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The following is the full text of speech by the Chief Executive, Mr Tung Chee Hwa, at the opening dinner of the Business Week CEO Forum held at the Grand Hyatt Hotel this (Wednesday) evening: -

Mrs Fong, Mr Dowling, Mr Wong, Guests, Ladies and Gentlemen,

I am delighted to be here, at the Business Week CEO Forum, to be talking with you. I have been speaking a lot during the last 10 days or so, almost non-stop. And the objective of all the speeches I have made was about the Policy Speech. And tonight, obviously, is another opportunity for me to be doing the same thing. So for some of you who have heard this once or twice, please bear with me. I try to make it as short as possible and then I'll open myself to questions.

I think the theme of this Business Week Forum for CEO is a very appropriate one for Hong Kong and for me personally because the theme is about managing change, the theme is about meeting the needs of tomorrow. And this is in fact what we have been doing for the last two and half years: managing major changes. One of the changes is Hong Kong from being British colony to becoming part of China and the "One Country-Two Systems" under very high degree of autonomy. We have been very fortunate that two years and four months have gone by and one country-two systems, a concept which has never been practised anywhere, is now firmly being established here in Hong Kong. Things are moving well, as I have said repeatedly. Before 1997, there were people leaving Hong Kong because of the uncertainty of the future. But since then, there has been a massive flow the other way from Australia, Canada, etc., wanting to come back and participating in the building of our future together. In 1998, one of our most difficult years, citizens of Hong Kong were able to put together HK$110 billion approximately to purchase close to sixty thousand units of apartments. Both are records in Hong Kong. So, you can see that the people of Hong Kong voting with their feet over their wallet, expressing confidence in Hong Kong's future and the fact that "One Country-Two Systems" is here, is working, is moving ahead well.

And the other change we had to manage was really the effect of the financial turmoil which began so soon after the return of Hong Kong. We had a really tough time but I am pleased to say that the worst is now behind us. We expect the economy in the second half of this year will be growing by more than two per cent. Unemployment has now stabilized. We have really taken many, many measures over the last two and a half years whether it is in the form of tax concession, in the form of reduction of rates, or providing financial facility to medium and small size businesses, all with a view to help the economy going, to stimulate the economy. We also map our plan to spend HK$240 billion on infrastructure projects, roads and railways, schools, etc., basically aim not only to stimulate the economy which we believe it will, but also laying the good foundation for the future. So all these we have done and I am pleased to say that economy is now slowly, slowly but surely coming back. Of course, the gathering strength of other economies in Asia has also been very helpful to us and the fact that US is moving ahead, I was just saying early on I hope the 280 point drop yesterday of the Dow Jones was just a sort of, not the forefront of anything serious.

Hong Kong is moving ahead because everywhere else seems to be moving well. But throughout all these two and half years while we were managing all these changes, we've never lost sight of trying to meet the needs of tomorrow. What are our long-term needs? And we know what have been factors of success in the past do not actually guarantee security of our future. We need to be very careful in looking at what we are doing. In meeting needs of the future, the first thing you say is you look at what's around us. What are the changes around us? And we identify three major changes: one is globalization of economy, coupled with the revolution of the impact of the information technology that is now with us, is changing our way of life, is changing the way we conduct business, is changing competitiveness of various communities, and we are squarely faced with this and particularly in Hong Kong where we have a very open economy.

Secondly, of course, is the rapid open up of the Mainland economy and the improvement that many of the major cities in China, in terms of infrastructure, quality of their human resources as China opened up. Those are actually great improvements which pose a great challenge to us in Hong Kong because Hong Kong, in a way, was successful partly because of the fact that China was more closed. But now China is more open, the gap is narrowing. So where do we stand? How do we position ourselves? How can we compete? More importantly, how do we take advantage? China's economy is now the seventh largest in the world and in another twenty years or twenty-five years, it will probably rank number three or number two in the world. So how do we position ourselves? Tremendous opportunities are out there for us to participate in that economy. So on the one hand, the changes in Mainland China bring to us some anxiety; on the other hand, a lot of opportunities.

Thirdly, of course, finally the restructuring within Hong Kong. We had too high a cost structure. We become less competitive. How do we become more competitive? Our economy was too narrowly based. We need to broaden our economy base. So we are faced with these three very fundamental changes as we move into the 21st century. And we ask ourselves, "Where are we? How do we position ourselves? What should we be?" After two and a half years of really a lot of soul-searching, with a whole lot of people in this community, we came up and said to ourselves: we need to position Hong Kong as really a world city in Asia, with a status comparable to New York, as New York is for the Americas and as London is for Europe. And we felt that if Hong Kong can position ourselves in such a way, as the leading city for Asia, our future will be secure. If you look at New York and if you look at London, where are their strengths? What are they good at? You know they are international financial centres, both of them. They are centres for tourism, centres for innovation and technology, centres for creative media and art work. You can go through the list of things and then you come up with the conclusion that well, many of the things we have in Hong Kong too, so why can't we become a world leading city for Asia? We are already an international financial centre; we are already the favourite tourist destination in Asia with over 9 million tourist-visitors every year. So it goes on, and we recognise that in many of these areas of traditional strength, there is a lot of work to do. We need to strengthen these areas of strength. For instance, we now have 9 to 10 million tourists every year. What do we need to do? To double this number, say, in the next eight years or so. We are already an international financial centre of substantial size, probably next to Japan, the largest in Asia. What can we do to double, to triple the size in the 21st century or do even better than that? These are the areas where we need to consolidate and improve on. And we will and we know what we need to do. And then, the other thing we ask ourselves is what are our shortcomings. What are the really important things we need to do? There are actually quite a lot but two things stand out. One is about education, the other is about the environment in which we live.

Education is important. Hong Kong had a good education system but now we are faced with having to move into an economy which is knowledge-based, intensively knowledge-based. Is our education system going to meet the needs of the future? And the answer is no. We now have the Education Commission who is now looking at all these issues, wanting to make sure that in the shortest possible time, we will have an education system which surely meets the needs of tomorrow. And the other, of course, is the environment in which we live, is about the air, the water around us, the water we drink, about waste disposal. Generally about how we can really live a quality life in Hong Kong. It's about urban renewal, about protecting our heritage, the beautiful Victoria Harbour. All the things that need to be done, not only just to make all the six and half million people proud of Hong Kong, but also that we can retain the talents we are trying to educate and also we are trying to attract so that they can all live and work in Hong Kong. So, we have chosen these two themes as the work in which the government will be very much focused on during the course of next year and next few years, and this is not to say everything else is not important because they are also very very important too.

Hong Kong is truly blessed because we have a wonderful geography, not only right in the heart of Asia, but also with a tremendous hinderland whose economy is growing and is growing very well and will continue to grow very well. So we are actually very fortunate. We are very confident that with the concerted effort of all the people concerned, we will be able to achieve our objective and our vision of making Hong Kong a world leading city in Asia. Many of you here tonight coming to attend this Conference, I welcome you very much. I want you to know that as far as Hong Kong is concerned, we will continue to create an environment which is friendly to business because the government knows too well that it is the business which drives the economy forward, which can create jobs and eventually get our prosperity.

Before I sign off, I just want to mention one other aspect in which many of you might be interested. There have been a lot of articles written, including those written by journalist friends sitting at this table, about you know, Hong Kong's economic philosophy changed since July 1 1997. I would like to tell you what our philosophy has been and still is. You know, we have been successful for a long time because of our belief in the free market, our belief in letting market forces dictate the pace of the market. We continue to believe this very strongly. We do not wish to interfere at all. We will only interfere when the market is being distorted, or being monopolised. We believe in small government. We believe in prudent finance, and we believe in level playing field for everybody.

The government's major role is to provide infrastructure, both soft and hard infrastructure. Soft infrastructure means the environment, education, the friendliness for business, etc. Hard environment means the best airport in the world, efficient railway system, good road system, good telecommunication network, so that we can all get on what we need to do. And this has been and will continue to be our government's main responsibility. Of course, in moving forward, looking at the infrastructure, before any money is invested, and very often the governments has to invest this money, like building a new airport and what have you. The government has to take a strategic direction. Is this what we want to do? Is service centre the main thing for us? And therefore we need to build a Convention Centre, etc. Now these strategic direction decisions were only taken after having very carefully listened to the views of the private sector because, I must confess that we, as a government, are not anywhere as good as the private sector in looking at the future in these areas and we listen carefully to the views of the private sector and then take a decision: these are the areas; this is the direction we really need to go. So we do take strategic directions but only with the help, guidance and strong lead from the private sector. And this is how we move forward. Is there a difference with the past? I have discussed this with the Chief Secretary and the Financial Secretary many times because of all the reports that have been circulated in the press, and we all came away saying "no". There has been no major changes. The only change I can say is that because of the challenges that we faced in the past two and a half years, we probably have responded more effectively. We were more quick at our feet, getting things ready and getting things done. So ladies and gentlemen, I said to Nellie and my colleagues that I would speak only for five minutes. I am afraid I spoke too long already. For those who have heard this before, I again apologize. I'll be happy to answer any question. Thank you very much.

Photo:The Chief Executive, Mr Tung Chee Hwa, attended "The Third Annual Business Week CEO Forum" opening dinner hosted by the Better Hong Kong Foundation and Business Week Magazine at Grand Hyatt Hotel. Picture shows Mr Tung responding to a question from the floor after his opening remarks.

End/Wednesday, October 13, 1999

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