John C Tsang, Financial Secretary of Hong Kong Special Administrative Region Government (China), has just paid a two-day visit to Vietnam to bolster bilateral economic cooperation. In a talk with The Saigon Times Daily, he highlights the opportunities for Vietnamese companies to further tap the huge market of China via Hong Kong under the Closer Economic Partnership Arrangement (CEPA) signed in 2003 between the territory and mainland China. CEPA is in fact a free trade agreement that breaks down trade barriers for goods entering China.
Hong Kong is the better gateway for Vietnam to enter China
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| John C Tsang |
John C Tsang, Financial Secretary of Hong Kong Special Administrative Region Government (China), has just paid a two-day visit to Vietnam to bolster bilateral economic cooperation. In a talk with The Saigon Times Daily, he highlights the opportunities for Vietnamese companies to further tap the huge market of China via Hong Kong under the Closer Economic Partnership Arrangement (CEPA) signed in 2003 between the territory and mainland China. CEPA is in fact a free trade agreement that breaks down trade barriers for goods entering China.
The Saigon Times Daily: Hong Kong signed a unique free trade agreement known as Closer Economic Partnership Arrangement (CEPA) with China in 2003. So how can Vietnamese enterprises take advantage of this agreement?
- John C Tsang: As you know, the Chinese market is the largest and the most potential one. However, successfully tapping this market is far from easy. In Vietnam, you have mostly small and medium sized enterprises (SME). And we understand that Vietnamese SMEs, when trying to access a new market, often find it very difficult because they have limited resources. However, if Vietnamese companies want to access the Chinese market, they can access through Hong Kong. Hong Kong people have quite better understanding on doing business in China than anybody else in the world. Vietnamese SMEs can use Hong Kong as a base to gain access to the Chinese market through the expertise that we have in Hong Kong.
Regarding CEPA, this is a unique free trade agreement (FTA). Under CEPA, all products with the “Made in Hong Kong” label are exempt from tariffs when entering the mainland. Because CEPA rules are nationality-neutral, companies from Vietnam and around the world can enjoy the same benefits as local Hong Kong firms. As long as you register as Hong Kong firms, you can make use of the CEPA and can easily access the Chinese market.
Hong Kong is considered a costly place to invest in. What is your opinion?
- For most businessmen, cost is not a major factor but the profit. So you may have to pay for extra cost but at the end of the day, if you can make more money that is more important. Doing business in Hong Kong is more expensive but there are alternatives that you can choose. You do not need to have an office in the tallest tower in the center of Hong Kong but on the outskirts of the city.
Currently 47 service sectors are included in CEPA covering key areas, such as trade, banking, tourism, legal and medical services as well as transport and logistics services. The number of areas covered under CEPA has increased each year since the beginning of implementation in 2003, making this an ongoing and expanding commitment to break down trade barriers between the two.
Moreover, we maintain our own financial system with a well-known and much-envied low and simple tax regime. In Hong Kong, people pay no more than 15% salaries tax, and the profit tax is capped at 16.5%. I think those preferences are worth considering instead of cost. The important thing is how much profit you can make from the business transaction.
How is your assessment about the economic relationship between Vietnam and Hong Kong in the future and do you have any recommendation for Vietnamese firms doing business in Hong Kong?
- There are quite a number of Vietnamese firms that are already doing business in Hong Kong. I just cite one example that is the export of Vietnamese rice to Hong Kong. In the past, it is mainly rice from Thailand but right now, rice imported from Vietnam makes up about 20% of our total intake. Rice from Vietnam is gaining a strong foothold in Hong Kong and that is a very good example. It takes hard work to build up a kind of interest, but it can be done.
Vietnamese rice companies are building up a very strong base in the wholesale market. But once they gain access into the supermarket and the retail market, then the business can grow even bigger. The most important thing is that you have to have good products. Rice trade is the good example and this can happen in other areas as well and I think that why it is important to maintain a close relationship and a better understanding of each other.
Vietnam was our 15th largest trading partner in 2011. Our bilateral trade reached US$8.4 billion (equal to HK$ 65.7 billion), a 35% increase compared to 2010. Hong Kong can provide the service space whereas in Vietnam, you have a large, young population, and a lot of natural resources. I think that is a complementary relationship.
Hong Kong signed the Comprehensive Agreement for Avoidance of Double Taxation with Vietnam in December in 2008, which is a very useful instrument for the businesses in both places to have a lot more certainty in terms of the tax commitment. However, Hong Kong intends to sign the FTA with ASEAN countries in the coming time. I have talked with Mr. Vuong Dinh Hue, the Minister of Finance of your country, and he is positive about that. I think the FTA signed between Hong Kong and ASEAN countries will benefit anybody concerned.
Reported by Thuy Dung