress. The threat of tit-for-tat sanctions between the U.S. and Mainland China reinforced our belief that closed, protected markets often hurt those they aim to help.
We must continue to explore new markets and opportunities, and not least reinforce Hong Kong’s competitiveness. I am pleased to report that some progress is being made on that front. For example, after years of lobbying, our proposal to implement a two-tiered profits tax system was embraced by the Government. This will not only be a huge boost for SMEs, it will also encourage more start-ups to start businesses, and attract investors.
Overall, I believe our proven consultation process reaps dividends for members and Hong Kong. Through the efforts of our committees and members, we presented your views in clear, constructive proposals which in general were well received by the Government. While we are making steady progress, we are aware that we cannot let down our guard. I can assure you that the Chamber will relentlessly lobby governments, policy makers, regulators and the public to safeguard the interests of the business community.
Not least of these is the issue of manpower. At our CEO Manpower Conference in October, we lobbied the Chief Secretary for Administration to take up our suggestions to ease the labour shortages or provide solutions. We understand labour importation is a prickly subject, but the current labour import schemes are not fulfilling Hong Kong’s manpower needs and are stalling Hong Kong’s development. We welcome the newly-announced Technology Talent Admission Scheme but much more needs to be done.
We will also need to be prepared for the opportunities presented by the Guangdong-Hong Kong-Macao Greater Bay Area plan. Our China Committee organized almost monthly visits to key cities in the Greater Bay Area, to help members understand more about the development and opportunities of the area.
Further afield, the opportunities being created under the Belt and Road Initiative, and the recently signed Free Trade Agreement with ASEAN, will allow businesses to diversify their markets as well as risks. We will continue to urge the Government to negotiate other free trade agreements, as well as double taxation agreements, with other economies to open new opportunities.
We are living in an extraordinary time. While yes there will be obstacles along the way, they are not unsurmountable. I believe we are on the cusp of what potentially could be one of the strongest economic cycles that Hong Kong has seen for decades. It is up to us to make sure we do not miss the boat.
Getting the Business Message Across
Shirley Yuen, CEO, HKGCC
You have probably seen the Chamber in the media a lot more than usual recently as discussions on the MPF offsetting issue heat up. We have been fighting in members’ corner for employees, employers and the Government to all work together to shoulder the burden of retirement protection, instead of just businesses.
Another crucial issue has been lobbying the Government to take bolder steps to address the acute labour shortage.
Our lobbying efforts saw a number of successes, with the Chief Executive taking up our idea for a two-tiered profits tax structure, which is now in effect. We also lobbied the Government to tap the expertise of the private sector to quickly identify and resolve problems relating to outdated, duplicate or contradictory regulations.
Some progress is starting to be made, however, as the Government recently set up a joint subcommittee taskforce on building, planning and lands with private sector participation. We look forward to similar initiatives being rolled out to address regulatory and inefficiency problems in other sectors.
To help members better understand the changing regulatory and business landscape, we organized over 300 events, 100-plus committee meetings, and hosted around 120 incoming visitors in 2017. We organized the Joint Business Community Luncheon with the new Chief Executive Carrie Lam speaking to over 1,300 business people, half of whom were HKGCC members. We also invited around a dozen of her new cabinet secretaries to speak to members on the new Administration’s policy direction at our Town Hall Forum Series.
At our C-suite CEO Manpower Conference, some of the leading innovators in technology development and implementation, such as NEC, Siemens, IBM and DHL, shared how technology will reshape the future of work. We also partnered with dozens of local and international chambers and Consulates to co-organize seminars, from Brazil and Chile to Indonesia and Japan, for members to expand their understanding and, hopefully, business in these important markets.
With the Greater Bay Area being potentially the most significant development to impact Hong Kong’s business environment for decades, we organized regular visits to GBA cities, and invited officials to Hong Kong to speak to members on business and investment opportunities.
But it wasn’t all serious business. Our regular cocktail receptions with Consuls General in Hong Kong and Mainland officials allowed members to make very useful contacts with senior officials. Our Young Executives Club, and Women Executives Club mixed business with pleasure by organizing an extremely diverse range of events for members.
Although we have come a long way in the past year, we are acutely aware that the business environment is undergoing a transformation. These changes will bring some disruption and challenges. However, by embracing change we can progress and improve. And your Chamber will be making sure members and Hong Kong make the most of these changes.
Building Bridges For Business
Jeffrey Lam, HKGCC LegCo Representative
Since the beginning of 2018, mounting trade tensions between China and the United States, continuing unrest in the Middle East, and the start of a rate hike cycle in the U.S., have all increased the number of uncertainties in the global economy. It remains to be seen if and when an economic downturn will hit Hong Kong.
As a small and externally-oriented economy, Hong Kong is very susceptible to the impact of global trade fluctuations. With Mainland China’s stable economy, and the potential of the Belt and Road Initiative and the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), Hong Kong is in an enviable position to leverage both the Mainland opportunities and engage markets globally.
With a population of 68 million, a combined GDP exceeding US$1.4 trillion, and home to 17 Fortune 500 headquarters, the GBA – comprising the nine Mainland cities and two SARs – possesses huge potential.
I led a 30-member delegation from four committees of the Legislative Council to the GBA last month. The trip was very fruitful as members from different sectors and districts got first-hand insights into the latest planning and development of the region. With the Hong Kong-Zhuhai-Macao Bridge and the Guangzhou-Shenzhen-Hong Kong Express Rail Link coming into operation later this year, economic and trade exchanges and the flow of people between Hong Kong and the GBA will be increasingly frequent and smoother. I will continue to listen to members’ views and, at both the government and council levels, push forward various policy initiatives beneficial to the development of the GBA.
Since the new-term SAR Government came into office, the Administration has proposed some “New Directions for Taxation.” These included the two-tier profits tax system, which the Chamber has championed for years, and additional tax deductions for research and development expenditure. I will continue to urge the Government to work on getting Hong Kong businesses and residents in the GBA “national treatment” to avoid double taxation.
Moreover, the SAR Government should roll out more measures to support local SMEs and encourage scientific research and development. Tax incentives to attract more overseas investors to Hong Kong would also be welcomed.
As a bridge between the business community and the Government, I will continue to deliver the voice of the Chamber to all levels of the SAR Government. I will also call on the Administration to foster a stable social environment and ensure Hong Kong continues to be one of the most business-friendly environments in the world.
Facilitating Cross-border Cooperation
PC Yu, Chairman, China Committee
In 2017, the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), and the Belt and Road gained a lot of momentum. As Hong Kong is a key player within the GBA, the business community attaches a great deal of importance to its development. Last August, the Chamber submitted its proposals to bolster the seamless, cross-border flows of capital, people, goods and services within the GBA to the HKSAR Government.
The China Committee also organized a number of GBA-related activities to help members gain a clearer understanding of its development and opportunities. These included visits to key cities in the GBA. Meanwhile, experts and enterprises from the banking, accounting, real estate and other sectors shared their analysis of the development in the region at Chamber seminars.
On the One Belt One Road Initiative, the committee has been following its progress closely since its launch in 2013. In the past year, various Mainland provinces and cities organized promotional roadshows in Hong Kong. The committee supported these events and informed members about opportunities for cooperation with these Mainland firms to jointly develop markets along the Belt and Road.
Since CEPA was implemented almost 14 years ago, additional liberalisation measures have been added to the agreement every year. Last year, with the signing of the Investment Agreement, the Mainland agreed to the Chamber’s proposal of providing national treatment to Hong Kong investments and investors in all non-services sectors, with the exception of 11 specific sectors.
To help members see for themselves the rapid developments unfolding in the Mainland, we organized eight missions in 2017, including our high-level mission to Beijing in December, led by Chairman Stephen Ng.
Within Hong Kong, the committee organized 23 seminars on a wide range of topics, from the Mainland’s tax and labour laws, to e-commerce trends, to the 19th National CPC Congress.
Helping members expand their Mainland connections is one of our key objectives. For example, last June, we hosted a cocktail reception celebrating the 20th anniversary of Hong Kong’s return to the motherland. We also supported 89 trade and investment events in Hong Kong hosted by various Mainland cities and provinces, and received 32 visiting delegations.
Creating a Greener, Smarter City
Douglas Woo, Chairman, Real Estate & Infrastructure Committee
2017 was a busy and fruitful year for the Real Estate and Infrastructure Committee. We worked closely with various government bureaus and departments on issues spanning land supply, town planning, housing and infrastructure development in Hong Kong.
A major aspect of the committee’s policy advocacy work in 2017 was the formulation of a Chamber submission in response to the Government’s consultation on the Hong Kong 2030+ Masterplan. The submission highlighted the Chamber’s support for a green, smart and liveable city, but also expressed the need to align various master plans and the need to address the chronic labour shortage faced by the real estate and infrastructure sector.
We also wrote to the Director of Planning with recommendations for improving the town planning process. These included calling for the establishment of a one-stop shop for the handling and vetting of planning applications to replace the decentralized system currently in existence.
One aspect of the committee’s brief is to alert and update members on recent developments in the industry. For example, on the issue of labour and skills shortages, the committee responded to this by organizing a number of talks on innovative and tech-related solutions to address this particularly prevalent issue.
In addition, the committee also held seminars on such topics as the adaptation of shopping malls to changing demographics and buying habits, market evolution of grade A office space, the Third Airport Runway and Hong Kong’s competitive positioning in the global urban landscape.
In the area of visits, the committee organized a number of well-received tours in 2017. These included visits to the Hong Kong International Airport, Hong Kong Housing Society’s senior housing project at Tanner Hill, the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link and the Construction Industry Council’s Construction Innovation and Technology Application Centre.
Over the coming months, the committee will be formulating responses to two important Government consultations to alleviate land shortages in Hong Kong.
Staying Competitive On Tax
Grace Tang, Chairman, Taxation Committee
The past year was a particularly busy and substantive one for the Taxation Committee as the new Administration put tax competitiveness high on its agenda. We are happy to see some meaningful developments, such as the introduction of a two-tiered profits tax and enhanced tax deduction for R&D expenses, both of which were championed by the Chamber.
In addition to providing technical input to the Government through its representatives on the Joint Liaison Committee on Taxation, the committee continued to contribute to the drafting of the Chamber’s Policy Address and Budget submissions. Through these, the committee sought to advance views and recommendations on such issues as maintaining a balanced budget, allowing loss carry-back and group loss relief, and incentivising the establishment of regional headquarters.
The committee was also responsible for formulating responses to a number of important government consultations. These included the proposed legislation on transfer pricing, prospective partners on Comprehensive Double Taxation Agreements and the proposed guideline on the keeping of significant controllers register.
The committee was also actively engaged in promoting among members understanding of and compliance with the latest taxation developments both abroad and at home. We achieved this by organizing forums, talks and workshops involving local and overseas taxation practitioners on such issues as Automatic Exchange of Information, tax regime on aircraft leasing, enhancing Hong Kong’s tax competitiveness, Trump’s tax cut plans, court-free amalgamations and tax audits.
Hong Kong’s simple tax system is one of the main reasons why we are consistently ranked as one of the most competitive economies in the world. However, that distinction is increasingly coming under threat as other jurisdictions go about slashing taxes. Combined with multilateral and unilateral initiatives by governments around the world to protect their own tax base, the operating landscape is filled with challenges.