First Minister Alex Salmond
Scottish Business Group of British Chamber of Commerce
Hong Kong - April 6, 2009
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It is a pleasure to be able to address this distinguished audience here in Hong Kong, in the presence of so many Scots and friends of Scotland. I am here at the start of a five day tour. A tour that takes in Hong Kong, the world's freest economy, and mainland China, the world's most dynamic economy.
I am joined by my Cabinet Secretary for Education and Lifelong Learning, Fiona Hyslop.
Our mission over the coming days is to learn about your remarkable economic development and to deepen our partnership in vital areas - areas that are the cornerstones of our China Plan: business, science, innovation, education, and culture.
We are here to create links, and to learn lessons, that will last us through the current recession, through recovery, and into the long-term.
We want to build a partnership with Hong Kong based on strength and mutual advantage. A partnership that will flourish throughout the twenty-first century.
I have no doubt that the best days for Scottish and Hong Kong business lie ahead.
The extraordinary potential of the Chinese economy, the flexibility and strategic position of Hong Kong, the deep-rooted strengths of Scottish industry - all of these give strong grounds for confidence in our long-term prospects.
Scotland and Hong Kong are both small, flexible, advanced economies. Hong Kong has 7 million people. Scotland has 5 million.
Both, and Hong Kong in particular, are heavily oriented towards the global economy. And both focused on high-value knowledge sectors.
Many of the key figures in the founding of the financial and trading institutions which permeate Hong Kong were Scottish, including of course many notable contributors to the rise of HSBC to become, by many measurements, the largest bank in the world.
And many Hong Kong governors were Scots - Sir Robert Black, Sir Murray MacLehose and Lord David Wilson in recent times. These were distinguished public servants who together guided Hong Kong for some twenty-two years during the postwar period.
Scottish influence is evident throughout Hong Kong.
In the Wilson and MacLehose trails that criss-cross your hills. In the place names and street names of this city.
In the Pipes and Drums of the Hong Kong Police Force, resplendent in their Macintosh tartan.
And in your very own Aberdeen Harbour, albeit one with a far larger quota of floating restaurants than the original!
So in a personal sense, as a Scot, this is something of a homecoming for me.
And it is only fair to reciprocate by inviting you, and indeed our friends throughout Hong Kong and mainland China, to Scotland to take part in this special Year of Homecoming.
This year we celebrate the 250th anniversary of the birth of Robert Burns, Scotland's national bard and an iconic figure worldwide.
And we are also celebrating some of the very best of Scotland.
Scottish invention and innovation. Our wonderful Scotch whisky. The game of golf, which is either a Scottish or a Chinese invention, depending on whom you believe. And of course we celebrate great Scottish minds and our contribution to The Enlightenment.
Indeed this year marks another major milestone - the 250th anniversary of the publication of Adam Smith's Theory of Moral Sentiments. A powerful and profoundly influential work, which also provides a clear moral foundation to his later Wealth of Nations.
Adam Smith prized justice as the quality above all others. Today we regard justice as the hallmark of an advanced, civilised society - a founding social principle. And we also see, more than two centuries after Adam Smith, the power of justice to transform lives and transform whole nations.
It is the countries that most respect the rule of law - the rights of individuals, property and contract - which have truly prospered in the modern era.
The reforms of the past three decades have already brought unprecedented economic growth to China and, according to the United Nations, have lifted some 600 million people out of poverty. We have every reason to expect even more in the future, helping China to achieve its full economic and social potential, and to enjoy an even stronger position within the global economy.
China is already a prime mover in the world economy. On a purchasing power basis it has generated one-third of global economic growth since 2000.
Scotland rightly prides itself as a wellspring of innovation and invention. But we know that China's scientific legacy stretches back many centuries further - and has also had an extraordinary global impact.
The philosopher Francis Bacon said, "Printing, gunpowder and the compass: These three have changed the whole face and state of things throughout the world... in so much that no empire, no sect, no star seems to have exerted greater power and influence on human affairs than these mechanical discoveries."
Today it is clear that China's scientific and academic prowess can make just as large an impact. So as much as Scotland has influence here, we are keen to share in the dynamism and energy of Hong Kong and mainland China - and to build strong and lasting academic, cultural and commercial ties.
Let me move on to consider the global economic situation.
Today it is clear that the world economy faces its steepest challenge in decades. The International Monetary Fund has forecast that this year, the global economy will shrink for the first time in the postwar period, albeit by less than 1 per cent.
The financial crisis and the economic slowdown have affected all economies, large and small. The UK, for example, is already in a technical recession. Scotland is almost certain to follow when the next set of data are published.
And an export oriented economy such as Hong Kong has a large stake in global trade recovery. With private demand falling sharply, there is a clear and now overwhelming case for a major, internationally co-ordinated Keynesian fiscal stimulus.
Gerard Lyons, Chief Economist of Standard Chartered Bank, has said that "to emerge from this crisis, we need demand now and balance in the future".
That is absolutely right. So it has been encouraging to see the two big engines of the world economy - China and the United States - committing substantial resources to the stimulus. More than 5% of GDP in America, and up to 14% in China.
It has also been encouraging to see the direction of travel agreed by the G20 leaders last week. Of course, the proof of the pudding is in the eating - we will judge the outcome of that conference on the detail and the impact over the medium term. Behind the presentational flourishes, there must also be real substance.
We must hope this response finally helps to stabilise the financial sector. If it does not, more will need to be done. A functioning monetary system, orderly financial markets and an underpinning of the weaker economies are all essential to delivering future prosperity.
The great American historian and economist, Herbert Stein, wrote a book on the American economy, called 'The Triumph of the Adaptive Society'.
Concerning the aftermath of the Wall Street Crash, the last great crash, he wrote: "Capitalism survived its crisis and went on to great successes. But the capitalism that survived and succeeded was not the capitalism of 1929."
That is a valuable insight. It reminds us recovery will follow, growth will resume. But it also reminds us that the economic model of 2007 must and will be superseded, with new priorities in place.
Scotland has a clear strategy for sustainable growth and for success in the global economy. Indeed its foundations are arguably the core of all successful economic strategies.
We seek to achieve two aims. To maximise the potential of Scotland's people, our stock of human capital, and to match it to our key sectors of comparative advantage. Sectors such as renewable energy, biotechnology and the life sciences, information technology, financial services.
Our people are the most precious asset for small, knowledge economies like Scotland and Hong Kong.
One of the first actions of my government was to restore the historic right to free education in Scotland. The principle that underpinned centuries of intellectual and scientific advance. Which enabled Scotland and Scots, to exert such global influence. And which has propelled Scots to an impressive total of eight Nobel Prizes.
This year we are investing in the creation of nearly 8000 new apprenticeships - many of these in our vital sectors, such as engineering, life sciences and electronics.
Scotland's workforce skills are excellent, by UK and by global standards. Half of our school leavers go into higher education. And a third of our young people already hold a university degree. Like Hong Kong, Scotland wants to draw on the best academic talent worldwide. 20% of our student population, some 58,000 students, are from outside the UK. The largest group of international students is from China, with numbers in excess of 5000.
Scotland's research base is among the very best. It is a world class asset that we want to achieve even more.
At five million people, Scotland now has less than 0.1% of the world's population. But we produce around ten times that share in terms of PhDs and academic publications. And more than twenty times our share, 1.77%, of academic citations worldwide.
Furthermore, we rank second in the world behind in terms of the overall research impact.
Taken together these attributes represent, by any standard, a wealth of human capital. They are an asset which offers the promise of growth for Scotland, and of substantial returns for those choosing to invest in Scotland.
The challenge is to deploy that talent, that human capital, to best effect. To support and develop our sectors of enduring comparative advantage. Hong Kong has done this to remarkable effect. Your reputation is synonymous with enterprise, with global reach, with excellence in finance and business services, with success.
Clearly financial services, here, in Scotland, and across the world, have been badly shaken. Confidence is weak. Liquidity is shrinking. And although we try to manage the fallout, jobs are being lost. Broader and tougher regulation is also on the way. The sector will be less free to experiment. Less able to take on, to transfer and to leverage risk.
In short, a culture change is coming. But that culture change will not unpick a fundamental competitive advantage in financial services.
Hong Kong is a global financial centre. Asia's second largest capital market. A financial gateway to the Chinese economy. With a deep and skilled pool of labour - and extraordinary depth in banking, insurance and securities.
In Scotland we see the consequences of some major banking institutions losing sight of fundamentals and becoming overstretched.
But Scotland's strengths in financial services have deep roots and a firm trunk. We are also an international centre for life assurance, pensions, asset management - and new jobs in these sectors are continuing to be created.
Moreover, many global firms - HSBC, BNP Paribas, State Street and others - will continue to benefit from the significant cost-to-quality advantage that Scotland enjoys over other European centres, particularly London.
The life sciences, meanwhile, are a strong and growing sector for Scotland. One which already adds some £2.8 billion to the Scottish economy, and potentially much more.
The basis for this success is an unbroken tradition of medical innovation. From insulin and penicillin. To the discovery of ultrasound. The development of beta-blockers.
And more recently, keyhole surgery, the MRI scan, and the discovery of the 'guardian angel' P53 gene - the gene which plays a central role in preventing cancer.
I spoke earlier of the quality of Scotland's research base, and in the life sciences we have few peers. Scotland's 14 universities are all involved in pioneering research, across the full range of medical technologies.
The result is that Scotland ranks first in the world in terms of research impact in health and related sciences. Second best in the world in clinical sciences. And a still respectable third for research in the biological sciences.
Today Hong Kong has its own successful biotechnology and pharmaceuticals sector, with substantial expertise in Western and Chinese medicine. We can be proud that the Hong Kong College of Medicine, founded by Sir Patrick Manson and Sir James Cantlie - who studied medicine at Aberdeen with Sir Kai Ho - has been at the heart of that development.
China's life science sector is flourishing - in biotechnology, pharmaceuticals, genomics, agricultural technology and wider. And with that growth, and that scale, there are countless opportunities for synergy and for cooperation.
On Friday, in Beijing, I will have the pleasure to help launch a new Memorandum of Understanding between Scotland and China on stem cell research collaboration.
Next month a delegation of medical technology companies from Scotland will visit Hong Kong and then Shenzhen.
And I believe that these initiatives should be followed by many more, as part of a genuine triangular cooperation in the life sciences between Scotland, Hong Kong and mainland China.
Let me turn to renewable energy - an industry where Scotland's strength derives not from our size, but from our skills base, our track record in the energy sector, and an abundance of natural resources. We have an estimated one quarter of Europe's offshore wind power potential - amounting to some 36.5 GW.
We are blessed with around 11,500 km of coastline. To put that in perspective, China has 18,000 km of coastline.
For Scotland that translates to an estimated 25% of Europe's tidal power, and 10% of its wave power potential.
Indeed, the fast-flowing waters of the Pentland Firth have become known as 'the Saudi Arabia of tidal power'.
With our abundance of natural resources it is estimated we could meet our country's own energy needs 5 or 10 times over, from renewable sources alone. And we are reaching out to our partners worldwide to help us meet this potential.
In December last year we launched the Saltire Prize. A £10 million prize fund which represents the world's biggest single prize for marine renewable energy.
The prize has already, in a few short months, attracted 98 registers of interest from 23 countries.
And we are delighted to have on the Challenge Committee of global experts, the President of the Chinese Academy of Sciences, Professor Lu.
The Saltire Prize embodies much of what Scotland is seeking to achieve for its economy. It is ambitious, focused on sustainability, focused on innovation, global in scope, global in reach, and perhaps also global in impact. The Saltire Prize also reminds us of those capabilities, invention and innovation, which run like a golden thread through the history of Scotland, and indeed of China.
A legacy of inquiry, of exploration, of achievement. A drive and an intellectual curiosity that are the basis of scientific progress.
This year, 2009 is a special year for Scotland. Our Year of Homecoming - a year of inspiration, a year of innovation.
There are many good reasons to come home this year. But the real attraction is not Scotland's past - it is our future.
The opportunity to take part and to invest in the new Scottish economy. To help develop and advance the new knowledge industries of the future.
Scotland is a nation that, even amid the current storms, is bold, confident, ambitious, outward-looking.
A nation of ideas, a nation of invention. We are reaching out to our friends and partners across the world.
I know there is no better place to make that invitation than in Hong Kong, and no better partner for Scotland in the years to come.