State of Hong Kong Economy

Hong Kong Financial Secretary John Tsang Chun-wah pointed out that the main reason why Hong could maintain its present economic status and maintain relatively low corruption rate was because Hong Kong has adopted a small-sized government and low tax policy in ruling this special economic district of China.

He said Hong Kong has a population of 7 million, but the civil servants, including teachers, street cleaners, etc., only accounted for 0.16 million or about 3 percent of the population.

GNP on Public Spending
"Hong Kong thinks that by managing a small-sized government in the public domain, expenditure can be maintained at a level that is below 20 percent of GNP (Gross National Product) while the remaining 80 percent can be handed over to the private sector. This is because the private sector has more manpower and talents and can come out with smart decision that can help to promote economic growth."

Hong Kong Financial Secretary said this in response to a question posed by a participant asking his suggestion of how Hong Kong could help Malaysia achieving the anti-corruption goal and in the elimination of business-government connection culture.

The talk by Tsang Chun-wah was held in conjunction with his official visit to Malaysia. It was jointly organized by the Malaysian International Chamber of Commerce, Malaysian Chinese Chamber of Commerce and the Hong Kong Economic and Trade Office based in Singapore.

Country's Personal Income Tax
Tsang Chun-wah said that Hong Kong's tax system was simple and its taxation was relatively low. For personal income tax, it was not more than 15 percent and for business profit tax it was only levied at 16.5 percent.

However, the low tax system of Hong Kong has also led people to think that Hong Kong is a heaven to escape tax. However, this is an unfair assessment of Hong Kong. Fortunately, Hong Kong did not face deficit problems in the past few years. As such it can maintain its healthy economic situation.

Malaysia Becomes Hong Kong's 11th Largest Trading Partner

Hong Kong Financial Secretary John Tsang Chun-wah has recently disclosed that Malaysia and Hong Kong's trade volume has maintained a steady growth of 7.5 percent in the past five years. He said that 2009, Malaysia was Hong Kong's 11th largest trading partner. The total bilateral trade volume between Malaysia and Hong Kong in 2009 was more than 93 billion Hong Kong dollars (M$40 billion ringgit).

Tsang also said that 15 percent or 62 billion Hong Kong dollars (M$27 billion ringgit) of the Malaysia-China trade volume was done through Hong Kong.

Springboard for Foreign Companies
Tsang said: "We should continue to work on the free trade agreement, namely, the Closer Economic Partnership Agreement (CEPA) to break through trade barriers in inter-regional trade, service and investment trade barriers."

Hong Kong Financial Secretary Tsang pointed out that financial service was one of the most important areas in the bilateral relations between Malaysia and Hong Kong. He said Hong Kong played the role as a springboard for foreign companies, including Malaysian companies to do business in China.

Bilateral Cooperation
Hong Kong enjoys a high degree of cooperative relationship in the financial field with Malaysia. More recently Hong Kong and Malaysia have both opened their respective financial liberalization door for both sides to create more opportunities for cooperation.

Tsang Chun-wah also said that one of Hong Kong's further cooperation with Malaysia was in Islamic finance. He said Malaysia has a lot of experience in this field. He said that in the field of Islamic finance, Hong Kong hoped to develop more opportunities for bilateral cooperation with Malaysia, including the development of Islamic bond market.

Hong Kong Maintains Close Economic Ties With US

Hong Kong Financial Secretary John Tsang Chun-wah said that since 1983 Hong Kong began to establish currency exchange system pegged with the US currency. Although such currency peg has gone through ups and downs in the past 27 years, Hong Kong has maintained good economic relationship with the United States. He said Hong Kong has no intention to change the present currency exchange system to follow China's monetary policy.'

Tsang said this in response to a question if it would be possible for Hong and China to implement the same monetary system. He said that Hong Kong's per capita income was more than $30,000. He added that in term of economic development, Hong Kong and the United States have maintained very close relationship. As such Hong Kong has no intention to change its monetary exchange rate pegging system with the United States.

Tsang Chun-wah said that although China's Renmibi (RMB) was an important currency, it was not an easily convertible currency. This was an area Hong Kong was currently trying to assist China.

Some places in Association of South East Asian Nations (ASEAN) countries also allow the use of RMB as trading currency. It is hoped that Hong Kong can become such a platform and base for RMB to rise and continue to grow strong.

Establishing Two Financial Centers
Hong Kong Financial Secretary John Tsang Chun-wah opined that since China has a population of 1.3 billion people, having Hong Kong and Shanghai as its two financial centers were not many. China can have two financial centers.

On primary and secondary industries, China has already grown very strong. China is now working on third tier of industries. This should be the economic growth engine to push China's economy further ahead.

Learning From Malaysia on Islamic Finance Development
Tsang said that Malaysia's experience in Islamic financial sector and in Islamic investment as well as in public education for it were very successful. As such, one of the main reasons he visited Malaysia was to learn from Malaysia in these areas. He said that at this moment, for Hong Kong to develop the Islamic financial sector, the most important thing is to enhance public education and promotion about it and to allow more market participants to understand that the Islamic financial sector was not only for Muslims to participate only. It was a financial field that all interested investors could join and participate.

When Tsang Chun-wah accepted a joint interview with the Malaysian media, he said that Hong Kong's Muslim population was not much. But Hong Kong has a robust financial structure. Hong Kong could become a regional platform, in particularly a platform for China to participate in Islamic finance and service.

In addition, Tsang also said that the purpose of his visit to Malaysia was also to see if the bi-lateral cooperation between Hong Kong and Malaysia could further be advanced in certain direction or to develop cooperation model. He said while he hoped his visit could promote bi-lateral economic relationship between Hong and China, he also wanted to learn from Malaysia's success economic stories.

He said that when he met and talked to Prime Minister Datuk Seri Najib earlier, he gained many constructive views. He believed this would help to make the bilateral economic growth and cooperation between Hong Kong and Malaysia to move forward.

Country's NKRA Measure
Hong Kong Financial Secretary Tsang Chun-wah said that in order for Hong Kong to maintain healthy economic development, Hong Kong has identified six priority areas in order to diversify Hong Kong's economic base and create employment opportunities. He said Hong Kong's priority measures and Malaysian Government's measures to identify National Key Result Areas (NKRA) were quite similar in essence.

He said that the six priority areas identified by the Hong Kong Government included education services, pharmaceutical services, laboratory certification, innovation and technology, environmental industries as well as cultural and creative industries.

When Tsang Chun-wah presented his keynote address at a public forum themed as "New Economic Order in Post Global Financial Crisis Era, he said: "The top priority area concept carried out by Hong Kong holds many common grounds as Malaysia's National Key Result Area policy. Through such comparison, I can see many opportunities for cooperation between Hong Kong and Malaysia. Such cooperation opportunities can help us to achieve our common goal. We should try to create these opportunities. "