STH's speech at Gala Dinner of the 6th Annual Sino-International Freight Forwarders Conference 2009 (English only) ******************************************************

Following is a speech by the Secretary for and Housing, Ms Eva Cheng, today (June 12) at Gala Dinner of the 6th Annual Sino-International Freight Forwarders Conference 2009:

Mr Zhao (Huxiang) [President of CIFA], Mr (David) Yokeum [President of WCA Family], the Honorable Miriam Lau, Mr Willy Lin, distinguished guests, ladies and gentlemen,

I am delighted to be here at the Gala Dinner of the 6th Annual Sino-International Freight Forwarders Conference. I am particularly glad that the World Cargo Alliance Family of Logistics Network and the International Freight Forwarders Association have decided to hold this conference in Hong Kong again.

Unparalleled challenges brought by the financial crisis

This conference provides a timely opportunity for key industry players to share their experience in bracing for the unprecedented challenges brought about by the global financial crisis. We are all witnessing the far-reaching impact of the crisis on global trade and people’s livelihood. Every industry, including the freight and supply chain sectors without exception, cannot escape from the impact of the crisis. Marked reduction in the transport of raw materials and finished products has led to much less freight activities, and it is estimated that some 1.3 million TEUs or 10% of container ship capacity all over the world is at the moment inactive. We are beginning to see signs that the fall in cargo throughput has narrowed in recent months and hopefully that will become a trend.

Like many other places in the world, Hong Kong is affected by the global economic downturn. That said, these challenges should be no cause for pessimism given Hong Kong’s strong fundamentals, including our robust banking system, rule of law and well-developed infrastructure. Building on our strengths, the Hong Kong SAR Government has formulated effective measures to maintain stability and confidence in our banking and financial systems and help small and medium-sized enterprises to tide over this particularly difficult period. To create the much-needed employment, the HKSAR Government is fast tracking an extensive programme of infrastructure projects. From commissioning to a mature stage, they should generate an estimated added value to the tune of US$12.8 billion and create some 250,000 new jobs.

Enhancement of regional connectivity

Among the “Ten Major Infrastructure Projects” that the HKSAR Government will deliver in the coming years, six are transport-related. This clearly demonstrates our commitment to achieving even better connectivity and placing Hong Kong in a more strategic and competitive position. Perhaps the most relevant to those of you in the freight and supply chain business would be the construction of the 29.6-kilometre Hong Kong-Zhuhai-Macao Bridge. The bridge has both strategic and symbolic importance for - 2 -

Hong Kong. It will greatly enhance our connectivity and open up a vast area in the western part of the Pearl River Delta (PRD). We will turn a new page in fostering economic integration with the Mainland. When the bridge opens, the existing four-hour trip from Zhuhai to Hong Kong will be substantially reduced to less than 45 minutes to Hong Kong International Airport. Hong Kong will be able to serve our cargo hinterland so much more efficiently.

We have reached a number of key milestones for this project in the past year by resolving key issues from the design to the financing of the main body of the Bridge. The Mainland, Hong Kong SAR and Macao SAR governments have agreed to take up the responsibility for the construction of the Main Bridge, instead of seeking private investment under a Build, Operate and Transfer franchise. The total contributions from the three sides will be RMB ￥15.73 billion, which is about 42% of the project cost of the Main Bridge. The remaining 58% will be financed by loans. This financing arrangement and the favourable loan terms offered by the lead loan bank will enable the three governments to have better control over the toll levels, and set the toll levels as low as possible to encourage traffic flow. The latest rough estimate shows that the toll levels of the Bridge may be considered to be set around $100 for private cars and $200 for trucks. As a result of the lower toll levels, traffic volume is expected to increased by some 40%. Together with other major cross boundary projects focusing on passenger travel, for example the -Shenzhen-Hong Kong Express Rail Link and the Hong Kong-Shenzhen Airport Rail Link, the improved connectivity will no doubt enhance our economic co-operation with .

Continued investment in infrastructure

We will also continue to invest in other facilities to build up our handling capacity and facilitate freight movements and supply chain activities. On the air side, 10 additional air cargo parking stands were completed and the franchise of a new air cargo terminal was awarded last year. The cargo handling capacity of the Hong Kong International Airport will be increased by 2.6 million tonnes per annum with the new terminal. We are also actively pursing the airport midfield expansion project with the Airport Authority to provide additional aircraft stands and apron facilities. In the longer term, the Airport Authority is actively studying the feasibility of building a third runway as part of its Master Plan 2030 Study, which will lay down a blueprint for airport development in the next two decades.

With regard to port development, we will strengthen the competitiveness of our port by ensuring that the necessary port and related facilities would be provided in a timely manner. The latest forecast shows that Hong Kong may require a new berth in as early as 2015. We are studying the feasibility of developing the 10th container terminal at Southwest Tsing Yi. Meanwhile, we are carrying out preparatory work for the dredging of the Kwai Tsing container basin and its approach channels so as to meet the draught requirement of new generation ultra-large container vessels. We will also strive to lower the cost for the movement of cargoes between Hong Kong and the PRD.

Hong Kong – A gateway to market opportunities

While we strive to implement these key initiatives, we have not for a moment forgotten the importance of the basics. We champion free trade, free flow of capital and - 3 -

information, and low tax rates under a simple and transparent tax regime. As experienced freight forwarders, you will no doubt appreciate that reliability is at least as important as cost knowing full well the hassle a delay will cause – missing berthing slots in subsequent ports, readjusted schedules, penalties, extra warehousing costs, and worst of all, missed seasonality and tarnished credibility. All these highlight the significance of speed, certainty and transparency in logistics flow. And we must not forget our pool of talents. Experience, knowledge and a critical mass of expertise cannot be built up instantly at the command of some government policy. They are nourished over time. All these advantages I have described make Hong Kong stand out as the preferred logistics hub in the region.

Closing remarks

Ladies and gentlemen, the Hong Kong SAR Government is more determined than ever to maintain Hong Kong’s position as an international aviation, port and logistics centre. We shall continue to provide a favourable policy environment and ever-improving infrastructure. However, even with the best of efforts, the Government must work closely with you in bringing the global market back on an even keel.

However, no matter how hard working we all are, there is always a need to maintain work/life balance. So apart from exploring business opportunities and renewing contacts with your business partners, do find time to relax in Hong Kong. We offer the best shopping and dining experience. I wish you a very enjoyable evening.