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Following is the transcript (English only) of a question-and-answer session given by the Chief Executive, Mr Tung Chee Hwa, following his opening remarks at the Hong Kong General Chamber of Commerce's Annual Business Summit this (Thursday) morning:

Question: Mr Tung, in your policy speech, you mentioned two key important elements, talent development and the environment. Is there any specific initiative that the Government is planning on developing the talent as a major competitive strength for Hong Kong?

Mr Tung: As I said in my policy speech we are already moving ahead in a number of areas. For instance, our concern is how we can make our primary and secondary education better to meet the new millennium. And one other thing we are doing is to ensure, for instance, primary schools will be full-day schools. I made this objective in my 1997 policy speech. And by now, today 35 percent of our primary schools are already full-day. Our target is that, if I remember correctly, by 2007 all primary schools will be full-day schools. We are improving the quality of our teachers to make sure that truly, students can get the best education. But the bulk of what we are going to do is being reviewed by the Government and also by the Education Commission. At this moment, the Education Commission is conducting a territory-wide consultation exercise to get all the stake holders of Hong Kong. Actually in education, all the six -and-half million people are stake holders to participate in the discussion as to what kind of education we would need for the university, for the primary school, for the secondary school, how would they all link up together. There has been criticism that our education system is too formal, too stiff, that we are not producing the creative brains we want, and too examination based. There are also arguments as whether there should be three-year university degrees or four-year university degrees. There are also arguments about the importance of life-long learning. So a whole lot of things is going on. The Education Commission is going to submit the report by June next year. Hopefully with the very wide support from the community at large, and then the Government would move ahead with whatever reform is being suggested, and we would move ahead as quickly as we can. But as you know, in education, the difficulty would be you move too fast, it could create more uncertainty. So you have to measure your pace very carefully. But the major reform proposal would have been tabled by June next year. It will be on that basis, we will move ahead.

Question: The Government is now going to review the Trade Marks Bill and to make the economy even more open. Now, as you mentioned, Hong Kong is an expensive place to do business and the economic recovery is still very fragile, aren't you afraid that by doing this, you are going to push or to make it difficult for companies operating locally in Hong Kong to remain competitive while facing parallel import from Malaysia, from Singapore, and the rest of the region?

Mr Tung: I think on many of these issues, it's always very difficult to find the right balance between consumer rights, between sometimes the need of protecting our local businesses especially in the downturn of the economy and our international obligations. All I can tell you is that, it's not an easy job and we try to do as best as we can. We do take all these into consideration when we ultimately make a decision.

Question: You mentioned that there is a string of loan growth in the banks ... for corporate and business. Do you think that there is a need for the Government to set up a policy bank to finance the SMEs, because all the banks are quite busy in handling the bad loans here in their portfolio?

Mr Tung: I think the banks here are also flooded with money and not knowing quite what to do. I hope I'm right. Let me say this on two fronts. Firstly, no, the Government has no intention to set up policy banks. We, as a Government, traditionally prefer to let the market mechanism operate, and setting up a policy bank in our very mature economy actually does not help economy to move forward. This is my view and the view very much shared by many members of the community. Insofar as SMEs are concerned, in the most difficult time last year, the Government made available two-and-a-half million dollars to help the SMEs. And in my policy speech recently, I have said that this amount, in the form of guarantee we provide, will be doubled by another two-and -a-half million dollars. So all this is now moving forward, we are moving forward in the help of SMEs. But what I see in the SMEs, they are a very important part in our community, but what I see in the SMEs is in a number of areas, one is that, I hope, trying to see whether there are bankers here, I hope, the banks in Hong Kong really need to change their culture a bit because our lending so far, the banks' lending so far, there is a banker there, the banks' lending so far is based on bricks and mortar, and we need to move away from bricks and mortar, try to be more business focused. That is my humble view. The second thing is that, SMEs really need a lot of help in many different areas - how to get more market information, how they can best manage the people and how to manage the finance and so on. In fact, in Hong Kong we have a number of organisations, such as TDC, Victor is sitting here, Hong Kong Productivity Council, Hong Kong Management Association, they offer a lot of courses to the SMEs to do these things. What I am a little bit worried is that the courses we provide may not totally meet the demand of the SMEs, whether in terms of cost or in term of the substance. And these are the areas where I think the Government needs to be working with some of the organisations here to ensure that provision of service to SMEs really meets their needs so that they can get on with what they need to do, because in my view, Hong Kong's SMEs are very nimble at their feet, and if we make some of these changes as we move forward, they will be able to help themselves. All this is now under review by the Government, so that we can decide how best to take the next step forward. Thank you all very much.

End/Thursday, December 2, 1999

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