27 Oct 2000
Keynot address by Mr Peter K.C. Woo
Introduction: An exciting new era
Mr Miner, Deputy Consul-General Shen, Mr Conley, Mr Tang, Mr Oran, Ladies and Gentlemen,
Thank you for inviting me to speak. I'm delighted to be back in the great city of Chicago. I first came here over 35 years ago when I was a college student and have visited many times since but this is my first time as Chairman of the Trade Development Council (TDC).
Facts have overtaken doubts about Hong Kong's post-1997 future as a Special Administrative Region of China. You can experience this by walking in our streets, talking to our people and reading our feisty newspapers. With each passing day we lengthen our successful track record as a free, open, tolerant society under the rule of law, as promised under "One Country, Two Systems".
Hong Kong has a new dynamism, brought on in part by China's imminent entry to the World Trade Organisation (WTO).
It is estimated China's trade with the world will double in the first five years after accession. Hong Kong has a strong "first mover" advantage in the mainland market, one we wish to share with American companies.
For the first time, Hong Kong is also able to look upon the mainland as a domestic market for goods and services, one of continental scale and promise. This is exciting. For as the United States and Japan have proven, no economy can totally succeed in global trade without a domestic market.
Hong Kong's rebound
With 8.5 per cent GDP growth forecast this year, Hong Kong is rebounding from Asia's economic crisis. Exports of goods and services have resumed their historical trend of growth. (Trade with the US surged 14 per cent in the first eight months of this year). Investments have returned. Operating costs have come down and our economic base is firmer now than before.
This is plain from the number of multinational firms that choose Hong Kong for their regional headquarters and offices. At last count there were 2,500 - far more than in any other Asian city -- of which nearly 500 were from the US. It is an added bonus for us that some MNC executives posted to Hong Kong choose to stay on as expatriate entrepreneurs in their own right.
Recent research undertaken for the Trade Development Council indicates that Asia represents five to 10 per cent of global sales for many Western multinationals. A large proportion would like that figure to reach at least 25 to 30 per cent by the year 2005.
Hong Kong's "triple play"
I'd like just to share my own thoughts on where Hong Kong fits in to this dynamic scene and to tell you the Hong Kong story.
Well, this has been World Series week, so particularly for the baseball fans present, let me characterise Hong Kong as a triple play. Of course, everyone dreams about a triple play. But the real excitement lies in its successful execution.
For the first play, which began 50 years ago, Hong Kong manufactured in Hong Kong and sold to the world. In the 1980s, as China began to open up, Hong Kong manufacturers moved most of their production to the mainland and expanded their output in quantum leaps. It gave us our double play: manufacturing in China and selling to the world.
In just over 20 years, this double play promoted Hong Kong rapidly from number 23 (1978) to number 10 (1999) in terms of trading territories. More importantly, our businesses have gained critical mass and moved up the value chain.
Now, with China's WTO accession we have a triple play: Hong Kong and our partners manufacturing on the mainland, selling to the world and selling to the mainland.
Each phase has brought Hong Kong closer to the consumer. Initially, we functioned as an OEM base making other people's products to their specifications. Now we are moving towards ODM and branding of our products.
We are also fast evolving our considerable capabilities in customisation and
consumer-driven production. As Hong Kong companies move up the value chain and
grow, they also see the stock market valuation of their businesses jump
We offer a dynamic platform for global production, distribution and customisation in Asia. Capitalising on this platform, entrepreneurs that sell to the world from Hong Kong also produce goods on the mainland and, soon, will sell more to the mainland. This is Hong Kong's new paradigm.
An entrepreneurs' haven
We have in Hong Kong both the entrepreneurial skills and the conditions to propel us to this higher level. We are a haven for entrepreneurs and it is crucial to understand why.
Most of Hong Kong's trade is done by some 300,000 small and medium-sized enterprises (SMEs). They are our champions in world markets. A high percentage operate across two or more international boundaries. They are strongly disposed to international partnerships and global alliances. In fact, for the next five years and beyond, they are actively seeking quality strategic partners. TDC's mission is to help them realise this goal. Hence my visit.
Two key elements underpin Hong Kong's entrepreneurial prowess: low taxes and our position as Asia's premier hub for trade finance. Let me explain.
First, not only are Hong Kong's flat taxes reckoned to be the lowest in the region, there is no capital gains tax, no dividend tax, no tax on overseas income and no estate duty tax on non-Hong Kong assets. (Hong Kong was founded by Scottish merchants and you know how they feel about taxes.)
Think about it. You work hard, you work smart, you make money and you can keep the money. Government keeps a respectful distance from the hip pocket, leaving real economic power in the hands of individual entrepreneurs. This is a major incentive for them to succeed and a reason why Hong Kong's economy is constantly charged with creative energy.
Secondly, we can lay strong claim to being the world's best at trade finance. We have truly got it together: the availability of bank money; the logistics; the port, both air and sea, and Hong Kong's own world-class customs regime, which is both user-friendly and predictable. With this total package we offer the very best service and reliably facilitate killer applications of the "just-in-time" business model.
The three "ts"
I will leave this simple concept of the three "ts" with you -- triple play, tax advantage and trade finance, or in layman's terms: "opportunity plus money equals wealth creation".
I believe these three "ts" are what make Hong Kong unique and what makes it tick for overseas companies. They define our competitive edge. They explain why now, and in the future, we are much more than a middleman; much more than a gateway. Our entrepreneurs are working for themselves and with global partners to reach customers. This is the Hong Kong business platform of the 21st century.
TDC: A matchmaker
I would be remiss to close without mentioning the fourth "t" - the Trade Development Council. Perhaps I should say capital "t" now that I am working closely with TDC's highly professional executives.
TDC operates globally in close partnership with our Hong Kong stakeholders. For 30 of our 34 years we have had an office here in Chicago where Midwestern businesses, too, are our stakeholders. That is clear from every United Airlines ticket office, every McDonald's restaurant and every Caterpillar earthmover in Hong Kong. We would very much like to work more closely with you to actively seek alliance opportunities and trade opportunities. Equally, we are keen to have your input into how we can achieve this objective together.
We see the IT revolution as an accelerator for such alliances. At TDC, this is evidenced by growing use of our Internet trade portal, tdctrade.com, which receives more than 800,000 hits a day. This cyber marketplace is an indispensable tool for entrepreneurs at home and overseas to access valuable trade information, services and opportunities. Together with Hong Kong's leadership in international trade fairs --- made possible by the spectacular Hong Kong Convention and Exhibition Centre that Chicago architects helped to design -- we are truly Asia's most modern and global market-place. Let us be of service.
Even in this cyber era, nothing can beat Hong Kong as a physical experience. You are all invited to visit so you can feel for yourselves the energy that pulses through every aspect of life in our city.
From the moment you land at our ultra-modern airport, Hong Kong is a city of unforgettable images: the mountains, country park and tracts of water that flash past as you head for town; the cats cradle of suspension bridges that carry you into the urban area; the sea terminal that serves the world's busiest container port and the island of Hong Kong that appears over the horizon like a new Emerald City. I promise you a most uplifting experience.
That great American philosopher, Woody Allen, once said, "80 per cent of success is showing up." I am sure new waves of American entrepreneurs and enterprises will do more than just show up in Hong Kong. I am sure they will be successful. And their success is, of course, Hong Kong's success.