Eddy Li points out city risks being marginalized if it remains outside the umbrella group while the B&R moves ahead
Chief Executive Carrie Lam Cheng Yuet-ngor has just finished her first overseas trip in the role — visiting Singapore and Thailand. Her visit to the two major Association of Southeast Asian Nations (ASEAN) countries, from my point of view, is a purposeful move to lay a foundation for Hong Kong’s joining the CAFTA (China-ASEAN Free Trade Area) within this year.
The Hong Kong business sector has paid close attention to the free trade agreement being negotiated with
ASEAN, since it’s a 10-nation (Singapore, Thailand, Malaysia, Indonesia, the Philippines, Laos, Myanmar, Vietnam, Cambodia and Brunei) bloc with a population of 600 million. This is a potential market with abundant resources. The CAFTA is the third-largest free trade zone in the world after the European Union and the North American Free Trade Area, and if Hong Kong can secure a membership, the city’s economic development in future will be much more promising, especially as the European and US markets are relatively unstable now.
From the interactions between the CE and the leaders of the two countries, I believe it’s safe to say the designated goal is achieved. Singapore’s Prime Minister Lee Hsien Loong also posted on Facebook: “Glad that Hong Kong Chief Executive Carrie Lam made Singapore her first overseas destination since becoming Chief Executive. We had a good discussion on SG-HK cooperation in trade and investment, and the Belt and Road Initiative. We also welcomed the recently concluded ASEAN-HK FTA and looked forward to its early implementation.”
As the B&R Initiative evolves, the trade volume between the mainland and ASEAN will definitely increase rapidly and substantially. Hong Kong would be marginalized if it could not join the CAFTA as early as possible. And it would be pointless to talk about Hong Kong’s role as a “super-connector”
As for the Thai government, its Prime Minister Prayut Chan-o-cha not only supported Hong Kong’s becoming a CAFTA member but also invited the special administrative region to open a trade office in his country to facilitate the cooperation in trade and investment between Hong Kong and Thailand. Lam responded actively toward his suggestion, hoping the Commerce and Economic Development Bureau could conduct feasibility research after the CAFTA agreement is officially signed. If successfully established, this will be Hong Kong’s third trade office in ASEAN countries, following those in Singapore and Indonesia.
It might rarely be known by people that the CAFTA negotiations are by no means easy — the 10 ASEAN countries all have their unique political conditions and economic features. Therefore, there are twists and turns to gain consensus in every single article in the agreement. What’s more Hong Kong, in itself, is already a free port, which lets any country import and export (lawful) goods without paying taxes. But in the 10 nations, only Singapore implements a zero-tariff policy; customs duties in the other nine economies vary from 2.9 percent to 10.3 percent. In other words, Hong Kong doesn’t have leverage in negotiations, since it has nothing further to offer ASEAN. That’s probably why the negotiations which began in July 2014 have not yet come to conclusion.
Some would question the importance of Hong Kong joining the CAFTA. Other than providing a potential new market for Hong Kong products, it is also significant for Hong Kong’s future role in the Belt and Road (B&R) Initiative. In the B&R, which is reckoned to be a new engine for the world’s future economic growth, the Southeast Asian countries are especially important in the 21st Century Maritime Silk Road. Geographically speaking, playing an important role in the “Silk Road” route is to Hong Kong’s advantage.
However, the “unimpeded trade” in the “five areas of connectivity” proposed in the B&R Initiative requires different economies to sign FTAs to remove trade barriers and pursue equal benefits. It is known that the Chinese mainland established free trade areas with ASEAN in 2010. As the B&R Initiative evolves, the trade volume between the mainland and ASEAN will definitely increase rapidly and substantially. Hong Kong would be marginalized if it could not join the CAFTA as early as possible. And it would be pointless to talk about Hong Kong’s role as a “super-connector”.
Once a CAFTA member, Hong Kong’s situation would be entirely different. On one hand, we can attract ASEAN companies to set up their regional headquarters here, which is a great chance for these firms to tap the mainland market; Hong Kong’s financial and professional sectors will be further developed and our position as an international center of trade, logistics and shipping will be strengthened. On the other hand, Hong Kong companies can take advantage of the lower labor costs in some ASEAN regions for manufacturing and reallocation of resources, so as to strengthen their overall competitiveness.
It is also noted that ASEAN is the region with the densest population of overseas Chinese. There are currently more than 32 million ethnic Chinese living in those 10 countries, accounting for 5 percent of the population. The percentage might not seem so high but their economic power is incontestable. This is also a strong point for Hong Kong businessmen to seek cooperation in ASEAN countries.
The author is president of the Chinese Manufacturers’ Association of Hong Kong.