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Following is the full text of the speech (English only) by the Financial Secretary, Mr Donald Tsang, at a dinner hosted by Global 2000 Co-ordinating Group tonight (Wednesday):

Mr Shepheard-Walwyn, Ladies and Gentlemen,

It gives me great pleasure to speak at this dinner gathering tonight, and share with you Hong Kong's experience in tackling the Y2K problem.

But first I would like to make a simple observation. I'm sure all of us here tonight would prefer this dinner to be taking place next January 21 rather than July 21 - by then all our worries about Y2K would be largely over! Which reminds me - with computers doing our thinking nowadays, all we need is a machine to do our worrying!

As a government, it is fair to say our business is to make sure the worries of the community are minimised. Unfortunately we don't have a machine to do this. The only way is to have all our systems Y2K compliant. And then to keep testing them to ensure they remain that way.

As we all know, the solution to the whole host of Y2K related problems has an immutable deadline, but the risks have been documented, assessed and are being remedied well before that date.

The problem is enormous because of the widespread use of computers and other date-sensitive-embedded systems in home and business operations and, in many cases, their close dependence on one another. Numerous variables are at work, often simultaneously, all adding to the complexity of the problem. The more developed our economy is, the more complex and burdensome will the remedial and preventive work become.

I am not surprised in the least, to hear that an international consulting firm has put the estimated total worldwide costs in preparing for the millennium transition at between 1 and 2 trillion US dollars. A cost overshadowed only by that of the Second World War.

Hong Kong is fully aware of the importance of the Y2K issue and the significant impact it may have. And I am pleased that the efforts made by Hong Kong as a whole have been duly recognised by the international community. I am delighted also that we are among the first few economies in the world to receive the highest ratings from the Global Group for the progress of Y2K compliance work. Perhaps we have learned our lessons of computer failures.

From what we have done so far to tackle the Y2K problem and what we plan to do in the remaining months of the year, I am confident that Hong Kong would be ready for the challenge and have a reasonably smooth sail through the millennium. The confidence that I have is not built on mere hollow statements but is well substantiated by facts and hard work by all quarters in the community.

I would not play down the important role of the Government in facilitating and co-ordinating initiatives to enhance the overall readiness of Hong Kong. Much of the credit, I would say, should go to our most responsible and self-motivating partners in the non-government sector. Most of them, I mean those from the financial services sector, are now in this room, ready to share with you their views and ideas on what is commonly regarded as the most important single problem in human history - for this millennium.

This afternoon, our industry leaders have outlined the progress of their Y2K compliance programme. My colleagues responsible for territory-wide co-ordination work have also unfolded before you our specific work ahead. I am not going to repeat them, but would just feel obliged to highlight here, in very brief terms, the overall readiness of the financial services sector, in my capacity as the Financial Secretary.

In March last year, we set up a steering committee to co-ordinate the efforts in tackling the Y2K problem in the banking, securities and futures, and insurance industries.

At the end of May this year, nearly all the banking institutions and members of the exchanges had completed rectification and testing of all their mission critical systems.

The interbank payment and clearing systems, and the trading, clearing and settlement systems in the securities and futures industry, are now all Y2K compliant. End-to-end testing between the interbank clearing house and its member banks was completed as early as last November.

The focus of work in the remaining months ahead will be on contingency planning and public expectation management. In both cases, we believe that individual institutions have the most important work to do, and that the Government's role is more of a facilitator or a co-ordinator.

Development of contingency plans in the financial services sector is now underway, at both institutional and sector-wide levels, to prevent, mitigate and contain possible disruptions caused by the Y2K problem. At the institutional level, we expect the plans to be completed and tested as far as possible before the end of next month.

To allow sufficient time for the financial institutions to complete their year-end transactions and data backup operations before the millennium date change, we have declared New Year's eve (December 31) an additional general holiday in Hong Kong. This is a proactive measure to enhance readiness and public confidence, and forms an important part of our Y2K contingency plans to prevent and mitigate disruptions.

In parallel, we are working closely with the financial regulators, the exchanges and the clearing houses to develop a Y2K contingency plan for the financial services sector as a whole. We aim to complete the plan and conduct specific rehearsals before early September.

This is a complex and extremely important exercise, given the nature of the problem, the large number of shared financial systems involved and the inter-dependency among them. We need to assess carefully the impact of a possible problem with one system on another, as well as the knock-on effects in socio-economic terms. We also need to co-ordinate contingency responses to deal with any specific problems that may arise.

We are now setting up a Y2K emergency co-ordination centre specifically for the financial service sector to co-ordinate information exchange during the millennium transition and other critical dates. We also expect the centre to play an important role in facilitating timely and effective responses when required.

The Y2K problem is not just a problem for individual financial institutions. The daily operation of a financial establishment relies to various degrees on the services and information provided by institutions in other sectors. For example, the dependency on public infrastructure services, such as electricity, telecommunications and water supply, is particularly strong.

So, at the community-wide level, we have set up an inter-departmental steering committee to ensure timely correction of any Y2K problem within government and non-government organisations which provide essential services to the public.

More than 99% of the government's mission critical systems are already Y2K compliant and have been since the end of last month. Essential services providers have either achieved compliance or are now in the very final stage of their programme.

With a little more than 160 days before the new millennium, the Y2K problem has the potential to develop into a confidence issue. As always, confidence is built on knowledge and transparency, which can be enhanced by the proper disclosure of information.

We are fully aware of the importance of putting in place an effective communications strategy. We shall continue to encourage information disclosure and sharing. This will enable the public to better understand the impact of Y2K, how they can prepare themselves for a smooth and orderly transition and why they can have a high level of confidence in what Hong Kong has done in this regard.

I cannot overemphasise the importance of co-operation of the international financial community in this. Today, we are conducting global transactions criss-crossing the planet at split-second speed.

The Global Group is playing an extremely constructive role in facilitating the readiness of the international financial markets to cope with these challenges. And, I would like to congratulate the group on its achievements so far, and look forward to more initiatives in the weeks and months to come.

For our part, we will continue to work in close partnership with the international community on this important issue. With the concerted effort of everyone at the global level, I am sure we will all be ready when the exciting moment comes.

Thank you.

Photo: The Financial Secretary, Mr Donald Tsang, speaking at a dinner of the Global 2000 Co-ordinating Group at a Hong Kong hotel.

End/Wednesday, July 21, 1999

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