Hong Kong woos Gulf investors

KUWAIT: China's Special Administrative Region, known to the world simply as Hong Kong, is eying the Gulf's Islamic financial market and regional investors.

Donald Tsang, Hong Kong's Chief Executive, is leading a high-level business delegation on a three-day visit to Kuwait courting local investors to enter Hong Kong's financial market which is seeking to expand into the Islamic finance market. "Kuwaiti investors can use Hong Kong as a platform (to entering mainland China and the entire Asian regional market)," said Tsang yesterday in an exclusive interview with Kuwait Times.

Hong Kong is poised to develop an Islamic finance platform in order to get a piece of the more than $1 trillion in petrol revenues generated by the Middle East each year. "Our job is to act as a catalyst and spur them into understanding what we offer and what we are as a global financial center," he added, and noted, "I am very happy with today's work.

On Friday, the European Union announced its disappointment over Hong Kong's delay in implementing universal suffrage which it had expected would occur by 2012. Tsang said of the issue, "This is a sovereign matter between the people of Hong Kong and a matter which will be decided from the Central Offices from China.

It is not something that is imposed from overseas the same way in which in any Gulf states you do not want your constitutional changes to be imposed on you from foreign affairs. It is important
to realize that the situation is largely resolved in that we have a firm line in which we will hold universal suffrage elections for CE in 2017 and the Legislative Council will follow in 2020.

I think it's a very good timetable and the Hong Kong people are generally happy about it. The latest survey shows that 70 percent of our people are content with this position.

" Continuing with the topic of democratic reform, Tsang stated, "It is important for people to realize that universal suffrage is not a fixed model that you can impose or clone on Hong Kong, it must be a self-grown one and we must decide for ourselves and we have to be careful in doing so, to ensure that we have the right model for ourselves.

Expanding on the lengthy timeframe for universal suffrage and outside Western influences, Tsang stated, "It is important not to gauge or decide or put pressure on people on other people's constitutional changes...you must see things through your own eyeglass...

We are not starting with a clean slate, everyone has his own tradition or history, we have a colonial history where democracy came in rather late in the day and this has to be grown and we have to be patient to get it right," he said further, and added, "If it is so easy, then the world should have one model and you can see we have different models and different varieties...

we must make sure that whatever we have is universally recognized to be universal suffrage on the one hand and it must be workable, pragmatic, and compatible with Hong Kong's situation on the other.

Hang Seng Bank launched Hong Kong's first Islamic fund in late October 2007, which invests mostly in stocks offered by the Dow Jones Islamic Market China/Hong Kong Titans Index, which itself only opened in early October of 2007. "It has been quite successful," he said.

The Dow's Islamic (new Islamic) index, tracks Sharia-compliant companies whose major base of operations are in mainland China and Hong Kong but trade in Hong Kong. Hong Kong's foray into the Islamic financial market will enable Hong Kong tocompete with Singapore and Malaysia for Muslim investments.

Tsang said of the Islamic financial market, "The future depends on how successful we are...this is the reason why we are here, to understand the requirements of Sharia compliance...we must learn the essentials." He said, adding, "We want to learn on the ground on how it is exactly conducted..." He stated, "We had a very interesting discussion with the head of the Central Bank here and I am sure this will be followed up - We have learned from him w
hat we might need to do.

" He added, "I believe our law is capable of doing that but we may have to change laws to suit this but that would be a minor amendment on our part." The Hong Kong government recently set up a committee to examine the introduction of Islamic financing to the region's established financial market.

"We had a good and successful seminar in Hong Kong bringing together the world's greatest Islamic financial experts." said Tsang.

Along with private investors, Hong Kong is seeking to woo Kuwaiti businesses to list on the Hong Kong exchange which is Asia's third largest by market capital and ranks seventh in the world. $789 billion worth of assets were managed by Hong Kong based funds in 2006, more than 60 percent of which came from overseas investors. $27 billion in venture capital funds were managed by Hong Kong based firms in 2006.

Looking positively to the future, Tsang stated, "I am sure the market is likely to see new products into 2008 and even more in the coming years." He noted, "I am trying to bring the key figures together, the head of our stock exchange, the head of our securities and futures commission and the head of the managing authority of Hong Kong.

" Tsang minimized his role in setting up the discussions which took place yesterday at Kuwait's Chamber of Commerce between the Hong Kong business delegation (half of whom are representatives of Hong Kong's Real Estate market and half of whom are from the financial market) and the Kuwaiti members of the Chamber of Commerce, "I merely opened the doors for the people to meet.

They spoke about the vantage point which Kuwaiti businessmen would wish to consider in establishing a base in our part of the world and radiate it to the Asian region, particularly in the mainland of China.

To get a business into mainland China from Hong Kong you must either be an established business for two to three years prior to the move, or form a partnership with a Hong Kong company," said Tsang, who furthered, "You don't just go to the mainland, you need someone to write down the legal instruments for you, you need a financier, you need insurance and we in Hong Kong can do this - We have something unique to offer.

" He continued, "It is very easy to set up a company in Hong Kong and it is also quite easy to find a joint venture.

Of Hong Kong's relationship with mainland China, Tsang said, "We are part of China and we have a close economic partnership agreement, essentially a free-trade agreement between Hong Kong and the mainland.

" He noted that the free-trade laws extend to all goods manufactured in Hong Kong, irrespective of the nationality of the owner, which is a key point in wooing foreign businesses to Hong Kong.

Tsang pointed to another key factor for foreign businesses doing business in Hong Kong - they are only taxed on in come derived in Hong Kong, therefore businesses which set up regional headquarters in Hong Kong but are controlling offices in other countries, are not, however, taxed on any of the income derived from those foreign based businesses.

He pointed out the uniqueness of Hong Kong saying, "Unlike most cities we are capable of dealing with the renminbi...the only city able to do this outside of mainland China.

" He noted, "We have come to the point where we have seen the beginning of Islamic financial products being created and we have seen particularly the investment opportunities that are on offer in the mainland of China...It will be very interesting to the investors in the ME who have a huge investment portfolio to consider what they can do, I believe that the opportunity is there in mainland China with very attractive returns in terms of global reach." He furthered, "What we are interested in is a long-term partnership with Gulf countries to start up a new range of products to make sure that the breadth and the depth of the Hong Kong market will include Islamic financial products.

I believe the money will flow from there." Tsang said of Hong Kong's thriving economy, "A free market means free access to any aspect of commercial activities here - We have to ensure the market is accessible to people - a free market is a competitive market.

Hong Kong's GDP in 2006 was $188.8 billion with a growth rate of 6.8 percent. Its economic success can be attributed to vigorous exports, its position as a leading tourist destination, and strong consumer spending. Notably, Hong Kong attracted more than 25.25 million visitors in 2006 alone.

The international financial hub has long maintained a stable business market attracting over 6,300 overseas and mainland China businesses to set up shop within its 1,104 square kilometers. "World financial management these days is augmented into different time zones really, Hong Kong fills a very important gap.

For trading in the day and separated from New York on the one hand, we've done reasonably well." He said. "Our market is one of the most active, fluid, very free, very reliable and more importantly we are capable of handling US dollar instruments of all kinds when New York Wall Street is sleeping.

We are also capable of dealing with Euro dominated instruments when London and Frankfurt are sleeping," he added. Of his visit to Kuwait, Tsang said, "My visit is quite beyond my expectations." Yesterday Tsang met with HH the Amir. "The Amir was very friendly...we talked about all sorts of things.

His experiences in Hong Kong...it was a very valuable meeting. It bodes well for what we wish to do here and what we can do together on the financial development side and the fiscal infrastructure side." Adding,I have seen the enthusiasm of the people here, particularly the leadership, the Amir himself, about doing things together with Hong Kong in a different time zone for the betterment of your people and my people.