(This interview with Hong Kong chief executive Donald Tsang Yam-kuen, in the context of his official visit to Indian starting today, was published in today’s edition of DNA.)
For four days from Monday, Hong Kong chief executive Donald Tsang Yam-kuen will be in India to make amends, he says, for Hong Kong’s historical neglect of the Indian economy. Hong Kong, a former British colony that reverted back to China as a special administrative region in 1997, has served China well since then as an international financial centre with a range of financial services and a rule of law environment that international investors find comforting; in turn, it has gained enormously from China’s rise. “But we’ve not worked hard enough in India,” Tsang concedes. “And Hong Kong mustn’t overlook the emergence of India as an economic superpower.” During these four days, Tsang will visit two cities (New Delhi and Mumbai), attend half a dozen official meetings, make eight speeches, and give half a dozen interviews. “I’m afraid it’s going to be all work and no play,” says Tsang. In an interview to DNA Money’s Venky Vembu in Hong Kong, the chief executive of the ‘world’s freest economy’ outlines his agenda for his visit to India. Excerpts:
What is the context of your visit to India? Is it merely to generate goodwill or will we see specific agreements signed to advance trade and commercial relations?
We in Hong Kong have done a lot of work in the mainland China market, and we’re very successful. But we’ve not worked hard enough in India, which is another very important market. We’re certainly not as successful as Singapore in this respect. I can only blame ourselves in Hong Kong: we have a very strong Indian ethnic community that has been here for centuries, but we’ve not been made good use of them to build a bridge between Hong Kong and India and build up a large business portfolio. We have been busy and successful in the mainland China market, but now Hong Kong has to think on wider terms against the backdrop of a globalised economy. Some of our markets elsewhere – in America or Europe – have gone to sleep. We must concentrate on our near neighbouring markets, and India is important in that respect. The emergence of India as an economic superpower is something that must not be overlooked by a moneychanger like Hong Kong.
Is this Hong Kong’s ‘Discovery of India’ moment?
My first visit to India was in 1977, when I was working in the Asian Development Bank as a financial analyst. One of the projects I was in charge of was to lend money to the Indian Railway Ministry to build locomotives at the Integral Coach Factory near Madras. No loan was eventually made, but I learnt quite a lot travelling through India, and made friends, whom I’ve visited occasionally since then. India is close to my heart and holds a lot of fascination for me.
I think of this visit more in terms of ‘rebuilding bridges’. We want to establish contact – at the government-government and at the government-senior business level. We want to explain to them what we represent in Hong Kong and what we can do to promote mutual economic and social benefits. We can do a lot more trade in both directions – and not just in diamond and jewellery. We can do a lot more in terms of mutual investments: there will be investment opportunities in India for Hong Kong people, and there is enormous potential in our financial markets to service Indian firms who want to tap the market here. We can also enhance tourist flows in both directions: there’s now a sizeable and growing number of Indian tourists. India too is a beautiful country, and should be a magnet for Hong Kong tourists.
Will any agreements be signed during your visit?
We are talking to each other on a number of things: we’re working on an agreement to avoid double taxation. Some changes were required in Indian domestic laws, which has now been done. We’re talking about enhancing our air services agreement to increase air service frequency. And we will discuss more issues and lay the groundwork for future agreements.
What I want to do on this visit is to make myself available to Indian businessmen and for them to ask me what Hong Kong can do for them. They will get an answer from the top man in Hong Kong. I want to tell them what we can do to help them raise capital here, about the range of financial services we offer here, and how easy it is for Indian businessmen to tap this market. All these things augur well for stronger relations not only at the government level but at the business level.
The double-taxation avoidance agreement has been in discussion for a long time. Are there any particular provisions from the Indian side – for instance relating to disclosure of information – that are unacceptable to Hong Kong because they exceed the requirements under OECD provisions?
No. We have an open book here. Our disclosure regime is acceptable to Europe and elsewhere for the purpose of concluding agreements for the avoidance of double taxation. I don’t think it will be an impediment in the case of bilateral negotiations with India.
There’s a process to be gone through on both sides. Some changes were required in Indian domestic laws, which has now been done. I’m sure substantive negotiations will follow.
Is India demanding more disclosure than Hong Kong has given to other jurisdictions?
I can’t go into the nitty-gritty of the discussions, but I doubt that this should be an impediment. Both parties are engaged in several sets of multilateral negotiations at the same time, so this thing may take a while. But I hope it will be concluded fairly quickly: it will be beneficial to businessmen on both sides.
India has a trade and economic cooperation agreement with Singapore. Does Hong not feel the need for a similar agreement?
I’m a bit jealous that Singapore has done this first! We can easily do that too on a bilateral basis. We’re doing it with several parties at the moment, and I’d be quite happy if there’s some indication, some interest, from the Indian side. If they are interested, we can bring people together and talk.
What is the level of interest among Indian companies to list in Hong Kong?
So far, we haven’t seen much interest because they’re not familiar with this market. Perhaps the fault is on our side; perhaps we haven’t promoted our wares conscientiously in the past. There is of course growing interest in the Hong Kong market among banking circles: there are a number of Indian banks here, and the financial communities are aware of the services that Hong Kong as a global financial centre can provide them. But it’s important for that message to be carried beyond, to the enterprises themselves. Sure, Indian enterprises can raise capital in Mumbai, London or New York. But they can do it more efficiently in Hong Kong, given the lower costs and greater efficiency. Additionally, they get better public recognition as an ‘Asian’ public company. They may have overlooked this in the past – perhaps because we’ve not adequately promoted ourselves to them.
When may we expect an agreement between the stock market regulators in both entities – the Securities and Exchange Board of India and the Securities and Futures Commission – that will speed up this process?
Senior representatives of the stock exchange and the Securities and Futures Commission are travelling with me to meet their counterparts and businessmen in Mumbai. We will tell them what we can do for Indian enterprises. Since we’re both members of a multilateral setting, there is no additional requirement for any agreement: individual enterprises have to make applications to the stock exchanges and start talking.
It’s not just about getting large companies to list. I’m looking at small and medium companies, who make up the bulk of the Indian economy as well. They will need partners if they want to go to mainland China – and Hong Kong is the ideal partner. Whatever line of industry they are in, we can provide them partnership because we know the mainland China market: we’ve been there for nearly 30 years, and nobody knows it better. We’re the largest investors in mainland China – and in each and every province in China. We have good connectivity. And we have all the services available in Hong Kong in a language and a legal system that Indian businessmen are familiar with.
What can Hong Kong do to attract more students and academic professionals from India?
That’s one important message I’m carrying on this visit to India. We’ve changed our rules to allow universities to allow enrolment of up to 20 per cent foreign students, who can also come on a subsidised fee level. Asia’s No. 1 university is in Hong Kong. There isn’t any reason why we shouldn’t attract the best Indian talent to Hong Kong. We’re getting them from mainland China and from elsewhere in the world, but not a sufficient number of young students from India. I certainly welcome them here.
In terms of faculty, our universities recruit globally. There are exceedingly brilliant academics in India as well, but most of them migrate to America or Europe. It’s not for our lack of trying…
You mentioned your interest in seeing enhanced tourism, but Indian passport holders who used to enjoy 90-day visa-free access to Hong Kong, now get only 14-day entry permits. Since the problem of overstaying, which was the reason for the policy change, is no longer so serious, will the Hong Kong government consider reverting to a 90-day visa-free provision for Indian passport holders?
Once we have evidence that overstaying is no longer a problem, we will change it back. You have my promise on that. But I’m also looking for reciprocity on this issue. Hong Kong passport holders don’t get visa-free entry into India. Even I need to apply for a visa to visit India. I will be putting this across personally when I meet Indian leaders! (laughs)
Diamond trade accounts for more than 50 per cent of bilateral trade. Just last week, the world’s largest diamond bourse opened in Mumbai. Given that cities in Guangdong province in southern China account for a substantial share of the diamond processing industry, can Hong Kong do more to build on that trade from India?
I’m sure there are a lot of things we can do together to not only get Indian merchants to sell more not only in Hong Kong but also through Hong Kong to a much larger market in mainland China. But it’s not something we can mandate from the government’s point of view. It must be dome in the private sector, on a firm-to-firm basis.
The Indian community in Hong Kong has, over generations, contributed much to Hong Kong’s development, and some of Hong Kong’s iconic institutions – including Hong Kong University and the Star Ferry – owe much to the Indian community’s enterprise and philanthropy. Is the Hong Kong government sensitive to their yearning for some form of legislative representation?
We do not have ethnic requirements for elections in Hong Kong. Recently, a Dutch expatriate was elected to a district council in Hong Kong. So, I’m sure that if the Indian community is determined to send one of their own to the legislature, they have a good chance of doing it. There is a sizeable Indian community in Hong Kong, and some ethnic Indians can also speak fluent Cantonese! But are you sure Indian people in Hong Kong want to go into politics? (laughs)