Speech – Maintaining and enhancing Hong Kong’s position as an international financial centre (Jeffrey Lam)

President, thanks to the hard work of Hong Kong people, Hong Kong has achieved very good developments in the economy and trade over the past few decades. Multinational enterprises have chosen to do business in Hong Kong because Hong Kong has a sound legal system and well-established financial policies, a low tax regime and social stability.
Therefore, in order to maintain and enhance Hong Kong’s position as an international financial centre, the Government should introduce more business-friendly polices to facilitate the balanced development of various large, medium and small financial enterprises, while stepping up financial co-operation with the relevant regions and particularly, seizing the opportunities brought by the Mainland.

But recently, many reports have pointed out a decline in the competitive advantages of Hong Kong. In order to maintain and even enhance Hong Kong’s position as an international financial centre, we need to seriously review the existing problems. In recent years, there have been incessant political contentions in Hong Kong, and if we are always skeptical about the Mainland and tying our own hands, we would only let opportunities slip by. As the internationalization of Renminbi is in an initial stage, Hong Kong should improve its relationship with other financial centres and explore more co-operation with them. With more co-operation, conditions can be created for healthy competition. Therefore, if we can seize the opportunities brought by the Mainland to Hong Kong and identify a new economic direction, it will help enhance Hong Kong’s position as an international financial centre.

President, according to the results of the 2012 Annual Survey of Companies in Hong Kong Representing Parent Companies Located Outside Hong Kong published at the end of last year, when these companies chose to set up regional headquarters or local offices in Hong Kong, the top five factors rated as most important by these companies included political stability, law and order, rule of law and an independent judiciary, and so on. However, there have been incessant political contentions in Hong Kong. A legal academic has even incited the public to resort to civil disobedience, breaking the law knowingly. These acts which shake the foundation of the rule of law and damage stability in society will affect the confidence of overseas investors in Hong Kong’s position as an international financial centre, which will not do any good to the overall development of Hong Kong.

President, social stability is the most important factor affecting the business and financial environment. The commercial sector, being a major stakeholder in society, is concerned about the “Occupy Central” movement. Let us not talk about whether or not the occupation would ultimately take place. The damages have already surfaced. Recently, a number of local and overseas business associations have unanimously pointed out the problems of the “Occupy Central” movement. Many large enterprises and industrial and business institutions have conducted risk assessments, and some enterprises have made plans based on the results of assessment. Besides, the concerns and anxieties aroused in society are also heating up. All these have directly deal a blow to Hong Kong’s position as a financial centre as well as its business environment. On the other hand, given that Hong Kong’s credit rating may possibly drop because of the “Occupy Central” movement, the relevant hedge funds may sell off shares to reduce the risks, and this would lead to volatility in the stock market and cause shareholders to suffer losses.

President, once the financial centre of Hong Kong is shaken, the overall business environment would become worse, and the three major pillar industries including tourism, trade and logistics would all be affected. Members will recall how Thailand’s “red shirt protesters” and “yellow shirt protesters” had affected the business districts and transport in Thailand. Although the protests took place many years ago, our memory of what happened then is still vivid. From this we can tell that the “Occupy Central” movement will cause irrevocable damages to the business development and international image of Hong Kong.

In recent years, the Hong Kong Government has introduced a number of policies and measures affecting the local business environment. I think government policies may not necessarily have to follow the footsteps of others; nor do we need to surpass Britain and catch up with the United States. Apart from the need to align with the international standards, our legislation should also have regard to our social and cultural background. The policy of maintaining a simple tax regime is an example. Therefore, before the introduction of new
measures, the Government should first duly conduct assessments to gauge the impact on the economy, in order not to compromise the international status and competitiveness of Hong Kong.

Regarding the proposals to set up a financial ombudsman and enact the Hong Kong Monetary Authority Ordinance, I have reservations about them. It is because the dispute resolution centre has initially produced some effects since its establishment as more investors have chosen to resolve their disputes with financial institutions using the approach of “Mediation First, Arbitration Next”, and over 80% of the cases handled by the centre have been resolved.

President, on the setting up of a financial ombudsman, The Law Society of Hong Kong has analysed the differences between arbitrators and an ombudsman and considered that it is more desirable to set up a centre for resolving disputes. It is because arbitrators have more extensive powers than an ombudsman and the arbitral award, which is final, carries a stronger binding effect. I agree to this point and consider it unnecessary to set up a financial ombudsman separately.

President, in view of the current volatility in the external economy, financial stability is of utmost importance. Apart from monitoring the operation of financial institutions, the Hong Kong Monetary Authority (HKMA), being the regulator, should decisively use the Exchange Fund to maintain the stability of the financial system in Hong Kong when necessary. Furthermore, the design of the existing legal framework, which includes making the HKMA part of the government structure rather than an independent statutory body, has actually

reflected this basic principle. For this reason, I think the enactment of the Hong Kong Monetary Authority Ordinance is superfluous and redundant.

President, I so submit.


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