TUNG OUTLINES THE BENEFITS OF FREE-TRADE ACCORD

At least 16 service industries in Hong Kong will benefit from the free-trade agreement that the special administrative region is poised to sign with the mainland, Chief Executive Tung Chee-hwa said yesterday.

Speaking after meeting Hong Kong and Macau Affairs Office director Liao Hui and Vice-Minister of Commerce An Min in Shenzhen, Mr Tung confirmed the Closer Economic Socios ship Arrangement (Cepa) deal would be signed at a ceremony in Hong Kong attended by state leaders on June 30.

Businesses involved in management consultant services, exhibitions and conventions, advertising, legal services, accountancy, medical services, real estate, construction engineering, transport, wholesale distribution, logistics, tourism, audiovisual services, banking, securities and insurance would be granted easier access to the mainland under the deal.

Mr Tung also confirmed that the central government had agreed to cut tariffs on Hong Kong goods entering the mainland market to zero.

Referring to the issue of the definition of Hong Kong goods and country of origin, Mr Tung said that government's approach would be 'flexible and easy to monitor'. The definition is seen as crucial to how many companies will benefit from the trade liberalization the agreement promises.

Mr Tung singled out President Hu Jintao, Premier Wen Jiabao and Vice-Premier Wu Yi for their efforts in pushing through the agreement.

"The good progress Hong Kong and the mainland have made on the arrangement fully reflects the central government's concern and support for Hong Kong," he said.

"I believe the agreement will bring more business opportunities. It will greatly help Hong Kong overcome its difficulties and achieve economic recovery as soon as possible.

"What we must do now is actively prepare ourselves for this golden opportunity so that Hong Kong's economy can pick up again.

"It gives Hong Kong's economic transition a new beginning, provides new motivation to our economy and also helps the people of Hong Kong to rebuild confidence."

Anthony Nightingale, chairman of the Hong Kong General Chamber of Commerce, said Cepa should bring substantial benefits to the service sector, adding: "Hong Kong is largely a service economy and therefore the benefit to our service sector will be substantially more significant than the benefit to the manufacturing sector."

However, Vicky Davis, the director general of the Federation of Hong Kong Industries, was confident that the 2,500 factories in Hong Kong and their 200,000 employees would benefit.

She was also confident the agreement and the zero tariff arrangement would attract high-end foreign industries to Hong Kong.

"There is a pharmaceutical company - a leading European brand - interested in setting up their manufacturing base in Hong Kong after Cepa," Ms Davis said.

Anthony Cheung Bing-leung, associate professor at City University's department of public and social administration, said the timing of the deal was designed to show that Hong Kong was moving forward after Sars.

"We would bear in mind that there are some protests planned for July 1. Announcing more good news could create a feel-good atmosphere in the society," he said.

GIFT FROM MAINLAND MAY BENEFIT BOTH SIDES

Despite the promise of great things to come, Chief Executive Tung Chee-hwa's comments yesterday on the free-trade agreement to be signed between Hong Kong and the mainland revealed little about the deal's contents.

We learned that a broad range of services, including those offered by Hong Kong lawyers, accountants and bankers, are to be included in the Close Economic Socios ship Arrangement (CEPA). They will be allowed to benefit from the early liberalization of markets on the mainland. But Mr. Tung's vague remarks on the key question of how a Hong Kong firm will be defined only serves to increase speculation. We must wait until later this month before all is revealed.

What is clear, however, is that the chief executive was anxious to talk up the significance of CEPA, which has been the subject of talks with the mainland since early last year. He was not holding back. The deal, Mr. Tung said, would not only provide substantial business opportunities for the sectors concerned, it would greatly boost Hong Kong's effort to overcome its difficulties, revive our confidence, revitalize the economy and contribute to a successful recovery.

In a final flourish, he told us : "Many countries would dream of such an agreement." Whether that is true, of course, remains to be seen. But Mr. Tung's promises would be easier to take at face value were it not for the far more cautious assessment of the Secretary of Commerce, Industry and Technology, Henry Tang Ying-yen. While describing the agreement as being like the opening of a candy store for Hong Kong, Mr. Tang also warned that people should not expect too much. In an interview with this newspaper last week he spoke of the importance of managing expectations and said CEPA should not be seen as the answer to all our problems.

Mr. Tang's approach would seem to be the more astute. Having promised the world, Mr. Tung will now be expected to deliver. This will be difficult, given hopes among some sectors of the business community that the deal will be on a grand scale and present them with rich pickings.

It is to be hoped that what CEPA will actually achieve is a more liberal, better-defined business environment for cross-border trade. In particular, it should make life easier for Hong Kong professionals looking to ply their trade in the Pearl River Delta. The agreement not only provides an opportunity to benefit Hong Kong, but to further integration and help the mainland liberalise its services sector ahead of reforms, from 2005, will occur as a result of China's accession to the World Trade Organisation.

If all of this is achieved, Hong Kong's economy will undoubtedly benefit. And while the agreement may be a gift from the mainland, underlining its commitment to Hong Kong, the beneficial effects could be felt on both sides of the border.