And thank you for that very kind introduction Michael [Mr. Michael Chong MP and Chair of the Canada- Hong Kong Parliamentary Friendship Group].

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1 Hong Kong + Canada: Innovating Prosperity at the Gateway to China Keynote Address to the Hong Kong Economic and Trade Office s Parliamentary Breakfast, Ottawa Stewart Beck President and CEO Asia Pacific Foundation of Canada Good morning everyone. And thank you for that very kind introduction Michael [Mr. Michael Chong MP and Chair of the Canada- Hong Kong Parliamentary Friendship Group]. I m delighted to be here with you today for the Hong Kong Economic Trade Office s Parliamentary Breakfast. Since its establishment 24 years ago, the HKETO has been instrumental in actively fostering closer economic and trade ties between Hong Kong and Canada, a relationship my Foundation has also actively supported in our case, for 31 years, since our founding in As you all here know, Canada has deep- rooted historical ties with Hong Kong, a unique and longstanding relationship that includes: + A Consulate General that first opened an office in 1923 and today works closely with Canada s Mission network in Mainland China to promote Canada across Asia Page 1 of 13

2 + The Consulate s dynamic Trade Commissioner Service, which opened its doors in Hong Kong 86 years ago + The largest Canadian Chamber of Commerce outside of Canada, with just over 1,000 members + And independent trade offices from the western Canadian provinces of British Columbia and Alberta And let us not forget, on the eve of the 70 th anniversary tomorrow of VE Day, the 1,975 Canadian soldiers who arrived in Hong Kong in and the 554 who subsequently lost their lives in battle or died as prisoners of war. Today I would like to talk to you about the role Hong Kong can play in assisting Canadian businesses, especially Small and Medium Sized Enterprises, tap into emerging opportunities in Asia and, of course, in Mainland China. Hong Kong is a major global financial centre and a hub for international talent. It has been at the forefront of Asia s rapid economic development for more than 40 years. Hong Kong s evolution has been rapid... and astounding. It bolted out of the gate in the late 1960s as a manufacturing powerhouse. In the 1980s it underwent a period of consolidation and diversification. Page 2 of 13

3 In the 1990s Hong Kong made the transition to a service- led economy. And now Hong Kong s service economy is transforming into a knowledge-based economy with a vibrant start-up community supported by a robust financial sector. Throughout its history, Hong Kong has demonstrated resilience and adaptability. In recent years it has endured the Asian Financial Crisis... the SARS pandemic... a global recession... even a change in management... and still it remains steadfast and true to the course of progress and prosperity. It is the world s third most trade- dependent jurisdiction per capita, making it an indispensable part of the global economy. The city consistently places at or near the top of any index measuring global economic importance, wealth per capita, human development, and city competitiveness. Hong Kong has also become a major intermediary and entrepot between the world and China, a connector through which goods and services flow and very importantly, where value is added. And so, for all of these reasons, a Hong Kong that remains stable and internationally- engaged is important not only for its own continued economic growth and development, but also for the Asia Pacific region, in which Canada must participate to prosper. Page 3 of 13

4 This morning I would like to draw on the Asia Pacific Foundation of Canada s work in examining the people- to- people connections and the economic ties that make the Canada- Hong Kong relationship unique in the world. I would also like to share my own thoughts on why innovative Canadian companies should consider Hong Kong as their docking station for entering Asian markets, particularly Mainland China. [PEOPLE- TO- PEOPLE LINKAGES: HONG KONG IS THE MOST CANADIAN CITY IN ASIA] In 2011 the Asia Pacific Foundation published a frequently- cited landmark study entitled Canadians Abroad: Canada s Global Asset. The study sought to determine the number of Canadians living outside Canada and to understand the attachments these people have to Canada. The project was designed to inform policy responses to issues such as the brain drain of talented Canadian professionals away from Canada. But it also allowed us to identify and quantify the very strong people- to- people ties between Hong Kong and Canada. The project found that Hong Kong was the jurisdiction with the largest number of resident Canadian citizens after the United States - - about 300,000, or roughly 1% of Canada s population. Page 4 of 13

5 That s about the same number of people living in Windsor, Ontario, and about double the size of Kingston, a couple of hours drive south of Parliament Hill. The project also found that the number of Canadian citizens in Hong Kong was 15 times greater than in Mainland China, 21 times greater than in South Korea and 27 times greater than in Japan. The numbers also revealed that Canada s people- to- people linkages with Hong Kong are by this measure stronger than either of Canada s two founding European cultures. It found that there are four times as many Canadians living in Hong Kong as there are living in the United Kingdom, and 25 times more than living in France. The project found the majority of Canadians in Hong Kong are naturalized citizens who were born in Hong Kong. It also found that their attachments to Canada are multi- dimensional and anything but uniform. While one in six individuals polled by the project reported they will never return to Canada permanently, more than three in five indicated they planned to return to Canada to live. And two- thirds reported having immediate or extended family living or studying in Canada. Clearly, Canada and Hong Kong are intrinsically connected. Page 5 of 13

6 [HONG KONG AND CANADA AS TRADING PARTNERS] Hong Kong and Canada are also long standing economic and trade partners, a relationship the Foundation monitors through its Asia Factor project, which is a comprehensive resource of information and analysis on Canada- Asia relations parsed and searchable at the provincial level. Our most recent trade update, featuring just- released 2014 trade figures, shows that Hong Kong is Canada s third largest destination in Asia for merchandise exports. Last year we exported $4.3 billion worth of merchandise to Hong Kong, of which about three quarters originated in Ontario. This figure represents about 8% of our overall exports to Asia. By comparison, Japan received over $10 billion of our exports while China in top position received nearly $19 billion worth of Canadian exports last year. It s hardly surprising that China and Japan are our number one and two export destinations in Asia. China s population is pushing 1.4 billion and Japan, with which we share a mature trading relationship, is home to 120 million more people than Hong Kong. But most intriguing are the comparative growth rates. Page 6 of 13

7 Since 2005, Canada s merchandise exports to Hong Kong have nearly quadrupled. They have outpaced in relative terms the growth in Canada s merchandise exports to China over the same period. Canada s exports to Asia as a whole increased by 90% since Exports to Hong Kong, meanwhile, increased by nearly 300%. We should feel good about the proportionally high growth numbers for Hong Kong; they re likely a result in large part of the entrepreneurial activities of many of you in this room. Adding the goods we import from Hong Kong a little over a quarter of a billion dollars last year we get a two- way merchandise tally of about $4.6 billion dollars annually. By comparison, our two- way merchandise trade with Japan was a little over $24 billion last year and with China just over $77 billion. These numbers represent the value of all the things we package up and send on ships across the Pacific... gold, grain and lumber... and the things our Asian partners package up and send to us... appliances, toys and textiles. Our two- way merchandise trade with Asia last year totalled $155 billion. Hong Kong accounted for about 3%, an important but small contribution. But when we look at our two- way trade in services with our partners in Asia products like the software and apps we have on our Page 7 of 13

8 smartphones Hong Kong s position in Canada s trade profile changes dramatically. Canada s two- way services trade with Japan in 2013 totalled $3.1 billion dollars, with China it totalled $4.4 billion - - with Hong Kong it totalled $5.1 billion. The services sector comprises the most innovative and highest- value added segments of Hong Kong s economy. This is where Hong Kong really delivers as a regional and international centre of excellence. And this is why Hong Kong must be an essential hub for innovative Canadian companies looking to exploit the vast growth opportunities in Asia. [HONG KONG AS A DOCKING SYSTEM FOR CANADIAN COMPANIES LOOKING TO ENGAGE ASIA] When I was in Hong Kong this past March I visited the Hong Kong Science & Technology Park, part of an innovation and technology ecosystem with a mission to catalyze innovation to deliver social and economic benefits to Hong Kong and the region. It does this by connecting stakeholders, facilitating collaboration and nurturing talented technology researchers, engineers and developers. The corporation is a non- profit statutory body set up by the Hong Kong Government and runs five locations: the Hong Kong Science Park, which specializes in R&D and lab spaces; InnoCentre, which is home to a cluster of design companies, including those in initial incubation Page 8 of 13

9 stages; and, three industrial estates for companies in skill- intensive manufacturing and service industries. The Park opened in 2001 and supports development in electronics, information communications technology, green tech, biomedical technologies, as well as materials and precision engineering. May 7, 2015 It also provides incubation programmes, support services, and a Soft Landing Centre for companies looking to get to know Hong Kong as a business location. It connects promising start- ups with venture capital and angel investors, and boasts a Mainland Collaboration Centre, which is a transfer station for companies looking to access Mainland China and for companies from Mainland China to expand to international markets. The Hong Kong Science & Technology Park is impressive. It houses some 500 companies about 170 of which are in early incubation stages and provides employment for over 10,000 across its locations, numbers that continue to expand. It continues to expand its focus beyond Hong Kong and China this June, for instance, the HKSTP is bringing a biotech delegation to Canada as part of an event called, Think Asia Think Hong Kong. And the Park is only one of the 35 incubators and accelerators throughout the city. Page 9 of 13

10 As Hong Kong continues to evolve, clearly it is developing the innovation infrastructure to nurture start- ups and growth companies looking to build a presence in Asia and service the region s rapidly- expanding middle class, particularly on the Mainland. And this is exactly the strategy Hong Kong seeks to promote through its innovation and technology policies. The Science & Technology Park is one piece of Hong Kong s broader approach to fostering innovation, which includes a series of funding schemes, co- operative initiatives, and exchanges, particularly with the Mainland. The government s Innovation and Technology Fund supports research- intensive activities in priority sectors that contribute to technology upgrades in industry. Its Research and Development Cash Rebate Scheme meanwhile promotes research through partnerships with local institutions. Both programs have been extended and supported with additional funding in recent years. And as Hong Kong builds and broadens its innovation infrastructure, Canadian companies are successfully docking in Hong Kong to innovate, incubate and ultimately to connect with Mainland China and the rest of Asia. Let me provide you with some examples of Canadian companies that have successfully navigated the Asian docking station we call Hong Kong. Page 10 of 13

11 I Think Security was founded five years ago in Waterloo, Ontario. The company s initial plan was to deliver secure communication and encryption capabilities to governments. After finding few takers in the government sector, the company shifted its focus to the financial services industry. After developing its products in New York and receiving interest from banks in Asia, the company was accepted at Hong Kong s FinTech Innovation Lab for an intensive incubation period. I Think Security arrived in Hong Kong in September last year and has since doubled its workforce. To meet demand it needs to double its workforce again in the coming months, and expects by the end of the year to have 25% of its front- end staff located in Hong Kong, with 75% back in Waterloo developing the tech. The company expects to announce its first major deal with a global private bank very shortly. And let me tell you about Nanoleaf, a young Canadian company that makes ultra- efficient light bulbs. Nanoleaf has offices in both Toronto and Hong Kong along with a manufacturing facility in Shenzhen. The company says it chose to locate its business development and sales office in Hong Kong for several reasons: - Hong Kong is an international business hub on China's doorstep, the largest clean tech market in the world. Page 11 of 13

12 - It s close to the company s factory in Shenzhen, which makes it easy for executives to monitor operations. - Hong Kong offers the company access to high quality investors and a mature clean tech retail market... its products are carried in over 80 stores throughout greater Hong Kong and Kowloon. - And Nanoleaf says it finds Hong Kong a terrific place to interact with international buyers, and an excellent place for attracting young talent. When its products are certified for sale in China, which is expected to happen within the year, the sky could be the limit for Nanoleaf. And finally, let me share the story of Toronto- based GuestLogix. GuestLogix provides retail tech for passenger travel. Its core business is supplying in- flight retail systems for the aviation industry. It started in 2002, making the handhelds flight attendants use to sell duty- free items and food and beverages on flights, and later developed self- service systems for airline passengers. GuestLogix s first Asia Pacific client was Australia's Qantas Airways in A growing client base in Asia made a regional head office in Hong Kong a logical choice, and the company set up in Hong Kong in GuestLogix says it chose Hong Kong over Singapore, Seoul and Mainland China because it offers a unique blend of talent, access to the Chinese market, and proximity to an important industry partner. Guestlogix now has 19 customers in the Asia Pacific region, including China Southern Airlines, China's largest carrier. Page 12 of 13

13 IN CONCLUSION Let me conclude by saying, the Canada- Hong Kong relationship is active, productive and multi- faceted. Hong Kong is the most Canadian city in Asia and our two- way trade in services demonstrates that we have a strong foundation on which to base next- generation collaborations. Eighteen years after handover, Hong Kong remains an important partner for Canada. Despite its obvious Asian roots and closeness to China, English remains the language of trade and business, the adherence to the Rule of Law and capitalism are inextricably linked to Hong Kong s history and continued success under the One Country, Two System s model, and overall Hong Kong continues to be a safe, dynamic and secure place to live, work and raise a family. And as Hong Kong continues to evolve, so does Canada s relationship with this global trade hub. Hong Kong s innovation infrastructure offers an opportunity for Canadian companies to develop and sharpen their capabilities, secure foreign capital and launch into Asian markets, particularly in Mainland China, addressing Asia s enormous needs for innovation and technology but all the while helping to grow prosperity back here in Canada. This is very much a win- win opportunity. Thank you very much. Page 13 of 13

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