Moving up the Value Chain

18.     Since our costs are higher than those of our neighbours, low-skilled and labour-intensive industries are no longer competitive.  Hong Kong cannot rely on them to provide the impetus for economic development.  We need to focus on high-value-added economic activities.  High added value is not the same as high technology.  High-value-added activities exist in every sector.  Of the many economic sectors in Hong Kong, I believe four are of particular importance, as they can foster the development of other sectors, give impetus to our economy, and create employment.  These four areas are financial services, logistics, tourism and producer and professional services.

Financial Services

19.     As an international financial centre, Hong Kong has a considerable edge.  We are renowned for our business in foreign exchange, securities and banking.  To develop further, our financial market needs to concentrate on two important areas.

20.     The first is to increase liquidity.  The Government will work together with the Hong Kong Monetary Authority, the Securities and Futures Commission, Hong Kong Exchanges and Clearing Limited and the financial services sector to attract more financial product issuers to Hong Kong, as well as capital and investors from the Mainland and overseas.  We are now streamlining procedures and lowering associated costs for the issuance of financial products, so as to facilitate market development and the introduction of new products.  For example, we are simplifying procedures for retail bond issues, and reviewing issuance and listing fees for derivatives.

21.     Second, we need to enhance our market system further.  We will continue to modernise our financial system and make it more user-friendly for investors, issuers and intermediaries through regular reviews.  We will ensure efficient and effective regulation in line with international standards in order to maintain our edge in the region.  The Securities and Futures Bill, which is in its final legislative stage, will introduce a series of measures to streamline the licensing system for intermediaries, increase market transparency, maintain a level playing field and facilitate product innovation.  When preparing the associated subsidiary legislation, we will continue to consult the public and the industry to ensure that such legislation is user-friendly.

Logistics

22.     Hong Kong's logistics industry enjoys many advantages.  We have the world's busiest container port, which handled nearly 18 million TEUs (twenty-foot-equivalent units of containers) last year.  The volume of international freight handled at Hong Kong International Airport was also the highest in the world, last year amounting to nearly 2.1 million tonnes.  The further development of our logistics industry depends on increase in speed and efficiency, as users often value these attributes more than cost.  In this respect, thanks to the efforts of the freight transport sector, the Airport and the government departments concerned, the transshipment time through Hong Kong of cargo shipped from the rest of the world to the Pearl River Delta has been reduced from two days to less than 24 hours.  Moreover, Phase 2 extension works at Lok Ma Chau Control Point are in full swing.  The Shenzhen Western Corridor, targeted for completion in 2005, is also under active planning, and upon completion will increase the capacity for vehicular cross-boundary trips by 44 000 a day.  Apart from enhancing infrastructure, the Government is re-engineering the customs process to speed up clearance, for instance by introducing "one-stop"  arrangements on a trial basis for trucks crossing via Lok Ma Chau Control Point.  The Logistics Development Council is studying the use of information technology to establish a common platform to facilitate data exchange among participants in the logistics industry, including consignors, transport companies, the Customs and Excise Department, banks and container terminal operators.

23.     To foster the further development of our logistics industry, we have to expand Hong Kong's cargo catchment area and we will encourage logistics services providers to do so.  We also need to develop high-value-added logistics parks in order to attract enterprises to use Hong Kong to support low or even zero-inventory modes of production in the region.

Tourism

24.     Last year, over 13.7 million visitors came to Hong Kong, with those from the Mainland registering strong growth of over 17%.  With the rebound of tourism in Asia, Hong Kong will remain the first choice for many.  To promote tourism, we must develop more attractions and improve our facilities.  We must also develop different types of tourism, such as business tourism linked with exhibitions and conferences, and family, ecological and cultural tourism.

25.     In addition to our existing first-class convention and exhibition facilities, we plan to build a new international exhibition centre at the Airport.  Upon its completion, this new facility will attract many more business visitors to Hong Kong.  Meanwhile, Ocean Park is introducing new attractions, and the construction of Hong Kong Disneyland is progressing well.  These theme parks, as well as the proposed Tung Chung cable car project on Lantau Island, will help cater for family tourism.  Hong Kong is endowed with scenic country parks, hiking trails and nature conservation areas.  They provide a good foundation for the development of ecotourism.  We are also well-equipped to promote cultural tourism.  As the city where East meets West, Hong Kong has attractions as diverse as Temple Street and Lan Kwai Fong, or Wong Tai Sin Temple and Murray House, which form strong and colourful contrasts.  The concept plan for an exciting new cultural zone in West Kowloon has been selected through international competition.  We will soon start detailed planning for its early construction, to provide new attractions for local residents and tourists alike.  Alongside these, we have one of the greatest attractions of all: our fine cuisine.  China has a venerable culinary tradition and Hong Kong enjoys a reputation as a gourmet paradise.  We need to make every effort to retain that accolade.

26.     Together we must welcome our visitors with hospitality, courtesy and sincerity.  I am pleased to note that improvements are taking place.  Every citizen, shop and restaurant is a Tourism Ambassador for Hong Kong.  We must give our guests a value-for-money experience so that they will all want to come back again, and tell their relatives and friends that Hong Kong is a uniquely vibrant and charming destination.

27.     Promoting inbound tourism does not merely bring economic benefits: it also helps us to rediscover Hong Kong's attractiveness.  Tourism enriches the flavour of Hong Kong, and encourages us to cherish our heritage and develop our cultural traditions.

Producer and Professional Services

28.     Another force driving economic development is producer and professional services.  As the Mainland, our hinterland, opened up, this permitted our industries to expand their production base and increase their competitiveness.  In this process, our industries have moved up the value chain, from a low-value-added and labour-intensive production mode to a high-value-added and technologically-based one.  That is why we have, in recent years, witnessed rapid expansion in producer services such as import and export, transportation and warehousing, trade financing, insurance, accreditation and testing, research and development, product design and market research and promotion.  In addition, Hong Kong has a steadily-growing professional services sector, including legal, accounting, engineering, advertising, consultancy, public relations and design services, which provide services to clients in Hong Kong, the Mainland, and throughout the world.

29.     To advance further up the value chain, enterprises in Hong Kong need to devote more resources to research and development, become more innovative and make wider use of technology, especially information technology, to add value to their services.  Such research and development work includes helping the manufacturing industry to introduce more sophisticated and efficient production techniques to enhance productivity and competitiveness.  One way is by accelerating the evolution of the production mode from Original Equipment Manufacturing to Original Design Manufacturing and thence Original Brand Manufacturing by means of design and product innovations and use of new materials.  Such activities can generate many other high-value-added industries and businesses, for example the design of integrated circuits.

30.     We have set up steering committees to promote development in each of these four important economic sectors.  I have been overseeing their work personally and will see to it that good progress is made.  In Hong Kong, there are many other industries with good potential, such as applied technology, Chinese medicine, film, music, publishing, fashion and construction.  Their concerted efforts will give further impetus to our economy.