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Following is the speech delivered by the Chief Executive, Mr Tung Chee Hwa, at the dinner hosted by the Heritage Foundation and the Asian Wall Street Journal this (Tuesday) evening:

Dr Feulner, Mr Henninger, ladies and gentlemen,

Believe me, this is one speech I will never get tired of delivering.

But first of all, let me, on behalf of my colleagues in the Special Administrative Region Government, extend a very warm welcome to the Heritage Foundation and the Wall Street Journal. We are truly among friends because there is so much we share in the ideas and values and the spirit of freedom and enterprise that epitomise the philosophy of the Heritage Foundation and the Wall Street Journal. We are particularly delighted today to hear that the Heritage Foundation/Wall Street Journal has published its "2000 Index of Economic Freedom" and named Hong Kong as the world's freest economy - for the sixth straight year.

It is quite an auspicious moment for Hong Kong. After experiencing a period of nearly two years of exceptionally difficult period, we have weathered the storm of the Asian financial crisis. Following a 0.7% growth in GDP in the second quarter of this year, the first positive figure since the final quarter of 1997, preliminary figures released last week show a robust 4.5% GDP growth in the third quarter, a pleasant surprise to almost all economic forecasters and analysts, including ourselves. The growth was driven by a significant upturn in exports of goods and the accelerated growth in exports of services, as well as a revival of the tourism sector and the picking up of local consumer spending. All these are signs of a general recovery in the region, a key factor needed to sustain our economic revival.

Hong Kong's place on this Index of Economic Freedom is based on our performance over the past year. We appreciate the honour you have done us, and I guarantee you that we won't stop here. This is not a matter of prestige alone, and Hong Kong is certainly very proud of having the title, but we consider it the cornerstone that will guarantee our continued economic success and competitiveness in the next millennium. This underlines our economic philosophy.

As I said in my last Policy Address, and I want to repeat it here. Hong Kong's remarkable economic success over the past few decades owes a great deal to our free and market-oriented economy with fair competition. The Government is committed to building the foundation for the healthy development of the market according to sound economic principles. It is only when the market mechanism is not working properly that the Government steps in and exercises necessary and limited intervention. Since its inception, the SAR Government has carried on the tradition of fiscal prudence and small government. All the Government's economic endeavours are infrastructure related. Infrastructure can be divided into two major categories: software and hardware. The former includes the framework for education, environment, rule of law, regulation of specific markets, etc., whereas the latter includes public facilities for air, sea and land transportation, tourism, communications, information technology, as well as scientific research, etc. All our strategic initiatives are market-oriented and designed to support the development of the private sector. Of course, in the face of rapid changes and fierce competition, the SAR Government ought to, and in fact does, respond more quickly on the economic front than before. Yet the guiding principles and the nature of our work have not changed.

The logic is simple. We need to have efficient roads so that people can move freely. Similarly, we must have a sound financial infrastructure, effective and even-handed regulatory regimes, and world class airport, port, and tourism facilities etc. so that companies and entrepreneurs can carry out their economic activities freely.

This is the task for the government and it is what makes an economy sound and competitive. Right across East Asia and the wider region, economies are recovering from the financial turmoil. To stay competitive, we must continue to build on our strengths and improve our weaknesses. We cannot be complacent. We know where we need to do more.

As we move into the next century we are providing the infrastructure that we will need for the information age and the knowledge-intensive economy, ranging from fibre optics for the Internet and a Cyberport to provide a basic infrastructure for anchoring the leading software and IT companies and start-ups.

But hardware is not enough, we need equally good software to drive the hardware. We mean people and talents. To produce the knowledge workers needed for the knowledge-based economy, we need to reform our education. We have been undertaking a series of initiatives to promote information technology in education, upgrade the quality of teachers, improve language ability, encourage the pursuit of excellence in university education and, most important of all, promote the concept of life-long learning. To galvanise the support of the community, we are undertaking an extensive public consultation exercise on how best to further improve our education system and the results, which will form the basis and consensus for more fundamental reforms, will be available shortly.

The environment is another area which we will all agree that we need to do more. In my Policy Address this year I have announced a package of measures to tackle the pollution problem. We have set aside a significant amount of resources to deal with emission from diesel vehicles, the main culprit of air pollution in Hong Kong. We will carry out a detailed review of the progress of the Strategic Sewage Disposal Scheme to ensure we have the most effective means to handle the significant volume of sewage we generate everyday. We are actively studying the latest and environmentally friendly technology to deal with solid waste. Furthermore, we have signed a six-point agreement with the Guangdong authorities to undertake joint effort to improve the environment of the Pearl River Delta as a whole. We do all these because our goal is to have not only the freest economy, but also a clean and healthy environment where our talented and enterprising citizens can thrive and prosper. I hope you will all share our commitment and give us continued support.

It seems that good news comes in quick succession. The Heritage Foundation is bestowing on Hong Kong today the honour of being the freest economy. The International Monetary Fund has also issued today its Article IV Consultation report on Hong Kong. The IMF has concluded that Hong Kong is "one of the most transparent, well-governed and least interventionist places to do business".

In closing, may I thank the Heritage Foundation and Wall Street Journal again - and compliment you on your choice. It is an honour we truly value.

Thank you.

Photo:The Chief Executive, Mr Tung Chee Hwa, received the 2000 Index of Economic Freedom from Mr Edwin Feulner, President of the Heritage Foundation.

End/Tuesday, November 30, 1999

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