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Speech of Hong Kong Chief Executive Mr. Donald Tsang on the occasion of the reception for Russia delegation

Mr. President, Your Excellencies, Distinguished Guests, Ladies and Gentlemen,


It is my great pleasure to welcome President Medvedev and his delegation to Hong Kong.


There is a Russian proverb that says, "A guest has not to thank the host, but the host has to thank the guest."


I would like to begin with a heart-felt "thank you" to all our guests and friends from Russia for visiting us in Hong Kong. I hope your stay here, though brief, will be an enjoyable and fruitful experience.


In particular, I thank President Medvedev for taking time out of his very busy schedule to lead the Russian delegation. We are honoured by your presence.


Mr. President, your visit to Hong Kong is much more than a goodwill stop. It underscores the great strides that Hong Kong and Russia have made in forging closer ties.


I had the great pleasure of leading a local business delegation to Moscow last year.


It was an unforgettable experience. I was very grateful for the opportunity to call on President Medvedev at the Kremlin.


I also recall that during a full-day program of meetings in Moscow, I attended a religious service at Sretensky Monastery at day break and took a late night ride on the Moscow Metro. It was a unique way to sample the history and grandeur of your nation’s capital. Although, without the Russian security officers leading the way, I probably would have lost!

During my visit I got a close-up look at the enormous potential for stronger links between our two economies: Hong Kong as an international business and financial centre and Russia as a highly resourceful and dynamic economy.


Ladies and gentlemen, our bilateral relations have come a long way in a relatively short time, thanks to the strong drive and determination of the two governments and the entrepreneurial spirit of our business communities. It is also due in no small measure to the hard work of the Russian Consul General in Hong Kong and our Economic and Trade Office in London which covers Russia.


In just the past two years, we have signed a mutual visa-free travel agreement. We have launched direct passenger flights between Hong Kong and Moscow. And both sides have staged various business events in each other’s cities.


Another breakthrough last year was the first listing of a Russian company on the Hong Kong stock market. So far two companies with Russian background have listed here, UC Rusal and IRC. I hope to see more such listings in the future.


We welcome this trend of Russian firms making the most of Hong Kong’s capital-raising expertise. For the past two years, Hong Kong has led the world in terms of capital raised through Initial Public Offerings. Last year, total IPO funds raised on our stock exchange exceeded US$58 billion.


Overseas firms listing here can benefit from wealthy investors in Hong Kong and Asia as well as from institutional investors in Mainland China. A Hong Kong listing also helps raise the profile and reputation of foreign firms in the Mainland of China. Listing in Hong Kong also extends their global coverage and reduces their time zone risks in portfolio management.


As part of China and a Global Financial Centre, Hong Kong also has a great deal of experience in business using the Mainland currency, the Renminbi. Banks operating here can offer a full range of Renminbi services. Russian firms can use Hong Kong as a stable and efficient platform to settle their Mainland trade using Renminbi. They can also issue Renminbi-denominated bonds in Hong Kong.VTB Bank achieved a successful Renminbi bond issue last year. Another one may be coming.


Another way for Russian firms to expand their reach in the Mainland is through our unique free trade arrangement. We call this CEPA, Mainland-Hong Kong Closer Economic Partnership Arrangement. Under CEPA, Russian companies incorporated in Hong Kong can enjoy enhanced access to Mainland markets, across 44 services areas. Also, goods that qualify as "Made in Hong Kong" and meet some straightforward Rules of Origin, enjoy tariff-free treatment under CEPA. This is an option well worth exploring.

Last year, the value of trade between Russia and Hong Kong grew more than 62 percent year-on-year. Last year, our bilateral trade amounted to almost HK$20 billion, or nearly US$2.5 billion.


Another telling statistic is that HK$12 billion, or US$1.5 billion worth of trade in goods between Russia and Mainland China was routed through Hong Kong last year.

I am confident that this is just the tip of a very large but friendly iceberg.


The Hong Kong Government is firmly committed to maintaining a stable, dynamic and business-friendly environment. We have a low and simple tax system with profits tax capped at 16.5 percent and salaries tax at 15 percent. There is no inheritance tax, no capital gains tax, no VAT, no sales tax and no withholding tax. Only income sourced in Hong Kong is taxed in Hong Kong.


We have free flows of capital, information and talent and our common law legal system is underpinned by an independent judiciary.


We are expanding our network of Avoidance of Double Taxation Agreements with economies around the world. We would like to add Russia to the list in the near future.


To further broaden Hong Kong's economic base, we have identified six industries with great potential for further development. These industries are education services, innovation and technology, the environmental industry, testing and certification, medical services and cultural and creative industries. The development of these industries provides fertile ground for broadening economic cooperation with Russia. Our Science Park, which stands at the forefront of our efforts in promoting innovation and technology, looks forward to welcoming its first Russian tenant.


Beyond business, we are promoting education, cultural and sports exchanges with Russia. Russian philharmonic orchestra, ballet and opera are already immensely popular in Hong Kong. We can also learn from Russia’s long and successful experience in the promotion of museums and performing arts, for which we are planning and building the largest ever arts and cultural district in Kowloon of Hong Kong.


I mention all this because I see huge potential for closer ties between Hong Kong and Russia in each of these areas.


Mr. President, ladies and gentlemen, it is appropriate that your visit to Hong Kong comes on the back of the BRICS Summit in Hainan.


The BRICS group of leading emerging economies: Brazil, Russia, India, China and South Africa are leading the world out of recession and playing an ever more prominent role on the international stage.


As the premier international gateway to Mainland China, Hong Kong has a crucial part to play in connecting our nation with fellow BRICS economies, including Russia.


Mr. President, I have mentioned a few sectors where our two economies are growing closer in this age of globalization have also touched on some of the areas with great potential for further collaboration between Russia and Hong Kong.


Once again, I thank all our Russian guests for coming to visit us here in Asia's world city.


I wish you all a memorable stay and I look forward to even stronger links between Russia and Hong Kong in the years ahead.


Thank you.


Hong Kong, April 17, 2011

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