Press Release

 

 

FS' luncheon speech at Stockholm

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Following is the full text of a keynote speech (English only) delivered by the Financial Secretary, Mr Donald Tsang, at a luncheon organised by the HKETO Brussels, Hong Kong Trade Development Council and Sweden-Hong Kong Society at Stockholm, Sweden today (Thursday):

Mr Gardo, Mr Cederschiold, ladies and gentlemen,

Thank you very much for your warm welcome. I am delighted to see so many business people here today.

It is my first visit to Sweden and I am pleased to say that, contrary to expectations, your spring is as pleasant and promising as one could wish for.

Expectation, of course, are all too often created on mis-understandings raised by poor communication.

What I wish to do is to state factually what has happened in Hong Kong recently and let you draw your own conclusions on our future.

As you know, Hong Kong returned to China's sovereignty on July First, 1997. Anyone encountering a large part of the news commentary might sometimes be forgiven for thinking that was the end of Hong Kong.

Much of this negative news emanated from a preconceived notion that Hong Kong was destined to fold once the British departed and China reclaimed it.

However, despite their best efforts to look for social and political ruptures, some 6,000 visiting journalists had to go home somewhat disappointed in early July 1997.

In many ways, the journalists left too soon after the Handover celebration in July 1997, because the real story of Hong Kong has unfolded in the months since then.

It is a fascinating story of achievement, of suffering, triumph over adversity and human development.

Of course, we have not been immune from the regional economic turmoil. It has been the most severe financial setback since World War Two.

It began when the Thai Baht fell on July Second, 1997, and progressed to engulf every major player in our region and globally for the next 20-odd months.

At first, no one realised how widely the impact would be felt when this happened in a relatively small part of the world economy.

We should all have learnt from the Asian financial crisis. However, it seems that many people have already forgotten about Long Term Credit Management's near disaster.

The world urgently needs to consider how to deal with global capital flows, but we have not done this.

This region may not have been affected much this time around. But you will remember 1991, when it was a different story with different victims.

Global problems require global solutions and we are really all in the same boat. As a sea-faring people, you will appreciate that when the vessel springs a bad leak, it must be all hands to the pump.

You cannot simply bail out at one end and hope to sail smoothly on while water pours in at the other.

This crisis was a watershed for Hong Kong. It shook us out of the complacency that developed in more than a decade of significant economic growth, increasing wages and escalating asset values.

We are now in the process of re-establishing our competitive edge and, compared with the problems of our neighbours, Hong Kong has fared well.

Financial turmoil aside, 1998 was a significant year for Hong Kong for several other reasons:

* We elected our first Legislative Council as a Special Administrative Region of China and saw a record turnout, despite some of the heaviest rains Hong Kong has ever recorded;

* We celebrated the first anniversary of our reunification with the Mainland after a virtually seamless transition in 1997.

* We opened a world class airport, which is acclaimed as one of the 10 most important engineering feats of the 20th Century.

* And we continued with business as usual, running Hong Kong under the unique concept of "one country, two systems".

Despite the sharp economic downturn, Hong Kong remains one of the most secure and stable cities in the world.

In 1997, our crime rate fell to its lowest in 24 years. Last year it stabilised at 1,076 cases per 100,000 of the population.

This was the second-lowest rate for 25 years and below that in most of the world's major metropolitan areas.

And this is in one of the world's most densely populated urban areas. Hong Kong's built-up areas house 27,000 people per square kilometre on average. In some areas it is over 50,000 people.

Overall, Hong Kong has about 5,900 people per square kilometre. By contrast, Sweden has 20, as The Economist newspaper measures it.

That density leads to the fact that Hong Kong has the world's most-crowed and most-used road network. This generates problems caused by vehicle exhaust emissions and that, in turn, provides opportunities for Swedish companies with their world-renowed expertise in providing environmental solutions.

Besides caring for the environment, the Hong Kong Government provides the full range of public services people reasonably expect in the late 20th Century.

We provide free and universal basic education for nine years and some 1.3 million students, almost 20 per cent of the total population, were in full-time education last year. The education budget takes up over 20 per cent of total public spending.

We also look after people's health. We were swift to act when a new form of 'flu was found in poultry in late 1997 and we had to put down more than one million chickens and ducks.

Influenza specialists of the World Health Organisation and the Centres for Disease Control and Prevention in Atlanta, USA, joined other world health experts in proclaiming that Hong Kong's action might well have prevented a global influenza pandemic.

Our people do remain in pretty good health. Hong Kong's life expectancy remains the second-highest in the world and the infant mortality rate last year was one of the world's lowest.

To give these people a better future, we are continuing to improve Hong Kong's infrastructure. Now that the airport is completed, we are embarking on an even more ambitious railway development programme.

Significant new infrastructure developments will further enhance our role as the pre-eminent gateway to the mainland of China and the communications and transport hub in the region.

One of these is the $1.7 billion US dollar Cyberport project, which will provide the essential infrastructure for the formation of a strategic cluster of information services companies, as well as a working and living environment of the highest standard.

Other facilities will include media laboratories, high-speed computers for computer graphics design, multi-media equipment and studio facilities for common use by the more than 100 small to medium sized companies which we expect to become tenants of the Cyberport.

So far, firms such as Oracle, Microsoft, and IBM have signed deals to set up in Cyberport - and there is room for more.

Planning is also well advanced for our Science Park project on a site bordering a beautiful harbour. This 22-hectare site will be developed over the next decade and a half and aims to attract technology-based firms and activities to Hong Kong.

Those who come will find that, after rejoining our motherland, Hong Kong retains its distinct identity. In its own right, the Hong Kong SAR is party to 168 international multilateral treaties including civil aviation, customs, the war on drugs, health and human rights.

We issue our own passports and 58 countries have granted visa-free entry to people holding them.

Thousands of Hong Kong people have returned from living abroad, bringing back a wider knowledge of the world. They and the expatriates living and working in the SAR contribute significantly to Hong Kong's sophisticated, cosmopolitan nature.

Indeed, the number of expatriates generally has risen steadily since the Handover. The number of US passport holders, for example, increased from 35,000 at the end of 1996 to 40,000 in February last year.

Over the same period, Canadians increased from 31,000 to 33,500 and Australians rose from 21,000 to 23,000.

Throughout the financial upheaval, and despite the recession, the Hong Kong SAR Government has maintained its traditional fiscal prudence.

Usually we produce a budget surplus. However, as a result of the economic downturn, we are budgeting for a deficit of $4.7 billion US dollars in 1999-2000.

Our reserves of more than $120 billion US dollars give us the financial means to help alleviate the pain of adjustment for individuals and business. We have firm plans to restore budgetary balance by 2001.

Our banking industry and regulations are the best in Asia, fully comparable to the best in Western Europe or the USA.

Our open, free economy has retained the Heritage Foundation's top world ranking for the fifth year running.

In December last year, the World Trade Organisation acclaimed Hong Kong as an outstanding practitioner of free trade principles.

The Cato Institute of the US also ranked us as the world's freest economy.

This has lately been qualified, unfortunately, by our incursion into the stock market last year - for which I am personally responsible. However, we believe that our commitment to free markets should not be judged on a single, extraordinary event during an exceptional and destabilising attack on our currency and stock markets.

During August 1998, in an unprecedented volatile external environment, we found clear evidence of speculators deploying a double-play strategy. There were strong signs that the markets were beginning to fail and local confidence was in jeopardy.

To ensure the stability and integrity of the financial markets and to end the manipulation that threatened to destroy our economy, the government invested the equivalent of nearly 125 billion Krona in quality shares of Hang Seng Index constituent stocks.

We explained our actions day by day and in October we set up the Exchange Fund Investment Limited (EFIL) to manage the portfolio we acquired.

This is entirely at arm's length from the Government with a Board of Directors comprising mainly non-officials.

It has appointed three independent advisers, all reputable international finance houses, to assist it with this task.

EFIL safeguards the government's interests and rights in the shareholdings, and identifies value-added opportunities for disposing of the shares with minimum disruption of the market.

As it happens, that portfolio is now worth more about 190 billion Krona - on paper.

In other aspects of Hong Kong life, politics remain as active as ever. From the day of the Handover to March 31 this year, Hong Kong people held 2,433 public marches and meetings. That is an average of 3.8 events every day when various groups of people freely express their views.

These activities are conducted with a civility that is unusual world-wide, and unique in Asia. It reflects a uniquely tolerant government and a self-confident population.

Our news media remain as free as ever - and always willing to attack the Government. A recent World Bank survey reported that Hong Kong has the world's most intense competition among newspapers, with an average of 739 newspapers distributed daily among every 1,000 people. In the United States and Britain, the figures were 215 and 332.

Our world-class communications facilities have encouraged international news agencies, newspapers with international readership and overseas broadcasting corporations have established regional headquarters or representative offices in Hong Kong.

The same World Bank survey said Hong Kong people are the third most frequent users of mobile telephones, after Norway and Sweden.

In January this year, the market for many services and circuits was opened to general competition and further liberalisation will be implemented next January.

We are also opening up the television industry further and have instituted a transparent and open regulatory regime to protect operators and consumers.

Even during the difficult times we have seen, Hong Kong continued to open up its markets, encouraging more competition in the area of international telecoms and transport services.

There is plenty of potential for growth in many areas during the first decade of the new century. China's markets are continuing to open up and reform. They will need investment capital - and most investors will find that Hong Kong continues to provide the most effective and efficient entry to China.

Hong Kong aims to implement a three-pronged reform of its securities and futures market upgrading market infrastructure, regulatory reform and demutualisation and merger of the exchanges and clearing houses.

Along with much of the world, our stock market has recently seen greatly increased activity. But even before the stock market investors returned, canny traders were already packing Hong Kong Trade Fairs, putting numbers back more or less to where they were two years ago.

I opened one recently and was, frankly, delighted at the attendance and the confidence displayed. On reflection, I should not have been so surprised. Hong Kong has always been resilient and the latest moves just indicate the depth of that characteristic.

There you are: without embellishment, I have given you the facts on Hong Kong. Better still, come to Hong Kong and experience it for yourself.

Thank you.

End/Thursday, May 6, 1999

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