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Following is the full text of a speech (English only) delivered by the Financial Secretary, Mr Donald Tsang, at the luncheon of the Council of Hong Kong Indian Associations and the Indian Chamber of Commerce today (Wednesday):
Mr Sital, Mr Arun, Mr Mahtani, ladies and gentlemen,
Kung Hei Fat Choi! And thank you for those kind remarks. If all the prognostications of the past few days come to fruition, we should be in for a pretty good Year of the Dragon. And what better way to start the new year than being invited to address a gathering of old friends. And you have kindly given me carte blanche on the subject matter of my speech - a latitude that some of you may regret if I keep you here for two hours!
The Council of Hong Kong Indian Associations may be relatively young but is representative of the Indian community here. The Indian Chamber of Commerce has been with us much longer. It contributes regularly to the discussion on my Annual Budget Speech. The history of the Indian community here, and the role it has played in helping the development of Hong Kong, stretches right back at least 160 years. Hospitals, buildings and street names attest to that.
Some of our abiding institutions have the indelible hand of Indian merchants on them. I imagine many people are not aware that a Mr Dorabji Naorojee, who arrived in Hong Kong in 1852, started what is now the famous Star ferry company -developing it from a single steam launch into a major cross-harbour ferry service. Another merchant, H N Mody, later to become Sir H N, was the driving force behind the establishment of the University of Hong Kong. A leading Indian firm of the day, Mody and Paul Chater, was Hong Kong's first and largest firm to deal in stock exchange and share brokerage. And last, but certainly not the least, members of the Indian community have made valuable contributions to the Hong Kong civil service. That is quite a legacy and it continues even today.
The Indian community, now numbers some 28,000. The firms they control account for between 7 and 10 per cent of Hong Kong's export trade. An excellent achievement reached over many years of trading and hard work.
There remains considerable scope for further development in Hong Kong's overall trading relations with India. Particularly when you consider that in 1998, our total two-way trade was valued at just HK$20 billion. And while it continued to increase last year, it still accounted for less than 1% of Hong Kong's global trade.
In this regard the Information Technology field holds out exceptional promises. We are discussing with the Indian government the signing of a joint Memorandum of Understanding on co-operation in information technology and services.
The MOU envisages an extensive range of co-operative activities from commercial and industrial exchanges to investment and technology partnerships, from educational and learning exchanges to the sharing of policy and regulatory information. I am sure this would complement the information technology developments that have made India famous in the past few years.
And from all accounts, the Indian economy is benefiting from the new technology revolution. IT products and services have grown there at a compound annual rate of 42% over the past five years. As well, the Indian government has plans to turn the country into a superpower in the area of software with an export target of US$50 billion for the year 2008. If this is achieved, there's no reason why it is not achievable, it will make India a formidable leader in the IT field.
In Hong Kong we are seeing a growing number of Indian professionals working in multi-national corporations, banking and finance. We warmly welcome them. They contribute to our success as a world city.
So, with the budget only a few weeks away, I'm sure you will have at least a 'passing interest' in what I have to say. And while I hasten to add, I won't be revealing any budget secrets on this occasion, I will give you a general background picture against which I am formulating my various proposals.
And most sectors of the economy have been performing pretty well:-
- The stock market, while showing some volatility, in the early days of the new year, has recovered much of the ground it lost in 1998. In fact it surpassed that just now.
- The property market is stable and our aim is to keep it that way. A sudden or sharp rise, or fall, in values will not be to anyone's interests as we continue to diversify our economic base away from its over-reliance on property.
- The banking sector is as robust as ever - a fact highlighted by the positive results of the first bank to start the reporting season last week.
- Tourists are returning to Hong Kong with nearly 11 million visitors last year - the highest number since the peak of 1996.
- The new airport is operating remarkably well and providing significant hubbing facilities for passenger and cargo carriers.
- And our trade is also growing, particularly in the latter part of the year with November and December showing double-digit growth over the previous year.
This impressive performance, however, conceals the pain the community endured as the flames of the Asian financial crisis swirled around us. In 1998, our economy shrank by 5%; unemployment rose to an almost unprecedented level of 6%; tourism slumped; trade toppled; and our currency came under severe attack.
On reflection, I believe 1998 will go down as the toughest year for Hong Kong in our recent history. But, looking back, it was a very important and salutary wake up call for all of us. It brought us down to earth from the hubristic days of the mid 90s. It made us pause. It made us think about ourselves and what we needed to do to shape ourselves for our role in the 21st century.
As we take our first tentative steps into the 21st century, I can report that various strands of our economy are meshing together. Not only are we seeing a stable market in which capital continues to flow into Hong Kong, but an exciting era of technological advancement. New start-ups are beginning to sprout, aided in many cases by the creation of the second board or the Growth Enterprise Market (GEM).
Hong Kong is on the move!
We have not lost our enthusiasm. We have not lost our energy. We have sharpened our competitive edge.
I believe what has happened since the nadir of 1998 is not a reinvention of Hong Kong, but rather a rediscovery of our own values, our cosmopolitan values, and our own strengths. It was not a deliberate, centrally planned re-engineering by the government, by no means. That is not, nor will it ever be, our philosophy. We leave that to others. We allow the private sector to take the lead. And they deliver the goods.
But how is the economic outlook shaping up for the year 2000. I have seen a wide spread of private sector forecasts on economic growth. As I mentioned, our last estimates gave the 1999 GDP growth just under 2%. That's as far as I can go today. I will not be drawn on predictions for 2000 until budget day - March the 8th.
Unfortunately, our unemployment rate is expected to remain high by Hong Kong standards. It will only decline gradually from the present 6% during the course of the year 2000. The property market will remain stable. The common consensus for the stock market is that it will go up beyond the highest level achieved so far. The banks are a bright spot in Hong Kong and are well positioned for the year ahead. Tourism is likely to continue to grow and edge ever closer to the 1996 record of 11.7 million visitors. And finally, we should have very much to gain from the Mainland's accession to the World Trade Organisation.
So, on the whole, apart from the employment situation and a rather indifferent private consumption pattern, most of the economic indicators range from good to very good in the Year of the Dragon.
Given this background, I believe the year 2000 and 2001 will hold out enormous opportunities and much fewer challenges. Although, for me, I still have one major challenge ahead - how to produce a budget that will keep up the momentum.
Thank you.
End/Wednesday, February 9, 2000
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