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Following is the transcript of a question-and-answer session given by the Chief Secretary for Administration, Mrs Anson Chan, after delivering a speech at a luncheon of the Australian Chamber of Commerce in Hong Kong this (Friday) afternoon:

Question: This is more of an advantage that you have had than many Australians in Hong Kong. You have managed to visit the Olympic site. Most of the ... have not had that privilege yet. You might share, for a few minutes, what your impressions of the site were.

Mrs Chan: I think one of the points that I made in my speech was the way in which the environmental concerns have been so capably and effectively addressed, and producing facilities that are user friendly, but at the same time ensuring that the environment is protected. I was very impressed with, first of all, the speed with which you have been able to turn what after all was a site originally used as an abattoir and as a refuse dumping point into the sort of really impressive facilities that I saw on the ground, whether it was your super ..., the sporting stadium.

The thing that really caught my eye was the aquatic centre. I am very determined to examine this concept. The aquatic centre, I don't know how many of you are familiar with it, combines facilities under one roof that cater for the entire family from the youngest to the oldest, from female members to male members and to children. It can cater for training, for people to do aquatic dancing, to take lessons and it's an extremely good use of space and facilities and particularly pertinent in Hong Kong circumstances. So I am exploring, together with my colleagues, importing this concept of an aquatic centre and I think it will serve us very well, for example, if we can get one done in time to put in our bid for the 2006 Asian Games.

The other thing that impressed me about the Olympic site was how the planners had catered for the transportation needs. I was told that the intention would be to make most people use public transportation and for that, as you know, they've laid on a special rail system. And finally, because I was particularly interested, given that we really have a very short period of time to put together a bid for the Asian Games and to improve facilities and whatever else we need to do to make a successful bid for the 2006 Games. That is, contrary to what I believe, what a lot of people believe, the lead time for even constructing brand new facilities is not all that long. So I was told that we have plenty of time to put ... the really first class facilities. So all in all, a very very rewarding and very satisfying visit, and we are hoping to be able to pick the brains of those involved in preparing for your Olympics in Sydney this year.

Question: ... How confident are you of Hong Kong's chances to win this bid, especially against top competition, perhaps Malaysia or Korea.

Mrs Chan: Well, we are aware of the competition for the 2006 Asian Games. But you also know that when Hong Kong says that it will do something, we are fully determined. We have the will and the ability to do it, and we certainly intend to make the best possible bid for the Asian Games and to win it.

Question: Mrs Chan, you in fact answered the question that I am going to ask, but you asked for an expression of concern. I've been living in Hong Kong for thirteen years and I become extremely concern about the quality of air here. I hope that in your visit to Australia, you've said that some of the things you've learnt you will be able to implement here to solve what I see as a very bad problem for Hong Kong, and it is certainly affecting the decision of a number of people to set up business and to come and live here.

Mrs Chan: We are, of course, as concerned as you are. We do realise that the quality of living, and in particular the environment, the state of our environment, is one of the key considerations when the international business community makes a decision about whether to come and invest, live and work in Hong Kong. And that was the reason why the Chief Executive, as you would have noticed, decided to make environment the centerpiece of his Policy Address, which he delivered in October, in which he announced a whole series of measures that we will take, in particular to improve the quality of our air.

I can assure you that we are fully determined to pursue, and if possible we will do our very best to even exceed, the target that the Chief Executive has laid down in the Policy Address. And this is one area where I particularly having visited in Australia. I think it's an area where you do have the expertise and the experience to give us a few pointers. And that is why I extended this specific invitation to your Minister of Environment to come and visit, and to lead a business group. In the next few months, as we implement and launch the various measures that we say we will be taking, we will be having an eye to where we can draw overseas experience, and Australia clearly is one of the focus points.

Question: How confident are you that the regulation in the wireless FTNS area will promote real competition in the telecommunications field in Hong Kong?

Mrs Chan: I realise that the entire telecommunications field, particularly in the FTNS sector as you point out, is not yet fully liberalised. But, other than that, in all other areas, I dare say we probably have one of the most open and most competitive environments. And I hope all those involved in providing services and interested in telecommunications service will take note of that. But at the same time, whilst we have not immediately now liberalised the FTNS market, we do nevertheless have a time-table, you know, precisely when it is going to be liberalised, that is, three years down the road. In the meantime, we are encouraging non-cable-based network providers to break into the market. We are encouraging people to lay, for example, submarine cables.

The mobile telephone services are already completely liberalised. I would think that there is plenty of scope, and since we will announce the table for full liberalisation across the board, I would encourage companies interested in this area of service to plan for that eventual complete liberalisation. But I do stress, in the meantime, there is also considerable scope for new players and we do want to encourage new players. We want to make sure that we continue to have, we already have in my point of view, a first class telecommunications infrastructure. But we want to improve that even further, we want to ensure prices are competitive, that consumers get the best possible deal at the lowest possible cost.

Question: An education question. In his first Policy Speech, the Chief Executive has said that he would encourage universities to introduce English exit tests. And it's now more that two years after that comment. I was just wondering if there's been any progress in that area.

Mrs Chan: All the universities are aware of the need to ensure that Hong Kong remains, as it were, a bilingual society. And as you know, under our constitution, both English and Chinese are official languages. I think the concern about deteriorating language skills, whether you are talking about deteriorating English language skills or Chinese language skills, is a concern that is shared by the community as a whole. And the universities certainly themselves are very alert to this. What the universities, I think, have agreed, is that there will be a minimum qualification and language proficiency test for all those who graduate, as it were, and also a minimum requirement for entry into the universities. And this is a target, even if it cannot be completely implemented right at this stage, it is something that they will progressively work together.

But the university is of course, as you can see, only one aspect of the problem, and in a sense, to tackle the problem at source, you really have to make sure that English language skills and ability are improved before you get into a tertiary institution. And that is where I think, particularly in the primary and secondary schools, it is very important. And in this respect, you know that we are devoting considerable resources to improving the teaching of English, both in providing more resources for schools and uplifting the standard of English proficiency amongst those who teach English. And in this connection, you know that we have a scheme to import native English speakers. And as I pointed out in my speech, the bulk of our native English-speaking teachers in fact come from Australia. So we are determined to tackle this because it seems to us to be extremely important in terms of underpinning Hong Kong's success as an international business society.

Question: Do you have any comments on the discussions of a sales tax imposition in Hong Kong?

Mrs Chan: I was surprised that that wasn't the first question that I was asked. Let me make several points. The Financial Secretary is in the ... of preparing his budget. And as any financial secretary has to do, he has to take seriously the sources of revenue and the expenditure pattern, and he does it as a matter of course for the preparation of each budget.

As you also know, those of you who have been operating in Hong Kong for any length of time, our tax base is extremely narrow. In fact, half of our revenue comes from profits tax, salaries tax and land sales. And we have been concerned that revenues from these sources have decreased. What we are in the throes of examining is whether this reduction in revenue is simply a cyclical occurrence or whether it indicates a structural defect in our tax system. The former, we are less concerned about because if it is cyclical, then clearly it is not going to recur year after year. But we would be very, very concerned if it was a systemic shortage which means that there will be deficit in our recurring account year after year.

We do have a constitutional obligation under the Basic Law to balance our budget and to ensure that over a period of time, expenditure is kept in line with growth in the GDP - and of course, we have suffered two successive years of really quite significant economic declines - and so, as part and parcel of that examination of tax sources, balancing it against what we can see in the way of expenditure requirements. And we have a community where aspirations and expectations in line with communities elsewhere are increasing by the year. And we have to, as a responsive and caring government, have to try and respond to those expectations as best as we can. But we need the economic ... to be able to do that.

So in that context, clearly, if you look around the world, there are very few countries where in fact there isn't some form of a consumption, or as it were, sales tax in one form or another. So it is in that context we are examining this. The Financial Secretary has taken no views on this but as a prudent Financial Secretary, which he is, he has got to carry out this exercise.

I can assure you that we hear the community's voice, and as you can see for yourself in the last few days, the views actually are quite diverse, at opposite ends, as it were, of the spectrum. And in particular, there is a concern that even if in principle a sales tax or a consumption tax is acceptable, there is a good deal of concern about when you might introduce this and what impact it might have, particularly as we are just coming out of an economic recession. So I can assure you that it is not an issue that we will take lightly. We will look at all aspects of it. But first, we need to determine exactly what our future revenue sources are likely to be, whether it is just a short blip on the radar screen, or whether it indicates a more long term problem. If the latter, then we do have to put on our thinking caps and see what is the best way of broadening our tax base and broadening our revenue source.

Photo: The Chief Secretary for Administration, Mrs Anson Chan, addresses a luncheon of the Australian Chamber of Commerce in Hong Kong.

End/Friday, January 14, 2000

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