Lore Buscher, Regional Director of Hong Kong Trade Development Council (HKTDC), made a pre-BaselWorld presentation in Geneva yesterday.
In it Lore presented a resume of Hong Kong’s results during 2005, details of this year’s participation at BaselWorld and a summary of the Hong Kong economy.
Here is a transcript of her speech:

“As the official trade promotion body of Hong Kong, we have been organising the Hong Kong pavilion at Basel for 20 years now – so I can say, that our presence this year will be an anniversary. And it clearly shows the continued importance of BaselWorld as a major forum for Hong Kong’s watch & jewellery industries. In fact, the show provides an excellent marketing platform for the two industries and our exhibitors usually generate a major part of their annual turnover at the fair.

Baselworld 2005: a resume
“Before I talk about Hong Kong’s participation at this year’s BaselWorld, I would like to take a look back at last year. It was our second year at the newly built Hall 6. And on the behalf of the HKTDC and our exhibitors, I can say that it was a successful one. With the participation of 347 Hong Kong companies we broke all records with an exhibition space of 6,500 square metres. Hong Kong once again constituted the largest international pavilion at BaselWorld. The order volume recorded by some companies increased by 20-30 per cent in comparison with 2004. In total, the Hong Kong companies booked orders totalling more than 10 million Euro (including both direct orders and those under negotiations).

Hong Kong at BaselWorld 2006
“Still, there were some aspects to be improved – and that’s what we have done when preparing our participation this year. Unfortunately, some of the jewellery companies reported mixed results last year. They felt that the visitor flow in the far end of the jewellery pavilion was not so good and asked the HKTDC for improvement. I am very glad, that, together with the BaselWorld authorities, we were able to work out a solution which is as follows:
“The horizontal rows of the booths at the end of the pavilion were broken into several blocks of islands, so that it becomes easier for visitors to get to the booths from all ends.
“Another innovation is, that we are going to have a Hong Kong Café in the jewellery section – if you have some time to relax during the busy fair days, please drop by and have a coffee with us.
“All in all, we will have 335 Hong Kong companies at our stand. 134 belong to the watch & clock industry and 171 are jewellery companies. 13 companies will display watch parts, with the remaining 17 companies having all sorts of packaging products on offer.
“Of course, we will also try to catch up with the media. Please earmark your diary with the following dates:

 On Wednesday, March 29, Raymond Yip, Director of Industry Promotion of the HKTDC will represent Hong Kong at the official Baselword press conference from 11:00 –12:00 am

 On Saturday, April 1st, we will organize a press breakfast at the Hong Kong pavilion. We will give you the details ASAP.

Hong Kong’s watch & clock industry
“Hong Kong has been the second largest exporter of watches & clocks for many years now. The largest export item is battery-powered wristwatches, accounting for over 60% of the total exports. These range from analogue to digital watches, metal to plastic watches, fashion to classic watches, standard to jewellery watches, and novelty to sport watches.
“According to estimates and as you are all aware, three quarters of Hong Kong watch & clock exports are manufactured on OEM-basis [private label] – the majority of customers are importers and distributors in the USA, EU and Japan. Hong Kong’s watch manufacturers are well-known for their modern manufacturing capabilities, fast delivery, good services to buyers, product quality, design etc.
“Let us have a quick look at the statistics. After an increase of 9% during 2003 and 2004, the watch exports from January to November 2005 rose by 1%. Exports to the EU, which accounted for nearly a quarter of Hong Kong’s total watches and clocks exports, were on the same level as in 2004. Consumer spending in the region remained weak. Sales to major EU members like Germany (-3%) and the UK (-9%) also remained below expectations. Regarding other European markets outside the EU, exports to Switzerland, which comprised mainly of parts and components, expanded by 24% in the first eleven months of the year.

“A reason for the rather slow development of the timepiece exports may be, that competition is becoming more and more fierce. Mainland suppliers offer very low prices and this practice has put pressure on the unit prices of watches worldwide. Given that the demand for Hong Kong watches has been steady compared to the year before (in terms of volume), lower unit prices have resulted in lower export value.
“Against this background, Hong Kong definitely will have to further strengthen its ambitions to move upmarket and to develop own brands – especially for the mainland Chinese market. To support this development, the HKTDC has recently extended its brand promotion and launched the ‘Hong Kong Watch Brand Name Promotion Programme’ targeting the Chinese Market. Its aim is to enhance the awareness of Hong Kong’s quality products among the new middle-class consumers on the mainland. “The initiative comprises promotions at the trade, consumers and media levels – a highlight of the programme is a series of in-store promotions targeting the emerging middle class in the mainland.
“Since Hong Kong’s watch industry has always been innovative and moving forward, I am convinced that the companies will master all these challenges which also create valuable opportunities.
Another aspect which I believe may help Hong Kong watch manufacturers to distinguish their products from their Asian competitors: environmental consciousness has gained importance there. The Hong Kong Watch Council and the Hong Kong Watch Manufacturers Association belong to the founding members of the Hong Kong Green Manufacturing Alliance (HKGMA) which has been established in February 2005.
“So far, Hong Kong has developed strong ancillary and supporting industries for its watches and clocks manufacturing. Local watch assemblers are well served with a large variety of high quality watch cases, dials, straps, hands, button cell batteries etc.. You all know, that your country also makes use of those supporting industries. In 2005, Switzerland again was the largest importer of watch cases and parts made by Hong Kong with a share of 53% and at a value of 142 US million – this marks an increase of 13% compared to the year before. These figures indicate, how much of “Hong Kong” you can find inside the timepieces made in Switzerland and how interwoven the product processes are. In comparison, Germany imported watch components made by Hong Kong amounting only to 3 US$ million - I think this fact reaffirms the special relationship between the watch industries of Switzerland and Hong Kong – a perfect partnership.

CEPA III
“Let me also give you some background information on a unique free trade pact between Hong Kong and China. 1,108 goods and 27 service areas were covered by the first two steps of the Closer Economic Partnership Arrangement (CEPA) in 2003 and 2004. As part of further trade liberalization measures Hong Kong and China signed another agreement called CEPA III on 18th October 2005, which took effect in January 2006.
“Under CEPA III, Mainland China has agreed to give ALL products of Hong Kong origin tariff free treatment. Also further liberalization in 23 service areas such as legal, accounting, audiovisual, distribution, banking, securities, tourism, transport services as well as individually owned stores come under this third agreement. There are certain Rules of Origin which need to be met so that products can benefit from this arrangement. This marks a new era for economic relations between Mainland China and Hong Kong.
“CEPA III also applies to Hong Kong’s watch industry. Notably, certain watches made in Hong Kong with a Hong Kong brand are no longer required to fulfil the 30% value-added content requirement in order to be eligible for zero tariff. This new regulation will surely reinforce the watch makers ambitions to develop brands for the giant mainland market.
“Jewellery made in Hong Kong will also benefit from Cepa III. From now on, precious metals, diamonds and other materials, can enjoy duty free access to the mainland if they can satisfy the country of origin requirements as Hong Kong products.

Hong Kong Snapshot
“Last but not least, a snapshot of the current situation. Hong Kong’s economy has been booming recently – and the outlook is also very good. In 2004, the economy grew by an impressive 8%. The territory remained on the growth path in 2005: the real GDP surged by 8.2% in the third quarter of 2005, marking its ninth consecutive quarterly increase since mid-2003. Thus, the official forecast of GDP growth for 2005 was raised from 5% to 7%. External trade continues with double-digit growth; it was 11 % up in the first nine months of 2005.
“Tourists are flocking to Hong Kong in record numbers: 17 million in the first nine months of last year (+7.6%) as against 21.8 million in 2004. And we are continuing to attract strong inward investment: Invest HK report they helped 232 companies set up in Hong Kong in 2005 representing a substantial increase of 13% over 2004. I think, these figures are really encouraging – also for Hong Kong’s watch and jewellery companies.

The Year of the Dog
Ladies and Gentlemen, this Sunday, January 29, our friends in Hong Kong and China will start celebrating the Chinese New Year and we will enter the Year of the Dog.
According to the Chinese horoscope, 2006, in general, will be a supportive year with a sensible climate of justice, relief, harmony and peace prevailing over the globe, compared to the last few years. I hope that this forecast will also come true for all of you personally.”