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Following is the full text of the speech by the Chief Secretary for Administration, Mrs Anson Chan, on "An Overview of Hong Kong's Outlook and Opportunities" at the Pensions 2000 Conference this (Monday) morning:

Mr Schaefer, ladies and gentlemen,

Thank you, Mr Schaefer, for that very kind introduction. I know that your delegation is now on the last leg of an intensive 11-day, 3-city swing under the banner of Access to Asia, so I would like to begin on a positive note by carrying out one very pleasant duty and making two observations.

Firstly, let me say that it is a real pleasure for me today on behalf of the Special Administrative Region Government of Hong Kong to welcome Pensions 2000 back to Hong Kong. I know it is your third visit in six years, and just a few days short of 4 years since your last conference was held here. Of course, a great deal has happened to us since then, but more about that later.

Secondly, I would like to commend you on your timing. It seems to me that this is precisely the right moment for serious international investors to be testing the waters in Asia. I hope you have found them to be at an increasingly inviting temperature.

We have over the last year and a half gone through a period of unprecedented economic and financial turbulence in Asia. It has caused deep and widespread economic contraction and personal loss. But I believe it has also had a cathartic effect in bringing about recognition of some serious structural problems and an admirable and typically pragmatic Asian resolution to tackle them.

Despite an inherent wariness about making economic forecasts and political predictions, I think it is safe enough to say that there are signs of a return to better days here and in the region as a whole.

We in Hong Kong have not escaped the pain and are dealing with our first recession since we started compiling the relevant GDP data some 37 years ago. But we have seized this historical moment of crisis as an opportunity to gear up for a more broadly-based and sustainable economic growth in the future and for a better quality of life here for our community.

Thirdly, let me say that I think you have made a very wise choice in wrapping up your regional visit in Hong Kong. If, as your conference title so presciently suggests, you are looking for Access to Asia, then this is the place to be. We are the living embodiment of Conrad Hilton's dictum about location, location, location.

We are five and a half hours flying time from half of the world's population. If you look at the Pacific Rim, and imagine it as a giant wheel, then Hong Kong is the hub from which the spokes of access and opportunity in the region naturally emanate.

We are on the doorstep of China and are a dynamic part of that great country, with a unique cultural and constitutional access to its ever-burgeoning markets. More about that later from the distinguished speakers you have lined up in the morning session to address the subject of Asia and the Global Economy.

However, I would like to touch on one China-related issue against the background of that special relationship I have just referred to. The economies of Hong Kong and the Mainland, especially that of the dynamic Southern China region, have become increasingly intertwined since Deng Xiaoping launched his visionary open door policy 21 years ago. To a large extent we have become the services and marketing centre for Southern China. Hong Kong owed or managed enterprises employ 5 million people in the neighbouring Guangdong Province. More than half of the foreign investment into China comes from or through Hong Kong. The Mainland is the second largest investor in the SAR. It's a mutually rewarding symbiotic relationship which has been broadened and deepened by the Reunification.

Premier Zhu Rongji's visit to the US has increased the likelihood of a further opening up of the Mainland market now that China's WTO entry seems to be all that much closer. As a major nation, China's accession to the WTO would enhance the universality of the multilateral trading system. We very strongly support the early accession of the Mainland to the WTO. In our view, China's membership will provide all WTO members with better market access, improved transparency and predictability of trade policies and measures, and a means to settle disputes multilaterally.

Since the Mainland is our No. 1 trading partner, the HKSAR too has much to gain from China's accession. We very much want to see China successfully assuming its rightful role in the world trading system.

We strongly believe that market liberalisation will bring about more business and trade opportunities. With Hong Kong's proximity to the Mainland market, our unrivalled knowledge and experience of the Mainland market gained through years of established business presence in the Mainland, our historical and cultural ties, our world-class business and financial services and excellent infrastructure, Hong Kong will have even more opportunities to play out its gateway and middleman role. It will also enhance our direct involvement in the economic development of the Mainland as more sectors are open to foreign participation. We are preparing ourselves for the challenges and opportunities ahead.

Hong Kong's political transition, that is becoming once again a part of China albeit with a high degree of autonomy, has worked beyond most expectation. All the fears and concerns some people had prior to the Handover have proved in the event to be totally unwarranted.

The Beijing leadership has been scrupulous in honouring its obligations under the "One Country, Two Systems" formula which grants to Hong Kong a high degree of autonomy in running its own affairs, except for foreign affairs and defense. As one who was intimately involved in this extraordinary diplomatic and political exercise, I can assure you that Hong Kong is being run by Hong Kong people, without interference or direction from Beijing.

Beijing has offered us a large measure of support, in particular during difficult episodes such as the predatory attacks on our currency last year, although they have left the handling of these and other matters entirely in our hands.

Hong Kong remains a free society under the rule of law with all the freedoms you will find in any pluralist, civil society. We have a clean administration and an executive-led government accountable to a fully-elected and vigorous legislature. All of us come under minute and occasionally unforgiving scrutiny by the freest press in Asia. People are free to protest, and they do so often in large but mostly orderly numbers.

We practice a diversity of religions without let or hindrance; our trade unions are active; we have the full panoply of NGOs and ginger groups. In short, we are the same energetic, entrepreneurial, hard working, and argumentative society that we were before the transition.

These freedoms are the underpinning, the software if you like, of the world's freest economy. As an administration, we have always believed in minimal government interference in the economy. We still do. We believe that businessmen and women, not bureaucrats, are best placed to take business decisions. But we provide maximum support in terms of the physical infrastructure and human resources required to enable the free market to flourish.

Three good examples : the new award-winning airport at which you arrived yesterday; a significant US$30 billion development programme over the next 5 years which includes a strategic upgrading of our road and rail systems; and reform and refocussing of our education system which takes the lion's share of our annual budget expenditure.

We maintain a low and simple tax regime. Salaries tax is capped at 15%, corporate tax at 16%. We have no sales tax, no capital gains tax, no withholding tax on dividends or interest. Hong Kong has no restrictions on foreign investment or foreign capital flows in or out of Hong Kong and virtually none on foreign ownership. We run our finances in a prudent manner, keeping government expenditure in line with the trend growth rate of the economy over time. We continue to operate a level playing field for business.

We have massive foreign exchange and fiscal reserves and monetary stability and certainty guaranteed by the link of our Hong Kong Dollar to the US Dollar.

I know that you will be hearing more about the economy and our recent Budget measures from the Financial Secretary later, and I really don't want to do any more than set the scene. Donald Tsang and other speakers will tell you in some detail how we are maximising the opportunities arising from the downturn we have suffered as a result of the Asian financial turmoil. We are embarking on reforms in the securities and banking sectors. We have some exciting plans to reinvigorate the tourism industry; further privatisation including the sale to the public of a substantial minority stake of our Mass Transit Railway Corporation; and most importantly from a medium and long-term perspective, our determination to provide the infrastructure to ensure that we can compete, and compete vigorously as a knowledge-based society in the global economy.

Our vision is clear: we aim to turn Hong Kong into a centre of innovation and technology for Southern China and beyond. To guide us towards this goal we have established a Commission on Innovation and Technology tasked with finding the sharpest technological cutting edge which can be applied to our industrial and services processes. We are building a teleport to take advantage of the increasing use of satellite. We are developing Hong Kong as an Internet hub - we already have 130 providers.

And, as you will hear later from Richard Li, we are negotiating a joint venture with his company to develop a cyberport to house a strategic cluster of major international and local information services companies to specialise in the development of services and multi-media content to support businesses and industries ranging from financial services, trading, advertising, entertainment and communications.

This is but a snapshot of a whole range of exciting and challenging developments. And does it all mean that we have somehow walked away from our non-interventionist policies and suddenly become more Singaporean, as the Financial Times recently remarked? Most certainly not. It simply means that we don't intend to miss the information wave. Our role is no more than a recognition that firstly on the eve of the Millennium the provision of infrastructure extends well beyond airports, railways, roads, tunnels and bridges and drainage; and secondly we as a government need to act quickly in response to imaginative private sector initiatives which will pay real dividends for the community as a whole.

Further, we are taking the opportunity to bring about reforms in the civil service to make it more client-friendly, strategically-oriented and with more flexible employment arrangements designed to provide the community with better value for money.

We have also taken a sharper focus on quality of life issues. We accept that parts of the environment have deteriorated, despite large expenditure and policy initiatives to tackle some of the worst problems.

The dynamic that drives Hong Kong is its people, but in a tiny place like this that in itself generates unique environmental pressures as well as unique economic vitality. Let me explain. In our central city area we have population densities of 50,000 people per square kilometre. Manhattan has 9,000. And our annual population growth of 150,000 is enough to add another Wan Chai - or about one fifth of Manhattan Island - each year.

Population has gone up 10-fold since the war; the area of forest cover has increased 20-fold; 40% of our land is protected country park; we are planting half a million trees a year. Hong Kong is verdant as well as vertical.

But our community expects more. I accept that we will all need to become much greener if we are to bring about the kind of improvements that we all want to see. There is a commitment, from the Chief Executive downwards, to see that this happens. We all realise that if we are to retain our large and influential international community in Hong Kong, and continue to attract the best brains and skills from overseas, then we will need to offer a lifestyle that promises not just commercial stimulation and ample reward for hard work and enterprise but a pleasant and enjoyable living environment as well.

This is perhaps a good point at which to remind you about Hong Kong's international attributes. Firstly, our history and the externally-oriented, trade-based nature of our economy means that we are perfectly at home with the rest of the world and at ease with people from all parts of the globe. There are more foreign nationals here now than there were before the transition. More Americans, for example: 40,000 today compared with 36,000 prior to 1 July 1997.

We are a very cosmopolitan Administration. Our government today is virtually identical to the one which was in place prior to the Handover, save for own first home-grown Chief Executive and a local Secretary for Justice who replaced the British-born Attorney General who held the post until the reversion of sovereignty.

There are still 800 expatriates in senior positions in the government. English remains the working language of the civil service and the courts. About one fifth of the government departments are still run by expatriate civil servants.

As a free society, this is a place where the international community feels at home. There is daily access to all of the world's great newspapers. Over your breakfast table every morning, you can read the Financial Times, USA Today, the International Herald Tribune or the Asian edition of the Wall Street Journal - all of which are published in Hong Kong. So is Newsweek. You can watch Dan Rather in the morning, David Letterman at night, tune into CNN around the clock and watch Friends or the Simpsons in between. I am not sure whether that is a plus or minus but it is nice to know it is there.

The Hong Kong government welcomes the international community with open arms. We are a part of China, a very special part of China, but we are above all a world city with an international outlook. The government stays close to the international community in many ways. One of our most important group of advisers is the Chief Executive's Council of International Advisers. It has on it people like Jack Welch, Maurice Greenberg, Paul Volcker and Rupert Murdoch. They give us their counsel on our policies and strategic global economic issues.

Another is our International Business Committee set up in 1989, which I chair. This group addresses in a very frank but constructive way issues of concern to them and the community at large. All the foreign chambers of commerce are represented on it. The American Chamber of Commerce here is the biggest outside of the United States and has always been a force in shaping business opinion and influencing government policy.

We work with the international community in practical ways, too. For example, we provide land so that they can build their own schools. There are American, Australian, British, French, Swiss-German, Japanese, Korean and Singaporean international schools here. Even the Norwegians have their own school. The Basic Law, our constitution, allows for a quarter of the seats in our legislature to be filled by foreign nationals.

Ladies and gentlemen, I apologise if I have spoken at some length. I know you have a very busy agenda. But I wanted to stress to this audience that the Hong Kong that has played such an important role as the conduit for trade and business in this region for so long continues to do so, and will continue to do so.

We have been buffeted by the financial storms which have hit the region. But the deeply rooted fundamentals of our free market economy, well-regulated and prudently-managed banking and financial services sectors, currency stability, clean and accountable government, the rule of law and a robustly independent judiciary have proved to be rock-solid foundations.

They have helped us to weather the storm in better shape than might otherwise have been the case. The Asian crisis has also provided us with an opportunity to fill some of our gaps and flesh out our vision for a bright and secure future into the new millennium.

As a public servant it would be quite wrong of me to offer any specific investment tips to anyone, least of all to a group like this. But I think it is perfectly proper for me to recommend to you in very broad terms that if you are looking at Asian futures, put Hong Kong down as a buy.

Thank you very much.

END/Monday, April 19, 1999

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