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Following is the speech by the Chief Executive, Mr Tung Chee Hwa, today (Thursday) at the opening ceremony of a seminar on "HK's Economic Future - Working Together to Create the World City of Asia", organised by the Business and Professional Federation:

Vincent, guests, ladies and gentlemen,

First of all, I would like very much to congratulate BPF for publishing the study entitled "Hong Kong's Economic Future - Working Together to Create the World City of Asia" and for organising the seminar. If you read very carefully the report, you'll wonder whether actually the BPF wrote my policy speech.

But, in my policy speech last week, I did emphasise the importance of positioning Hong Kong in the 21st century, not only becoming one of the most important cities of China, but also becoming a world city, or the world city of Asia. The publication and today's seminar offer an opportunity for business and professional sectors of our community to examine and debate this important issue, and help to create a shared vision for the whole community. Since 1 July 1997, as a government and as a community, we have to overcome two enormous challenges. We were able to fully overcome the uncertainty caused by the concept which has never been practised before anywhere in the world or in history, the "one country, two systems" concept. And over the two-and-a-half years, thanks to the effort of the community as a whole, and the trust given to us by the Central Government, we have now successfully implemented the "one country, two systems" concept and turned it into a reality.

We also had to overcome the enormous challenge imposed on us by the Asian financial turmoil. After two years four months of very hard work, sometimes very difficult decisions having to be made, I think our economy has turned the corner. Unemployment has stabilised, and our economy is expected to grow by more than two per cent in the second half of this year. Indeed, we have to take many short term measures to alleviate the pain that was brought about by the financial turmoil and the economic adjustment that followed. We provided tax concessions, reduction of rates, freezing of charges, close to $40 billion. It is an enormous reduction. We also provided a short term capital in the form of guarantees to medium and small businesses. Whatever could be done, the Government tried to do. Even more importantly, we decided to invest $240 billion Hong Kong dollars over the next five years in rails, roads, in all the fundamental infrastructure projects which are so important for us to develop into a world city in the 21st century. So while we worked very hard to alleviate short term pains to get the economy going again, we were also there, planning for the long term -- thinking about the long term investment in infrastructure. And as a result of all these activities, the economy has turned around. Of course, that alone was not enough. Economies in this region are moving ahead.

Perhaps one of the most difficult decisions we had to take was in last August when we had to intervene in the marketplace to protect the integrity of our financial system. We were wrongly criticised at that time, but I think most of you would agree and, indeed most around the world now agree that what we did had to be done. It was a right thing to do and it created the environment for the stability to emerge.

As I said, while we go about tackling the short term problems, we, as a government, never lose sight of the need of long term planning because we realise there are many changes that are around us, and we have to plan for the future.

There are three changes that are very startling out there. One, of course, is the change -- the rapid change within China itself. China is already the seventh largest economy in the world and in 20 to 25 years' time, it will become a much bigger economy. The cities in China are improving very rapidly. The quality of the people in many of these cities are really very impressive. And as the gap between Hong Kong and many cities in China narrows, what is our role in all this? What would these changes bring to Hong Kong? What are the challenges that we have to face? On the other hand, because of the momentous change in China - the growth in the economy - there are so many opportunities for Hong Kong business to get involved in China. So we have to face that challenge. If you look back in the 60's, Hong Kong became a very important labour intensive manufacturing centre. Migration from China - capital that came with it - created this opportunity. And in the 80's, it was the service sector that drove Hong Kong forward as we moved our factories across the border. But what will happen in the 21st century? What is our relationship with the mainland of China from an economic point of view?

The second change is a change brought about by the rapid globalisation of the economy spurred upon by the information technology - the revolution of information technology - and how as a community - a very open economic community, how do we deal with this particular challenge?

And the third, of course, is the change that's brought about within Hong Kong as a result of the necessary economic adjustment that's now taking place. We need to make Hong Kong a lot more competitive than what we have been and how do we go about with that?

So faced with all these challenges, we say to ourselves, what are we going to do as Hong Kong in the 21st century? Where are we going? Because one thing I am sure, past success does not guarantee future economic security and we really need to look at all these things as we move forward. As an administration under the advice by the Commission on Strategic Development, we conclude that the most important thing for us to do is to reposition Hong Kong. Reposition Hong Kong as what? As a leading city or as a world city of Asia.

Now, there are many who question why do we need a vision, and I have heard criticisms from various quarters. There are some who say we did very well before without wasting time and energy on a vision. Why do we need a vision? The Government should leave business to get on with business because business knows best. On the other hand, there are others who say the government is too passive. You're only reacting to crisis. The Government needs to demonstrate visionary leadership. To those who suggest foresight and vision into the long term future, they have all our full support.

Let me emphasise that the Government believes strongly in the market force, and the Government is not good in making business decisions. But on the other hand, the Government does have the responsibility to provide the necessary infrastructure, whether it's soft or hard infrastructure, to enable the community, particularly the business community, to get on with what needs to be done. But when we take these infrastructure decisions, whether it's investing in schools, whether it's investing in an airport, we must take some strategic views as to where we are going to be in five years, 10 years, 15 years, 20 years from now. We can't take these decisions in a vacuum as a government. So what we do is not taking these decisions in a vacuum. We listen very carefully the views of a community, from different sectors of the community, particularly the private sector business community. And having listened very carefully to these views, then we form a view - a strategic view - as to where we need to be going. And based on that, we then move forward in our soft and hard infrastructure development. So I can assure you that we believe strongly in market forces. The Government does have a responsibility to create a vision which the community as a whole must share, but in doing this we listen very carefully to the views of the community as a whole and decisions are taken very much after having listened to the private sector views.

Today, in fact, increasing globalisation of the world economy has led to rapid economic and social changes. Capital, facilitated by modern technology, flows rapidly from one economy to another. Raw materials are shipped to places where processing is most cost effective. Information technology has fundamentally changed the way we do business and competition in the world markets is extremely fierce. There's a mismatch of demand and supply of skills while unemployment rates stay high in many economies. Knowledged workers are in short supply. Economic disparity has led to social deprivation that in turn affects social cohesion. The population is ageing and the quality of our environment is deteriorating. In this light, we need to anticipate and manage these changes. We need to have a foresight. In order to do so, we should, while attending to the short term measures, look ahead, identify our goal, identify the threats and opportunities, and map out robust strategies to meet the challenges. A long term vision for Hong Kong would, therefore, set out our long term aspirations, provide policy guidance, set priorities, ensure consistency and facilitate the adoption of co-ordinated approach within the Government. It also offers a basis for sharing a common goal among the Government, private sector and the community as a whole; each holding different roles but all are equally important in realising the common goal. The ultimate objective of our long term vision is sustainable development, that is, to improve the economic prosperity and the quality of life in Hong Kong without compromising the resources and the need of our future generations.

I want to emphasise again that to be forward looking does not mean to become interventionist or to change to a planned economy, as some have criticised. The Government firmly believes in free trade, free market, fiscal prudence and small government. The Government is committed to building the foundation for the healthy development of the market according to sound economic principles. Our remarkable economic success over the past few decades owe a great deal to our adherence to a free and market-oriented economy with fair competition. The Government will only step in and exercise necessary and limited intervention when the market mechanism is not working properly. We will continue to provide a pro-business environment, underpinned by the rule of law, the clean and effective administration, and a level-playing field. The Government's role is to provide the basic infrastructure, and I repeat, it's only to provide the basic infrastructure and appropriate regulatory framework for the market to operate efficiently. It acts as a catalyst and plays a facilitating and supporting role to the private sector in their entrepreneurial pursuits. Business decisions remain strictly the prerogative of the business sector.

In developing our long term vision of becoming the most cosmopolitan city of Asia as well as a major city within China, we have benchmarked Hong Kong with world cities like New York and London, and our findings are quite simple. Both New York and London are financial centres. They are centres for tourism, homes for multi-national headquarters, international communication and transportation hubs, news and information centres and centres for creative and cultural activities. For the Asian time zone, a similar dominant city has yet to emerge. We believe Hong Kong has the potential to fill this vacuum. This is not just that we want to have a fancy title as a world city of Asia, but being a world city of Asia, you can see the many activities do create value in the economy and therefore bring about much greater economic benefit to the community as a whole. Many of the activities that New York and London today have, we already have in Hong Kong. What we need to be sure is to continue to work very hard to strengthen our role as an international financial centre, a centre for tourism, a transportation hub, a telecommunication hub, and we will, as a government, continue to do that. And one other enormous advantage we have is a very unique relationship of Hong Kong with the Mainland of China. As the Chinese economy continues to expand, I believe it will give Hong Kong business enormous opportunities over the next 25 years to participate more fully in this economy. This is an advantage few around the world has.

It is true, for Hong Kong has already been recognised as one of the world cities, but clearly there are areas we are far behind; far behind compared with New York, London and some of the other cities in Asia, and these are the areas we really need to improve on. These areas include the quality of human resources, quality of environment and the application of technology. And this is not to say we are not doing a sufficiently good job today. But given the need for a very intensive knowledge-based economy, we have to ask ourselves what we are doing today, is it sufficient? Eighteen per cent of our students have already gone into universities, six per cent have actually gone overseas to universities; another six per cent have received post-secondary education, and 30 per cent have received either university or post-secondary education. The question is: is this number enough? Should there not be 45 per cent, 50 per cent, 60 per cent, 70 percent? Bill Clinton recently said it should really be 90 per cent. Where are we? These are the issues we really need to examine.

And as far as the environment is concerned, it is about the air we breathe, about the water we drink, about the water we swim in. It's also about waste disposal. And clearly, we have major challenges, but I have very carefully examined all aspects of environmental protection and felt that it is entirely realistic if we all pull together for Hong Kong to achieve, for instance, the same air quality as New York or London by the year 2005. But we must all work together and put aside individual differences and self-interest, and work together to achieve this. Because only if we can do all these things - create a city whose living environment we can all be very proud of - we can then become a real world city of Asia, and our economy then will continue to be prosperous and sustainable.

To achieve this vision, therefore, we really need the help of everyone in Hong Kong - all the public institutions, the quasi-government organisations, business sectors and individuals - and this is why I attach so much importance to this seminar today, because you are the leaders of our community and I would hope that through the exchange of views and the work you do today, you can really help the community to move forward with a common purpose.

The BPF was formed in 1992 and from the very beginning of BPF's work, I have taken a very keen personal interest. BPF contributed greatly in the run-up to 1997; studied about the future of Hong Kong from an economic point of view. It also contributed in many different aspects, politically, to the stability of Hong Kong during those very difficult years. And subsequent to 1 July 1997, BPF continued to do excellent work in Hong Kong, and all I can say, Vincent, to you and many of your colleagues sitting in the front, well done, keep it up, and Hong Kong needs organisations like you to move the whole community forward. Thank you very much indeed.

Photo:The Chief Executive, Mr Tung Chee Hwa, attended the opening ceremony of the "Hong Kong's Economic Future" seminar organised by the Business and Professional Federation at Hong Kong Convention and Exhibition Centre. Picture shows Mr Tung addressing the seminar.

End/Thursday, October 14, 1999

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