POLITICAL STRUCTURE

Hong Kong became a Special Administrative Region (SAR) of the People’s Republic of China on 01 July 1997, after over 150 years as a British Crown Colony.  Under the Basic Law, Hong Kong’s constitution, the existing economic, legal, and social system will be maintained for 50 years.  The SAR enjoys a high degree of autonomy except in defense and foreign affairs.
 

GOVERNMENT STRUCTURE
The HKSAR exercises an independent executive, legislative, and independent judicial power, even on final adjudication of cases. The branches of Government are

The Executive Branch
The Chief Executive 

The Chief Executive (CE) of Hong Kong is the head of the Hong Kong Special Administrative Region. The CE is assisted by the various heads of the policy bureaus which is under the direction of the three principal secretaries: the Chief Secretary for Administration, who manages the day to day running of the government bureaucracy of Hong Kong; the Financial Secretary, who assists the CE in formulating the government’s budget for the coming fiscal year; and the Justice Secretary, who is responsible for prosecutions and legal matters.  The current CE is Mr. Donald Tsang.  He is the second Chief Executive of Hong Kong after Mr. Tung Chee Hwah, whom he succeeded in May 2005.
 
The Executive Council
 
Under the Basic Law, the Executive Council (ExCo) assists the Chief Executive in policy making.  Membership of the ExCo is composed of the heads of the various Government Bureaus and Departments, members of the Legislative Council, as well as prominent Community Leaders. The ExCo, due to its composition, acts as the Cabinet of the Chief Executive.
 
Representative Branch
The Legislative Council (LegCo)
 
LegCo is the unicameral assembly of Hong Kong.  LegCo legislates, controls public expenditures, and monitors the performance of the Administration.
 
Election to LegCo is divided into two: one is via the geographical constituency, which elects members through universal suffrage of voting, and the other is through the functional constituency, which allows various sectors of Hong Kong to vote in their representatives.  Currently, there are a total of 60 members of LegCo, with half equally divided between the Geographic constituency and the Functional constituency.
 
The LegCo has a term of four years, with the present term starting in September 2004.  LegCo’s current President (Speaker) is Ms. Rita Fan.
 
The District Councils
 
The District Councils are district organizations in the HKSAR.  It is mainly a consultative body of the HKSAR Government on district administration and other district affairs.  There are 18 district councils in Hong Kong, corresponding to the 18 districts of Hong Kong.  District Councils also undertake various activities for the local community of their respective districts with its available funds allocated by the Government.
 
The District Councils are currently composed of 405 elected members, 27 ex-officio members and 102 appointed members.  The term of Office of the District Councilors is four years.  The current term began on 01 January 2008 and shall end on 31 December 2011.
 
The Judiciary
 
The Judiciary of Hong Kong is responsible for the administration of justice. It hears all prosecutions and civil disputes, including disputes between individuals and the Government.  It is fundamental to Hong Kong’s legal system that members of the judiciary are independent of the executive and legislative branches of government.  The courts of justice in Hong Kong comprise the Court of Final Appeal, the High Court (which includes the Court of Appeal and the Court of First Instance), the District Courts (which includes the Family Court), the Lands Tribunal, the Magistrates’ Courts (which includes the Juvenile Court), the Coroner’s Court, the Labour Tribunal, the Small Claims Tribunal, and the Obscene Articles Tribunal.  The Chief Justice of the Court of Final Appeal is head of the judiciary and assisted in his administrative duties by the Judiciary Administrator.  A bilingual court system in which Chinese, English or both can be used was put in place, in accordance with the requirement of the Basic Law.  The Head of the Hong Kong Judiciary is Andrew Li, Chief Justice of the Court of Final Appeal.
 
FOREIGN RELATIONS
 
Hong Kong's diplomatic relations and defense are the responsibility of the People's Republic of China.  Hong Kong has retained considerable autonomy in all aspects, including economic and commercial relations, customs control, and immigration, except for diplomatic relations and defense.  Hong Kong continues to be an active, independent member of the World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation (APEC) forum in the name of Hong Kong, China.
 
POLITICAL DEVELOPMENTS (January to December 2007)
 
Election for Chief Executive of Hong Kong SAR
 
On 25 March 2007, Hong Kong held its fourth chief executive elections, which saw the incumbent Chief Executive Mr. Donald Tsang win a full five-year term as Chief Executive starting 01 July 2007.  Mr. Tsang had been elected as Chief Executive in 2005 following the resignation of Mr. Tung Chee-hwa. 
 
Following the announcement of the results of the election, Mr. Tsang vowed that his new government will be one that is representative of all social strata and one that will balance the interests of all sectors, promising a policy formulation that will take a bottom-up approach.  At the same time, Mr. Tsang pledged to strive for universal suffrage in a “pragmatic and proactive” manner.  Mr. Tsang also promised to push for Hong Kong to becoming Asia’s premier financial center, and to push forward innovative social welfare programs for the local people.
           
Presentation of new HK government team
 
On 23 June 2007, Mr. Tsang formally presented his new cabinet to the people of Hong Kong.  In his remarks, Mr. Tsang noted that his new team was pragmatic, professional, and committed and that they would carry out his election pledges.  Mr. Tsang also said the new team signals the start of a new term, new ideas and new initiatives.
 
Celebrations marking the 10th Anniversary of the HKSAR
 
From 30 June to 01 July 2007, Hong Kong celebrated the 10th anniversary of the establishment of the Hong Kong SAR.  President Hu Jintao was on hand to grace the festivities as well as officiate in the swearing-in of the new Chief Executive and his team.  In his remarks, President Hu acknowledged the desire in Hong Kong society for greater democratization/universal suffrage, but that, such developments should be within the context of Hong Kong’s unique situation and that it should be gradual and in line with the desires of all the people of Hong Kong.  At the same time, he called on the people of Hong Kong to continue to love their motherland and to support the Hong Kong government. 
 
Simultaneously with the celebrations, pro-democracy activists held the largest annual 01 July pro-democracy rally since July 2004.  According to estimates, a total of 68,000 people took part, including various personalities of the pro-democracy camp.
 
Release of Green Paper on Constitutional Development
 
On 11 July 2007, the Hong Kong government released the much awaited green paper on constitutional development.  The green paper presents various options from which the people of Hong Kong can choose on how they wish to proceed in electing both their Chief Executive and their legislature from 2012 onwards.  During various forums organized by the Hong Kong government, Mr. Stephen Lam, Secretary for Constitutional and Mainland Affairs, stated that the people of Hong Kong would be given a three-month consultation period, and that a report will be prepared by the Hong Kong government to be given to the Standing Committee of the National People’s Congress in Beijing reflecting these views.  The Hong Kong government would then create a package that would hopefully be in place by 2010.
 
In December 2007, the Hong Kong SAR government submitted its findings on the green paper to the Standing Committee of the National People’s Congress (NPC) with the observation that a great majority of the people of Hong Kong would want universal suffrage by 2012, but that it would be more politically feasible to hold it in 2017.  The NPC Standing Committee eventually agreed with the Hong Kong SAR government’s position that universal suffrage can be implemented by 2017 for the election of the HK Chief Executive and the legislature by 2020.
 
Chief Executive’s Policy Address 2007-2008
 
On 11 October 2007, Hong Kong’s Chief Executive Donald Tsang presented his policy program for 2007–2008 before the Legislative Council.  In his first policy address after his re-election, entitled “A New Direction for Hong Kong,” Mr. Tsang put forward several proposals which he believed would have created a better Hong Kong by the time he steps down from office in 2012.  These are:
Ten major infrastructure projects: Mr. Tsang presented these 10 major projects as the anchor of his economic policy.  With a total price tag of HK$ 250 billion, the projects are meant to increase economic integration between the Mainland and Hong Kong.  These projects include several major extensions of rail lines (HK-Shenzhen-Guangzhou), bridges (HK-Macau-Zhuhai), and developmental projects (West Kowloon Cultural Hub, Kai Tak).
 
Economic initiatives: In his address, Mr. Tsang provided several initiatives designed to enhance Hong Kong’s reputation as a financial hub as well as renewing the commitment that Hong Kong will fully implement the provisions of its action agenda to address Hong Kong’s involvement in the 11th Five Year Plan (see below).
 
Improvement in quality of life: Mr. Tsang proposed several initiatives meant to address the growing concern over Hong Kong’s air pollution problem.
 
Social services: Noting that Hong Kong was experiencing a budget surplus, Mr. Tsang presented several projects designed to bring the benefits of Hong Kong’s boom to the less privileged (more social welfare to elderly, minimum wage legislation for low-end workers).
 
Demographics: The Chief Executive presented several initiatives designed to encourage more foreign talent to move into Hong Kong.
 
Governance/Constitutional development: Promised that a comprehensive report on universal suffrage will be released after the analysis of the recently concluded consultation paper on constitutional reform.  Enhance patriotic development as well as provide increased powers to the District Councils.
 
Legislative Council By-Election
 
Upon the death of Mr. Ma Lik, leader of the largest pro-Beijing party who died in early August, a seat in the legislative council in Hong Kong island was opened up, and an election for the seat began on 02 December 2007.  In what was considered a clash of the titans, two former high ranking civil servants, Ms. Anson Chan (former Chief Secretary) and Ms. Regina Ip (former Secretary for Security) contested the elections.  Their contest was considered a proxy fight on the need for democracy in Hong Kong, with Ms. Chan advocating for universal suffrage by 2012, while Ms. Ip advocating for a gradual approach to the question of greater democracy in Hong Kong.
 
On 02 December 2007, results of the by-election showed that Ms. Chan won 55 %, or 175,874 of total votes cast while Ms. Ip garnered 43 % of the total vote or an equivalent of 137,550 votes.
 
District Council Elections
 
Hong Kong held district council elections for 405 council seats on 18 November 2007.  A total of 866 candidates participated in the district council polls.  Official results from the Hong Kong Electoral Affairs Commission showed that a total of number of 1,148,815 or 38.83% of the voting public turned out to vote, the highest recorded for any lower-tier election in Hong Kong’s history.  The total number of votes exceeded the 1,066,373 who voted in 2003, in the wake of SARS, the economic downturn and the Article 23 protest rally.
 
Results of the district council elections saw the Beijing-friendly Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) win a commanding number of seats in the district polls, garnering 115 of the 177 seats it contested, making a stunning comeback from its defeat in the last such polls in 2003.  Another pro-Beijing party, the Liberal Party, suffered losses in this election, winning only 14 of the 56 seats it was contesting, and losing a prominent seat in Victoria Peak to a pan-democratic candidate.  The Democratic Party, on the other hand, only received 59 seats of the 108 seats it contested in this election, the worst performance of the pro-democratic party in district council polls since the handover.  The other allies of the Democratic Party, the Civic Party and the League of Social Democrats, won 8 and 6 seats, respectively.
 
Annual duty visit of Hong Kong Chief Executive to Beijing
 
Hong Kong’s chief executive Donald Tsang made his annual duty visit trip to Beijing on 22 to 24 November 2007.  Mr. Tsang took the opportunity to meet with Mr. Xi Jinping, who had been designated as the chair of the Central Government’s working group with regard to Hong Kong and Macau affairs.  Mr. Xi informed the Chief Executive that Beijing’s basic policy towards the city would not change.  Mr. Tsang also invited Mr. Xi to make an official visit to Hong Kong.
 
ECONOMIC DEVELOPMENTS
 
Major Economic Indicators 2007
 
Hong Kong has experienced strong and broad-based economic growth in recent years.  Based on a new calculation method announced in mid-October 2007, real GDP expanded by 7.1% in 2005, 6.8% in 2006 and 6.1% year-on-year in the first three quarters of 2007.  Domestic demand has resumed its growth momentum since the start of 2005, and is playing an important role in the current economic upturn.  Following a 5.9% growth in 2006, private consumption perked up further by 6.7% in real terms in the first three quarters of 2007, on the back of firmer employment prospects, a mild increase in real wages and the gradually increasing asset prices.  Fixed investment grew robustly at 6.6% in 2006, and 4.9% in the first three quarters of 2007, with corporate spending on machinery and equipment being the main driver.  As for the external sector, exports of goods and services sustained robust increases of 7.6% and 11.0%, respectively, in real terms in the first three quarters of 2007, compared to 9.3% and 8.9%, respectively, in 2006.  The government forecast a GDP growth at 6% in real terms for 2007 in the latest round of forecast exercise in November 2007.
 
Amid better consumer sentiment and improving employment prospects, retail sales grew by 7.3% in 2006 and another 12.4% in the first eleven months of 2007. After more than five years of deflation, consumer prices have been gradually edging up, along with the solid economic recovery, rising by 2.0% in 2006 as a whole, and another 2.0% year-on-year in 2007.  Meanwhile, Hong Kong continues to see signs of an improving labour market.  For 2007 as a whole, the unemployment rate averaged at 4.0%, down visibly from 5.6% in 2005 and 4.8% in 2006.
 
Hong Kong's external sector showed robust growth in 2006 and 2007.  In 2006, tourist arrivals rose by 8.1% year-on-year (visitors from the Chinese mainland and the rest of the world rose by 8.4% and 7.8%, respectively).  Tourists from the Chinese mainland reached 13.6 million (54% of the total tourist arrivals), of which 6.6 million traveled under the individual visitor scheme.  In 2007, tourist arrivals exceeded 28 million, up by more than 10% year-on-year.  As for the flow of goods, please refer to the section on Latest Trade Performance and Issues below.
 
The four pillar economic sectors of Hong Kong are: trade and logistics (28.9% of GDP in terms of value added in 2005), tourism (3.2%), financial services (12.8%), and professional services and other producer services (10.7%).
 
2007-2008 Hong Kong Budget
 
In 28 February 2007, then Financial Secretary Henry Tang unveiled his proposed budget for 2007-2008.  The budget measures were designed to "share the fruits of economic prosperity with the community" and support Hong Kong's ongoing economic development and job creation.
 
The center of the budget was a HK$20-billion package of tax concessions and other one-off relief measures, including HK$4.9 billion worth of cuts in salaries tax, HK$250 million worth of reductions in stamp duty on property transactions, HK$8.1 billion in salaries tax rebate, HK$5.2 billion in rates waivers and HK$1.5 billion in additional social security payments.
 
Mr. Tang said that the combined efforts of the Government and the entire community had made possible the achievement of the fiscal targets three years ahead of schedule, and which resulted in the operating expenditures of the Hong Kong government to have been reduced to below HK$200 billion.

Hong Kong Action Agenda for 11th Five Year Plan
 
In September 2006, business leaders and government officials convened an Economic Summit to provide a platform for the Government, the industrial and business, professional, labor and academic sectors to discuss how Hong Kong should respond to the challenges and opportunities arising from the 11th Five-Year Plan, and to come up with a set of strategic proposals.
 
After the Economic Summit, four focus groups continued to meet to discuss in depth the range of strategic proposals identified at the Summit, with a view to each submitting an "Action Agenda" setting out specific follow-up actions to the Chief Executive by the end of the year.  On 15 January 2007, the four focus groups presented their 200 point plan to the Chief Executive as to what Hong Kong should do to complement the 11th Five Year Plan:
 
Trade and Business
 
a.       Launch “Brand Hong Kong” campaign to publicize city’s success in the first decade of Chinese rule
b.       Set up a high-level body to tackle air pollution
c.       Attract more non-local students
 
Financial Services
 
a.      Draw up a scheme to allow Mainlanders to invest in foreign currency overseas through Hong Kong
b.      Make Hong Kong a testing ground for a fully convertible yuan
c.      Ease limits on Mainland firms raising capital in Hong
d.      Allow stocks and bonds issued by Mainland companies in Hong Kong to be traded on the Mainland
 
Maritime, Logistics and Infrastructure
 
a.     Study building the proposed 10th container terminal and North Lantau Logistics Park
b.      Import Mainland drivers to cut cross-border freight costs
c.      Attract more local and Mainland talent to the shipping industry
d.      Facilitate the building of a third runway and cargo terminal at the Hong Kong International Airport Professional Services, Information Technology and Tourism
 
a.      Explore cross-boundary partnerships for law firms
b.      Eplore further mutual recognition of accounting qualifications
c.      Make tourist visa and entry/exit procedures easier
 
Investment climate
 
Hong Kong is a highly attractive market for foreign direct investment.  According to the UNCTAD World Investment Report 2007, Hong Kong was ranked the second in Asia and seventh in the world in 2006, with FDI inflows increasing by 28% to US$42.9 billion.  In terms of FDI outflows, Hong Kong was the second largest source of FDI in Asia, with FDI outflows surging by 60% to US$43.5 billion.  The UNCTAD's Outward FDI Performance Index, which compares an economy's share of world outward FDI against its share of world GDP, suggested that FDI from Hong Kong was 10 times larger than would be expected given its share of world GDP.
 
According to a recent government survey, Hong Kong's total stock of inward direct investment was estimated at US$740 billion at the end of 2006, corresponding to 391% of GDP in that year.  One distinct feature of such direct investment was the indirect channeling of capitals from non-operating companies in tax haven economies..  Excluding tax haven economies, the Chinese mainland was the most important source of direct investment in Hong Kong (accounting for 35.1% of the total), followed by the Netherlands (6.8%), the US (4.8%) and Japan (2.6%).  The majority of the stock of investment was related to service industries including investment holding; real estate and business services; wholesale, retail and trading; banking, finance and insurance; and transport and communications.
 
Fourth Closer Economic Partnership Arrangement Supplement (CEPA 4)
 
During the visit of President Hu Jintao, the fourth installment of the Closer Economic Partnership Agreement (CEPA IV) was signed in Hong Kong.  In the agreement, the following areas were further liberalized:
 
a.       Banking
-         Minimum asset requirements for Hong Kong banks to acquire shareholding in Mainland banks cut from US$10B to US$6B.
-         Substantial business operation requirements for Hong Kong banks to be relaxed.
 
b.       Securities
-         Mainland fund management companies approved by China’s securities regulatory commission will be allowed to set up subsidiaries in Hong Kong.

c.       Conventions and Exhibitions
-         Hong Kong companies allowed to organize exhibitions in Guangdong and Shanghai on a pilot basis.

d.       Tourism
-         Minimum annual business turnover required for HK travel businesses seeking to set-up joint venture travel agencies lowered.
-         HK travel agencies established in Guangxi, Hunan, Hainan, Fujian, Jiangxi, Yunnan, Guizhou and Sichuan allowed to apply to operate group tours to HK and Macau.

e.       Cultural
-         Allows establishment of HK wholly owned performing arts agencies in the Mainland and allows HK performing arts agencies/groups to organize commercial performances in Guangdong and Shanghai on a pilot basis.
 

Summary of Hong Kong SAR Foreign Trade

Total Trade (Value in US$ Million)

2006 Hong Kong Top Exports to the World

         2006 Hong Kong Major Imports from the World

2006 Hong Kong Top Markets

2005 Hong Kong Top Suppliers

Source:  China Division, Dept. of Foreign Affairs
17 March 2008

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Philippine-Hong Kong relations remains cordial.  Several agreements have been signed between the Philippines and Hong Kong over the past several years.  In 2003, the Philippines signed the RP-Hong Kong Memorandum of Understanding on Cultural Cooperation.  The Philippines and Hong Kong  also have an existing Extradition Treaty, which has been implemented twice, most recently for the extradition of suspected drug lord Calvin Tan.  There are also an agreement on the Exchange of Prisoners, which currently is awaiting the release of an Implementing Rules and Regulations from the Philippines.  The Philippines and Hong Kong also have an existing Mutual Legal Assistance Treaty (MLAT) in effect.

The Philippine Consulate General in Hong Kong SAR, is one of the busiest Philippine Foreign Service Posts in the world and is one of the largest Philippine Consular Services operations outside of the Philippines.  Due to the large number of Filipino nationals in Hong Kong, working either as professionals or domestic helpers, the Philippine Consulate General has formed a close and cordial relationship with the government of Hong Kong.

The Philippines and Hong Kong SAR have developed a close cooperation on law enforcement issues, including customs, drugs and illegal immigration.  The Philippine Consulate General has good working relations with the Police, Immigration, and Labor authorities.  The extradition of Filipino-Chinese Calvin Tan, an alleged drug lord in 2005, was a case in point of the close cooperation between Philippine and Hong Kong authorities, notably, the Hong Kong Departments of Justice and Customs.  More recently, the Philippine Consulate General successfully shepherded a landmark case of human trafficking in Hong Kong that secured the conviction of two Filipinos who brought fellow Filipinos to Hong Kong and forced them to work as prostitutes.  This involved close coordination between the Consulate General, the Hong Kong Police, the Presidential Task Force Against Human Trafficking in the Philippines and a victim support group for this case.  In line with this case, one of the Consulate General’s officers accompanied a team from the Hong Kong Police to the Philippines on an official visit in November 2007 to strengthen cooperation between the Philippines and Hong Kong in human trafficking.  The success of the landmark case capped the Consulate General’s anti-human trafficking efforts since the beginning of the year that resulted in the decline of the number of trafficking cases from over 100 in 2006 to just 21 in the present year (as of November 2007).  The post has also been instrumental in the filing of a case against an alleged trafficker in Nueva Ecija who is reportedly engaged in the deployment of Filipinos to Malaysia, Taiwan, Korea and Japan to work as prostitutes.

Cordial bilateral relations between the Philippines and Hong Kong also made possible the successful conduct of the Overseas Absentee Voting (OAV) exercise here for the 2007 National Elections for Senators on 14 April – 14 May 2007.  A total of 19,495 voters (19,185 in Hong Kong, 224 in Macau and 86 seafarers) cast their votes, out of a total of 116,577 registered voters (96,530 in Hong Kong 1,643 in Macau and 18,404 seafarers).  Hong Kong PCG posted the highest number of both total number of registered voters and total number of those who actually voted.  Voters cast their votes in person (as opposed to by mail) in 22 Special Boards of Election Inspectors (SBELs) set up in Hong Kong, and a total of 38 SBELs for counting conducted the counting of votes.  Post mobilized around 200 Filipino community members representing various community organizations for the activity.

Post continues to cultivate good relations with the various government agencies in Hong Kong by conducting regular meetings with high-ranking officials, including those from the Office of the Chief Executive and the Commissioner of the Ministry of Foreign Affairs in Hong Kong as well as Hong Kong government legislators.

On the economic front, the Consulate continues to spearhead and support initiatives to further improve bilateral economic relations in Hong Kong.  This includes providing assistance to Philippine companies and agencies attending the various trade fairs in Hong Kong such as the Hong Kong Fashion Week:  Fall/Winter 2007:  Hong Kong Toys and Games Fair 2007; Hong Kong International Jewelry Show 2007; Hong Kong House ware Fair 2007; Hong Kong Gifts and Premium Fair 2007; Hong Kong International Licensing Show 2007; Summer Sourcing Show for Gifts, House ware and Toys; Hong Kong Fashion Week; Spring/Summer 2007; Hong Kong Book Fair 2007; and Hong Kong International Lighting Fair and Hong Kong Furniture Fair.  The Consulate General also continues to promote Hong Kong trade fairs to various Philippine companies, and the Manila F.A.M.E. trade fair and other government-sponsored trade fairs to the various chambers of commerce in Hong Kong and other interested associations/companies.  The Philippines also participates in economic roundtables and fora to present the latest economic figures of the country and encourage trade and investments.  The latest such activity was “Meet the Consuls General” in November 2007, a roundtable event organized by the Hong Kong General Chamber of Commerce where buyers convened.  The Philippines had the chance to inform the body of investment opportunities in the country, principally in the field of information communications technology.

Overview:  Bilateral Trade in 2007
(value in US$ millions)

From January to September 2007, Hong Kong ranked 4^th as the Philippines trading partner, 3^rd as export market and 10^th as import supplier.  During the same period, total trade with Hong Kong reached US$ 5.89 billion, with exports accounting for US$ 4.32 billion and imports of US$ 1.56 billion.  Due to the strong performance of exports during the first nine months of 2007, the Philippines recorded a surplus of US$ 2.76 billion.

From January to December 2006, Hong Kong had ranked as 6^th as the Philippines’ trading partner accounting for US$ 5.74 billion, with exports valued at US$ 3.67 billion or 7.82% of total export receipts, and imports at US$ 2.07 billion or 4.01% of total import bill.  Hong Kong ranked 5^th as export market (after China 4^th, and Netherlands 3^rd), and 10^th as import supplier (behind Thailand 9^th, Malaysia 8^th).

From January to December 2006, semi-conductors continued to dominate exports, accounting for US$ 2.76 billion or 75.12% of export receipts, with a percentage change of 14.94% compared to the same period in 2005.  Other top performers were gold bullion, US$ 165 million; parts and accessories of data processing machines, US$ 118 million; radio receiver parts and accessories, US$ 70 million; and storage units, US$ 52 million.

Top imports were parts and accessories of data processing machines, followed by semiconductors, components/devices; materials and accessories on consignment for the manufacture of machinery and parts; dice of any materials on consignment for the manufacture of semiconductor devices; and watch parts on consignment for the manufacture of watches.  Top five imports comprised 55.89% of total import bill.

From 2002 to 2006, Philippine trade with Hong Kong expanded by 9.13%, from 3.91 billion in 2002 to US$ 4.74 in 2006.  Exports averaged a growth rate of 10.29% yearly during the period from US$ 2.34 billion in 2002 to US$ 3.67 billion in 2002 to US$ 2.07 billion in 2006.  Imports likewise grew at an annual average rate of 7.35%, from US$ 1.57 billion in 2002 to US$ 2.07 billion in 2006.  Trade balance during the five-year period was in the Philippines’ favor, with average annual surpluses amounting to US$ 1.33 billion.

Philippine products/services for promotion to Hong Kong SAR

• Information Technology (data entry services, application programming, system analysis and design, website creation and maintenance & electronic commerce and application development)

• Other services (journalism, financial and engineering services)

• Fresh and processed food

• Fresh fruits – mangoes, bananas, durian, lanzones, coconuts, papaya, rock melons, honey dew melons, jack fruit

• Electronics (telecommunications, sound and video apparatus)

Prospects for Philippine products

Hong Kong with its estimated GDP per capita of US$ 28,400 to US$ 28,700 in 2007, is a potentially huge market for food and consumer items from the Philippines.

While non-tariff barriers are few in the Special Administrative Region and Philippine products remain competitive quality-wise in the market, Hong Kong is fast becoming environment conscious.  Buyers consider “environmental friendliness” as the next most important criterion after price and quality when choosing among different brands within a product category, and are willing to pay a premium price for “green” products.  Philippine exported and manufacturers should adapt their products to this requirement.

As reflected in Hong Kong’s merchandise trade statistics, in 2006, 63% of re-exports were of China origin and 48% were destined for the Chinese Mainland.  This is an indicated that it will remain a trade hub in Asia and a conduit of Philippine exporters.

Besides the new airport core projects, the HKSAR government is undertaking other infrastructural improvements.  The State Council has agreed to pursue the advance work for the Hong Kong-Zhuhai-Macau Bridge and the Guangzhou-Shenzhen-Hong Kong Express Rail Link.  The 5.5 km-long HK-South West Corridor bridge, the fourth vehicular boundary crossing between Hong Kong and the Chinese Mainland that opened in July 2007, is expected to eventually provide another alternative crossing to the Mainland.  At the same time, the Sheng Shui to Lok Ma Chau Spur line of the MTR West Rail was opened in the first half of 2007.

The estimated 130,000 documented OFWs in Hong Kong are a huge market for ethnic foods such as chilled seafood, fresh/processed vegetables like okra, saluyot, and breadfruit, fresh/processed fruits, and sauces/condiments.

Disneyland offers continued employment opportunities to Filipino engineers, lightning technicians, entertainers, and animators in its daily shows and in the maintenance of its facilities.

The current positive economic indicators, the continued expansion of the Mainland economy, and Hong Kong’s strategic position as Asia’s business growth.  These destinations will attract more world-class and larger scale conventions, and entice more business travelers to extend their stay and increase their spending in Hong Kong.

Philippine – Hong Kong SAR Trade and Investments

Total investments in the Philippines
(Value in US$ Thousands)
 

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1.         Background

The Filipino presence in Hong Kong has been felt as early as the late 19^th century, when exiles from the revolutionary period made Hong Kong their base and home.  It was not until the late 1940's that the first group of Filipino musicians in the former British Crown Colony  arrived here.  Within the span of 60 years, the demographics of Filipinos in Hong Kong have shifted towards Foreign Domestic Helpers, with a significant minority being professionals in various fields in Hong Kong (entertainment, service sector, finance, etc.)

2.         Foreign Domestic Helpers/Household Service Workers (HSW)

Foreign domestic helpers or Household Service Workers (HSW) account for the bulk of the total Filipino population in Hong Kong.  Filipino HSWs first entered the Hong Kong market in the late 1970's and early 1980's, and once numbered, at its peak, around 155,485 in 2001.  As of 31 December 2007, the total number of Filipinos working as HSWs in Hong Kong numbered around 123,545.

Hong Kong, in comparison to other labor-importing countries of foreign domestic helpers (FDH), has a generally favorable working environment in comparison to other Asian and Middle East countries.  OFWs in Hong Kong are covered by the Hong Kong Employment Ordinance and they enjoy the same rights as local workers.  The standard contracted of a FDH in Hong Kong provides for the following:

1. Monthly salary of HK$ 3,480 or higher;
2. Annual leaves, statutory holidays and rest days;
3. Free passage from place of origin to Hong Kong and return upon end of employment;
4. One month's notice or its monetary equivalent on pre-termination of contract;
5. Paid sick leave equivalent to 4/5 of the monthly salary;
6. Ten (10) week maternity leave with pay equivalent 4/5 of salary;
7. Severance pay for worker with minimum service of two years in case of redundancy;
8. Entitlement to long service after a minimum of five years continuous service; and
9. Mandatory insurance coverage for worker paid for by employer.

Foreign Domestic Helpers are also the only sector in Hong Kong's economy which has a legislated minimum wage.  The current minimum wage is HK$ 3,480.  The minimum wage itself is higher that that which the Department of Labor and  Employment has put forward as the standard wage for Filipino Domestic Helpers.  Labor laws in Hong Kong give equal protection to both employers in all cases as well.

The Consulate General in Hong Kong however also notes several concerns of most of the domestic helpers in Hong Kong.  They are as follows:

• Labor/Employment concerns
  These concerns are mainly brought about by problems caused between relationship of the FDH  with their employer, problems brought about by pre-termination and retrieval of subsequent benefits, as well as concerns over practices of unscrupulous employment agencies.

• Immigration concerns
  Brought about by problems caused by over-staying or false representation to immigration officials.

• Criminal concerns
  Deals mostly with the cases which are brought forward to the various courts in Hong Kong.  Cases are mostly minor (ex. Theft), or can be big cases such as human trafficking  and drug smuggling.

• Social/Psychological concerns
  Problems of adjusting to a different culture and environment, as well as problems with regards to separation from family

• Financial concerns
  The leading problem of OFWs in Hong Kong is the issue of money-lending /loan problems by our nationals with financing companies and/or private individuals.

• Post arrival Orientation Seminar (PAOS):  This free seminar, open to all newly-arrived Filipinos in Hong Kong, is conducted monthly in various locations in Hong Kong.  Topics discussed include an overview of the services of the Consulate General, a background of the laws and regulations of Hong Kong with regard to foreign workers, and tips while living in Hong Kong such as how to manage finances.  This seminar provides an opportunity for the Filipino community to ask questions and/or to seek advice from consulate personnel on any problems that they may have.
   

• Appearance in "Good Evening Kabayan" and other Filipino media.  Post takes part in a twice-a-month program in a Filipino radio program called "Good Evening Kabayan", wherein various relevant topics are discussed and listeners can be phone in their questions.  Post, from time to time, makes timely announcements and/or provides interviews to various Filipino community newspapers as well as the other media outlets catering to the Filipino community in Hong Kong.
   

• Hospital and Prison visits:  The Consulate conducts monthly prison visits to all major correctional facilities in Hong Kong.  During these visits, Post representatives give advice as well as facilitate the requests made by Filipino nationals detained there.   During the Christmas season,  the Consulate hosts a Christmas gift-giving program for our Filipino inmates in the various prisons in Hong Kong.
   
  The Consulate, through its ATN and OWWA Office, also conducts hospital visits to Filipinos who have encountered serious medical problems while here in Hong Kong, and provides all necessary assistance they may need.

Minimum Allowable Wage for HSW

In 2003, as Hong Kong was reeling from an economic downturn as well as the effects of the SARS epidemic, the Hong Kong government announced the imposition of HK$ 400 levy on all employers of foreign domestic helpers.  This levy was to put into a re-training fund for unskilled local Hong Kong workers.  At the same time, Hong Kong government announced a reduction in the minimum allowable wage from HK$ 3,670 to HK$ 3,270.  Several foreign domestic helpers and concerned groups as well as the Philippine Consulate General pushed for a judicial review of the government’s policy.  The Court of First Instance however dismissed the argument of the foreign domestic helpers that the levy and the wage were interconnected.  After a similar defeat upon appeal in 2006, the case was quietly dropped by those seeking for its review.

Presently, Hong Kong’s economy has rebounded from its 2003 downturn.  The Labor Department of Hong Kong has made annual increases to the minimum allowable wage since the economy picked up.  At present, the MAW is HK$ 3,480 per month, which is still HK$ 190 lower than the 2003 level.

3.         Professionals and residents

 Although Filipino domestic workers vastly outnumbered other Filipinos in other professions, there are a notable number of Filipino professionals in Hong Kong.  They are architects and civil engineers, some of them involved in the more prominent buildings and construction projects in Hong Kong; information technology professionals; and professionals in accounting, law, and finance.  Many of these professionals have grouped themselves  into organizational, such as Builders, HK Musician's Union, Philippine Association of Hong Kong , and the Bankers Club, which regularly conduct activities that help promote Philippine interests in Hong Kong, most often in partnership with the Philippine Consulate.  There are also Alumni networks  (UP, Ateneo) whose members are  mostly  professionals.

The first Filipinos have worked professionally in Hong Kong were these groups who went to Hong Kong during the post-World war II years, following the fall of the Mainland to the Communists in 1949.  Many  Filipinos also work in service industries in the Central business district, and also in Hong Kong Disneyland as entertainers or other cast members.

There are also some Filipinos who have married expatriates, mostly from Western countries, and have settled down in Hong Kong.

4.         Language

Most Filipinos in  Hong Kong communicate with the local population in English (usually a second language for both parties).  They communicate with their fellow Filipino friends and community in Filipino or in another Filipino dialect.  Most of them have packed up a few Chinese (Cantonese) phrases in everyday life.  A few are adept at Cantonese usage.

Filipinos haven't settled long enough  in Hong Kong to have a large number who speak Cantonese fluently, unlike some of the other ethnic minorities such as the Pakistanis and the Indians, who can speak Cantonese like locals.  Typically, a large number of Filipinos are transients - -  each year, a large number of these leave Hong Kong permanently, to be replaced by a different set of Filipinos who have to learn  Cantonese from the beginning.

5.         Commerce

Philippine business catering to needs of Filipino clients, such as banks, remittance centers, mobile phone operators, and restaurants that serve Filipino food, can be found in most parts of Hong Kong, but most are centered in the Hong Kong Island area.  The most popular center of Filipino goods is located in Central in the building World-Wide House where many of the shops are run by Filipinos.  The wide assortment of typically small shops caters to their needs, selling telecommunications and banking services, food and magazines.

6.         Entertainment

On Sundays, one can usually encounter a large number of Filipino domestic helpers gathered at various spots in Central, such as the ground floor of the HSBC Hong Kong headquarters building and Chater Garden.  Many Filipino HSWs in Hong Kong have Sunday as their fixed once-a-week working day off, during which they socialize, eat self-prepared food, sing, and even sell various items.  This weekly  gathering  is such a long-standing practice that the "No littering" signs in the vicinity are written in three languages:  Chinese, English and Tagalog.  Other areas of relaxation for Filipinos are local churches within their communities as well as the Bayanihan Centre, a building complex in the Western   District of Hong Kong Island, which is the venue of various programs for Filipinos and other nationalities during weekends.

7.         Religion

Most Filipinos in Hong Kong are Christians, the majority Roman Catholic.  There are also a sizeable number who congregate in Protestant and non-denominational churches.  A minority  are Muslims.  Many spend at least a part of their Sunday mornings attending Mass and various church services.  Numerous Catholic parishes in Hong Kong offer Masses in Tagalog or English to cater to the Filipinos, who make up a large part of the membership of the Roman Catholic Diocese of Hong Kong.

Source:  Philippine Consulate General, Hong Kong
March 2008

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The Asian Investment Conference (AIC), sponsored by Credit Suisse, has established itself as the most important event on the regional investment calendar. The conference covers four days and in 2008 more than 250 companies from Asia, including Australia and Japan are expected to participate.

Over the last decade, as Asia has gone from the depths of a financial crisis to becoming the global leader in growth, investors in the region’s markets have come to recognize the Credit Suisse Asian Investment Conference (AIC) as the leading event for discovering tomorrow's opportunities. With its mix of headline economics and other macro speakers, company presentations and one-on-one meetings between CEOs and fund managers, the AIC gives its delegates the ability to compress months of work into a single week by bringing the best of the region to a single venue in Hong Kong.

The AIC's popularity has grown along with investor interest in the region; from some 400 delegates at the first AIC in 1998, the conference now welcomes more than 1,400 fund managers from Asia, North America and Europe. These are the people who make the region's markets tick, meeting the companies that matter most.

Since 1998, the AIC has brought the world's best-known economists to Hong Kong to consider the issues facing Asia. This has included three Nobel Laureates, a former US Treasury Secretary, several winners of the John Bates Clark medal, and advisors to the World Bank, the International Monetary Fund, the Asian Development Bank and many central banks and ministries of finance around the world.

Aside from the heavyweights of economic theory, the AIC has also welcomed prime ministers, central bankers, heads of commerce and finance ministries, special advisors on economics to heads of state, privatization experts, some of the world's leading private equity players, and World Trade Organisation luminaries such as Thailand's Supachai Panitchpakdi and China’s Long Yongtu. The range of experience is remarkable: Michael Dell has spoken at the AIC — so have John Major, Shaukat Aziz and P. Chidambaram.

The AIC also prides itself on following events that may be non-financial but impact the markets.  It has hosted a United Nations weapons inspector, former ambassadors and other diplomats, military strategists, leading think-tank members and experts on the environment, responsible investing and corporate governance.

The companies that make the AIC their priority appreciate that it gives them access to a buy-side audience representing more than US$3 trillion under management and featuring the world’s greatest fund-management names. Traditional mutual funds, hedge funds, pension funds and insurers – they are all found at the AIC. Every year, there are more than 3,500 one-on-one meetings held during the four days of the AIC (plus a one-day small cap event that precedes the main AIC). Over the history of the event, investors and companies have been brought together in more than 20,000 private meetings.

(Past keynote speakers from the Philippines were:  then Finance Secretary Alberto Romulo and then Finance Undersecretary Joel Bañares in 2001 and then Speaker Jose de Venecia, Jr. and then NEDA Director General Cielito Habito in 1998.)

11^th AIC

The 11^th AIC will be held from March 31 to April 3.  Keynote Speakers are President Gloria Macapagal Arroyo and Robert Swan, OBE, Polar Explorer.  The future of the US  Dollar will be the focus of discussion by three experts:  Mr. Tim Adams, Managing Director with the Washington -based Lindsey Group, and former US Undersecretary of Treasury for International Affairs; Dr. Steve Hanke, professor of Applied Economics, Johns Hopkins University, and Senior Fellow, The Cato Institute;  Dr. Yu Yongding, China’s pre-eminent monetary economist, Director General of the Institute of World Economics and Politics, Chinese Academy of Social Sciences.

Invited Philippine Corporates for this year’s AIC are:  Alliance Global (Megaworld); Globe Telecom (subsidiary of Ayala Corp.);Manila Water Company; PLDT/Smart Communications; PNOC Energy Development Corporation; and Universal Robina Corp/JG Summit.

Source:  Credit Suisse website

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The Development Bank of the Philippines and the Landbank of the Philippines have two new products each to present to the Filipino Community in Hong Kong during the visit of President Gloria Macapagal-Arroyo there on 30 March to 01 April 2008.  These products were carefully designed and packaged for the OFWs and the needs of their beneficiaries.  These four products are aimed at providing OFWs and their beneficiaries secure, fast, and reliable savings program and to mitigate the effect of the continued appreciation of the peso by preserving and optimizing the value of earnings of the OFWs.

FROM THE DEVELOPMENT BANK OF THE PHILIPPINES

A.         OFW HEDGING PROGRAM

The OFW Hedging Program is designed to provide protection to OFWs from the foreign exchange volatility. OFWs will have the opportunity to mitigate the effects of the Philippine Peso appreciation vis-à-vis their US Dollar remittances or the equivalent in US Dollars. The Development Bank of the Philippines offers two products under the Hedging Program, the Peso Insurance and Peso Protect.

Peso Insurance is an agreement where the OFWs can sell their US Dollars at prevailing exchange rate on maturity or at the selected protection rate if Peso appreciates and the OFW pays an insurance fee while Peso Protect is an agreement whereby the exchange rate (forward rate) at which OFWs will sell their US Dollars in the future is already determined beforehand and OFW pays no fee but has to place a hold-out deposit refundable after delivery of contract amount to DBP.

Profile of OFWs who Availed of the OFW Hedging Program

Availees of the OFW Hedging Program to date are mostly OFW individuals comprising of professionals based in Hong Kong and Nigeria. Majority of the availees belong to the middle income bracket group and have been based overseas for 10-15 years already. Most of the availees have already hedged their salaries/ proceeds for 1 month

DBP has been offering the hedging for the USD/PHP (US Dollar-Peso) currency pair but recently began to offer the HKD/PHP (Hong Kong Dollar-Peso) currency pair also.

DBP has also intensified its marketing efforts on the Hedging Program to the manning companies to be able to reach out also to sea-based OFWs. To this effect, pre-departure seminars are also being regularly conducted in OWWA and the different manning companies. In addition, DBP has also organized a seminar on the Hedging Program for the Manning Companies on March 25, 2008.

B.         i-NET NEGOSYO PROGRAM

The Development Bank of the Philippines i-Net Negosyo Program has been created to provide livelihood opportunities for OFW’s families in the Philippines. This is a loan facility offered to eligible OFWs for the setting up of a mini “Internet station” via SMART Wireless Broadband or other telecom internet service provider offering similar packages.

The DBP-SMART OFW i-net Negosyo Program has a P1.0 Billion fund allocation to eligible borrowers. Eligible borrowers are OFWs with valid employment contract of not less than twelve (12) months and a gross joint monthly income with a co-borrower equivalent to forty thousand pesos (P40,000.00). Maximum loanable amount is P45,000 per computer unit and is payable over a period of twelve (12) months to eighteen (18) months in equal monthly amortizations. Fixed interest rates run up to 9% per year.

This project shall be initially available to applicants working under controlled environments i.e. seafarers, OFWs working in offices of remittance companies, hospitals, and other offices abroad and their co-borrowers/specified beneficiaries who are gainfully employed, either spouse or children of a married OFW, parents or sibling of a single OFW, who shall manage the business.

Profile of OFWs who Availed The DBP i-Net Negosyo

There have been 30 approved loan applications for the i-Net Negosyo Program. All of the availees are already married thus are availing of the program to help their beneficiaries here in the Philippines become self-sufficient. The availees are based among the countries of United Arab Emirates, Hong Kong and Saudi Arabia. 

FROM THE LANDBANK OF THE PHILIPPINES

A.         LONG TERM NEGOTIABLE CERTIFICATE OF DEPOSIT (LTNCD)

The Long Term Negotiable Certificate of Deposit (LTNCD) is affordable for the OFWs requiring a minimum investment of only twenty thousand pesos (P20,000) while having a high-yielding interest compared to other existing savings or time deposits.

The LTNCD is safe as it is being issued by Landbank, a government-owned financial institution with assets of P381.8 Billion. OFWs are assured of interest if the investor holds on till the maturity period. LTNCD is entitled to an insurance coverage by Philippine Deposit Insurance Corporation (PDIC) of up to P250,000 per depositor. OFWs and their families may purchase the LTNCD from Landbank branches, Hong Kong Shanghai Banking Corporation (HSBC) and other designated selling agents during the offering period which will last from two weeks to a month. A purchase devise will be given to investors. OFWs may use existing remittance infrastructure for payments of purchases of LTNCDs, the details of which are still being worked out. Should there be a need to liquidate the LTNCD, secondary market support will be provided by the Market Makers at prevailing market rates.

B.         OFW CASH CARD

OFW Cash Card, developed by Landbank in collaboration with Smart Communications, is a safe, convenient, fast and affordable way that the OFWs can send their remittances to the Philippines. It is a debit card that can be linked to the Smart mobile phone and likened to an ATM card that can transact in any of the 7,000 Expressnet, Megalink or Bancnet ATMs nationwide. Unlike an ordinary ATM card, it does not require any opening deposit or maintain daily balances.

In using the OFW Cash Cards, funds can be easily transferred and received compared to the door-to-door delivery which normally takes about 2-3 days, remittances will be directly credited to the cash card ensuring safety of funds, notification messages will be received whenever successful transactions are made, and balances of cash card may be checked through text or by calling the banks. Payment of remittances sent using the OFW Cash card can be as low as five pesos only compared to the door-to-door service.

Source:  Department of Finance

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The OFWs Hedging Program is designed to provide protection to OFWs from the foreign exchange volatility.

Development Bank of the Philippines offers two products under this program, Peso Insurance and Peso Protect.

Peso Insurance is an agreement where the OFWs can sell their US Dollars at prevailing exchange rate on maturity or at the selected protection rate if Peso appreciates.

Example:

USD/PHP Rate  : P41.68

Protection Rate : P41.50

Term               : 1 month

Insurance Fee  : 0.83% of contract amount (not fixed)

OFW pays an insurance fee.  Insurance fee varies according to maturity date, protection rate and USD/PHP market rate.

Peso Protect is an agreement whereby the exchange rate at which OFWs will sell their HK Dollars in the future is already determined beforehand.

Example:

HKD/PHP Rate  :  P 5.36

Rate on maturity  :  P 5.38

Term                  :  1 month

OFW pays no fee but has to place a hold-out deposit refundable after delivery of contract amount to DBP. Rate on maturity varies depending on the interest rate differential of the HK Dollar and Peso and the HKD/PHP rate on deal date.

Source:  Department of Finance, March 25, 2008

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