HONG KONG, 11 October 2007 — Hong Kong’s chief executive said yesterday the city would look to emulate Malaysia and Singapore as a center for Islamic finance, in an effort to grab a slice of the thriving market.
In his annual policy address, Donald Tsang said providing financial products that comply with Islamic law “offers huge potential for development.”
“To further consolidate Hong Kong’s position as a global financial center, we should actively leverage on this new trend by developing an Islamic financial platform in Hong Kong,” Tsang told legislators.
“Apart from stepping up our efforts to promote Hong Kong’s financial services to major Islamic countries and regions, we will focus on developing an Islamic bond market.”
Tsang said the city’s Monetary Authority was now working with the financial sector to develop products that complied with Islamic finance’s strict rules.
Since Malaysia’s first issuance of sovereign global Islamic bonds in 2002, there has been a series of issuances by countries such as UAE, Qatar and Bahrain.
and Pakistan.
Malaysia retains the world’s largest Islamic bond market, accounting for about US$47 billion or two-thirds of total Islamic bonds outstanding worldwide. Singapore has also pushed to establish itself as an Islamic banking center.
Hong Kong could also face competition from former colonial power Britain, where Lloyds TSB became the country’s first high-street bank to provide services compatible with Shariah law, following the establishment of the Islamic Bank of Britain (IBB).
Tsang insisted that economic development would remain the city’s top priority in an annual address that skirted the thorny issues of pollution and democracy. In his first policy address since winning re-election in March, the chief executive said improving the city’s environment or maintaining its heritage — another campaign popular among activists — had to take a back seat. “I will insist on promoting economic development as our primary goal,” he told legislators.
“The reason is simple. Without economic prosperity, people cannot make a decent living and all visions are just empty talk.” The city has been blighted in recent years by severe pollution, which some business groups say is harming their ability to attract senior managers and compromising Hong Kong’s position as an international finance center.
While Tsang, sporting his trademark bow-tie, conceded Hong Kong should “do our part to improve the regional environment,” he made limited commitments.
He promised to reduce energy intensity — energy consumed per unit of gross domestic product — by 25 percent by 2030 and submit to a government carbon audit to “set an example” to the business community.
A levy on plastic bags will also be introduced alongside measures to reduce sulphur emissions.
Hong Kong has also seen increasing public protests against the destruction of several historic landmarks for new developments, including the Star Ferry terminal.
Tsang said the government should aim to ensure that such buildings would be re-used, rather than simply torn down.
He made no firm promises on bringing in full voting rights, guaranteed in the “Basic Law” introduced when this territory in southern China was returned to Beijing by former colonial power Britain in 1997.
Announcing both personal and business tax cuts, he said the territory had enjoyed an average annual growth of 7.7 percent between 2004 and 2006, showing its economy was “back on track” after the deadly SARS outbreak of 2003.
A string of major infrastructure projects would form the backbone to future growth, including a road bridge between Hong Kong, Macau and the Chinese city of Zhuhai, Tsang said.
The 10 projects, which also include new underground and train lines, are expected to boost the economy by more than 100 billion Hong Kong dollars a year when finished and create 250,000 jobs.
He also sought to strengthen co-operation with mainland financial markets, in which Hong Kong could “act as a platform for outward investment by mainland funds, investors and financial institutions.” Hong Kong will also aim to become a center for Islamic finance, including a bond market, in an effort to take a piece of the sector currently thriving in Malaysia and Singapore.
The 63-year-old added that greater attention should be paid to the needs of the poor. Despite the territory’s booming economy, more than 20 percent of the population live in poverty, more than double the number two decades ago.
“I will insist that development brings about social harmony, with different strata of people sharing the fruits,” he said.
Although the territory is now part of China, it has a great deal of autonomy in running its affairs under the “One country, two systems” formula.
