Looking to the future: Lessons and opportunities for Australia from Hong Kong



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Professor the Hon. Stephen Martin
Chief Executive, CEDA

Professor the Hon. Stephen Martin has had a long and distinguished background in the Australian Parliament, academia and the private sector.

After a recent visit to Hong Kong, CEDA Chief Executive , Professor the Hon. Stephen Martin, discusses lessons and opportunities for Australia

Hong Kong is ever changing, an economy in search of a new identity and a people somewhat insecure in their relationship to the motherland.  My recent visit to Hong Kong SAR as a guest of the Government, reinforced my view that Australia can learn from Hong Kong’s development.

Infrastructure projects are omnipresent.  Whether it be extensions and new lines in the highly-efficient MTR (train) system, harbour reclamation, high rise office or accommodation buildings or construction of massive undertakings such as the bridge to link Hong Kong with Macau, the pace of change is incredible. Yet it all seems to work so efficiently. Travel times on the island or on the Kowloon side seemed to be little affected by the obvious disruption evident.

But if you look deeper it is evident many of Hong Kong’s economic fundamentals have changed.  Gone is a manufacturing industry that once produced everything from textiles to watches.  These have been pushed across the border further up the Pearl River Delta into Guangdong Province where cheaper labour is plentiful.

Instead, Hong Kong thrives almost exclusively as a finance centre linked to Asia and beyond. There are relationships with the Shanghai Stock Exchange, global banks offering RMB clearing services, and private futures exchanges providing opportunities for global engagement. Regional, privately-owned banks based in China are seeking registration in Hong Kong.

Yet there is also a commitment to searching for other economic opportunities.  The Hong Kong Science and Technology Park is one such example.  This massive and growing complex demonstrates how to achieve what Prime Minister Malcolm Turnbull is apparently seeking for Australia.  Incubator facilities for start-up businesses often supported by government grants embrace cutting-edge technology with clear links to Hong Kong’s excellent higher education providers.

It is through government support that world-leading institutions such as MIT have committed to establishing campuses in Hong Kong. Hong Kong’s universities consistently rate highly in any ranking system.  But while they are magnets for high quality researchers, the ever-present arguments around publish or perish as opposed to practical commercialisation of research remain. A familiar refrain here in Australia.
Assisting the business transformation process are taxation rates that Australia could only ever dream about. Generally personal rates are at 15 per cent, corporate rates at 16.5 per cent. Registering a company is comparatively simple.

Impressively Hong Kong has instituted corporate governance, anti-corruption and regulatory protocols that ensure businesses, universities and the public can have confidence in the system.  This has been critical in managing the changed interrelationships between Hong Kong and Mainland China since 1997. The interchange of information between entities such as APRA, RBA, ICAC in New South Wales and ARC has featured in this process.

However it is still somewhat intriguing that in some quarters it is as if there was a longing to return to the ‘good old days’ of colonial rule. This would not seem to be the majority view but it has taken some time for older Hong Kong residents and some younger, more socially active residents to adjust to the new reality.

The mantra of ‘One country, two systems’ is repeated frequently, whether in discussions with government officials or with business. Additionally reference is just as frequently made to the importance of ‘The Basic Law’.  It is a genuine attempt to assure its residents, potential investors and businesses more generally that Hong Kong is an autonomous, free-market economy, and that through legal protections offered in 1997 essentially it is business as usual. 

Recent local elections were principally a contest about genuine local issues, and the status quo maintained in terms of pro versus anti Beijing candidates elected.  The expected surge in support for the ‘Occupy Movement’ candidates did not eventuate. However what was also striking about these election results was the number of younger people that were returned at the expense of older, long-term former representatives.

Australia’s relationship with Hong Kong should not be one that is taken for granted.  On several occasions the desire for an Australia-Hong Kong free trade agreement was raised.  Yet it would seem the enthusiasm from Australia has sent mixed signals to the extent that the Hong Kong government may now put its energy into a closer relationship with ASEAN.

Our government should perhaps take appropriate steps to ensure our extremely positive relationship is not in any way damaged by any perceived misunderstandings. Equally the Hong Kong government may need to more actively pursue issues such as airline access rights to assist any such proposal.

Hong Kong continues to be dynamic, but clearly searching for other opportunities to diversify its financial services-dominated economy. With a government blessed with a budget surplus and an apparent desire to facilitate such change, Hong Kong SAR has a bright future.  

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