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During a recent speech, the Director-General of Trade and Industry, Kenneth Mak, has explained why, last November, Hong Kong made a formal request to join the Association of Southeast Asian Nations (ASEAN)-China Free Trade Area (ACFTA).
He noted that ASEAN is Hong Kong's close neighbour and a very important trading partner. "The ACFTA is an evolving platform for progressive liberalization of trade and investment between ASEAN countries and China, with the ultimate objective of fostering closer economic integration and sustainable economic growth in the East Asian region,” he said.
He pointed out that, as a free and open economy serving as a regional trading, financial and logistics hub, Hong Kong is already an important conduit of trade and investment between ASEAN and mainland China.
Bilateral trade between ASEAN countries and China amounted to some USD360bn in 2011, and has been growing rapidly. A significant portion of this trade was physically routed through Hong Kong, or was arranged or financed by Hong Kong.
Hong Kong, Mak said, believes that its participation in the ACFTA “will improve the efficiency of such trade, and more generally the flow of capital, entrepreneurship, technology and people within the region, enhancing the overall competitiveness of the ACFTA. This will be a win-win situation for all of us.”
“At present,” he added, “Hong Kong adopts a policy of zero import tariffs and has few restrictions on services trade and foreign direct investment. Hong Kong's participation in the ACFTA will bring legal certainty of such policies to ASEAN enterprises selling their goods and services to Hong Kong, or investing in Hong Kong.”
“By the same token,” he continued, “with the investment promotion and protection provisions in the ACFTA, Hong Kong investors will have an even greater incentive to channel more investments into the ASEAN region, creating more jobs and contributing to economic development in the host countries, particularly the relatively lesser developed ASEAN member states.”
Mak confirmed that Hong Kong was the world's fifth largest and Asia's second largest provider of foreign direct investment in 2011, with total outflow of direct investments from Hong Kong amounting to USD82bn. Mak predicts that the proportion of such investments going into the ASEAN region will increase significantly after Hong Kong becomes a party to the ACFTA.
As an important platform for trade and investment between ASEAN and China, Hong Kong's entry into the ACFTA should also strengthen its intermediary role, with more than 3,700 multinational companies having set up their regional headquarters or regional offices in Hong Kong, and, being a global financial hub and the pre-eminent offshore renminbi centre, Mak believes that Hong Kong can provide high-quality financial and management services between ASEAN, China and the rest of the world.
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