For Asia 2025, an Asia House publication launched on 8 March 2016, Hong Kong Chief Secretary for Administration The Hon Mrs Carrie Lam Cheng Yuet-ngor contributed her thoughts on Asia’s hard and soft infrastructure needs, the future of information sharing and the Belt and Road initiative. Please read below for the full piece.
Trying to predict what may happen over the next 10 days, let alone 10 weeks or the next 10 years is an inexact science at best. But there are a few things of which we can be reasonably sure, as we cast our eyes to what may unfold over the next decade.
One is that there will be more of us. Various estimates see world population growing to hit 8 billion in 2025. Asia’s population will grow by more than 400 million during that time to reach about 4.75 billion.
We’ll need more food, energy and resources to cater for this growth. We will also need more infrastructure – roads, railways, ports, airports, power plants and telecommunications, as well as water treatment and waste disposal.
The Asian Development Bank estimates that infrastructure investment required in Asia by 2020 will be as high as US$730 billion per annum. Infrastructure development is necessary to unlock economic potential and increase efficiency in markets, but the extent to which it can be built will depend on how much an economy can afford or whether they can afford it. Private sector investment or Public-Private Partnerships (PPP) will be two ways to meet these demands. Hong Kong has good experience to share in this regard.
We can also be sure that technological advances will continue to spur exponential growth in the use and flow of information. This, in turn, will profoundly impact the way we live, work, communicate, and interact with each other and the built environment.
The world in 2025 will be much more switched on, interconnected and information-saturated than it is now. So, to grow and prosper, economies will also need investment in information hyper-highways to transport the precious cargo – data – in a safe and secure way. Hong Kong has always been a rapid and enthusiastic user of new information and communications technology, and this can only continue since it is a matter of survival for its small, knowledge-based and externally orientated economy.
All these developments will present considerable opportunities as well as risks. The opportunities lie in leveraging our extensive connections in trade, investment, finance, shipping, logistics, and aviation.
The challenges come in managing the risk of instability and contagion that increases in tandem with enhanced connectivity as well as economic and informational interdependence. We are dealing with two sides of the same coin.
It is important, then, to ensure that we have the most solid foundation possible and to develop multiple growth networks upon which to build our economy. If the foundation is solid, the structure is much better equipped to withstand any shockwaves or geo-political earthquakes.
We can do this by ensuring that our institutional infrastructure is rock solid – the rule of law upheld by an independent judiciary; the free and unfettered flow of information; a clean, transparent and accountable government and regulatory environment; a level playing field and rule-based system for business; and an education system that can serve the needs of the global village.
Such ‘soft’ infrastructure (not really soft, since it requires determined effort to build and maintain) is further buttressed by core values such as fiscal discipline and living within our means, openness, pluralism, tolerance, and a commitment to excellence and service quality.
All these factors combined have served Hong Kong well, and will continue to provide a value proposition moving forward. That’s because trade, business and investment – and the myriad of services that support them – will inevitably look for certainty, clarity and consistency in their operating environment. Hong Kong’s magnificent harbour has long provided a safe anchorage for the shipping industry; so too have our institutions for business and trade.
Thus, it is important whenever talking about what the future might hold to understand your advantages, to protect and promote them, and to stay true to your values. Trust in the integrity of your market – particularly at a time of rapid change – is hard earned and indeed a precious gem to be cherished.
Hong Kong’s future is very much anchored in our constitutional document, the Basic Law. It is the foundation of our development and progress under ‘One Country, Two Systems’ and protects our way of life and the capitalist system. That includes the core advantages and core values mentioned above.
It is within this constitutional context that Hong Kong finds itself with an enormous opportunity to play to its strengths under ‘One Country, Two Systems’ through the visionary ‘Belt and Road’ initiative unveiled in some detail by the Chinese Government leadership last year.
The ‘belt’ will head west through Central Asia to Europe, while the ‘road’ will encompass deeper engagement with ASEAN, South Asia and Eastern Africa, as well as the Middle East and the Mediterranean.
The land-based ‘belt’ and the sea-based ‘road’ cover more than 60 countries, with a total population of 4.4 billion and gross economic volumes of US$22,000 billion. The visionary undertaking is being founded on existing multilateral and bilateral platforms to deepen trade and economic integration, political trust, mutual co-operation and cultural inclusiveness.
New platforms are also being developed to underpin the broad goals of the ‘Belt and Road’ in the areas of policy co-ordination, enhanced connectivity, freer trade, financial integration and people-to-people links.
These include the Asian Infrastructure Investment Bank, the New Development Bank, the SCO Development Bank and the Silk Road Fund – all of which are designed to help fund the infrastructure needed to unlock the massive economic potential of Asian and emerging economies.
This long-term undertaking represents a new kind of development model to better utilise excess capacity and capital, as well as help numerous economies at different stages of development to play to their strengths and competitive advantages. The ‘Belt and Road’ initiative will provide huge opportunities for Hong Kong, and many other economies, over the next 30 to 50 years.
The central theme is ‘connectivity’ and this could not be a better fit for Hong Kong, which has built its fortunes and reputation as a super-connected economy acting as a conduit between China and the rest of the world, and for Chinese enterprise ‘going out’. Hong Kong will play a number of key connector roles in the ‘Belt and Road’ initiative.
We will play to our strengths in trade and logistics, financial services, professional services, and tourism; and we will strive to build on new pillars such as creative industries, education and training, and innovation and technology.
As a global trade, business and tourism centre, Hong Kong’s extensive networks of business and professional links would not be possible without the physical infrastructure to make it happen. Our airport lies at the heart of Asia and serves as a hub that puts half of the world’s population within a five hour flight. Our port serves more than 500 destinations worldwide. We are well connected by road and rail to Guangdong Province and the Pearl River Delta, which are economic powerhouses in manufacturing and high-tech industries. And our fibre network, capable of carrying high-speed broadband, covers the entire city. These links – and the expertise that has built them – will all be strengthened to ensure our physical connectivity remains not just world-class, but world-leading.
In terms of financial services, Hong Kong’s position as the world’s largest offshore renminbi (RMB) centre is set to expand, which will also provide new opportunities in asset management, which we lead in Asia. The RMB will inevitably become one of the major trade and investment currencies along the ‘Belt and Road’.
We have a deep and mature market for IPOs, equities, loan syndication, private equity and in recent years, bonds, including those geared for Islamic financing requirements. We have the only interbank payment system that can seamlessly settle, in real time, trades in RMB, USD, EUR and HKD.
This dual global-China interface will be a lynchpin of the financial services needed to put the ‘Belt and Road’ into practice, since it will require massive amounts of capital to make it work.
Hong Kong will play a crucial role in the continued opening up of China’s capital account and the internationalisation of the RMB, as well as the development of China’s stock markets. The Hong Kong Stock Exchange already has a trading link with the Shanghai Stock Exchange, and a further link with the Shenzhen Stock Exchange is also planned. These links allow both institutional and retail investors to access the Mainland market via Hong Kong, and vice versa. It is clear that Hong Kong will play a pivotal role in the ongoing opening up and reform of China’s financial markets.
This plays to another of Hong Kong’s key strengths – its people. We have a highly experienced, connected and outward-looking workforce that covers a broad range of areas including financial services, accounting, law, architecture and engineering management. Like part of a giant brain, these professionals are the neural transmitters that allow connections across multiple disciplines, cultures and time-zones.
As the ‘Belt and Road’ initiative comes into fruition, there will be greater demand for those who don’t just have experience in a certain sector, but who can work across different cultures and languages to exploit their expertise in areas such as construction, operations, management, consulting and, of course, banking and finance.
The big challenge for Hong Kong – and other advanced economies with declining birth rates and longer lifespans – is to find and retain the talent to feed the demand for high quality professional services. Emerging economies will also need people with international expertise and exposure to ensure their interests are well protected.
Ensuring that our education system provides such expertise to serve our own needs is only part of the equation. Immigration laws and schemes will need to be reviewed and suitably tweaked to attract talent and allow the freer movement of people with the skill sets in demand.
Another area where we see good opportunities for Hong Kong actually lies at the heart of our success – that is, our tried and trusted legal system. Hong Kong’s role as a dispute resolution centre – both arbitration and mediation – will become more entrenched as companies and businesses from the different legal and business systems within the ‘Belt and Road’ look for a common platform to settle their differences. This will include sectors such as construction and maritime services.
Beyond these traditional strengths we see good potential in areas such as intellectual property trading, creative industries, and testing and certification, as well as the film and cultural industries. All these areas require a robust legal system to protect ideas, creativity and intellectual property as well as a free, open and pluralistic environment that acts as a petri dish for innovation. Hong Kong also has good potential as an education services provider – in particular, professional and technical education that is aligned with global standards.
Anybody who has been to Hong Kong cannot help but notice the ease at which you can travel, commute and communicate – from arrival at the airport, to the ride on the metro and the thousands of Wi-Fi hotspots connecting you to the world from the comfort of a shaded park bench.
Hong Kong has long understood – and leveraged – the value of connectivity as an economic driver. Indeed, we have built our success on being a super-connector for goods, trade, capital, and people from all corners of the globe. Ten years hence, in order to survive and prosper – we’ll need to raise the bar. We’ll need to become Asia’s hyper-connected world city.
The Hon Mrs Carrie Lam Cheng Yuet-ngor, Hong Kong Chief Secretary for Administration
Carrie Lam Cheng Yuet-ngor is the Chief Secretary for Administration of the Government of Hong Kong SAR.
She was appointed Chief Secretary for Administration on 1 July 2012. She joined the Administrative Service of the Hong Kong Government in August 1980. During her 27 years as an Administrative Officer, she has served in various bureaux and departments. She was Director of Social Welfare from August 2000 to October 2003, Permanent Secretary for Housing, Planning and Lands from November 2003 to May 2004, and Director-General of the Hong Kong Economic and Trade Office in London from September 2004 to March 2006. She was Permanent Secretary for Home Affairs before being appointed as a Principal Official on 1 July 2007, when she assumed the post of Secretary for Development.
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