>>>Related Special: The 3rd PPRD Forum

While brooding over the question of whether Hong Kong will be marginalized and how the territory should synchronize with the mainland's 11th Five-Year Plan, the SAR's Chief Executive Donald Tsang led a delegation of government officials and about 80 business leaders to attend the 3rd Pan Pearl River Delta Regional (PPRD) Co-operation & Development Forum in early June.

In a keynote speech, Donald Tsang described Hong Kong as a bridge connecting the PPRD with ASEAN countries in commerce and trade with its established extensive economic and trade connections and transportation links with ASEAN members.

Previously, Hong Kong contributed to regional development by pouring out capital and professional labour together with the exodus of manufacturing industries to the mainland, in particular to the Pearl River Delta Region in Guangdong. This has led to a hollowing out effect in the Hong Kong economy. Hong Kong's pillar industries, namely finance, logistics, trade and commercial services and tourism, now constitute a dual economy. On the one hand, logistics and tourism offer employment to large numbers, but with very low added value. On the other, the financial and commercial service sectors add much higher value, but hire very few people. And with the hollowing out process unabated, especially with the facilitation of the Closer Economic Partnership Arrangement (CEPA) to break down most barriers, the two high value-added sectors are also at risk of leaving Hong Kong, chasing after clients in the mainland. Should this process goes on unchecked, Hong Kong will lose its vitality and become marginalized.

To reverse this dangerous trend, Hong Kong has to do the opposite of hollowing out, which is filling in. We have to attract more economic activities into Hong Kong, and with them, more capital and talents, more vitality, higher growth and a better employment situation.

At the moment, Hong Kong commands fabulous strength in financial services, tourism, logistics, economic and trade and professional services, as well as its international experience and network. "Hong Kong can assist ASEAN enterprises to invest in the PPRD region with its profound experience in interacting with the mainland. It can also assist enterprises in the PPRD region to explore business opportunities in ASEAN countries and provide a platform for their development in ASEAN markets," declared Tsang in his PPRD speech, capitalizing on the SAR's existing strength. This two-way convergence is going to highlight Hong Kong's future role in PPRD regions and ASEAN countries.

Basically, in the 11th Five-year Plan, the PPRD regions will have an insatiable need for capital for further industrialization and urbanization. In addition to direct investment from Hong Kong, the territory has established itself as the preferred market for the overseas initial public offering (IPO) of larger mainland enterprises. They will also need an efficient and user-friendly gateway for their international trade, and Hong Kong's extensive international transportation network and logistics services are more than ready to contribute to the growth of import and export trade in the region. To make full use of Hong Kong's bilingual platform, enterprises in the PPRD regions should be encouraged to set up their international headquarters in the SAR to reach out to the outside world.

ASEAN countries, on the other hand, are historically Hong Kong's economic and trading partners, with ties established for generations. The SAR government should direct its promotional effort targeting ASEAN enterprises to come and set up operations in Hong Kong to make full use of it as a base for ASEAN countries to make inroads into the ever booming mainland market and vice versa. Now is the most appropriate moment, as ASEAN countries will enjoy the same preferential treatment under the free trade agreement between China and ASEAN as Hong Kong under CEPA in 2008.

As the two most vibrant regional economies, PPRD and ASEAN have a combined population comparable to that of China coming together under a free trade environment; only time can tell what economic and social miracles this gigantic synergy can perform. This will also generate a lot of economic activities in Hong Kong, and plenty of high value-added jobs, enhancing its competitiveness, and propelling the territory to a new height.

Financial and trade and commercial services are the prime locomotives in this new initiative. The implementation of the measures in the 11th Five-Year Plan, such as further reform of the RMB and the outflow of investment, will have a profound impact on its success and on the long-term development of Hong Kong.

Hong Kong will have to undergo a paradigm shift to face up to this new challenge, and should get ready for the vast opportunities opening up in the 11th Five-Year Plan. In particular, public infrastructure investment should place much more emphasis on linking up with the mainland. The SAR government should seriously reconsider building a dedicated railway for the regional express linking Hong Kong to Guangzhou, and onward to major cities throughout the country to cater for the inevitable future increase in traffic. It should also mend fences with its neighbours to hasten the building of the long awaited bridge across the Pearl River estuary, linking Hong Kong with Macau and Zuhai.

It should also upgrade the priority in the development of the restricted border area and extend it to cover the big plain in the northwest New Territories larger than the size of the Hong Kong Island, which is the ideal pathway for seamless integration into Huanggang, the new Shenzhen city centre. This grand new development, together with the dedicated railway link, will create another hub of economic activities directed to servicing the PPRD region.

Editor: Yan