Phase two of the Closer Economic Partnership Arrangement will further propel Hong Kong's economic growth on the back of the success of the scheme's first phase.

Secretary for Commerce, Industry & Technology John Tsang told legislators today the implementation of CEPA has been smooth. Last year, $1.15 billion in Hong Kong-made products were imported into the Mainland tariff free under CEPA.

Over 660 Hong Kong-registered enterprises have been issued with Hong Kong Service Supplier Certificates. Under CEPA, these enterprises are able to enjoy preferential treatment to enter the Mainland market.

Some enterprises in sectors like banking, distribution, transport and logistics, have already set up operations on the Mainland, and over 1,000 Hong Kong residents have registered with Guangdong authorities to set up individually-owned stores to provide retail services.

Tourism boost

Over five million Mainland visitors came to Hong Kong under the Individual Visit Scheme, which helped to boost tourism-related industries, like restaurants, retail and hotels.

In addition, among the 205 foreign companies assisted by InvestHK in setting up or expanding operations in Hong Kong, 45 of them, or 22%, have indicated that CEPA was one of the factors considered when making the investment.

Nineteen companies invested in Hong Kong because of CEPA, while others have accelerated their investment plan, and invested more capital or employed more staff as a result of CEPA. Out of the 205 investment projects assisted by InvestHK in 2004, 35 are Mainland enterprises, a sharp rise of 106% compared to 17 in 2003.

"We believe the implementation of CEPA is one of the factors attracting Mainland enterprises to Hong Kong," he said.

Mr Tsang said the administration is conducting an analysis of the economic impact of CEPA. The study will cover trade in goods, trade in services, and the Individual Visit Scheme. It will be completed within the first quarter.