To ASEAN with love: An FTA that can be a win for HK, China

September 19, 2017 12:11
A free trade pact is set to be signed by Hong Kong and the ASEAN this November, marking the culmination of two years of negotiations. Photo: Internet

Hong Kong leader Carrie Lam on Saturday concluded a two-day visit to Myanmar, becoming the city's first ever chief executive to pay an official visit to the Southeast Asian nation since the establishment of the Hong Kong Special Administrative Region (SAR) in 1997.

During the trip, Lam called on Aung San Suu Kyi, Myanmar's de facto leader, in the nation's capital city of Naypyidaw and subsequently met with Vice President U Myint Swe, followed by talks with three ministers responsible for tourism, commerce, and planning and finance.

In Yangon, Lam officiated at an entrepreneurship summit and then toured a Hong Kong-invested knitwear factory. She also hosted a dinner for some 30 Hong Kong businessmen operating in the country.

Goodwill visits

Myanmar is the latest addition to the recent flurry of visits and exchanges between Hong Kong and members of the Association of Southeast Asian Nations (ASEAN).

Lam's first two official trips overseas after taking office in July were to Singapore and Thailand. The visits took place in August.

In Singapore she met with Prime Minister Lee Hsien Loong, comparing notes on housing and urban renewal, as well as on grooming young civil servants. She also held talks with the city-state's Emeritus Senior Minister Goh Chok Tong and Deputy Prime Minister Teo Chee Hean, who had earlier visited Hong Kong in April.

The reciprocal exchange marks a thaw in relations between Hong Kong and Singapore, after ties were strained earlier due to Hong Kong's seizure of some armoured vehicles belonging to the Lion City.

After Hong Kong resolved the issue by releasing the military vehicles, which had been seized at a local port during transshipment, Singapore signaled its support for free trade agreement between the ASEAN and Hong Kong.

As for her Thailand visit, Lam was received by Prime Minister Prayut Chan-o-cha and later she held a roundtable with four Thai ministers overseeing foreign affairs, commerce, industry, and digital economy and society. Thailand is now Hong Kong’s second largest trading partner within the ASEAN region.

The SAR government is said to be expediting the setting-up of a representative office in Bangkok, which will be tasked with promoting Hong Kong’s business interests on the continental portion of the ASEAN, with its jurisdiction covering Thailand, Myanmar, Vietnam, Cambodia and Laos.

Executive Council Convenor Bernard Charnwut Chan, a key political ally of Lam and whose family founded Bangkok Bank, is actively coordinating the establishment of the office.

In April, Lam met with visiting Indonesian President Joko Widodo in her capacity as Chief Executive-elect, and thanked his government’s assistance in the opening of a Hong Kong economic and trade office in Jakarta, capital of the largest and most populous economy in the ASEAN.

The office, officially inaugurated in July, covers Indonesia, Malaysia, Brunei, and the Philippines, and represents Hong Kong in matters between the territory and the ASEAN, whose secretariat is also in Jakarta.

Hong Kong also has a similar office in Singapore that has been operating since 1995.

A treaty for three

The recent uptick in Hong Kong's long-standing contacts with the ASEAN is against the backdrop of an up-and-coming landmark FTA set to take effect in November, capping two years of marathon talks when officials of Hong Kong and the ten nations of the intergovernmental organization meet at the 31st ASEAN summit to be held in Manila.

China has already entered into a similar trade pact with the ASEAN in January 2010 and together with the Closer Economic Partnership Arrangement, the de facto FTA between Hong Kong and the mainland signed in 2003, the new Hong Kong-ASEAN deal will bring about a three-pronged vehicle and further spawn trade and business between Hong Kong, mainland China and the ASEAN.

ASEAN nations have long been another hinterland for Hong Kong, underpinned by the kinship and cultural proximity of the sizable Chinese diaspora in the region, many of whom descended upon Southeast Asia via Hong Kong. Hong Kong's businessmen started to frequent the region since the 20th century with remits, trade and personnel exchanges.

Hong Kong has also been a crucial conduit for trade between mainland China and the ASEAN after 1949.

Consolidating Hong Kong’s entrepôt status further in the massive region of 634 million people is seen as key to maintaining the city’s competitive edge in trade and finance, and also for channeling the growing investments from China to the ASEAN.

Since Hong Kong has always been a free port that levies minimal tariff with a liberal regime of trade policies, the FTA is more about convincing the ASEAN to put down barriers to facilitate the flow of commodities, capitals and services from Hong Kong.

Thus Beijing must also be given the credit for bringing the Hong Kong-ASEAN free trade pact to fruition, as its endorsement was pivotal in allaying misgivings on the part of some ASEAN members.

Singapore, for instance, categorically objected to Hong Kong's participation in the China-ASEAN Free Trade Area a few years ago, fearing losing its own intermediary role of trade and capital, but Beijing reportedly mollified the city-state when Hong Kong was negotiating its own deal.

With the upcoming deal, Beijing will be in a better position to tap Hong Kong's enhanced, barrier-free economic and trade ties with the ASEAN for the Belt and Road initiative, where Southeast Asia is one of the priority areas.

Specifically, Chinese firms listed in Hong Kong can raise capital in the local market and marshal the money to the ASEAN to fund the numerous infrastructure projects there.

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Read more:

Hong Kong, ASEAN set to ink landmark FTA pact in November

Why Guangdong-HK-Macau Bay Area matters to ASEAN nations

Why Singapore doesn’t want to see a HK-ASEAN free-trade deal

Foreign banks see pros and cons in ASEAN countries


Hong Kong's Chief Executive Carrie Lam (left) presents a gift to Myanmar leader Aung San Suu Kyi during a meeting in Naypyidaw last week. Photo: GovHK
Lam met with Singapore's Prime Minister Lee Hsien  Loong in August. She chose Singapore as the destination of her first overseas visit since taking office as Chief Executive. Photo: GovHK
Lam calls on Thai Prime Minister Prayut Chan-o-cha during her visit to Bangkok in August. Photo: GovHK
Hong Kong and ASEAN business ministers pose for a group photo at the second ministerial conference held this month. Photo: GovHK

EJ Insight writer