Full text of "The Chief Executive's 2017 Policy Address"

Hong Kong (HKSAR) - "We Connect for Hope and Happiness"
Mr President, Honourable Members and fellow citizens,
I.  Introduction: A New Beginning
1.     Today, I am most honoured to present my first Policy Address in my capacity as Chief Executive, sharing my governance philosophy and elaborating on the vision and initiatives of the current-term Government for different policy areas.  I hope that this Policy Address will set new starting points for Hong Kong in areas such as governance, economic development, housing, education, healthcare, and chart the gradual delivery of the pledge that I made in my inaugural speech about connecting with you to build an even better Hong Kong.
2.     This year marks the 20th anniversary of Hong Kong’s return to the Motherland, a milestone for us to build on our achievements and begin a new chapter of development.  In his keynote address delivered at the Meeting Celebrating the 20th Anniversary of Hong Kong’s Return to the Motherland and the Inaugural Ceremony of the Fifth-term Government of the Hong Kong Special Administrative Region (HKSAR), President Xi Jinping said with deep sincerity that the destiny of Hong Kong has always been intricately bound with that of the Motherland.  In the last two decades, thanks to the support of the Motherland and with an international vision, Hong Kong has kept its distinct features and strengths.  This fully demonstrates that “One Country, Two Systems” is the best institutional arrangement to ensure Hong Kong’s long-term prosperity and stability after our return to the Motherland.  It is a workable solution and an achievable goal welcomed by the people.  Thus, everybody with a passion for Hong Kong has the responsibility to ensure that, here in Hong Kong, “One Country, Two Systems” advances in the right direction, the obligation to say ‘no’ to any attempt to threaten our country’s sovereignty, security and development interests, as well as the duty to nurture our next generation into citizens with a sense of national identity, an affection for Hong Kong and a sense of social responsibility.
3.     Hong Kong is facing challenges on many fronts.  On economic development, we need to consolidate and enhance our traditional advantages while developing new areas of economic growth as a matter of urgency.  I propose that the Government should be more proactive and play the role of a “facilitator” and a “promoter”.  We should seize the opportunities brought by the national Belt and Road Initiative and the Guangdong-Hong Kong-Macao Bay Area (Bay Area) development, make good use of the autonomy enjoyed by the HKSAR in developing our external affairs as provided under the Basic Law, and make timely investments in order to create new impetus for our economy.  The economy chapter in this Policy Address elucidates our views on the prospects of various trades and industries.  It reflects, in particular, the importance that we attach to innovation and technology and the creative industries, and sets out an array of measures to spur their further development.
4.     On people’s livelihood, meeting the public’s housing needs is our top priority.  The Government has no magic wands, but in the past few months the Directors of Bureaux concerned have demonstrated their readiness to think out of the box in a bid to address the community’s pressing needs.  We strive to meet public expectations by pursuing new directions and new initiatives.  On care for the elderly, we do not see ageing population as a threat to publicfinance.  We have, instead, taken the opportunity to devise a variety of effective elderly care services.  We will continue to devote resources to poverty alleviation as well as support for the disadvantaged in order to build a caring and inclusive society.  On education, we will uphold the “professional-led” principle and deploy the necessary resources to nurture our next generation.
5.     Strengthening governance is a key focus of the current-term Government.  For some time in the past there was a tendency for suspicion to breed without cause and a propensity for matters to get personal.  We must turn this round and make our best effort to improve the executive-legislature relationship.  I pledge to continue to take concrete actions to resolve problems for our people, following the principles of being “Innovative, Interactive and Collaborative”.
6.     I would like to extend my gratitude to Members of this Council and all sectors of the community for offering me a wealth of suggestions during my preparation of this Policy Address in the past three months.  My thanks also go to my devoted political team and our dedicated civil servants at all levels.  In full display of a progressive spirit, they recognise the need to change and share a readiness to seek changes.  We must cherish this new beginning and stay engaged in charting our future.  Let us join hands and work with one heart to take Hong Kong to a new level of success.
II.  Good Governance
My Belief
7.     As a Chief Executive with 37 years of experience in public administration, I have set good governance as the primary requirement for my political team.  Good governance is vital, whether in discharging the responsibilities of the Government as a “service provider” or a “regulator”, or in taking up the new roles of the Government as a “facilitator” and a “promoter” that I advocate.  Through immense contributions made by generations of Hong Kong people and countless challenges overcome, we have established our core values including an independent judicial system, adherence to the rule of law, a highly efficient and clean Government, freedom of the press, respect for human rights, pluralism and inclusiveness as well as the freedom of expression.  Since our return to the Motherland, these institutional strengths, rights and freedoms have been protected by the Basic Law under the principle of “One Country, Two Systems”.  These constitutional bulwarks and cornerstones of a civilised society and our moral values are unbreachable.  The Government and myself will, with our utmost endeavours, implement the “One Country, Two Systems” principle, uphold the Basic Law and safeguard the rule of law.  This is my solemn pledge to the Central Government and the HKSAR.
Executive Authorities
New Roles for the Government
8.     As Hong Kong becomes an increasingly complex societyand the expectations and demands of the community towards the Government have continuously grown, there have been new challenges to governance.  The Government must come up with policies and measures that address the community’s needs, respond to the pressing issues faced by the population while displaying a strong sense of commitment and high efficiency.  Thus, the Government’s roles must also keep abreast of the times to seize the opportunities for steady social and economic development.
9.     During my election campaign, I proposed that the Government should take up new roles other than as a “service provider” and a “regulator”.  The proposal has gained wide support from the community.  In taking up the role of a “facilitator”, the Government should be visionary, scrutinise existing policies and measures pursuant to policy objectives, remove obstacles for our industries, and strengthen co-ordination and co-operation across government bureaux and departments, and provide “one-stop” consultation and services as far as practicable, with a view to maximising thebenefits for the community.  Furthermore, government officials should place more emphasis on the role of the Government as a “promoter”.  By strengthening the links between the HKSAR and the Mainland as well as other countries, elevating Hong Kong’s status as Asia’s world city, attracting Mainland and overseas enterprises and talent to Hong Kong and, in collaboration with relevant organisations and trade representatives, proactively conducting “government-to-government” (G2G) interactions and lobbying, we seek to further expand Hong Kong’s external relations.  To set a good example by practising what I preach, I have made nine outbound visits since my assumption of office.
Upholding the Principle of Meritocracy
10.   The new term of Government attaches importance to public participation and engagement.  In the course of policy formulation, we will listen to different sectors of the society, especially industry stakeholders, frontline personnel as well as young people, and take account of their views with a view to building consensus.  I have called upon all policybureaux to uphold the principle of meritocracy and cast their net wide in scouting for talents.  Anyone with ability and the commitment to serve the community will stand a chance to join various statutory and advisory bodies and tender advice to the Government.
11.   To further encourage public participation, the Government will introduce a pilot self-recommendation scheme to recruit young members as a priority target.  We have already identified five advisory committees for inclusion in the first batch for recruiting self-recommended young members.  These committees, covering different policy areas, include the Youth Development Commission to be established, the Committee on the Promotion of Civic Education, the Committee on Innovation, Technology and Re-industrialisation, the Environmental Campaign Committee and the Action Committee Against Narcotics.  The Home Affairs Bureau (HAB) is drawing up a mechanism for recruitment and selection to ensure an open, fair and just process.

Open and Transparent Government
12.   In reflection of the openness and inclusiveness of the current-term Government and to address the aspirations of some media bodies, the Information Services Department has introduced a mechanism for the admission of online-only mass news media to government media events.  I now announce that we will re-open the East Wing Forecourt of the Central Government Offices (CGO) as soon as possible before the end of this year, so that the East Wing Forecourt will resume its functions as a vehicular access to the CGO, a passenger pick-up/drop-off point for the CGO and a passageway for visitors and staff of the CGO and the Legislative Council Complex.  Besides, we will resume the arrangement for members of the public to make applications for holding public meetings or processions at the East Wing Forecourt on Sundays and public holidays.  Relevant departments are making preparation for the re-opening of the East Wing Forecourt and details will be announced later.  I appreciate that we need to keep up our efforts in order to fully realise the design concept of “Door always open; Land always green; Sky will be blue; People will be connected” of the CGO.
Boosting Implementation Capabilities
Augmenting the civil service establishment
13.   In view of the increasing workload across all ranks of the civil service in recent years, I will ask the Heads of Departments to reduce the demand for manpower by streamlining administration, fostering innovation and collaboration, and leveraging technologies.  In order to ease the work pressure on civil servants as soon as possible and to support the Government in taking forward various new policies and initiatives, we will, as a first step, augment the civil service establishment.  We expect an establishment growth of not less than 3% in the 2018-19 financial year, which will represent the highest year-on-year increase since our return to the Motherland.  Relevant details will be announced in the 2018-19 Budget.
Extending the service of civil servants
14.   On the other hand, to tie in with the goal of expanding the labour force and to respond to the aspirations of our serving colleagues in the civil service, we have re-examined the issue and agreed that serving civil servants joining the Government between 1 June 2000 and 31 May 2015(i.e. the effective date of the policy of extending the retirement age of new recruits) will be allowed to choose to retire at 65 (for civilian grades) or 60 (for disciplined services grades) on a voluntary basis.  The Civil Service Bureau is working out the details and plans to consult the staff side in early 2018.
Establishing a new civil service college
15.   Our civil service is well-known for its professionalism and high efficiency.  We must, nevertheless, continue to strive for excellence through enhanced training.  The civil service must be forward-looking, visionary as well as innovative in order to tackle different challenges and deliver outstanding performance in the Government’s roles as a “service provider”, “regulator”, “facilitator” and “promoter”. I propose to establish a new civil service college with upgraded training facilities so as to further enhance training for civil servants in the areas of leadership development, interaction and communication with the public, innovation, use of technology, etc.  The new civil service college should also place emphasis on deepening civil servants’ understanding of our country’s development and the relationship between the Central Authorities and the HKSAR, enhancing their awareness of international affairs, as well as promoting exchanges with civil servants in other places, through which knowledge, experience and insights gained from local public service management could be shared.
Stepping up Collaboration Across Bureaux and Departments
Revamping the Central Policy Unit
16.   To tie in with the Government’s new role as a “facilitator”, I will revamp the Central Policy Unit as the Policy Innovation and Co-ordination Unit.  The new office will be responsible for policy research and innovation, co-ordination across bureaux and departments, enhancing public participation as well as rendering assistance in co-ordination work for cross-bureaux policies selected by the senior leadership of the Government.  We will soon start the recruitment of young people who aspire to be engaged in policy research as well as policy and project co-ordination to join the Policy Innovation and Co-ordination Unit proposed to be established as non-civil service contract staff so that they could make a contribution in shaping the future Hong Kong.

Transferring the Efficiency Unit to the Innovation and Technology Bureau
17.   With its team of professionals and network of external partners, the Efficiency Unit (EU) has been supporting bureaux and departments in enhancing operational efficiency and providing improved public services.  In future, it will become increasingly important to achieving this goal through the applicationof innovative technology.  In view of this, I propose transferring the EU from the Chief Secretary for Administration’s Office (CSO) to the Innovation and Technology Bureau (ITB) so that we could build a stronger team and make better use of the $500 million earmarked for technology application in departments to further promote innovation and technology development within the Government.

Legal Aid Department to come under the Chief Secretary for Administration’s Office
18.   In view of the above restructuring of the Government, we will implement the Legal Aid Services Council’s earlier proposal to transfer the Legal Aid Department from the HAB to the CSO to underline the independence of the legal aid system.  As for the restructuring proposals put forward by stakeholders of other sectors, such as the establishment of a Culture Bureau, the splitting of the Transport and Housing Bureau, etc ., we will further listen to the views of different sectors.

19.   The rule of law is the most important core value of Hong Kong, and judicial independence is the linchpin in upholding the rule of law.  During the past few months, the Hong Kong courts’ decision on certain cases have sparked some negative comments on judicial independence, with some casting doubts about our courts’ freedom from external interference.  I must solemnly point out that the Basic Law clearly stipulates that the HKSAR enjoys independent judicial power, including that of final adjudication, and that our courts shall exercise judicial power independently, free from any interference.  The Court of Final Appeal is the highest appellate court in the HKSAR, consisting of the Chief Justice and permanent judges.  Non-permanent judges from other common law jurisdictions may also be invited to sit on the court.  Since 1 July 1997, the Court of Final Appeal has been, pursuant to Article 82 of the Basic Law, inviting judges with profound judicial experience and high professional status and reputation from other common law jurisdictions to take part in its hearings.  This unique arrangement is the very manifestation that under the protection of the Basic Law, the judicial system of Hong Kong has won international recognition.  The high quality and independence of the judicial system in Hong Kong is most precious.  We are fully confident that the courts will impartially exercise their judicial power.  The HKSAR Government will continue to steadfastly safeguard judicial independence, and discharge its roles in upholding theBasic Law and defending the rule of law.
20.   The Government has all along been providing sufficient resources to the Judiciary to ensure its effective operation.  During the past seven financial years, the Government has acceded to the Judiciary’s requests for funding and post creation in full.  To attract top talent to join the Judiciary, the Government has also adopted all the specific measures proposed by the Judiciary to enhance the conditions of service for judges and judicial officers.  Moreover, the Government spares no effort in improving court facilities.  We have reached consensus with the Judiciary on the relocation of the High Court Building, which is now in very congested conditions, to Site 5 of the new Central Harbourfront (i.e. adjacent to the Legislative Council Complex) and the construction of a District Court Complex at Caroline Hill Road to house the District Court, the Family Court and the Lands Tribunal.  Costing over $20 billion, these projects will fully address the long-term accommodation needs of courts at various levels.
Law Reform Commission
21.   In the context of upholding the rule of law, the Law Reform Commission of Hong Kong (LRC) plays a key role in promoting effective law reform.  To enhance the efficiency and operation of the LRC, the Department of Justice (DoJ) is studying the experience of law reform agencies in other jurisdictions with a view to exploring different options for enhancing the operation model for the LRC.
Archives Law
22.   Accountability and transparency are of vital importance to good governance.  As pointed out in my Election Manifesto, I attach importance to the integrity of government records and hold a positive view towards the enactment of archives legislations.  The LRC is studying our existing records management system and the relevant experience of other jurisdictions, and will conduct extensive consultation on its proposals.  The Government will follow up on this subject after receiving the report from the LRC.  In the meantime, the Government will continue to enhance its records management work.
Legislating for Article 23 of the Basic Law
23.   It is the constitutional responsibility of the HKSAR Government to legislate for Article 23 of the Basic Law in order to safeguard national security.  From experience, this issue will very readily generate controversies in the community.  The current-term Government must act prudently after weighing the pros and cons, and seek to create a favourable social environment for the community to handle this constitutional obligation of the HKSAR in a positive manner.

Article 45 of the Basic Law: Selection of the Chief Executive by Universal Suffrage
24.   Regrettably, after spending 20 months on the political reform package, the “political reform trio” led by me in the last term of Government was unable to secure the selection of the Chief Executive by universal suffrage through “One Person, One Vote”.  The unlawful “Occupy Central” movement launched by some people has led to social conflicts and seriously affected the economic and social development of Hong Kong.  As a responsible Chief Executive returned by election, I fully understand the aspirations of the community, in particular our young generation, for universal suffrage.  Yet, we cannot ignore the reality and rashly embark on political reform once again.  During my term of office, I will do my best to work towards creating a favourable social atmosphere for taking forward political reform within the framework of the “831 Decision” of the Standing Committee of the National People’s Congress.

Executive-Legislature Relationship
25.   The Basic Law stipulates the respective responsibilities of the executive authorities and the legislature of the HKSAR.  While the Government fully respects the functions of the Legislative Council (LegCo) to exercise checks and balances on the executive authorities, we hope that through co-operation, we can reach consensus on issues that are controversial and yet strategically important for the long-term development of Hong Kong.  Before assuming office, I had started communicating actively with LegCo Members from different political parties and groups, and consulting them on how to make the best use of the new resources for education.  The additional recurrent funding of $3.6 billion for quality education was approved smoothly by the LegCo Finance Committee two weeks after it was proposed by the Government.  This demonstrates that good communication is the basis for co-operation between the executive authorities and the legislature.  I am confident that with the overall interests ofHong Kong as our common goal, we can discuss, decide and proceed together.
26.   In the past three months, I have demonstrated through action that I attach great importance to improving the relationship between the executive authorities and the legislature.  Accepting the suggestion of LegCo Members, I have reverted to the practice of delivering the Policy Address at the first meeting of the legislative session.  I also responded positively to the request of the LegCo Committee on Rules of Procedure to increase the frequency of the Chief Executive’s Question and Answer Sessions.  I will continue to set an example and lead my political team to build an interactive platform for communication and co-operation with the LegCo.
District Administration
27.   On district administration, we will adopt a “bottom-up” approach and propose improvement measures after listening to the views of the District Councils and local communities regarding their long-standing concerns.  In this connection, the Government has already implemented a series of improvement measures through co-ordination across relevant departments under the Steering Committee on District Administration.  These include:
(i)    increasing the cleaning frequency: cleaning hygiene blackspots in all districts more frequently, and conducting large-scale clean-up operations regularly at coastal areas and typhoon shelters;
(ii)   stepping up law enforcement: stepping up inter-departmental collaboration and law enforcement effort with regard to blackspots of littering, illegal dumping, illegal parking of bicycles and shop-front extensions in the districts;
(iii) using automation to enhance efficiency: exploring the introduction of automated cleaning machines or technology for trial use at suitable venues or after large-scale events;
(iv)  making good use of idle sites in various districts: opening up and landscaping undeveloped government sites for leisure and recreational purposes as far as possible in accordance with the recommendations of the District Councils, or allocating such sites for use by non-governmental organisations or arts groups; and
(v)   stepping up publicity and public education efforts: steppingup collaboration with the District Councils and encouraging local personalities to participate in public education and publicity activities, to educate the public to keep our city clean and protect the environment at source.
28.   Good building management is also conducive to improving the living environment, promoting community building and fostering social harmony.  To assist owners in proper building management and to address public concerns, we will implement multi-pronged initiatives, including the submission of proposed amendments to the Building Management Ordinance to the LegCo for deliberation; publishing new Codes of Practice to set out the best practices of building management; and launching the Building Management Dispute Resolution Service, to be steered by a retired judge, on a pilot basis to provide objective opinions on dispute cases.
29.   Since its establishment in 1974, the Independent Commission Against Corruption (ICAC) has profoundly transformed Hong Kong from a city plagued with corruption to one of the least corrupt cities in the world.  Internationally acclaimed, our citizens and businesses maintain high ethical standards and show zero tolerance towards graft.  The achievements of the ICAC owe much to its adoption of a three-pronged approach, comprising law enforcement, corruption prevention and community education, as well as the unwavering dedication of its highly professional staff in fighting corruption on all fronts.  Today, the ICAC remains independent in its operation.  It is fearless, robust and effective in pursuing the corrupt, and continues to be held in high regard by both the local and international communities.  The Commissioner of the ICAC will continue to call on major international ranking institutions to enhance their understanding of Hong Kong’s probity situation.  On the enhancement of legislation, we will resolve as soon as possible those constitutional and legal issues pertinent to theamendment of the Prevention of Bribery Ordinance to extend the scope of sections 3 and 8 to cover the Chief Executive.
Public Finance
30.   Sound public finance and optimal use of public resources are key to good governance.  With years of practical experience in public finance, I fully appreciate the Basic Law’s requirement of keeping the expenditure within the limits of revenues and avoiding fiscal deficits as far as possible.  But the fact is that the HKSAR Government last went into deficit in 2003-04.  Taking into account the investment return previously injected into the Housing Reserve, we currently have a fiscal reserve in excess of $1,000 billion.  We are well positioned to use our accumulated fiscal surpluses, which are wealth derived from the community, wisely to benefit the community.  On the premise of ensuring the health of our public finance, I will adopt forward-looking and strategic financial management principles in making investment for Hong Kong and relieving our people’s burdens.

The Chief Executive’s Mission and Leadership
31.   In the past three months, in my new capacity as Chief Executive, the honour as well as the immense responsibility of the office are most deeply felt.  Some of the decisions cannot be delegated.  Certain views must be stated in unequivocal terms.  And some of the tasks have to be taken up by myself.  What I find most encouraging and touching is the warm support I have received from numerous leaders in our community.  Some of them have joined the Executive Council and various statutory bodies or advisory bodies, some have participated in outbound business delegations or summit meetings, and some have spoken in support of Hong Kong through their liaison with Mainland and overseas organisations.  I will capitalise on this rich talent pool during my tenure in working on Hong Kong’s future.
The Chief Executive’s Council of Advisers on Innovation and Strategic Development
32.   I will set up the Chief Executive’s Council of Advisers on Innovation and Strategic Development to replace the existing Economic Development Commission and the now defunct Commission on Strategic Development,both chaired by the Chief Executive.  The Council, comprising leaders from various sectors, will contribute ideas on future innovation in Hong Kong and the strategic positioning of Hong Kong in the future global economy, guide future changes to maintain Hong Kong’s competitiveness in theglobal arena and enhance Hong Kong’s alignment with the development of our country.  The new Policy Innovation and Co-ordination Unit will provide secretarial support for the Council and conduct evidence-based policy research in the light of the Council’s suggestions.  This would strengthen the Government’s capability in policy formulation to meet Hong Kong’s development needs.
Steering Committee on Innovation and Technology
33.   I will personally chair an internal Steering Committee on Innovation and Technology to take forward the development of innovation and technology in Hong Kong, and to steer collaboration and participation across bureaux and departments with effect from the most senior level.  I will also ensure that the resources requirement will be met in a timely manner.
Chief Executive Summits
34.   While inviting the Chief Secretary for Administration and the Financial Secretary respectively to lead other important policy areas, I will chair the annual Chief Executive Summits to be apprised of the outcome of efforts made in various policy areas and to listen to further views from stakeholders.  The subjects initially proposed for the summits include youth development, quality education, poverty alleviation, and innovation and technology.  I will also attend the “Summit on the New Directions for Taxation” to be held late this month to gauge the views from all sectors in formulating forward-looking tax policies and measures.
III.  Diversified Economy
My Belief
35.   For 23 consecutive years, Hong Kong has been ranked asthe world’s freest economy by the Heritage Foundation of the United States.  Hong Kong has also been crowned as the world’s most competitive economy for two years in a row by the International Institute for Management Development based in Lausanne, Switzerland.  The Canadian think-tank Fraser Institute recently published its annual report on Economic Freedom of the World.  Since the publication of the report in 1996, Hong Kong has always been ranked the world’s freest economy.  In the World Economic Forum’s latest Global Competitiveness Report, HongKong has leapt three places to reach the sixth place worldwide.  Such recognition does not come easily.  We will continue to respect the rules governing the economy and market operations, and promote free trade.  At the same time, we will leverage our unique advantages under “One Country, Two Systems”.  With a new style of governance of being proactive, a strong sense of commitment embodied in the new roles of the Government, as well as a new fiscal philosophy to manage our finances wisely, we will inject new and continuous impetus to Hong Kong’s economy.
Hong Kong’s Current Economic Situation and Outlook
36.   Our economy has been performing very well this year, expanding by 4.0% in real terms year-on-year in the first two quarters.  Entering into the third quarter, our positive economic development has continued with export growing notably and domestic demand remaining firm, displaying an encouraging performance.  The local labour market has continued to see full employment, with the employed population increasing steadily and the unemployment rate dropping to 3.1% in recentmonths.  This is the lowest level in almost two decades.  Household income has generally recorded solid increases, with the earnings of full-time employees in the lowest decile group increasing by 4.5% in real terms after discounting inflation.  Inflation has dropped for six consecutive years.
37.   Looking ahead to the second half of the year, we believe that our economy will continue with its consistently upward trend.  This is partly attributable to the modest growth of the global economy and the steady performance and positive outlook of the Mainland economy, which is particularly important for our export trade.  In addition, sanguine local economic sentiment will bring momentum to our economy.  Barring abrupt negative shocks externally, our overall economic growth this year is expected to go higher than 3.5%, the mid-point in the earlier forecast range of 3-4%, and would fare better than the annual average of 2.9% over the past decade.
38.   While upholding the free market principle, the Government has to actively enhance its role in boosting our economic vibrancy through efforts in various areas, including land supply, talent, government-to-government business, policy directions, investment, business-friendly environment and taxation.  In the face of keen global competition, the Government must step up its policy effort in the areas of talent and innovation to ensure sustainable economic development.
Land Supply for Economic Development
Industrial/Commercial Sites
39.   To maintain Hong Kong’s competitiveness and seize new opportunities, the Government will continue to increase the supply of various types of land, including general industrial/commercial sites, sites for logistics use, and sites for convention and exhibition facilities, etc ., in order to meet the needs arising from economic development.  Under the 2017-18 Land Sales Programme, the Government has put up three sites, one each for commercial, hotel and industrial uses for sale in the first three quarters.  The Government expects to put up a number of commercial sites, located at the Kai Tak Development Area, above the terminus of the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link, at the New Central Harbourfront, Caroline Hill Road, Queensway Plaza and Sai Yee Street, etc ., for sale starting from next year onwards.  These sites will provide a total of about 1.1 million square metres of floor area.
Logistics Sites
40.   In addition to a site of about 3.2 hectares for logistics use in Tuen Mun Area 49, the Government will continue to identify suitable sites for such use at different locations (including Hung Shui Kiu New Development Area, Yuen Long South development, Tuen Mun Areas 40 and 46 and New Territories North).  We will also continue to support the Airport Authority Hong Kong (AAHK) in its development of SKYCITY, a facility combining retail, dining and entertainment purposes, to turn the Airport North Commercial District into a unique tourist attraction.
Convention and Exhibition Sites
41.   The convention and exhibition industry is crucial to Hong Kong as an international centre for commerce and trade.  By attracting world-class and the most prestigious international conventions and exhibitions to Hong Kong, we have reinforced our position as an international hub.  Regarding conventions, apart from the annual Asian Financial Forum and the Business of Design Week, we hosted the Belt and Road Summits on the Belt and Road Initiative of our country in the past two years to promote this major national policy as well as the opportunities for international business collaboration and to facilitate the related business matching in Hong Kong.  Regarding exhibitions, a number of large-scale international exhibitions are organised in Hong Kong every year.  Among them, over 10 are the largest Asian, or even global, procurement platforms for the trades concerned, such as electronics, jewellery, gifts, clocks and watches, lighting, and culture and arts.
42.   To maintain and consolidate the international status of our convention and exhibition industry, there is a pressing need for new venues.  Otherwise, Hong Kong will miss the opportunities to host some of the large-scale conventions and exhibitions that are either internationally important or newly launched.  The current-term Government is determined to tackle this long-standing problem.  After a detailed study, we consider that the priority is to build a new convention and exhibition venue of international standard in the proximity of the existing Hong Kong Convention and Exhibition Centre (HKCEC) in Wan Chai.  The new venue must be connected to and integrated with the existing HKCEC to maximise the benefits.  Therefore, we have decided that for the time being, we will give up the identified site at the Wan Chai Sports Ground announced by the Government earlier.  Instead, we will demolish and redevelop the three government buildings next to the HKCEC in Wan Chai North into a new wing that can be connected to and integrated with the existing HKCEC.  Based on an initial estimate, the project will add about 23 000 square metres of connected convention and exhibition facilities.  Hotel facilities, which complement the convention and exhibition activities, and Grade A officespace, which can help alleviate the market shortfall, can be built on top of the new convention and exhibition venue.
43.   The proposed new wing of the HKCEC will not be sufficient to make up for the venue shortage.  We will continue with the development of a new convention centre above the MTR Exhibition Station of the Shatin to Central Link to provide the market with an additional 15 000 square metres of convention space.  As a longer-term plan, when the reprovisioning of the Wan Chai Sports Ground is satisfactorily resolved, the site may be earmarked for the further development of convention and exhibition facilities so as to reinforce and enhance the status of Wan Chai North as a convention and exhibition hub in Asia.  We will also continue to explore the feasibility of expanding other existing convention facilities.
44.   In redeveloping the site vacated by the government offices buildings in Wan Chai North, we will take the opportunity to thoroughly examine the traffic arrangements.  To make full use of the new MTR Exhibition Station of the Shatin to Central Link in Wan Chai North, we propose to upgrade and enhance the footbridge network in Wan Chai North and its proximity to connect the convention and exhibition facilities to the MTR Wan Chai Station, Admiralty Station and the MTR Exhibition Station of the Shatin to Central Link.  This will improve the pedestrian walkway network inthe area.  We will also capitalise on the completion of the Central-Wan Chai Bypass to optimise the traffic arrangements in the vicinity and enhance the efficiency of the road network linking Wan Chai North.
Revitalisation of Industrial Buildings
45.   The Government is exploring different approaches to facilitate the transformation of industrial buildings and releasing land resources.  Possible options include reactivating the revitalisation scheme for industrial buildings by offering incentives to encourage owners of old industrial buildings to undertake redevelopment or wholesale conversion, and considering how operating space can be provided legally and safely under the scheme for certain industries with development potential, such as cultural, arts and creative industries, and for appropriate community facilities.  To address the issue of fragmented ownership in certain old industrial buildings, the Government will consider ways to facilitate the assembly of titles, including examining the threshold of “compulsory sale” applicable to old industrial buildings.  The Government is also studying how to facilitate the conversion of the lower floors of industrial buildings for non-industrial purposes, subject to fire safety and building safety requirements, and will review the definition and coverage of “industrial” and “godown” uses in land leases.
46.   The continuing development of Hong Kong’s economy requires a supply of talent for different sectors.  Nurturing local talent is thus the priority task of the Government.  In this connection, we will set up a Commission for the Planning of Human Resources, to be chaired by the Chief Secretary for Administration, for the training of talent for different industries and the formulation of policy initiatives to attract talents from outside Hong Kong more proactively.  In addition, the pooling of talents benefits the development of various sectors.  The Government will enhance Hong Kong’s training resources and policy initiatives to fully realise our soft-power and strengthen our training capacity in such areas as aviation, maritime, railway, finance, construction, city management, etc.  This will not only provide suitable talent for the high value-added and diversified development of Hong Kong in the long run, but also make contribution in training talents for our country as well as the Belt and Road cities and neighbouring areas.
Government-to-Government Business
47.   Through conducting more government-to-government dialogues and establishing more bilateral and multilateral ties with the Mainland and overseas countries, we will promote Hong Kong’s advantages and attract more Mainland and international enterprises, investors and talent to Hong Kong.
48.   On the enhancement of bilateral ties, the Government will actively seek to sign free trade agreements (FTAs), investment promotion and protection agreements (IPPAs) and comprehensive avoidance of double taxation agreements (CDTA) with other economies, including those along the Belt and Road to open up markets, and to further strengthen Hong Kong’s position as an international trade, commercial and financial centre.
49.   After years of negotiations, Hong Kong will sign an FTA and an IPPA with the Association of Southeast Asian Nations (ASEAN) in November this year.  This will help foster closer bilateral economic ties, boost the confidence of investors and enhance investment flows, thereby benefiting our economy.  The Hong Kong and Macao Closer Economic Partnership Arrangement (HK-Macao CEPA) is expected to be signed within this year.  We will sign an FTA with Georgia upon the completion of all the necessary internal procedures by both parties.  We will continue to negotiate bilateral FTAs with Australia and the Maldives.  We will also sign IPPAs with Bahrain and Mexico respectively after both parties have completed all the necessary internal procedures.  In addition, we are engaged in a strategic trade dialogue with Britain to discuss its post-Brexit trade relationship with Hong Kong.  We will review our bilateral and multilateral economic and trade relationships with our trading partners with a view to creating the most favourable environment and maximising the business opportunities for external trade and investment.
50.   The Government has so far concluded CDTAs with 38 tax jurisdictions.  Following the signing of an agreement with Saudi Arabia this August, we will continue to identify potential negotiation partners, especially countries along the Belt and Road.

We hope to further expand our CDTA network, bringing the total number of such agreements to 50 over the next few years.
51.   On multilateral relations, we will maintain our active participation in the affairs of the World Trade Organisation (WTO) and the Asia-Pacific Economic Co-operation (APEC).  The Secretary for Commerce and Economic Development (SCED) will be one of the Vice Chairs of the WTO’s Eleventh Ministerial Conference to be held in December this year.
52.   We now have 12 Economic and Trade Offices (ETOs) in major economies around the world.  To further expand the network of our ETOs and to strengthen our work on external promotion, in addition to the new ones proposed earlier (such as those to be set up in India, Russia and the United Arab Emirates), the Government is planning to set up an ETO in Thailand, which will be our third ETO in ASEAN, after Singapore and Indonesia.  This plan takes into account the fact that ASEAN is currently Hong Kong’s second largest merchandise trading partner and the fourth largest services trading partner.  It is also an economic region with significant development potential under the Belt and Road Initiative.  The addition of an ETO in Thailand will make the ETO network in ASEAN on par with that in the European Union.
Enhanced Co-operation with the Mainland
53.   Regarding the Mainland, we have upgraded the network and functions for our offices in the Mainland.  At present, our five offices in the Mainland cover 31 provinces, municipalities and autonomous regions, with each office having at least two liaison units.  In future, these offices and their 11 liaison units will enhance government-to-government connection both at the central and local levels, strengthen the promotion of Hong Kong in the Mainland and establish platforms for direct communication between Hong Kong’s business sector and relevant Mainland authorities.  This will further enhance the close relationship between Hong Kong and the Mainland, and support Hong Kong people and businesses to fully grasp the development opportunities in the Mainland.
54.   In addition, the DoJ is actively liaising with the Mainland authorities on proposals for facilitating the resolution of cross-boundary civil and commercial disputes through a clear and user-friendly legal regime with the aim to further safeguard the rights of the parties from the two places.  In this regard, the DoJ will explore with the Supreme People’s Court and relevant authorities appropriate ways to expand the scope of the arrangements on mutual legal assistance between the two places in civil and commercial matters.  Furthermore, the DoJ will soon renew the “Co-operative Arrangement on Legal Matters” with the Shenzhen Municipal People’s Government to enhance legal collaboration and exchanges between Hong Kong and Shenzhen.
55.   The DoJ is also stepping up its overseas promotion of Hong Kong’s international legal and dispute resolution services through co-operation with international organisations such as the United Nations Commission on International Trade Law (UNCITRAL) and participation in the work of the “Friends of the Chair on Strengthening Economic and Legal Infrastructure” under the Economic Committee of APEC.
Policy Directions
56.   In the face of competition from other economies as well as the rise of protectionism in recent years, Hong Kong is facing increasingly grave challenges.  We must develop a high value-added and diversified economy.  This embraces the development of new economic sectors such as innovation and technology and creative industries, and capitalising on the opportunities arising from the national Belt and Road Initiative as well as the Guangdong-Hong Kong-Macao Bay Area (Bay Area) development, in order to generate new impetus for our future economic development.
Opportunities Arising from the Belt and Road Initiative
57.   The Belt and Road Initiative is a new engine for Hong Kong’s economic development.  In the current-term Government, the Commerce and Economic Development Bureau (CEDB) has been tasked to co-ordinate the work of the HKSAR Government on the Belt and Road Initiative.  The SCED is proactively steering the next stage of work on the Belt and Road Initiative.  To ensure that the CEDB will be able to take forward the work on the Belt and Road Initiative more effectively and on a sustained basis, we will provide additional resources to reinforce the manpower for the Belt and Road Office.  The SCED has also revamped the Trade and Industry Advisory Board into a broader platform to facilitate liaison with enterprises and various professions and to collect their views more effectively.
58.   To fully participate in and capitalise on the opportunities brought by the Belt and Road Initiative, and to leverage our edge under the “what the country needs, what Hong Kong is good at” policy, the HKSAR Government will step up communication with the Central Authorities to gain a deeper understanding of the policy directions and implementation of the Belt and Road Initiative.  We will also co-operate with enterprises and chambers of commerce to translate policies into business opportunities.  We are in discussion with the Central Authorities with the aim of entering into an agreement of Hong Kong’s full participation in the Belt and Road Initiative with the National Development and Reform Commission (NDRC) by the end of this year.  The agreement will cover various areas such as finance, infrastructure, economic and trade facilitation, people-to-people bonds, project interfacing, dispute resolution as well as the Guangdong-Hong Kong-Macao Bay Area development.  Specific measures will be drawn up to lay down the principles and provide a blueprint for mutual co-operation.  Among these measures, we will explore the establishment of an information sharing platform for Belt and Road projects so that enterprises will have a better grasp of relevant information to facilitate more effective project interfacing and enterprise collaboration.  The HKSAR Government will also establish a joint working mechanism with the NDRC for direct and regular dialogues, to strengthen communication and co-operation and to oversee the implementation of the agreement.
59.   The second Belt and Road Summit (the Summit), jointly organised by the Government and the Hong Kong Trade Development Council (TDC), is a significant initiative in driving the Belt and Road Initiative.  The second Summit held on 11 September this year gained strong support from the Central Authorities and attracted the active participation of many countries and various sectors in Hong Kong.  Over 3 000 government representatives of different countries and leaders of different sectors from more than 50 countries and regions took part in the Summit.  The business matching sessions, in particular, received an overwhelming response from the business sector.  As many as 170 investment projects in transport and logistics infrastructure, energy, natural resources and public utilities, and urban development were featured through project presentations and networking sessions, with more than 600 participants.  In addition, one-to-one business matching meetings were arranged for over 200 companies, including project owners, investors and professional services providers.  The Summit successfully achieved its objective of “turning vision to action, fostering concrete co-operation under the Belt and Road Initiative”.  Building on the success of the Summit this year, the HKSAR Government plans to continue to work with the TDC and stage the event every year, making it a key platform to promote and foster Hong Kong as an international commerce and trading platform for the Belt and Road Initiative.
Development of the Guangdong-Hong Kong-Macao Bay Area
60.   After the signing of the co-operation framework agreement by the governments of Guangdong, Hong Kong and Macao, and the NDRC, witnessed by President Xi Jinping, on 1 July this year, we have basically completed the drafting of the development plan for a city cluster in the Guangdong-Hong Kong-Macao Bay Area (the Plan).  Soon to be promulgated by the State Council, the Plan will provide a blueprint for building a world-class city cluster through complementary co-operation among the three places.  The HKSAR Government will actively participate in taking forward the development of the Bay Area, so as to create favourable conditions for diversifying our industries, in particular for promoting innovation and technology development.  Moreover, we will seek further facilitation measures for Hong Kong people to study, work, and start up and operate business, live and retire in the Bay Area and thereby facilitating the flow of people, goods, capital and information between Hong Kong and other cities in the Bay Area and making it a quality living circle for Hong Kong people.
61.   To more effectively take forward various tasks related to the development of the Bay Area, the Steering Committee on Co-operation with the Mainland, chaired by the Chief Secretary for Administration, will be renamed as the Steering Committee on Taking Forward Bay Area Development and Mainland Co-operation.  This will enable us to capitalise on the unique advantages of Hong Kong in the Bay Area and formulate concrete work plans in a more focused manner.  The Constitutional and Mainland Affairs Bureau will set up a Guangdong-Hong Kong-Macao Bay Area Development Office, which will be responsible for co-ordination with the relevant central authorities, the Guangdong Provincial Government, the Macao SAR Government, and the relevant bureaux and departments of the HKSAR Government.  The office will proactively approach trade associations, professional bodies and relevant stakeholders to co-ordinate effort related to the implementation of the Plan.  Additional resources will be allocated to the office for undertaking research and publicity on the Bay Area development to assist Hong Kong people and enterprises to discover new opportunities.
62.   The current-term Government is committed to promoting two-way investments.  Invest Hong Kong (InvestHK) under the CEDB will maintain closer ties with the HKSAR’s offices overseas and in the Mainland to identify targets and proactively attract enterprises, including start-ups, to Hong Kong.  According to the latest annual survey jointly conducted by InvestHK and the Census and Statistics Department, there are over 8 200 business operations in Hong Kong with parent companies overseas and in the Mainland.  Among them, 1 413 have their regional headquarters in Hong Kong, representing an increase of 2.5% over the same period last year.  The Government also encourages local enterprises to explore investment opportunities overseas and in the Mainland.  This will in turn add momentum to the development of professional services in Hong Kong.
A Business-friendly Environment
63.   To create an environment for all businesses to thrive, the Government must devote effort to business facilitation.  Through the Business Facilitation Advisory Committee, we will improve our regulatory regimes and provide an effective platform for communication across departments and sectors so that the industries can put forward their views on regulatory matters to the Government.
64.   Our business facilitation work has won recognition worldwide.  In the past ten years, Hong Kong has all along been ranked by the World Bank’s Doing Business report among the top five easiest places to do business across the globe.  Our ranking last year further moved one notch up to the fourth place.  This achievement is made possible only by hard effort.  Looking ahead, we must enhance our business facilitation effort and remove red tape for various industries so as to enhance Hong Kong’s competitiveness.  We will also step up our dialogue with the World Bank and share the results of our work in this area with them so that Hong Kong will be able to maintain its position among the world’s top ranking economies in the Doing Business report.
New Taxation Proposal
65.   We must maintain a simple and low tax regime, which is one of the important competitive advantages of Hong Kong.  In the face of new dynamics arising from economic restructuring and global competition, we should strategically utilise our tax measures to enhance Hong Kong’s competitiveness by promoting the development of our industries and economic diversification.
66.   The Financial Services and the Treasury Bureau will soon implement the two specific tax measures put forward in my Election Manifesto.  On the two-tier profits tax system, the profits tax rate for the first $2 million of profits of enterprises will be lowered to 8.25%, or half of the standard profits tax rate, instead of 10% as proposed in my Election Manifesto.  Profits above that amount will continue to be subject to the standard tax rate of 16.5%.  The tax rate for the first tier, which is even lower than that proposed in my Manifesto, will provide further tax relief to small and medium-sized enterprises (SMEs).  To ensure that the tax benefits will target SMEs, we will introduce restrictions such that each group of enterprises may only nominate one enterprise to benefit from the lower tax rate.  To encourage research and development (R&D) investment by enterprises, the ITB will consult the industries on additional tax deduction for R&D expenditure.  It is proposed that the first $2 million eligible R&D expenditure will enjoy a 300% tax deduction with the remainder at 200%.  The implementation of the above two initiatives requires the formulation of the operations details and the enactment of legislation.  We will submit the draft legislation as soon as possible, with a view to implementing the proposals in 2018.
67.   The Government will maintain communication with stakeholders with the aim to formulate forward-looking tax policies and initiatives to promote the economic development of Hong Kong.
68.  The above initiatives of the Government apply to all trades and industries.  For individual industries, we need to draw up more concrete policies and measures depending on how developed they are.  I would like to first talk about two emerging industries in respect of which we have a competitive edge and much potential: innovation and technology and the creative industries.
Innovation and Technology
69.   Since the establishment of the ITB in November 2015, the Government has been actively promoting scientific research and the development of innovation and technology.  Our efforts in these two years are beginning to see results.  Capitalising on our advantages of “One Country, Two Systems”, our geographical location, business environment, legal system, intellectual property, R&D capability, financial services, etc ., and given the opportunities brought by the National 13th Five-Year Plan and the Guangdong-Hong Kong-Macao Bay Area development, Hong Kong has huge potential to become an international innovation and technology hub.  Nevertheless, we must keep reinforcing and upgrading our capability, provide a conducive eco-system for innovation and technology, drive entrepreneurship through R&D results, foster economic development and improve people’s daily lives.
70.   Innovation and technology is not a single industry, but a new model of development.  The development of innovation and technology can lead to new industries and create wealth, provide more employment for young people and improve people’s daily lives.  To catch up in the innovation and technology race, the Government will step up its efforts to develop innovation and technology in eight major areas.
71.   First, increase resources for R&D.  We have set a goal to double the Gross Domestic Expenditure on R&D as a percentage of the Gross Domestic Product to about $45 billion a year (i.e. from 0.73% to 1.5%) by the end of the current Government’s five-year term of office.  The Innovation and Technology Fund has doubled its financial support for innovation and technology from $730 million in 2013-14 to over $1.5 billion in this financial year.  From 2013-14 to 2016-17, the research funding provided by the University Grants Committee (UGC)/Research Grants Council (RGC) has increased by 18% from $4.46 billion to $5.28 billion.  We have set aside no less than $10 billion as funding for university research, which will be disbursed upon the completion of the review on research funding by the UGC task force led by Professor TSUI Lap-chee.  But before that, the funding provided by the RGC need not be confined to the investment return of the Research Endowment Fund.  We can also draw down part of the principal as appropriate.  To give private companies an incentive to increase investment in technological R&D, we will provide additional tax deduction for expenditure incurred by enterprises on R&D.  The first $2 million eligible R&D expenditure will enjoy a 300% tax deduction and 200% for the remainder.  With this measure, we hope to reverse the ratio of public sector versus private sector expenditure on R&D from government-led to public-private participation, which will make R

Published on: 2017-10-11

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