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Following is the full text of the speech (English only) delivered by the Financial Secretary, Mr Donald Tsang, at a Vancouver Board of Trade - Hong Kong-Canada Business Association Dinner in Vancouver on June 7 (Vancouver time):

Mr Turner, Minister Wilson, Minister Waddell, Ken [Woodhouse], distinguished guests, ladies and gentlemen,

Thank you, Minister Wilson, for those kind words. I am honoured to have been invited to speak at this function tonight, but a little daunted by knowing that I am following in the footsteps of some illustrious former speakers including presidents, prime ministers and leading business executives. Not to mention my boss Mr Tung Chee Hwa and my colleague Mrs Anson Chan!

I hope you will excuse me if my speech gets a little slower at some point later in the night. I can assure it won't have anything to do with the fine Canadian wine, but the fact we only arrived a few hours ago after that long flight from Hong Kong. However, I must quickly add that the traditional warmth of the Canadian welcome, particularly here in Vancouver, has more than compensated for leaving my body clock on the other side of the Pacific!

Being surrounded by so many good friends of Hong Kong, makes us all feel at home. And we want to continue building on those close ties, not only in economic and trade relations, but in cultural exchanges as well.

Now is the right time to be examining how we can put this into practice. The economies of East Asia are once again on the march. Nearly three years after the onset of the Asian financial crisis, prospects are much brighter. In some parts of the world, the severity of the crisis may have led their commentators to suggest that the Asian region will be less important than people once thought it would be.

There certainly hasn't been much talk in recent times about the Pacific Century. But, to my mind, that silence may be premature and even unwise. The regional rebound is gathering momentum. Forecasts indicate that this year the nine economies of East Asia, excluding Japan, will grow by an average of 6.3 per cent; and there are predictions of a 6 per cent growth in 2001. This compares with the average projected growth in the G-7 countries, which include Japan, of 3.3 per cent; and 2.7 per cent next year.

So, are we heading for a significant revival? It is probably too early to give a cast iron answer to this question, but I believe the signs are encouraging. Take Hong Kong's case as an example. The latest figures show our economy grew by over 14 per cent in the first quarter of this year. This is much higher than even the most bullish predictions. It was the fastest growth recorded since late 1987 - and comes on top of the 9.2 per cent fourth quarter growth last year. As a result, we have adjusted our economic growth forecast for 2000 from 5 per cent to 6 per cent.

And the medium term prospects - the four-year period from 2000 to 2003 - are looking good with a trend GDP growth rate of 4 per cent annually. The turnaround in the economy, remembering that we finished 1998 with negative growth of 5.1 per cent, owes much to the remarkable flexibility and adaptability of our work force and our entrepreneurs.

We have reduced business costs, improved efficiency and enhanced productivity. These were not government imposed measures. They were the direct result of market forces at play in what is still the world's freest economy.

But the financial turmoil did inflict a good deal of pain on many in our community. We recognise that and have tried very hard to alleviate that pain wherever we could.

The recovery itself has been largely export-led - driven by a resurgence in demand in Asia, and continuing strong growth in the United States and the European Union. I'm pleased to say that after a drop of over 5 per cent in total trade between Hong Kong and Canada last year - which was still worth some C$5.7 billion - there are signs of an upward trend. In the first quarter, total trade between Hong Kong and Canada increased by nearly 19 per cent over the same period last year. That's good news for both of us.

In many ways, the Asian financial crisis was a wake up call. The alarm bells sounded. We heard the ringing and set about implementing fundamental reforms and economic restructuring. But before I get carried away, we still have quite a lot to do if the recovery is to be sustainable.

Top of the list is to learn from the painful lessons of the recent past. Asian governments must continue with the reforms needed to address the structural weaknesses in their economies exposed during the crisis. We need to do this with greater transparency, openness and discipline.

There must be a strong and continuing commitment to free trade and the further liberalisation of trade. When China's long-awaited accession to the World Trade Organisation takes place probably before the end of this year - and the prospects are looking good - this commitment will be given a greater meaning and urgency.

We need to watch carefully the international trade environment, particularly in the U.S. following recent interest rate hikes, which could prompt a slow-down in the near term. And we need to monitor the current volatility in global financial markets; and the fluid situation across the Taiwan Strait.

But let me turn specifically to Hong Kong. To give you a feel for how we have been doing; how we have addressed the challenges; and how we see our future as we move into the 21st century.

In essence, it is to position Hong Kong as the world city in Asia, enjoying a status similar to that of New York in North America and London in Europe. That means like other great world cities, which have vibrant economies in their own right; a depth of talent in every field of endeavour; locations of choice for the principal offices of major corporations; and dynamic and diverse populations.

I don't think I am being immodest when I say Hong Kong is already Asia's most cosmopolitan city. It is a free society based on the rule of law. It is an international centre of finance and trade. A hub for services such as communications and transport, regional and international media. And home to numerous multi-national enterprises and a large international community. We remain a unique city where the best of East and West blend seamlessly. We provide a complete level playing field for all, irrespective of nationality, race or sex. Compare the numbers of women in top positions in Government and business in Hong Kong with those in other economies, including the most advanced ones. The facts tell all. We have a hinterland of vast potential. But with globalisation and the competition this brings, it is not good enough just to tread water.

After recovering from the initial shock waves of the Asian financial crisis, it was clear we could no longer rely on asset inflation to oil the wheels of economic growth. We had to diversify; broaden our economic base. Now, nearly 3 years later, costs of doing business in Hong Kong compare favourably with other cosmopolitan cities, given our low tax rates. Even our highly precious property is competitively priced.

Companies are diversifying into the new economy. Innovation and technology are helping to redefine what makes Hong Kong tick. But we have been careful not to overlook the volatility of the markets and have been putting in place significant reforms to underpin our traditional strengths.

We have introduced a series of measures that are making the banking industry - probably the most efficient and best regulated in Asia - even more competitive, while at the same time opening up the market to more foreign banks.

The securities and futures markets have been revitalised with the merger and demutualisation of the stock and futures exchanges and their clearing houses. I notice that you have been restructuring your markets as well. And we're forming new strategic alliances with other major bourses to keep pace with the movement towards a global 24-hour trading environment; and Hong Kong has become the first in Asia to offer 'live' trading in the Asian time-zone of seven leading Nasdaq stocks.

A new Nasdaq-style second board known as the Growth Enterprise Market, or GEM for short, began trading in November last year, principally as a vehicle for new start-up companies with growth potential and innovative ideas to raise capital.

We have implemented important measures to strengthen our currency board system and the link between the Hong Kong and U.S. dollars; and we have widened the monetary base to provide a greater buffer against concerted attacks on our currency.

In tourism, we are taking bold steps to expand the horizons of Hong Kong's potential. Hong Kong Disneyland will open up a whole new tourism frontier in 2005; and we are developing a cable car system linking our superb new airport with the world's biggest outdoor seated bronze Buddha.

We have liberalised the telecommunications industry to the point where we have one of the most open and competitive markets in the world - and some of the cheapest international direct-dialing rates.

The enthusiastic embrace of the new economy is extending into the development of our flagship IT project, the Cyberport. It is pleasing to see that several Canadian firms are amongst the 120 local and overseas companies already expressing interest in becoming tenants. With your expertise and strong influence in IT and telecommunications, we would like to see an even greater presence from Canada in our high-tech development.

As part of our determination to build a stronger economic base, Hong Kong's first Science Park is also taking shape. More than 20 companies have so far applied to become tenants. Of these, six have signed contracts to establish regional headquarters for research and development, including one Canadian pharmaceutical group that will be involved in R and D into traditional Chinese medicines.

With the shake-up that's taking place, it's probably true to say more has happened during the past three years than at any other stage in Hong Kong in the past decade.

But we cannot achieve world city status on these initiatives alone. We have to make sure that we have the talent to keep the momentum going. We're reforming the education system; we're improving our standards of English, with the help of a number of teachers from Canada. As an aside, the Canadian International School at Aberdeen, overlooking the Lamma Channel, is a truly magnificent institution.

One issue we are treating with the highest priority relates to our efforts to clean up the environment, particularly the quality of our air and water. Without it we cannot, in all conscience, call ourselves a world class city.

First of all, we have embarked on an accelerated programme, to clear the air. The measures we are implementing should see an improvement in air quality within the next 18 months to two years as we switch to cleaner fuels and greener technology to power our taxi and bus fleets. I understand the development of fuel-cell technology here in Vancouver may help us find solutions to some of our problems.

In the longer term, we have already embarked on a programme to increase the size of our electrified rail network by 70 per cent over the next 16 years. A programme that will cost an estimated C$38 billion. That's more than we spent on building our new airport and all the infrastructure associated with the project. Incidentally, we are putting a substantial stake in our Mass Transit Railway Corporation on to the open market later this year. When implemented, this ground-breaking initiative will become the benchmark for privatisation, where appropriate, of other government-owned assets in future.

So far I have not mentioned what we are doing to protect and preserve our institutions. To a great extent this is unnecessary as the systems that were in place prior to our reunification with China are still in place today as they are guaranteed under our constitution, the Basic Law. The rule of law, an independent judiciary, a level playing field for business, a low and business-friendly tax regime, free and open markets, the free and unfettered flow of information, a free press and all the freedoms that we have come to expect in a pluralistic society - these are Hong Kong's lifeblood.

But, our economic success in the past 20 years has been linked to the emergence of China, particularly the Pearl River Delta, as our hinterland. Now that China's accession to the WTO seems assured this will benefit not just Hong Kong, but Asia and the global economy.

Although we anticipate increased competition as the Mainland's markets open wider to the world, we are confident there will be substantial opportunities for our businesses, particularly in the services sectors. Our distributive trades, our financial services, insurance, telecommunications and tourism as well as many other professional services will benefit. And, because there is no one better than our business people and entrepreneurs in connecting with the Chinese market, Hong Kong will still remain the best place for international companies to access the Mainland.

Ladies and gentlemen, I would like to leave you with this observation. Hong Kong has made a solid start on the road to recovery. We have the right economic ingredients, a new sense of purpose and a spirit of progress as a community that propels us forward with a clear focus on the future. We know where we're going, and we know how to get there.

And we hope you will use the opportunity of Team Canada's visit to China and Hong Kong later this year to come and see for yourselves what we have to offer. And to explore ways in which we can promote even more business contacts between our two communities.

Thank you.

End/Thursday, June 8, 2000

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