With many institutional strengths and strong fundamentals, Hong Kong has all it takes to become an international financial center, says Antony Leung.

Hong Kong has a very strong competitive edge but in recent years, it encountered internal competition from Shanghai and external challenge from Singapore.

He suggests: "Since the neighboring regions are developing very rapidly, we must step up to strengthen our long-term competitiveness, knowing it is the best way to create more opportunities and enable the people, including the disadvantaged people, to improve the standard of living."

He reckons there are many things, including but not limited to taxation, education, technology, research and development, start-up funds, manpower development and infrastructures, to be done to strengthen Hong Kong's competitiveness, and the city is more than capable of doing so with its financial strengths.

"We can afford profits tax reduction to attract foreign investors and shorten the gap between Hong Kong and Singapore," he says. "About 10 years ago, there was a big gap in our profits tax rates but it has narrowed."

Some mainland cities have cut profits tax from 33 percent to 25 percent, he says. The thing is some local governments offer tax concessions to lure their preferred investors and talented people. In his view, tax reduction does not only benefit the rich people but in fact propels economic development and creates more job opportunities.

Leung, former chairman of the Education Commission, calls for greater funding for promotion of technology in universities and the commercialization of their research results. At secondary school level, he suggests more schools with dormitories be built to attract overseas students because the birth rate is low in Hong Kong.

To attract smart, aspiring entrepreneurs to Hong Kong, start-up funds may be established to allow people with good ideas to start businesses.

The aspiring entrepreneurs may also be asked to manage the fund because they are energetic and innovative.

"You can't ask civil servants to do this, because they are conservative and cannot afford to lose. But for new businesses, there are bound to be some losers out of 10 starters. If they are told that they have to contribute part of the capital besides government funding, they will be more cautious in investing and grasping the right opportunities."

Leung also suggests Invest Hong Kong, the department for foreign direct investment, be provided greater resources to showcase the city's strengths. To enhance Hong Kong's position as an aviation hub and facilitate smooth air traffic, he suggests the third runway be built as soon as possible.

China Daily

(HK Edition 04/13/2011 page4)