Hong Kong on Friday said its first free trade agreement with European countries would take effect from the beginning of October, opening up business opportunities and cutting prices of imports.

The agreement, which was signed in June last year with Iceland, Liechtenstein, Norway and Switzerland -- members of the European Free Trade Association (EFTA) -- will cover investments as well as trade in goods and services.

"Hong Kong service providers and the services they provide will enjoy better business opportunities...in market access as well as non-discriminatory treatment in the EFTA states' markets," the government said in a statement.

Hong Kong service providers would be granted temporary entry permits to encourage travel into EFTA states, it said.

The agreement will come into effect on October 1 between Hong Kong, Iceland, Liechtenstein and Switzerland, and a month later for Norway.

Hong Kong signed a free trade agreement with Chile in early September ahead of the Asia Pacific leaders' summit in Vladivostok, Russia.

The former British colony and Asian financial hub was returned to China in 1997.

It was ranked as the world's freest economy in 2012 for the 18th consecutive year by the Heritage Foundation, an American think tank.