A free-trade agreement and related investment deal, signed by Hong Kong and the Association of Southeast Asian Nations (ASEAN), will come into effect on 1 January and is expected to boost textile investment and exports from Hong Kong to the 10 ASEAN member states.
Hong Kong’s major financial centre is now well placed to boost investments in south-east Asia’s growing textile and clothing sector. And quality manufacturers based in the China special administrative region (SAR) will be better able to supply products to the growing ASEAN middle class through the deal’s reduced or zero-rate import tariffs, Wenda Ma, assistant principal economist for Asian and emerging markets at the Hong Kong Trade Development Council, tells WTiN.
Negotiations on the FTA had been ongoing since 2014 and were finalised at the end of 2017, with each country having one year to complete domestic legal procedures ahead of implementation. This has now happened in Hong Kong, and ASEAN member countries involved in the deal are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
“The agreements will bring legal certainty and better market access, and fair and equitable treatment in investment, thus creating new business opportunities and further enhancing trade and investment flows between Hong Kong and ASEAN,” says Au Yeung, a spokesman from Hong Kong’s trade and industry department. “We expect that many sectors, including the textiles industry, will benefit.”
A zero-rate customs tariff will be applied immediately to most textile products entering ASEAN member states from Hong Kong, with others decreasing more gradually over the next 10 years.
But to enjoy the preferential customs duties, Hong Kong exporters will have to comply with relevant preferential origin rules and fulfil other requirements, pushing them to make textile products within the SAR, and/or source inputs from SE Asia. Most textiles and textile articles made with at least 40% of materials sourced or value added in Hong Kong or ASEAN, or a combination of these places, are eligible for the preferential customs duties.
As a result, Hong Kong textile manufacturers will see lower export costs and improved market competitiveness, the trade and industry department spokesman says. “The investment agreement also provides Hong Kong investors with non-discriminatory treatment of investments in non-services sectors and protection of investments in all industries, including the textile industry, in respect of their investments in ASEAN,” he adds. The official notes that the closer ties forged by the agreements will enhance Hong Kong’s role as a trade and investment hub and help its traders “better tap the business opportunities offered by the [mainland China government’s] Belt and Road Initiative,” boosting trade infrastructure between China, Asia, Europe and Africa.
Ma tells WTiN.com: “To Hong Kong manufacturers, ASEAN is increasingly an attractive production base for its low costs and continued liberalisation – especially Myanmar, Indonesia and Laos for textiles and garment manufacturers.”
She says latest statistics show Hong Kong was the fourth-largest source of foreign direct investment (FDI) in ASEAN in 2016, trailing Singapore, the US and Japan. FDI from Hong Kong, which totalled US$9.9tn in 2016, or 10% of the total FDI in ASEAN member states, increased 218% compared with 2011.
“With a rising middle-class, ASEAN also emerges as an important market for Hong Kong products,” she notes.
