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Following is the speech by the Financial Secretary, Mr Donald Tsang, at the Trade Development Council luncheon in Istanbul today(Monday):
Distinguished guests, ladies and gentlemen,
Thank you for that warm welcome. I have been in Istanbul for just over a day now and I am thoroughly enjoying the visit. As you may guess, this is my first visit here. And if it had not been for the inaugural flight between Hong Kong and Istanbul it may well have been a few more years before I had the opportunity to look around and really get a sense your long history and culture.
Now that we have direct flights I hope it will also lead to increased trade, investment and cultural ties between Hong Kong and Turkey. I am certain that two-way tourism traffic will be boosted. Turkish nationals enjoy three-month visa-free access to Hong Kong and I am very happy to say that last month, from July 14, the Turkish Government granted Hong Kong Special Administrative Region Passport holders three-month visa-free access to Turkey.
Hong Kong and Turkey already have a good bilateral trade relationship. The total trade between us was about US$730 million in 1997. It has grown at an average rate of around 24% in value terms over the past five years. Hong Kong is an important entrepot for Turkey's trade with the Mainland of China - in fact about 60 per cent of our total trade with you is re-exports to your wonderful country. I am sure this role will be sustained and expand as the Chinese economy continues to reform and open up. The major products we export or re-export to Turkey include watches and clocks, telecommunications equipment, computer parts and textiles yarn. Our major imports from Turkey include iron and steel, copper and textiles yarn. So with direct flights and visa-free access both ways I think bilateral relations between our two communities have entered a new era and can only get stronger.
Many of you will be aware that Hong Kong also entered a new era just over a year ago. On July 1, 1997, we became the Hong Kong Special Administrative Region of the People's Republic of China. The transition has gone remarkably well. Hong Kong is much the same as it was before the Handover. Our way of life, our legal system and laws, our currency, our civil service are still the same. We have our own fiscal and trade policies; our own immigration and customs laws; our own legislature and election laws; and, we remain a separate member of international groups such as the World Trade Organisation, the World Customs Organisation and APEC. With the exception of defence and foreign affairs, Hong Kong people are running Hong Kong under the principle of 'One Country, Two Systems'. And I must point out that our leadership in Beijing have been very supportive of Hong Kong in this past year. In particular, they have been most forthright in their determination to uphold all of the promises in our constitutional document, the Basic Law. They have given us their maximum support, but have left us to get on with the business of running Hong Kong as had been promised. This is of great importance, not only to the people of Hong Kong but to the international investor community which plays such an important and integral role in the ongoing success of Hong Kong.
No doubt you have been reading a lot of news about the financial difficulties now plaguing Asia. With 11 of our top 20 trading partners in Asia-Pacific, Hong Kong could not escape the fallout. And, while we are doing all we can to alleviate the problems, they are more severe, and will last longer, than we had originally anticipated. Certainly the economic statistics in Hong Kong have not been good recently - the economy contracted by 2.8 per cent in the first quarter and unemployment has been edging higher. Our stock market - the second largest in Asia - continues its roller coaster ride. Interest rates are higher than we would like. Property prices have dropped by between 30 and 40 per cent, but this was a much-needed correction of an overheated economy which had developed over the previous two years.
It is not all bad news. The lower property prices and rents will help Hong Kong become more competitive. Inflation is at about 4 per cent - the lowest rate in 12 years - and looks like it will continue to drop. Imports from East Asia are cheaper. And our Hong Kong Dollar - which has been linked to the US Dollar since 1983 - has remained rock solid, even in the face of massive speculative attacks.
The financial turmoil also highlighted several areas in which Hong Kong is different from those countries which have required major economic restructuring. When the turmoil struck the region last year several economies with inherent structural weaknesses were the first to tumble. By structural weakness I mean a lack of transparency, a lack of regulation, a lack of fiscal prudence. The foundations on which their rapid success had been built were inadequate and flawed. As a result, the IMF was called in, not only to repair the storm damage, but to make sure that the economic foundations were strengthened enough to withstand any future tempest. That rebuilding exercise is continuing and, it is fair to say that has been progressing well for Thailand, Malaysia and South Korea. We are watching the situation in Japan and Indonesia closely and hope that we will soon see prompt and sweeping reforms from them.
When Hong Kong was hit by the turbulence, no one could really estimate its ferocity. We perhaps thought it would have a limited impact, or at the very worst, send a few squally showers our way. And, as I just mentioned, we are now feeling the full brunt of the storm. But - and here is the important difference - the fundamentals of our economic success have not been blown away, nor do they need rebuilding.
So what are these differences?
First and foremost, we have the rule of law, upheld by an independent judiciary. Businesses operating in Hong Kong know that our courts are fair and impartial. Everyone is equal in the eyes of the law.
This leads me to a second point - our level playing field. Everyone doing business in Hong Kong competes on an equal footing. No favours, no patronage for anyone.
We have a clean, corruption-free and politically-neutral civil service committed to integrity and honesty and backed up by our world-renowned Independent Commission Against Corruption.
Our financial markets are open, transparent and well regulated. Despite massive swings up and down, our stock market continues to operate normally and smoothly, as do our futures, foreign exchange and gold markets.
We have a fast, unfettered flow of information. Hong Kong is a regional communications hub and we like it that way. Hong Kong businessmen have more access to, and a wider selection of, information than probably any other businessmen in the world. You cannot make informed and sensible business decisions without the right information and there is no shortage of that in Hong Kong.
Another 'difference' for Hong Kong has been our tried and tested policy of limiting government spending to within the trend growth rate of GDP. Put simply, this means that we don't spend more than we earn. Over the years this has enabled us to build up sizeable fiscal reserves - about US$57 billion by the end of March 1998. And we have no fiscal debt. The result is that, even during times of an economic downturn, the government can still forge ahead with its plans to build more infrastructure and to improve education, housing, health care.
Let me give you an example. Last month, on July 6, we opened our new international airport. It marked the end of an eight-year infrastructure programme which cost about US$20 billion. Apart from the new airport we have new land for housing, new highways, a third cross-harbour tunnel, one of the world's longest suspension bridges and the first phase of a new town which will house 320,000 people by 2011.
Despite the economic setback, Hong Kong is now moving ahead with the next phase of its infrastructure programme. We plan to spend some US$30 billion over the next five years - that's 50 per cent more than on the new airport and related projects.
Our main thrust will be:
To expand our urban transport networks - new railway lines and new expressways and bridges;
To create new land for housing, commercial, infrastructure and recreational purposes; and
To build more homes to keep pace with our population growth and to improve the living standards of all in Hong Kong.
So these are the differences which set Hong Kong apart - and which will help us to be the first to recover from the current economic downturn.
We have the systems in place for the economy to continue to function smoothly; we have the will and the determination to build a better future for our citizens; and, we have the financial resources to push ahead with important infrastructure and social development programmes.
As I have indicated previously, Hong Kong is hurting at the moment and we are undergoing a period of significant economic adjustment. But we can and will emerge from this financial crisis leaner, stronger and more competitive than before.
If you have any doubts then I suggest you hop on a plane and come to see for yourself. And there's no excuse for not visiting - there is, after all, a direct flight from Istanbul to Hong Kong twice a week. I look forward to seeing you in Hong Kong, and I wish you all the best in your endeavours.
Thank you - "Tesekkur Ederim".
End/Monday, August 10, 1998
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