IV. Diversified Economy
75. Hong Kong has been acclaimed as the world’s most open, freest and most competitive city by many international organisations5. Leveraging our unique strengths under “One Country, Two Systems”, we will continue to respect economic principles, uphold operation of the market and promote free trade. We will also strive to develop new areas of economic growth. The National 13th Five-Year Plan pledges support for Hong Kong to reinforce and enhance its status as an international financial, transportation and trade centre; develop its I&T industry; and establish itself as a centre for international legal and dispute resolution services in the Asia-Pacific region. The B&R Initiative of our country, as well as the Greater Bay Area development personally planned, deployed and taken forward by President XI Jinping have brought enormous opportunities for the economic development of Hong Kong. The HKSAR Government will do its best as a “facilitator” and “promoter”, seizing the opportunities to capitalise on Hong Kong’s strengths to serve the country’s needs, and seeking active liaisons with the world to explore more business opportunities.
Hong Kong’s Current Economic Situation and Outlook
76. I attended the World Economic Forum in Davos in January this year. While an optimistic sentiment prevailed at that time among heads of states and governments, chiefs of international organisations and economic commentators, the situation has changed after a few months. Amid the unstable and fluctuating international trade environment, coupled with the rise of unilateralism and the intensifying trade friction between China and the United States (US), Hong Kong cannot stay immune. The apparently inevitable dispute reminds us that Hong Kong, as an externally-oriented economy, must always remain vigilant and get ourselves equipped and prepared for responding to contingencies. At the same time, we must pursue the development of a diversified economy in order to enhance our capabilities in withstanding external shocks.
77. In the first half of this year, the Hong Kong economy grew strongly by 4% in real terms over the previous year, riding on the broadly positive global economic environment. Entering the third quarter, economic activities sustained solid expansion, with both external trade and local consumption continued to achieve notable growth. The labour market was in a state of full employment, with the unemployment rate staying at 2.8% in recent months, the lowest in more than 20 years. Income showed broad-based increases, among which, with the employment earnings of full-time employees in the lowest three income decile groups rose by 2.3% in real terms over the previous year after discounting inflation. Inflation largely stayed within a moderate range.
78. However, uncertainties in the global economy have increased markedly. As the trade friction between China and the US may persist or even escalate, international trade, financial markets and investment activities might be affected and the direct and indirect impacts on our economy will become more visible. Moreover, rising US interest rates have led to an increase in Hong Kong’s prime rate for the first time in 12 years. This, together with a possibly more volatile global financial environment, might impact on our economy and asset prices in the future. Given the limited impact of the trade friction between China and the US on our economy for the time being, and considering the actual outturn since early this year, the economy should still be able to attain 3-4% growth this year, which is higher than the average annual growth rate of 2.7% in the past decade. Yet, we must closely monitor upcoming changes in the economic environment so that we may respond swiftly and suitably.
Land and Manpower
79. Land and manpower are currently the two major bottlenecks in Hong Kong’s economic development, and they are not easy to resolve. The current-term Government will make every effort to provide sufficient land for housing and economic purposes through short, medium and long-term initiatives. We will also adopt a multi-pronged approach to ensure the sufficient supply of talent for the development of different sectors.
80. The Government is committed to enhancing our human resources planning to support the development of Hong Kong as a high value-added and diversified economy. The Human Resources Planning Commission, chaired by the Chief Secretary for Administration, is examining the manpower situation of various industries, the opportunities and challenges presented for them and co-ordinating relevant studies and analyses, with a view to exploring strategies for nurturing talent, unleashing the potential of local workforce and attracting outside talent. Our first Talent List promulgated in August this year covers 11 specific professions needed most for Hong Kong’s economic development.
81. Through the provision of additional resources and the updating of relevant policies and measures, the Government will nurture and attract talent for Hong Kong. On the I&T front, for example, the Government has progressively introduced various initiatives, such as the Postgraduate Programme Finance Scheme for Local Students, the Technology Talent Admission Scheme, the Technology Talent Scheme and the enhanced Internship Programme, to proactively attract and nurture scientific research talent. On maritime sector, we will inject $200 million into the Maritime and Aviation Training Fund to enhance the training and nurturing of industry talent. As for the construction industry, the Hong Kong Institute of Construction established this year offers well-structured and advanced programmes accredited by the Qualifications Framework to attract more young talent. As for legal services, the Department of Justice (DoJ) proactively supports legal professional talent in enhancing Mainland, regional and international co-operation and exchange, including arranging internships in international organisations, as well as participation in important legal conferences and training programmes in Hong Kong, for local young legal professionals. Moreover, in addition to engaging Senior Counsel/experienced junior counsel to prosecute some of the cases of complexity or sensitivity, the DoJ will also actively consider expanding the existing arrangement whereby counsel with less than ten years’ experience are engaged to act as junior counsel to the Senior Counsel/experienced junior counsel, so that more less-experienced counsel can gain precious experience and skills in case handling. The DoJ also plans to launch an understudy programme for less-experienced counsel to be engaged in civil law matters.
82. Over the past year, we have given full play to the functions in terms of Government-to-Government through establishing bilateral and multilateral ties to explore more opportunities for Hong Kong, promote our strengths and attract more overseas and Mainland enterprises, investors and talent to Hong Kong.
83. On the enhancement of economic and trade relations, the HKSAR Government has signed three free trade agreements (FTAs) with 12 economies (namely the ten Member States of ASEAN, Georgia and Macao Special Administrative Region) in the past 12 months. We have also concluded FTA negotiations with the Maldives, while our bilateral negotiations with Australia are ongoing. Building on the good foundation of the Strategic Dialogue on Trade Partnership and the joint statement on closer collaboration on trade and economic matters between Hong Kong and the United Kingdom (UK), we are exploring with the UK options for forging even closer economic ties, including the possibility of a FTA in future. We are exploring a FTA with the four members of the Pacific Alliance, namely Chile, Colombia, Mexico and Peru. Combined together, these four Pacific Alliance member countries account for nearly 40% of the gross domestic product (GDP) of the whole Latin America.
84. Besides, we plan to seek accession to the Regional Comprehensive Economic Partnership (RCEP) after completion of negotiations by ASEAN with relevant economies, in accordance with the terms on accession of new members therein. Apart from the ten Member States of ASEAN, other RCEP members are Australia, India, Japan, Korea, the Mainland and New Zealand. The combined GDP of these 16 economies represents nearly one-third of the world’s total. Joining the RCEP will enable Hong Kong to become a part of the largest FTA in the Pan-Asia region.
85. To attract foreign investors to Hong Kong and to protect overseas investments of Hong Kong businesses, Hong Kong has so far signed 20 investment agreements with foreign economies, covering most of Hong Kong’s major trading partners. We have completed negotiations with Bahrain, the Maldives, Mexico and the United Arab Emirates (UAE) respectively and will arrange for signing of the investment agreements after completion of the required internal procedures by both sides. Currently, negotiations with Russia are underway, and we will explore the possibility of commencing negotiations with Turkey.
86. To consolidate and enhance the status of Hong Kong in the international trade market, as well as to explore new business opportunities, in addition to our existing 12 overseas Economic and Trade Offices (ETOs), we are actively expanding the ETO network. The plan to set up the Bangkok ETO in Thailand as announced in my Policy Address last year has received high level of attention from the Thai Government with the relevant discussion concluded within a short period of time. Upon approval by the LegCo for funding and creation of the relevant posts, the Bangkok ETO is expected to commence operation in early 2019, following the coming into effect of the Hong Kong-ASEAN FTA and the investment agreement in January 2019 at the earliest. The ETO will become our third ETO6 in ASEAN and will further strengthen our bilateral ties with ASEAN. As regards the earlier proposed ETOs in India (Mumbai), Korea (Seoul), Russia (Moscow) and the UAE (Dubai), discussions are being held with the respective governments.
87. The Government has so far concluded comprehensive avoidance of double taxation agreements (CDTAs) with 40 tax jurisdictions. We hope to further expand our CDTA network, bringing the total number of such agreements to 50 over the next few years.
88. As the Chief Executive, I make every effort to promote bilateral and multilateral ties and raise Hong Kong’s international profile. After taking office in July last year, I attended a number of international conferences, including the Asia-Pacific Economic Co-operation Economic Leaders’ Meeting, the World Economic Forum Annual Meeting held in Davos, the Boao Forum for Asia Annual Conference and the Meeting of the United Nations Economic and Social Commission for Asia and the Pacific. I also paid visits to the UK, Switzerland, France, Belgium, Saudi Arabia, Singapore, Thailand, Vietnam, Myanmar and Indonesia etc., during which I reiterated the successful implementation of “One Country, Two Systems” in Hong Kong after our return to the Motherland, promoted Hong Kong’s strengths on various fronts and explored co-operation opportunities.
Enhanced Co-operation with the Mainland
89. The HKSAR Government will continue to enhance liaison with the various Mainland provinces, municipalities and autonomous regions through the five offices and 11 liaison units in the Mainland, as well as to introduce the latest development of Hong Kong to the Mainland enterprises and people, to establish platforms for direct communication between Hong Kong’s business sector and the relevant Mainland authorities, and to connect with Hong Kong people working, studying and living in the Mainland.
90. In the past year, the HKSAR Government has been actively exploring room for closer co-operation with the Central authorities and the municipal and provincial governments respectively. The scope of co-operation is no longer confined to trade, finance and investment, but has been extended to cover I&T, creative industries, youth exchanges etc.
Belt and Road Initiative
91. The Government has strived to grasp the opportunities brought by the B&R Initiative. At the end of last year, we entered into the “Arrangement between the National Development and Reform Commission and the Government of the Hong Kong Special Administrative Region for Advancing Hong Kong’s Full Participation in and Contribution to the Belt and Road Initiative” with the NDRC. Through the 26 collaboration measures laid down therein seeking to support Hong Kong’s full participation in and contribution to the B&R Initiative, we have established Hong Kong’s pivotal position in the promotion of the B&R Initiative by leveraging our strengths to meet the country’s needs. These measures cover six key areas in which Hong Kong have distinctive strengths and positions, namely finance and investment, infrastructure and maritime services, economic and trade facilitation and co-operation, people-to-people bond, taking forward the development of the Greater Bay Area, and enhancing collaboration in project interfacing and dispute resolution services. In June this year, the first B&R Joint Conference, establishing Hong Kong’s unique and direct communication mechanism with relevant Mainland authorities regarding the B&R Initiative, was held in Beijing. Furthermore, we have co-organised consecutively with the Hong Kong Trade Development Council three Belt and Road Summits since 2016. Within a short span of three years, the Summit has established itself as the largest and most important B&R commerce, investment and business matching platform for Mainland, overseas and Hong Kong enterprises.
92. Hong Kong has firmly established itself as the prime platform and a key link for the B&R Initiative. Riding on our various unique advantages, and in view of the opportunities and challenges, we have formulated a five-pronged B&R key strategy on continuous engagement with the Mainland and B&R related countries and regions. These themes include (i) enhancing policy co-ordination; (ii) fully leveraging Hong Kong’s unique advantages; (iii) making the best use of Hong Kong’s position as the professional services hub; (iv) promoting project participation; and (v) establishing partnership and collaboration. The Commerce and Economic Development Bureau (CEDB) plays a leading and co-ordinating role in promoting the B&R Initiative, and is in the process of recruiting the Commissioner for B&R to undertake the relevant work. The Professional Services Advancement Support Scheme administered by CEDB will continue to provide funding support for projects to enhance external promotion for our professional services and to better equip the professional services sector in seizing the opportunities and meeting the challenges brought by the B&R Initiative.
Guangdong-Hong Kong-Macao Greater Bay Area
93. This year marks the 40th anniversary of the reform and opening-up of the country. Under the theme of “Joint Development, Shared Prosperity”, the Government is organising activities for the public to look back on how Hong Kong has actively taken part in the country’s reform and opening-up over the past 40 years, and to look ahead on how Hong Kong and the Mainland may work together to expand the scope of co-operation and explore more opportunities under the country’s further reform and opening-up.
94. In July last year, President XI Jinping visited Hong Kong and witnessed the signing of the Framework Agreement on Deepening Guangdong-Hong Kong-Macao Co-operation in the Development of the Bay Area between the NDRC and the governments of Guangdong, Hong Kong and Macao. In the past year, relevant Central authorities and the governments of Guangdong, Hong Kong and Macao continued to proactively take forward work relating to the development of the Greater Bay Area.
95. On 15 August this year, I attended, as a member, the first plenary meeting of the leading group for the development of the Greater Bay Area convened by the Vice Premier of the State Council, Mr HAN Zheng, in Beijing. As I said at this meeting, “One Country, Two Systems” is a unique characteristic of the Greater Bay Area, as well as the key foundation for its internationalisation. In fact, leaders of the Central Government have repeatedly made it clear that in taking forward the development of the Greater Bay Area, we should, under the framework of “One Country, Two Systems”, strictly adhere to the country’s Constitution and the Basic Law, as well as stay committed to the basis of “One Country” and leverage the benefits of “Two Systems”.
96. The development of the Greater Bay Area will bring Hong Kong new areas of economic growth and the opportunity to enlarge the living environment of Hong Kong residents. With the commissioning of the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link, the HZMB and the new land boundary control point at Liantang/Heung Yuen Wai, a one-hour living circle encompassing Guangdong, Hong Kong and Macao is basically formed. Since last year, the Central Government has introduced a series of measures to provide facilitation for Hong Kong people living, working and studying in the Mainland, in particular the measure introduced by the State Council in August this year to allow Hong Kong, Macao and Taiwan residents to apply for residence permits, which has substantially enriched this living circle.
97. I will make good use of the Chief Executive’s membership of the leading group to explore and identify the economic, social and livelihood opportunities brought to Hong Kong by the development of the Greater Bay Area. Within the HKSAR Government, I will establish a high-level Steering Committee for the Development of the Greater Bay Area, with me as the chairperson and its membership comprising all Secretaries of Department and Directors of Bureau. The Steering Committee will be responsible for the overall co-ordination of matters relating to the HKSAR’s participation in the development of the Greater Bay Area. The Constitutional and Mainland Affairs Bureau will also set up a Greater Bay Area Development Office and appoint a Commissioner for the Development of the Greater Bay Area to implement the relevant work.
Innovation and Technology
98. In last year’s Policy Address, I outlined eight major areas for I&T development and committed enormous resources for this purpose. This strategy has received wide recognition from various sectors and good progress has been made, including:
- The bill7 for providing enhanced tax deductions for qualifying R&D expenditure incurred by local enterprises has entered the final stage of scrutiny in the LegCo, the passage of which will benefit enterprises for their qualifying R&D expenditure in 2018-19. The Government has also accepted the recommendations made by the Task Force on Review of Research Policy and Funding led by Professor TSUI Lap-chee, including an additional injection of $20 billion into the Research Endowment Fund set up by the Research Grants Council (RGC) under the University Grants Committee (UGC) to strengthen the research capabilities of our universities, and the setting up of a scientific research matching fund of $3 billion to increase the source of research funding;
- Funding approval of $10 billion has been obtained from the LegCo for establishing two I&T clusters at the Hong Kong Science Park, with one focusing on healthcare technologies and the other on artificial intelligence and robotics technologies. Institut Pasteur from France, as well as the Guangzhou Institute of Biomedicine and Health and the Institute of Automation in Beijing under the Chinese Academy of Sciences have expressed interest in joining the clusters as the first batch of institutions to work in collaboration with local universities and research institutions. Our target is for the first batch of scientific research institutions to set up their laboratories in the two I&T clusters progressively starting from the latter half of next year. On pooling of technology talent, the Government has launched the Technology Talent Admission Scheme and the Technology Talent Scheme, and has adopted the recommendation of the above-mentioned task force to set up fellowship schemes using a three-pronged approach to attract, train and retain talent, thereby enlarging the local I&T talent pool. The Greater Bay Area academician alliance to be set up in Hong Kong will certainly add to the might of our talent pool;
- Under the I&T Venture Fund, the I&T Commission entered into agreement with six investment companies in July and August this year to invest, on a matching basis, in local technology start-ups. The Government has also provided funding of $7 billion and $200 million to the Hong Kong Science Park and Cyberport respectively for enhancing their support for tenants;
- The infrastructure works of the Hong Kong-Shenzhen I&T Park at the Lok Ma Chau Loop has commenced in June this year, with the objective of providing the first batch of land parcels for superstructure development not later than 2021. The Science Park expansion project will be completed one year ahead of schedule in 2019, the InnoCell residential building for talent, as well as the Data Technology Hub and the Advanced Manufacturing Centre at Tseung Kwan O Industrial Estate will be completed progressively starting from 2020 as scheduled;
- The PICO is now reviewing existing legislation and regulations, so as to remove outdated provisions that impede the development of I&T. The PICO is consulting the relevant sectors and sorting out the scope for the review;
- Opening up government data can provide the ingredients needed for technology research. Last month we firmed up the policy and implementation measures on opening up government data to promote smart city development. The policy requires all government departments to formulate and publish their annual open data plans by the end of this year. Besides, the Hospital Authority (HA) is actively making preparations for a Big Data Analytics Platform, which will allow academic researchers to access HA’s clinical data. The HA will also provide training for them to facilitate collaborative research projects;
- We will introduce a pro-innovation government procurement policy in April next year. By raising the technical weighting in tender assessment, tenders with innovative suggestions will stand a better chance of winning government contracts. We will also enhance exchange with the sector and dissemination of procurement information to facilitate the participation of I&T start-ups and small and medium-sized enterprises (SMEs) in government procurement; and
- Popular science education is important in promoting I&T development. The Education Bureau (EDB) has been promoting Science, Technology, Engineering and Mathematics (STEM) education in primary and secondary schools and will continue to enhance the support for schools in providing students with more learning, exchange and competition opportunities, with a view to unleashing their potentials in science and technology. Last year, the EDB issued a supplementary curriculum document on “Computational Thinking – Coding Education” for use by schools, and started organising intensive training programmes on STEM education for the leadership tier and mid-level administrators of schools. The STEM Education Centre at Lok Fu, Kowloon Tong, has commenced operation. We are pleased to note that an organisation plans to set up the first school in Hong Kong with STEM as its main direction of curriculum planning, with the aim of nurturing local students interested in I&T. I much appreciate that various organisations have been organising I&T expos, seminars and competitions for students to enhance their interest in science and technology and put what they have learnt to application. To promote the use of I&T in addressing livelihood issues and create a fervid I&T atmosphere, we will allocate $500 million for organising an annual “City I&T Grand Challenge” in the next five years. We will openly invite various sectors to put forward I&T solutions to tackle issues closely related to our daily lives. In addition to prize money, solutions selected will have the opportunity to be tried out in suitable public organisations for application and refinement.
99. The most heartening and impactful event in our I&T development over the past year has been the personal steer of President XI Jinping. President Xi recognises that Hong Kong, with its solid foundation in science and technology and a pool of high quality technology talent, is an important force in implementing the nation’s innovation-driven development strategy and building an innovative country, and renders his support for the development of Hong Kong into an international I&T hub. In May this year, the MOST and the Ministry of Finance launched a new initiative, allowing universities and research institutions in Hong Kong to bid for science and technology funding of the Central Government on the basis of merit and competition, and the funding granted can be used in Hong Kong. This has realised the cross-boundary remittance of science and technology funding, which the local technology sector has been longing for. Just in end-September, the Arrangement on Enhancing Innovation and Technology Co-operation between the Mainland and Hong Kong was signed between the MOST and the Innovation and Technology Bureau (ITB), providing an overarching framework for mutual I&T collaboration.
100. While Hong Kong is a service-oriented economy, high-end and high value-added manufacturing has a promising prospect, following the development of I&T and promotion of R&D. Moreover, high-end manufacturing will generate R&D needs, which is conducive to raising R&D investment by the industries, thus contributing to robust and sustainable development of the R&D work of local universities and research institutes. High-end manufacturing will also provide quality jobs for local I&T talent, particularly young graduates.
101. To encourage the industries to engage in high-end production by tapping into I&T and application of smart technologies and production processes, and expediting the realisation of “re-industrialisation”, I propose to allocate $2 billion for launching a “Re-industrialisation Funding Scheme” to subsidise manufacturers, on a matching basis, to set up smart production lines in Hong Kong. The ITB will work out the operational details of the scheme, such as the eligibility criteria and approval mechanism. The Precision Manufacturing Centre established by the Hong Kong Science and Technology Parks Corporation (HKSTPC) in Tai Po Industrial Estate and the Advanced Manufacturing Centre to be completed in Tseung Kwan O Industrial Estate will provide the industries with facilities for smart production. I also recommend providing an additional allocation of $2 billion for the HKSTPC to identify suitable land in industrial estates for building manufacturing facilities required by the dedicated advanced manufacturing sector.
Promoting Technology Transfer
102. There is gifted and outstanding scientific research talent in various local universities. To fully unleash our strengths in scientific research and promote technology transfer as well as the realisation of R&D findings, funding for three relevant schemes under the I&T Fund will be doubled. The maximum annual funding for the Technology Transfer Office of each university will be increased from the existing $4 million to $8 million; the maximum annual funding for each specified university under the Technology Start-up Support Scheme for Universities will also be increased from the existing $4 million to $8 million; and the annual funding for each State Key Laboratory and each Hong Kong branch of the Chinese National Engineering Research Centre will be increased from the existing $5 million to $10 million to support scientific research and commercialisation of outputs.
103. The Smart City Blueprint for Hong Kong published last year has set out more than 70 initiatives, including infrastructure projects such as eID, smart lamppost, a revamped Government’s cloud infrastructure and a new big data analytics platform. Under the direction of the steering committee chaired by myself, these projects have commenced in succession.
104. An important objective in promoting smart city development is to enhance the Government’s capability in innovation and the standard of city management. The ITB set up a TechConnect (block vote) in mid-2017 to support government departments in planning and implementing technology projects for higher operational efficiency and better public services. To date, the block vote has supported over 40 technology projects proposed by departments, many of which are closely related to our daily living, such as the use of technology to assist in water seepage investigation in buildings, strengthening integrated weather monitoring and enhancing the efficiency of customs clearance for cross-boundary vehicles and cargoes. I will allocate another $500 million to the block vote to promote further technology adoption by departments, with a view to providing better services for the community.
105. We will tap into the latest I&T to further revamp our e-Government services. We will introduce artificial intelligence and chatbot functions to the GovHK portal in 2019 to facilitate searching and access of e-Government services by the public, and enhance e-Government services in mid-2021 through the application of eID. We will also pilot the use of chatbot to handle 1823 public enquiries.
106. To tap the views of the technology sector, the Office of the Government Chief Information Officer will set up a Smart Government Innovation Lab and invite the industry to put forward proposals on I&T applications and product suggestions for various public services. Trials and technology testing will be arranged for suitable proposals, thereby allowing government departments to formulate innovative measures more effectively to improve public services such as municipal services, crowd control and cargo clearance. This will also create more business opportunities for local start-ups and SMEs.
107. To cope with the rising challenges on law enforcement brought about by technological development, we will adopt a four-pronged strategy covering “application”, “research and development”, “analysis” and “fortification” of I&T to enhance the capabilities of law enforcement agencies. “Application” includes developing smart prisons, smart customs clearance and law enforcement, as well as using technology to enhance services of the Immigration Department. “Research and development” and “analysis” include strengthening R&D on technologies for government security, combating crimes and enhancing the analytical capabilities for digital and forensic evidence. “Fortification” includes fortifying cyber security and using big data analysis to enhance fire safety strategies.
Transportation and Logistics
108. The maritime sector has all along been driving Hong Kong’s economic development. It is a major pillar of Hong Kong’s trading and logistics industry, with more than 90% of freight volume to and from Hong Kong still transported by water at present. Although there has been a declining trend in the container throughput of Hong Kong Port in recent years, we still have our advantages, which include a long-established maritime tradition, our geographical location, and the clustering of shipowners, shipping companies and maritime services sectors. The Hong Kong Shipping Registry (HKSR) provides shipowners with round-the-clock quality services throughout the year, and its shipping register comes fourth in the world in terms of gross tonnage of ships on the register. Ships registered in Hong Kong are well-recognised as a high quality fleet8 in the international maritime arena.
109. In the past few months, I have convened inter-departmental meetings and met with the industry to review the future development strategies for our maritime sector; I have also consulted the Chief Executive’s Council of Advisers on Innovation and Strategic Development. Facing the fierce competition among neighbouring ports and ports in the region, we must admit that relying on our port container trade alone can no longer bring strong and sustained impetus for Hong Kong’s economic growth. For this reason, we must capitalise on Hong Kong’s unique strengths and the immense opportunities brought by the B&R Initiative and the Greater Bay Area development to develop high value-added maritime services.
110. The Government will implement the following measures to support and enhance the development of high value-added maritime services:
- using tax measures to foster ship leasing business in Hong Kong and commissioning the Hong Kong Maritime and Port Board to set up a task force to devise the details, with a view to enhancing Hong Kong’s position as a ship leasing centre in the Asia-Pacific region;
- providing tax reliefs to promote the development of marine insurance and the underwriting of specialty risks in Hong Kong;
- exploring streamlining regulation with a view to facilitating the operation of protection and indemnity club for shipowners in Hong Kong;
- offering the necessary facilitation and measures in support of Hong Kong’s provision of reliable and quality dispute resolution services for the global maritime industry;
- setting up Regional Desks of the HKSR in selected ETOs and Mainland Offices and Liaison Units to render more direct and prompt support to shipowners at the ports concerned and to promote the HKSR;
- injecting $200 million into the Maritime and Aviation Training Fund to enhance the training and nurturing of talent for the sectors;
- further expanding our CDTA network to attract more international marine and maritime service providers to set up offices in Hong Kong; and
- working with the trades to jointly promote our maritime and port services to overseas and local stakeholders and encourage more companies and individuals to seize the business and job opportunities of the relevant industries.
111. Our maritime sector has also suggested that the Government should consider implementing additional measures to encourage more commercial principals of the maritime industry (such as shipowners, ship operators and ship managers) to base their operations in Hong Kong. Given that the commercial principals are involved in a wide range of businesses, we need to further examine the proposal. I have asked the THB to take the lead, together with other relevant government departments, in putting forward feasible proposals as soon as possible.
112. The booming growth of e-commerce worldwide has generated an ever-increasing demand for cross-border logistics and delivery services, in particular air delivery and transshipment services. The AAHK awarded tender for the development of a premium logistics centre in June this year; meanwhile, it has been 20 years since the Air Mail Centre at the Hong Kong International Airport commenced operation, Hongkong Post is actively exploring the feasibility of redeveloping the centre with advanced equipment, in order to boost its operating efficiency and handling capacity.
113. With highly international and professional financial infrastructure and market profiles, and riding on the reform and opening-up in the Mainland, Hong Kong has developed into a mature international financial centre. These characteristics not only form an integral part of our prosperity and stability, but also contribute to our country in opening up the financial market.
114. To further strengthen Hong Kong’s position as an international asset and wealth management centre, the Government will continue to forge a conducive environment for the fund industry by enhancing our legal and tax frameworks. The open-ended fund company regime that commenced in July this year provides a new fund structure in addition to the unit trust form. We are also studying the establishment of a limited partnership regime for private equity funds, and reviewing the existing tax concession arrangements for the fund industry to ensure that the industry can stay in line with international requirements on tax co-operation while promoting their business. To further expand the fund distribution channels, we will continue to promote mutual recognition of funds arrangements with other markets.
115. Spurring the continued development and strengthening our capital markets are vital to cementing our status as an international financial centre. With our internationally-aligned legal and regulatory system, free flow of capital, and our listing regime which is compatible with the needs of the market, we ranked first globally in terms of Initial Public Offering (IPO) funds raised in five out of the past nine years.
116. In April this year, the Stock Exchange of Hong Kong (SEHK) launched a new listing regime, under which companies from emerging and innovative sectors with weighted voting rights structure held by individuals, and pre-revenue or pre-profit biotech companies are allowed to be listed in Hong Kong, subject to compliance with a range of investor protection requirements. IPO activities this year sustained the growth momentum of previous years. Up to September, the total IPO funds raised in Hong Kong was over $238 billion, the highest among our counterparts over the world so far. The SEHK will continue its endeavour to develop Hong Kong into a broader and deeper fund-raising platform.
117. We have introduced the Financial Reporting Council (Amendment) Bill 2018 into the LegCo to initiate a reform of the regulatory regime for auditors of listed entities. In the new regulatory regime proposed, the functions of the Financial Reporting Council (FRC) will be enhanced to become a full-fledged independent oversight body for auditors of listed entities. After enactment of the bill, we will inject no less than $300 million into a seed capital to facilitate the FRC’s smooth transition from the existing auditor regulatory regime to the new regime.
118. The B&R Initiative facilitates the development of infrastructure and trade in countries along the routes. It also generates demand for insurance and risk management services for large-scale infrastructure and investment projects. With a mature insurance market and a robust regulatory regime, Hong Kong is well positioned to provide quality services for these projects. Meanwhile, the development of the Greater Bay Area spurs the flow of production factors, consolidates Hong Kong’s advantages in the financial market and supports the growth of real economy in the region, giving a fresh impetus to our insurance sector. After having consulted the Financial Leaders Forum, the Government will adopt various measures, including tax reliefs to promote the development of marine insurance and underwriting of specialty risks in Hong Kong so as to strengthen Hong Kong’s status as an international insurance hub. In addition, the Government will make relevant legislative amendments to allow for the formation of special purpose vehicles in Hong Kong specifically for issuing insurance-linked securities with a view to enriching the risk management tools available in the Hong Kong market. I expect the Insurance Authority to make further proposals to promote the competitiveness of Hong Kong’s insurance industry.
119. The Government has adopted a five-pronged approach in facilitating Fintech development, namely promotion, facilitation, regulation, talents and funding. Just last month, the Hong Kong Monetary Authority (HKMA) launched the Faster Payment System to link up banks and stored value facilities operators. It enables the public to make real-time money transfer anytime and anywhere with the use of mobile number or email address as account proxy for the payee. A common QR code standard was also launched last month to facilitate retail payments across different e-wallets, offering convenience to merchants and customers alike.
120. The HKMA is processing the first batch of virtual banking licence applications. The licences are expected to be issued by end-2018 or early 2019 at the earliest. The Open Application Programming Interface framework for the banking industry will allow access by third-party service providers and offer innovative financial services to members of the public. While we embrace Fintech to enhance the competitiveness of our financial services industry, we are also mindful of the risks involved and will fulfil our duties to protect the investing public.
121. I announced in my last Policy Address that the Government would take the lead in issuance of green bonds to signify our support for sustainable development and determination to combat climate change, and to promote the development of green finance in Hong Kong. We are now seeking the relevant authorisation by the LegCo for launching the Government Green Bond Programme early and making an inaugural green bond issuance under the Programme.
122. To facilitate the balanced, healthy and sustainable development of the tourism industry and to formulate forward-looking strategies for the future, the Government promulgated the Development Blueprint for Hong Kong’s Tourism Industry last year. We are actively pressing ahead with various initiatives, including promoting in-depth district tourism to enable visitors to experience Hong Kong’s local life and district characteristics. In this connection, following the launch of Old Town Central promotion last year, the Hong Kong Tourism Board just launched another district tourism campaign in Sham Shui Po this September to promote the distinctive characteristics of the district to our visitors. We will continue to identify suitable local areas for district tourism promotion. We are also enhancing the supporting facilities of key hiking trails and piers with a view to strengthening the development of Hong Kong’s green and eco-tourism.
123. Hong Kong Disneyland and Ocean Park, as the two major theme parks in Hong Kong, have for years attracted many visitors locally and from around the world. We will continue to ensure that the two theme parks can enhance their attractiveness so as to draw more high value-added overnight visitors. The Government is closely monitoring the existing expansion plans of Hong Kong Disneyland and will explore whether there is room for its next-stage development. We will also continue to support Ocean Park in reviewing its strategic positioning and future development plan, with a view to bringing more comprehensive recreational experience to visitors. In addition, the Peak Tram has always been an iconic facility in Hong Kong since it commenced operation in 1888. The Peak Tramways Company Limited, to which the second 10-year operating right up to 2035 has just been granted by the Government, will implement an upgrading plan of over $650 million to improve the existing facilities so as to provide better services for the tourists and locals alike, which will be conducive to enhancing the attractiveness of peak tramway as an important tourism and recreational facility.
124. It is of great importance to strengthen trade regulation for safeguarding the rights and interests of visitors. We hope that the LegCo will pass the Travel Industry Bill in the near future, so that the Travel Industry Authority can be established as soon as possible to commence necessary preparations for setting up the new regulatory regime.
Protection of Consumer Interests
125. We do our best to protect the interests of consumers and boost their confidence in consumption. In recent years, there have been many complaints that consumers felt aggrieved at being pressurised or were forced into making purchases unwillingly by salespersons of certain trades who deploy aggressive sales tactics. Person-to-person telemarketing calls have also caused nuisance to many members of the public. The Government is studying the feasibility and scope of proposed legislation requiring traders to provide a cooling-off period in certain service contracts that involve large contract sum or long contract period, and will put forward a proposal for public consultation at the end of this year or early next year. We have completed a public consultation earlier on the proposal to establish a statutory Do-not-call Register so that those who do not wish to receive person-to-person telemarketing calls may so indicate by registering their phone numbers. Our target is to introduce the above mentioned two Bills within the current term of the LegCo.
Trade and Investment
Coping with the Rise of Trade Protectionism
126. With its long-established business environment and an open, free and competitive system, Hong Kong is currently the seventh largest trading entity and the third largest foreign direct investment recipient in the world. As a founding member of the World Trade Organisation (WTO), Hong Kong has remained steadfast in our firm commitment to the free trade principles and has given staunch support to the rule-based multilateral trade system. Together with our Motherland and other countries in the world, we have been persistently advocating the reduction of tariffs and elimination of trade barriers to promote global trade liberalisation. The unilateral trade protectionist measures adopted by the US since early this year challenge the WTO system, representing a major setback in the international trade development. We have grave concern over this issue, particularly the imposition of heavier tariffs by the US on grounds of national security on certain products from Hong Kong and other places. We must keep a close eye on the impacts of the trade friction between China and the US on Hong Kong and formulate response plans accordingly.
127. The HKSAR Government has been maintaining close liaison with the trade and has taken a number of immediate initiatives to assist them in market development and risk diversification. Such initiatives include strengthening various funding schemes for SMEs, and implementing special enhanced measures by the Hong Kong Export Credit Insurance Corporation to strengthen the protection for Hong Kong exporters affected by the US tariff measures. We will enhance the special concessionary measures under the SME Financing Guarantee Scheme operated by the Hong Kong Mortgage Corporation Insurance Limited and extend the application period to further relieve the financing burden of local enterprises. The HKSAR Government will continue to closely monitor developments and implement timely measures to support the trade.
128. We will continue to actively attract foreign inward investments. According to the latest survey jointly conducted by Invest Hong Kong (InvestHK) and the Census and Statistics Department, there are over 8 700 business operations in Hong Kong with parent companies situated overseas or in the Mainland. Among them, 1 530 have their regional headquarters situated in Hong Kong, representing an increased by 8.3% as compared with the same period last year.
129. By adopting a more proactive and targeted strategy, InvestHK, together with the relevant bureaux as well as overseas ETOs and Mainland offices, successfully attracted many renowned organisations in priority sectors to set up operations in Hong Kong over the past year. For example, a spin-off from Hamlyn Centre of Imperial College London established a surgical robotics research and development centre in Hong Kong; Alibaba, in partnership with SenseTime and the HKSTPC, launched the HKAI Lab; Tencent set up Tencent WeStart in Hong Kong, its first creative hub outside the Mainland for digital entrepreneurs; Deloitte launched its Asia Pacific Blockchain Lab; and The Floor, a Fintech platform from Israel, established its presence in Hong Kong. Hong Kong’s start-up ecosystem is developing rapidly. A survey conducted by InvestHK revealed that there were over 2 200 start-ups in Hong Kong last year, representing a growth of 16% over 2016.
Convention and Exhibition
130. The Convention and Exhibition (C&E) industry is vital to Hong Kong as an international business and trading centre. In order to reinforce the advantages of the C&E industry of Hong Kong and enhance the synergy between C&E venues and facilities in their vicinity, we will continue to actively increase the supply of C&E venues and facilities, including developing Wan Chai North into a C&E hub in Asia. As announced in my Policy Address last year, we will redevelop the sites of the three government towers in Wan Chai North and Kong Wan Fire Station into C&E facilities, hotel and office. We are constructing as planned a number of new government buildings in various districts to relocate the government departments and law courts concerned. The sites are expected to be vacated by 2026 at the earliest for demolition and redevelopment, and their plot ratios will be fully utilised to maximise their potential. We are working at full steam on technical assessments and design, and will consult stakeholders and conduct town planning procedures as soon as possible.
131. Regarding AsiaWorld-Expo (AWE), another important C&E venue, as the AAHK has completed the acquisition of the private interest in it, we will discuss with the AAHK the Phase Two expansion plan of AWE.
132. The DoJ is committed to promoting Hong Kong as an international dispute resolution centre for the B&R Initiative. A task force has been set up to explore the establishment of a credible and neutral B&R Dispute Resolution Centre in Hong Kong, providing parties from all over the world with one-stop dispute resolution services to resolve a wide range of cross-border and international disputes, including commercial, trade and investment-related disputes. The centre will feature panels of international dispute resolution experts to offer dispute resolution solutions that accommodate the various cultures involved. It will also consider preparing a set of bespoke B&R dispute resolution rules.
133. On the development of LawTech, the DoJ supports the development of a B&R e-arbitration and e-mediation platform by NGOs, so that Hong Kong will be able to provide efficient and cost-effective online dispute resolution services. The HKSAR Government will provide funding for the cost of development of this project.
134. The DoJ will continue to enhance legal co-operation in civil and commercial matters between Hong Kong and the Mainland, including the early conclusion of an arrangement with the Mainland to broaden the mechanism for reciprocal recognition and enforcement of judgments in civil and commercial matters, as well as exploring the arrangement for entering into an agreement with the Mainland for reciprocal recognition and enforcement of international commercial settlement agreements resulting from mediation.
135. The Government is committed to taking forward the Legal Hub project. Works are in progress to renovate the West Wing of the former Central Government Offices and the former French Mission Building. It is expected that space will start to be provided to international and local law-related organisations commencing mid-2019. The Legal Hub project will help attract more reputable international legal services and dispute resolution institutions to provide services or set up offices in Hong Kong, and thus further consolidate the competitiveness of Hong Kong’s international legal and dispute resolution services sector.
Telecommunications and Broadcasting
136. The advent of the fifth generation mobile communications technology (5G) presents new opportunities and challenges. It will not only upgrade telecommunications, I&T infrastructure, but also open up high value-added markets and industries, boost efficiency and competitiveness and revolutionise mobile user experience, bringing vast potential for various commercial services and smart city applications.
137. To enable early launch of 5G services, we have made advance planning to release sufficient radio spectrum with a total of 4 500 MHz in various frequency bands for assignment to mobile service operators in phases next year, thus enabling them to plan ahead and launch 5G services as soon as possible. Since the roll-out of 5G networks will involve installing a larger number of base stations, it will pose challenges for network operators to put in place the infrastructure. In this connection, the Government will proactively open up suitable government premises and roof-tops for the installation of base stations by mobile service operators. At the same time, we are making use of the subsidy scheme to extend fibre-based networks to villages in remote locations in the New Territories and on outlying islands to provide the backbone for the extension of 5G coverage.
138. Following our earlier review of the television and sound broadcasting regulatory framework to provide a more balanced competitive environment and given our intention to introduce legislative amendments to give effect to our proposals, we will proceed to the second phase of the review that will cover the Telecommunications Ordinance. Our aim is to ensure that our laws and regulations dovetail with the latest developments in technologies to pave the way for early adoption and provision of innovative services, so that Hong Kong can consolidate its leading position as a regional telecommunications hub. We plan to consult the public on our proposals before the end of this year and to introduce legislative amendments next year.
139. The array of measures to support creative industries I announced in the Policy Address last year is being implemented, including a one-off injection of $1 billion into the CreateSmart Initiative to promote the development of design and other creative sectors, of which $300 million has been earmarked for the Hong Kong Design Centre (HKDC) mainly to fund mega activities. I also undertook to make full use of the traditional base for apparel and fabrics in Sham Shui Po District to develop our design and fashion sectors, with a view to driving the district’s local economy and promoting its unique charm for local tourism. The Government, in collaboration with the URA and the HKDC, has secured space in a redevelopment project in the district for establishing a Design and Fashion Project to combine design and industry, to bring Hong Kong’s fashion design development to a new level, and to groom young designers. Construction works of the project will soon commence and are expected to be completed in 2023-24.
140. We have been actively promoting design thinking as a problem-solving capability in the past year. The HKDC, in collaboration with the Efficiency Office and the Civil Service Training and Development Institute, is holding classes and seminars both at the community level and within the Government. The Government will draw up internal guidelines to encourage departments to adopt pro-innovation proposals and apply design thinking in the procurement process to enhance efficiency, to meet the needs of the public, and to advocate the “people-oriented” service culture.
141. The film industry, a key sector amongst the eight creative industries in Hong Kong, does not only enrich our cultural life, but has also successfully built up a brand name for “Hong Kong Films”.
142. Although the global film market has undergone major changes in recent years, and there is a significant decline in the number of local productions, Hong Kong filmmakers are doing well in other markets, and many talented and enthusiastic young people still choose to pursue their career in the film industry.
143. Recently, I have met with two groups of experienced filmmakers on separate occasions to gain a better understanding of the state of play and their views on the prospect of the sector. I believe that there is strong potential for our film industry to prosper. It is important for the Government to work closely with industry players to turn challenges into opportunities so that Hong Kong films can shine again.
144. I propose to make a one-off injection of $1 billion into the Film Development Fund to support initiatives for boosting the development of our film industry in the next few years. We will realise this vision through measures under the following four broad directions:
- Nurturing talent
Enhancing the First Feature Film Initiative by increasing the number of winning teams and the prize sponsorship; providing more comprehensive nurturing and training programmes for various film disciplines to integrate theory and practice; and providing targeted support to address gaps of skill in scriptwriting and script production with a view to grooming more scriptwriters;
- Enhancing local production
Expanding the scope of the Film Development Fund to cover mid-budget films and raising the Government’s investment ceiling to enhance Hong Kong films’ competitiveness in the local and overseas markets; encouraging content production of different genres and different lengths to cater for a more diversified and multi-media market; and encouraging the industry to utilise Hong Kong’s facilities and talent for post-production services;
- Market expansion
Promoting the brand of “Hong Kong Films” through film festivals and other publicity activities in the Mainland and overseas markets; and establishing a platform for film financing to match investors and filmmakers; and
- Building audience
Cultivating cinema-going habits among young people and students; and encouraging more cinemas to screen local film productions.
Regarding the proposals of the industry for facilitating Mainland-Hong Kong co-productions and entry of Hong Kong productions into the Mainland market, I am prepared to discuss with relevant Central authorities and seek their support.
145. To cope with the huge demand for housing, land, healthcare services and community infrastructure development, we will collaborate with the Construction Industry Council in leading the industry to make changes by implementing “Construction 2.0” advocating “Innovation”, “Professionalisation” and “Revitalisation”, uplift the capacity and sustainability of the industry, increase productivity, enhance regulation and quality assurance, improve site safety and reduce environmental impact. We will also encourage innovative minds and strive to nurture the younger generation, offering them more opportunities to develop their strengths. The Government will pilot “Construction 2.0” in public projects to promote industry enhancement. We have also established a $1 billion Construction Innovation and Technology Fund to encourage wider adoption of innovative technologies and stimulate the provision of cutting-edge solutions by local I&T enterprises for industry enhancement. Moreover, industry practitioners and students can observe the latest construction technologies under the auspices of the fund. Coupled with the establishment of the Hong Kong Institute of Construction this year to offer well-structured and advanced programmes accredited by the Qualifications Framework, we aim to attract more young talent to join and provide impetus for the industry.
Agriculture and Fisheries Industry
146. The Government will continue to take forward the measures under the New Agriculture Policy, including the works of the Agricultural Park Phase 1 to be commenced next year. We will recommend designating new fish culture zones at suitable locations, as well as resuming issuance of new marine fish culture licences, with a view to facilitating the change in mode of operation and sustainable development of the fisheries sector.