Straight Talk presenter Eugene Chan (left) interviews Daniel Fung, vice-chairman of the Financial Services Development Council, on TVB, Dec 12, 2023. (PROVIDED TO CHINA DAILY)

Daniel Fung, vice-chairman of the Financial Services Development Council, is on the show this week. Fresh from his trip in Dubai, Fung explains Hong Kong's importance in bridging the Middle East and China, and even Southeast Asia, in providing trade and investment opportunities. 

Check out the full transcript of TVB’s Straight Talk host Dr Eugene Chan’s interview with Daniel Fung:

Chan: Good evening! This is Straight Talk with Eugene Chan. Our guest this evening is Daniel Fung, vice-chairman of the Financial Services Development Council. Fung comes from nearly 48 years practice at the bar with experience in both public and private sectors, as well as in academia. He was the first person of Chinese extraction to serve as Solicitor General of Hong Kong, doing so under the last British Governor Chris Patten. And then our first chief executive CH Tung. Fung has also served for the maximum four terms totaling 20 years as national delegate to the Chinese People’s Political Consultative Conference, he continues to serve on many local and international boards. He has been honored by the United Nations for his contribution to China's attainment of the UN Millennium Development Goals, and also by our government for his contribution to Hong Kong's constitutional development. We have invited him to talk to us about the rise of the Middle East, and what is in store for us in Hong Kong. Welcome, Daniel!

Fung: Thanks. Thanks so much, Eugene! I'm delighted to be here.

Chan: Right, Daniel, we know that since the lifting of the pandemic curbs, and also in the face of increasing geopolitical tensions, our government has been on a concerted effort, a drive to deepen our business ties with the Middle East, I believe you were part of the COP28 delegation to Dubai, maybe you can share the highlights of your trip, particularly the experience when you were co-hosting the session with Friends of the Earth at the conference.

Fung: This has been a breakthrough for Hong Kong. And not just for the Financial Services Development Council. I say it's a breakthrough because it's the first time our government has been given blue passes, in other words, official status to present at COP28. So, this is the first COP we have been officially present at even though some officials attended previous COPS, but they did not get the opportunity to present and we managed to do this, as you mentioned by the good grace of Friends of the Earth, plus the blessing of the central people's government. So, we were in the China Pavilion.

Chan: Right, let me ask you. A lot of people may not know what COP means. And also, why is it so special? You said Hong Kong has made a big mark?

Fung: Well, Hong Kong is not a sovereign state. The COP series, this is the 28th year was conducted under the auspices of the United Nations, so Hong Kong was not a member of the United Nations. But of course, China is and a very important member as one of the P5 and therefore with the central government's blessing. We were able to attend COP officially for the first time. And a lot of credit goes to Friends of the Earth for supporting us in doing so.

Chan: Right, COP stands for Conference of Parties, I believe. What were the key messages that we aim to develop to sort of convey about Hong Kong's offering in green and sustainable finance in that conference?

Fung: Well, I think the first message is that finance can be a very important tool for combating climate change. Climate change is, of course, the greatest existential challenge to humankind and the biosphere. So, there's no greater issue or crisis that humankind faces today. Now, what has finance got to do with any of this? The answer is very simple, that by promoting, developing and deepening green finance, we are able to combat climate change and balance a number of policies. China is of course the great manufacturing superpower even today, and therefore it does a lot of practices, which may be detrimental to the environment, etc. So, we need to balance that policy. But the way Hong Kong comes in is because Hong Kong is a global financial center, third after New York and London and we have achieved two firsts in the world this year. Number one, we issued the world's first tokenized green bond in February of this year. Later in the year, we issued the world's largest retail green bonds. So, that's one aspect of what we do. And that's very much appreciated in the least because we know, for example, Saudi Arabia's the world's biggest, most important oil producer, they also want to transition beyond fossil fuel. And therefore, they have to look at the world after carbon. And the answer is technology. And also, the markets, we're helping them do this. So, it's a win-win for both Hong Kong and Riyadh.

Chan: Right, Daniel, what will be your key takeaways that you believe Hong Kong should... well, kind of prioritize, when you come back. After you, we have developed further engagement with the counterparts with the Middle East, especially in sustainable finance.

Fung: I think, emerging into the post COVID world, Hong Kong faced a number of challenges, the recovery in the Chinese mainland is slower than expected. Hong Kong itself is suffering from a malaise in terms of economic growth. Therefore, it's imperative that we look at new markets. We can't just rely on as we did, in the old days, the major export markets of the United States and the European Union. Given the geopolitical tectonic shifts, we need to look at different geographies, and the Middle East is one obvious geography we need to focus on the reason being that the mainland is the biggest customer of Saudi carbon fuels today.

Chan: At the conference, I'm sure you also met other nations and how do you see their sort of perspective of Hong Kong, especially after being the last few years, all the geopolitical stuff and all those negative media coverage sort of being portrayed by some of the Western media? I mean, how interested are they with our sort of with Hong Kong's financial system with them sustainable finance?

Fung: I think they're very interested. I mean, the participants at COP from both the industrialized north, as well as the developing south, are fascinated by Hong Kong, because they are a sophisticated interlocutor, they see beyond a lot of news in the 24-hour news cycle. They look at deeper, longer trends, they see that Hong Kong remains the interface for the mainland with the outside world. They also know that we add value, not just to the mainland’s development, but actually to development in East and Southeast Asia. And therefore, now that we have indicated, quite categorically we want to build stronger ties with the Middle East, they also see the synergies between Hong Kong and the Middle East.

Chan: Since we're sort of developing this. I won't say the new area, but definitely an area that we're going to put a lot of emphasis on. In your role, do you see any potential risks or challenges that Hong Kong should be mindful?

Fung: Well, I think the risk is one of expectation management, we cannot expect a silver bullet by reason of our focus on the beliefs when there's no such thing. But we also need to justify, "one country, two systems" what value do we bring to the table in order to maintain and deepen that special privilege status of, "one country, two systems”? I think the answer is very simple. We can do things that the mainland finds difficult to do: interfacing with the outside world is what I've mentioned earlier. We are also the world's leading offshore RMB center. And the reason why that is relevant to the Middle East is because Saudi Arabia, through the Crown Prince Mohammed bin Salman has announced in December last year that they will take RMB for oil. This is a historic first, because for the past 80 years, that trade has always been conducted in US dollars. Why has the shift been announced? The answer is very simple. The US used to be Saudi Arabia's biggest customer for oil. Today, the US with its shale revolution, in the Permian Basin in Bakken, and also shale oil from Alberta, Canada is a competitor to Saudi Arabia. Conversely, China is the biggest customer of Saudi oil. In 1993, China became a net carbon fuel importing country because before that we had, of course, the Daqing production. We had a production in the Tarim Basin in Xinjiang. But that was insufficient to meet our domestic needs. So, we had to import.

Chan: From what you're saying, definitely Hong Kong is fulfilling our unique position.

Fung: Yes.

Chan: Being a gateway between Middle East and mainland China, isn't it?

Fung: Correct.

Chan: If I want to think further, and if we take another step further ahead. Could Hong Kong be sort of a bridge between the Middle East and the rest of Asia? Do we have that capacity?

Fung: I think we do. I'll tell you why. Because we actually have a number of things going for us, which are real assets. Number one, we have the common law system, right, which President Xi Jinping recognized as a main pillar of Hong Kong stability and prosperity. He said so in terms on the first of July last year on the 25th anniversary of our return to the motherland. Secondly, we have very deep knowledge of the markets, much more so than in the mainland, and arguably much more so than the rest of Southeast Asia, South Asia and the Middle East. And thirdly, we have regulatory transparency, these are major soft assets that we have deployed to great effect. And we will continue to do so.

Chan: Daniel let's take a break now and viewers do stay with us, we will be right back.

Vice-chairman of the Financial Services Development Council Daniel Fung attends the Straight Talk show on TVB, Dec 12, 2023. (PROVIDED TO CHINA DAILY)

Chan: Thank you for staying with us. And we have Daniel Fung on the show this evening, and he has been talking to us about the rise of the Middle East and how Hong Kong can capitalize on the various opportunities available. So, Daniel, on the first part you said that categorically Hong Kong is being welcomed, especially being able … kind of a bridge between the mainland and the Middle East. And one thing I want to ask you is that one of our local firms that has expanded in the Middle East said that they often lack embassy or consulate support. I know that we have the InvestHK, as well as the Hong Kong Trade Development Council, have offices there. Do you see we should expand further on the aspect to support our local firms in the region?

Fung: I think we should. We have an Economic and Trade Office in the UAE. I think that is a very good start. But I think we should consider having a presence in Riyadh, the capital of Saudi Arabia because whereas the UAE is very dynamic, the real power or the center of gravity in the GCC region, of which Saudi Arabia is the core country, we definitely should consider having a presence there. Now, if you look at the equivalent practice in the past of the ETO, we have had offices, we still do, in London, in Brussels, and in Berlin, covering the EU, and of course, now the UK as a separate part outside of the EU. And in the United States, we have always had New York, Los Angeles, and another center. 

Chan: True. 

Fung: Covering that vast economy. And we should consider that. Saudi Arabia has the youngest population in the GCC region. It’s a major regional power, and it’s growing. And the excitement about Saudi Arabia is because it reminds visitors, including my mainland friends and counterparts, of China in the early 1980s. So, it’s a country on the move.

Chan: Right. Since you attended the COP28 this year, are there more networking events along the pipeline, so that more Hong Kong businesses will be able to have direct contact with potential business partners?

Fung: Absolutely. We have coming up, I believe, on the 24th and 25th of January next month. The biggest event on the Hong Kong government’s international calendar, that is known as the Asian Financial Forum, AFF, taking place on those two days, in which we have over 7,000 delegates from both the industrial north, and the global south attending. Saudi Arabia will be present, as will the UAE, and other countries within the GCC. Beyond that, we also are planning a revisit to the UAE and Saudi Arabia, end of January or beginning of February. So, these visits are important, you can’t build Rome in one day. So, it’s not as if the moment you visit, you are going to achieve something very long term. I think the relationship has to be nurtured. And the Middle East, in terms of culture, would trust you the more often you commit yourself to that relationship. That is just common sense, we have seen the same thing in mainland too. 

Chan: Right. Daniel, you know recently we had the Aramco Team Series Golf Tournament in Hong Kong, and they have also announced that the LIV event is going to be in Hong Kong next year for golf. It is a huge tournament coming up, and looks like there are more interactions between Hong Kong and the Middle East. But as you rightly said so, cultural differences are there. And I am just wondering under your own experience, has there been any sort of differences or any similarities that you think sort of help us bind together?

Fung: I’ve talked about some of the similarities. And I think it’s worth talking about the importance of family in MENA culture, Middle East and North African culture, and the importance of family in Chinese culture. So, that is one building block. We have seen that the Hong Kong government has tried three times to introduce Sukuk financing, which is Islamic financing, Sukuk bonds, in the mid-2010s. We need to go further. And we definitely can do this because we need greater understanding, a deeper understanding of Islamic finance. We have invited Saudi Arabia to issue bonds in Hong Kong, and we can do the same, so reciprocally in the Riyadh market. They also know that Hong Kong, being a major global financial center, can help them develop their centers into much more vibrant markets.

Chan: The reason why I asked you about the culture is when you are mentioning all these, I remember when mainland tourists come down to Hong Kong and actually started to spend money with all those campaigns, we have all these negative sentiments that was in Hong Kong. So, one must be aware that we don’t want to tread the same path wrong because I am sure they have many, with Arab culture, they have their own taboos. That is the reason why I asked you that question. 

Fung: No, you are absolutely right. I mean I think we have to be culturally sensitive.

Chan: Exactly.

Fung: As visitors or as trading or just business partners. But I think … let’s just take Saudi Arabia as a microcosm. They have come a very long way, women can now drive, and the women I met all drive to work. This was in Riyadh. In addition, amongst the eight different financial institutions I met in Riyadh, including the Central Bank, the stock market, the market regulator, the main bond issuer, etc. Many of them are led by women, which I never expected. I mean on my last visit to Saudi Arabia, which was more than 10 years ago, it was like seeing a country in a different century. So, I was very impressed by that rapid development. And nowadays, ladies visiting, let’s say Riyadh, do not have to put on the Abaya.

Chan: That is exactly what I was going to ask you. 

Fung: Yes, they can wear whatever they wear in Hong Kong, within reason. We have to be modest, so we have to be sensitive to those cultural differences. But I think both sides are moving towards some middle ground, which is a strong foundation for building consensus.

Chan: Right, that is very encouraging. So, looks like none of the Western media smear campaign has actually sort of tarnished Hong Kong.

Fung: Yes, we understand the media campaign that you mentioned. But I think the sophisticated counterparts I met with actually see beyond that. For example, they have Al Jazeera, as a main media provider, and Al Jazeera actually gives a very different take on these matters you talked about, including geostrategic shifts, they also take a very long view. 

Chan: Yes, right. Daniel, when you mentioned more and more of the Middle East, I remember my trip there, saying that it gives also your impression that it has got a good concentration of wealth there. So, do you think Hong Kong will have the opportunities with the wealth management sector, like family offices there? Like how do you see that for Hong Kong?

Fung: I think that is a winner for us, if I may say so, because we are attracting … we are going to be the world’s global hub for family offices. We have attracted a lot of business from the Middle East, also from Southeast Asia, including from Singapore.

Chan: Right.

Daniel Fung (right), vice-chairman of the Financial Services Development Council, attends the Straight Talk show on TVB, Dec 12, 2023. (PROVIDED TO CHINA DAILY)

Fung: I tell you why. Because we actually do not have any local employment requirement. Singapore has an 80 percent local employment requirement. As far as Hong Kong, we are completely free, anybody of whatever citizenship or nationality could come, provided they have the competence. The same goes for Riyadh, same goes to the UAE, they have no local employment requirement. Beyond that, Hong Kong has a very, very deep capital market, I have seen one report that says Hong Kong has 200 times the capital raising capacity as compared to Singapore. Now that is a very big difference. And I think a lot of people used to think of Hong Kong as a place of 7.5 million people, as opposed to Singapore having 5 million. But the real comparison is actually Hong Kong within the context of GBA, that is 80 million people, that is the size of Germany. With a GDP the same size as South Korea, now that is a major shift in terms of perception. And given that we have this smart card arrangement that allows us to travel into the GBA, without traditional immigration controls, and we can get to Shenzhen in 20 minutes from Central, that is a big plus.

Chan: Right. Daniel, I am going to ask you the last issue I want to know, it is with highly acclaimed individuals, arts and collectables are always something that they like to have. And I know that there is such financing on those areas. Does Hong Kong have a role to play?

Fung: We do, absolutely. I think Hong Kong is already the world’s leading wine hub.

Chan: Yes.

Fung: And that was since Henry Tang lifted duties on wines. And immediately overnight, we became the world’s leading auction center.

Chan: I remember that, yes.

Fung: Now that was 15 years ago. As far as art is concerned, it is developing by leaps and bounds. We have Art Basel, we have other regular auction events run by Christie’s and Sotheby’s, etc. We also have, of course, the academy for wealth legacy, recently established, Adrian Cheng is chairing. And that synergizes with this idea of family wealth, I am actually very bullish on that development. And when we discussed that with our counterparts in the UAE and in Saudi Arabia, they were extremely interested.

Chan: Right, thank you. And unfortunately we have run out of time. But really thank you, Daniel, for your valuable insights into these exciting opportunities emerging in the Middle East. Hong Kong is indeed ideally placed to serve as a bridge to the mainland with our well-established capital. Allow me to share a quote from the PM of the UAE, Mohammed bin Rashid Al Maktoum: “We in the UAE have no such word as impossible.” Have a good evening and see you next week.

Fung: Thank you very much.

Chan: Thank you.