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Following is the full text of the speech (English only) delivered by the Chief Secretary for Administration, Mrs Anson Chan, at the Intercham lunch today (July 5):

Mr Cheng, distinguished guests, ladies and gentlemen,

First of all, thank you, Matthew, for your welcoming remarks. I hope they indicate that if there is a requirement for a vote at the end of this speech, the outcome will be somewhat more positive than the vote in the Legislative Council exactly a week ago.

More about that later. I would just like to flag the point that we live in a free and plural society where politics is part of the rough and tumble of life. We civil servants are not squeamish about that; we are simply anxious to ensure that the game is played by the rules.

I was delighted for three reasons to accept the invitation to speak to this gathering today. First, because I understand that this is one of your main fund raising activities during the year. I am delighted to see so many of you present, and I hope that as a consequence, the coffers of the international business council or community will be enriched as a result of your presence here this afternoon. Secondly, it gives me an opportunity to publicly recognize the importance of the international business community to our economy and to our community in general and, thirdly, it enables me to address the wider membership of the various chambers represented on the International Business Committee which I have the honour to chair. Furthermore, the occasion is very timely : because I have just returned from a 10-day visit to Europe to promote Hong Kong. I went to Brussels - twice - Berlin, Hamburg, Amsterdam and the Hague.

This was my 26th overseas visit since becoming Chief Secretary in 1993. In that time I have travelled to five continents and been to major cities on 70 different occasions to wave the Hong Kong flag. Up to 1 July 1997, my job was to reassure foreign investors about the Handover, and since then to reassure them once again that the transition had worked as well, perhaps better than I had predicted.

I am pleased to report that on my recent visit, I found a tremendous amount of interest, goodwill and quite detailed knowledge among many of those I met. I was received by Prince Phillipe of Belgium who himself had only just returned from a visit to Hong Kong. I had meetings with government ministers and officials, think tanks, bankers and businessmen and journalists in every city that I visited. I also spoke at a number of business conferences organised by the Hong Kong Trade Development Council. They were all interested in what I had to say.

I was particularly pleased to have made my first official visit to Berlin. And even more pleased with the very good attendance at all our events, including the business conference. Competition was pretty keen in Berlin as my visit coincided with those of President Putin and Prime Minister Goh Chok Tong - not to mention Euro 2000 - which, of course, I didn't mention, given Germany's somewhat poor showing. It's a pity that I didn't go to Paris!

I did however think it appropriate in my keynote speech in Berlin to point out how under One Country Two Systems our freedoms and civil liberties and free market economy had been preserved. This was an important point to emphasize in a city with a similar but not quite parallel history of reunification. They were impressed when I detailed the size and involvement of the German expatriate community in the SAR, and I think it was well received when I said that I knew many Hong Kong-based Germans who would be proud to say Ich bin ein HongKonger.

These visits, I think, are always a useful reminder of how news - and perceptions - travel quickly. I was asked on many occasions about our policy and security arrangements to deal with illegal immigration from the Mainland in the wake of the tragic death of the 58 Chinese at Dover. Fortunately, I was able to provide solid reassurance on this point, citing our stringent enforcement actions.

There was great interest, too, in the meeting of the two Kims and its potential implications for the Taiwan issue, and how Hong Kong might be affected by cross-Strait developments. I was also tackled on questions relating to the rule of law and political development and even on the various protests taking place in the SAR. As I say, there is no shortage of interest or knowledge of Hong Kong issues. I hope I was able to address all the issues raised in a positive but balanced manner.

But above all, the key messages I carried with me were threefold : first, the success of the transition; second, the rebound of the economy in Hong Kong and the region; and third, the clear opportunities for European businesses to leverage Hong Kong's unique positioning with China's accession to the WTO. The business delegation who travelled with me also reinforced those messages at conferences in Berlin, Hamburg and Amsterdam. We had some very attentive listeners. At the same time, the Financial Secretary was delivering much the same kind of messages in Canada and the United States and will carry them to Australia at the end of the month.

To be honest, I have not had much time to reflect on my visit since returning to Hong Kong. I was met at the airport to be told that Rosanna Wong had resigned as Chairman of the Housing Authority. There followed the motion of no confidence in LegCo last week.

I do not intend to refight that battle today. I'm sure you have all heard and read more than enough about it. But I do want to say something to you in more general terms about the issue of a Ministerial system and the responsibilities of the civil service.

The first point I would like to make is that we have a highly-motivated and committed service with a strong results-oriented culture. The system is based on the politically neutral model of the British civil service, modified here and there to take account of our own circumstances. It has been largely successful over a long period of time in providing smooth and efficient government.

The role of the civil service is recognized in the Basic Law. What does executive-led government mean other than a civil-service administration? It does not of course begin and end there. Our job as civil servants is to formulate policy recommendations for the Executive Council's consideration and decision and then to implement those decisions.

We are also accountable to the Legislative Council, now fully elected, and increasingly representative under the timetable laid down in the Basic Law. The civil service has long recognized that dynamic, and willingly accepts its responsibility in explaining, defending and arguing for the policies and proposals before legislators.

That does not mean hidebound and blinkered argument. It means honest debate and compromise reached in the public interest. Some legislators accuse civil servants of being unbending in this regard. I can assure you that this is not the intention, nor is it my experience, or that of most of my colleagues. While we are prepared to press our case, we remain open to suggestions and better ideas from legislators or, for that matter, other sectors of the community, including the media.

After all, a cardinal principle of our policy-making process is consensus-building. Being politically neutral does not mean that we are politically naive. We adopt a logical, fact-based, problem-solving approach. We certainly take into account public opinion and the views of all interested parties. Indeed, that weighs heavily on our deliberations. It is all part of the analytical mix.

Honest government is about striking a fair balance of interests that best serve the community. Not many decisions are controversy-free. Most will not please everyone. We are also bound to sometimes take decisions which will be widely unpopular. We do not shy away from them, nor should we so long as we are sure the decisions have been properly thought through.

We do not lay claim to a monopoly on wisdom. Nor do we claim infallibility. It would simply make no sense to form proposals in a vacuum, even less when we have to secure the approval of such a diversified and vigilant legislature. Nor is there room for arbitrary decision-making in our collegiate system. The system itself, with its checks and balances, is more important than any individual in it.

The crucial factor, however, is the political neutrality of the civil service. It would be a disaster if it were to be politicised. Quite simply, the civil service would cease to function as we know it now, and have known it down through the decades. The politically neutral integrity and impartiality of civil servants must be preserved for the system to function effectively.

You might say - and some people have indeed said - that this is all very well and good, that it was fine and dandy in the good old colonial days, but it is now out of date and not suitable for modern post-Handover Hong Kong. We need a more accountable Ministerial system, the argument goes, so let's just get on with it.

Well, leaving aside for a moment the implications for the Basic Law of those views, let us just pause for a moment and consider what they mean.

Do they mean a Ministerial system based on the Westminster parliamentary model, where the political party with the largest number of seats chooses a Prime Minister who selects a Cabinet and a bundle of junior Ministers from the ranks of his or her parliamentary colleagues? That would not seem to fit the current arrangements in Hong Kong although it would, I suppose, be conceivable if Hong Kong were to have a fully elected legislature and a directly elected Chief Executive. That scenario is, of course, compatible with the ultimate aim of universal suffrage as stipulated in the Basic Law.

Or do they mean something more along the lines of the US system where the President appoints his Cabinet from outside the legislature? It is tempting to think that this might be applicable to Hong Kong. But it would have to take into account the political structure in which the President is popularly elected as a representative of one of the two major parties which sometimes but not necessarily always commands a majority in Congress.

Perhaps they have in mind a hybrid, but I have not yet heard how such a creature might be created and, more importantly, how it would work. But Hong Kong's unique circumstances may well require something of the sort.

I raise these questions not to pour cold water on the idea of a Ministerial-type system. I do so to make the point that there is no magic wand we can wave to produce an instant answer, particularly given our constitutional restraints. We need to be realistic, calm and measured about this. We need to think and talk it through. Patience and a willingness to compromise will be required. I will repeat today what I told LegCo last week : whatever system evolves in Hong Kong, we need to preserve the political neutrality of the civil service. It is one of our greatest assets. It has served this community conscientiously and well and I cannot believe that the public would willingly see it destroyed or undermined.

It certainly makes no sense to tamper with the current system if we have nothing to put in its place. That will only produce uncertainty and instability within the civil service, and weaken government as a whole. Surely no one wants to see that.

I certainly recognize the tensions and frustrations that exist between the executive and the legislature. I acknowledge that this is not good for either side, or for the public. Both sides need to do much more, to adopt a more open-minded approach to cooperation, to improve the situation. This is something we aim to do with the legislature to be returned in the September elections.

That may well be the time to begin the debate on the way forward for democratic development; to properly address some of the complex questions we will, as a community, need to answer as we approach the Basic Law trigger point of 2007 when the opportunity of a consensus - or otherwise - on universal suffrage presents itself. In the meantime, the public interest will be best served by stability and certainty, not instability and uncertainty.

I hope this is not an overly old-fashioned approach, because I have indeed been criticized as being out of touch with Hong Kong's changing political culture. That may be so for those who live in an ideal world, but as head of the civil service I have to live in the real world and deal with it as it is, and not how I might like it to be. And the real world, as we know, demands certainty and continuity, especially at times of uncertainty and rapid change.

I am also afraid that it is a fact that in the real world, last week's vote of no confidence in LegCo and the resignation of Ms Rosanna Wong as Chairman of the Housing Authority could discourage some from coming forward to serve the community. There are many in life who want to give something back to society. Some want to go into politics, others to take up public appointments.

It is no criticism of the latter that they do so to avoid the hurly-burly of politics. It makes them no less committed or accountable. Nor is it a particularly Hong Kong phenomenon. I am sure you all know people who are eminently qualified for public life and who would be happy to serve, but do not wish to be embroiled in politics. So why should it be any different in Hong Kong, where we don't have the same kind of parliamentary or democratic traditions as many of the countries represented here today.

I think we also need to recognize that one of the contributing factors to the current debate about issues of this nature is the way that the public mood has been affected by the economic difficulties of the last three years and the pace and scale of reform in public policy during that period. Frankly, any government, anywhere, half way through its term and at the tail-end of a recession, could hardly expect to find itself at the top end of the public opinion polls.

The fall in property prices and the resultant negative equity among some homeowners has had a serious impact on public sentiment. So has the rise of unemployment to levels not seen before in modern Hong Kong. Thankfully, the unemployment rate is falling, although it is still on the high side.

We must never underestimate the pain and anxiety caused by these factors, and the government has done a great deal to restore economic health. We have thought laterally and acted decisively : look at the Cyperport and Disneyland. The rebound in growth is a good measure of our efforts, but it is also clear that the recovery has by no means trickled down to every sector of the community. We have to do all that we can to ensure that it does.

It is perhaps not surprising in these circumstances that there is concern about the government's programme of policy reform. I do acknowledge we need to be more sensitive to this concern, and show flexibility where appropriate. We need also, I believe, to better explain ourselves so that there is a greater understanding of what is happening and why. We need to spell out the medium and longer term benefits for the community as a whole.

The first thing to do is to get the context right. For obvious reasons, it was not possible to launch major reforms in the years leading up to the Handover. That is not a criticism of the previous administration, just a statement of political reality. There were, if you like, invisible bonds which restricted movement in those days. With Hong Kong people running Hong Kong, these bonds are no longer there.

There were issues left over to be tackled. I don't think anyone would argue, for example, that our education system is not in need of reform. The battery hen, exams-based, learning-by-rote system is simply not sustainable in the cyber age. Education reform definitely includes a greater effort to improve our standards of English. Simply put, they are not good enough.

And is there a real argument against the economy shifting from its over-dependence on property to innovation and technology? The Asian financial crisis gave us no chance for a gradual soft landing once the property bubble had burst. But it did provide us with the opportunity to diversify and to restore some measure of competitiveness. We all remember the pre-crisis complaints that bloated property costs were pricing Hong Kong out of business.

Nor would I find too many in this room, or outside of it, who would take issue with the measures we have in place to tackle our environmental problems - except perhaps to say that they are long overdue.

Likewise, isn't it time to fix the problems in our construction industry? They appear to be deep-seated and show up in the private sector as well as the public sector. Related to this is the reform process in the Housing Department, which we aim to pursue vigorously.

And for all of my defence of and pride in the civil service, I would not for a moment suggest that the overhaul now taking place is unnecessary. We need to shed outmoded practices and overmanning to equip ourselves for the challenges of this new century.

There is of course more. I believe the reforms in the financial services sector have been well accepted. The whole question of financing our hospital and medical services also needs to be addressed unless we want the public purse to be drained by their exponential growth. We have seen in other places how this can happen.

Let's have a look at the second part of this context. It is very important not to lose sight of the fact that on the economic front, things are starting to look brighter. We certainly had a rough couple of years as a result of the Asian financial crisis, there are no two ways about it. But the economy is well on the way back.

We finished the first quarter with a GDP growth of more than 14 per cent - the fastest recorded since 1987. Look at Monday's independent forecasts. The University of Hong Kong's Apec Study Centre predicts the next two quarters will grow at 11 per cent or more. Of course, the forecast is not official, but it does at least demonstrate that independent analysts see bright prospects ahead for the economy.

Consumer confidence has been improving; investment has returned to positive growth after falling for six consecutive quarters; tourism continues to record double-digit growth : for each of the past three months it has topped the one million mark. And our economic outlook for the medium term remains favorable, underpinned by sustained growth and further economic reform and liberalization in China after its accession to the WTO. The news is by no means all bad. It is of course one thing to take our problems head on - that is the Hong Kong way. It is quite another to start talking ourselves down when we have so much going for us.

Mr Cheng, you asked me to speak for 30 minutes. I hope I have not outstayed my welcome. But I wanted to take the opportunity today to raise issues that are important to the whole community, and that certainly embraces the international community. You have a big role in Hong Kong. Your presence here is important, and indeed, vital to us. You are a living and dynamic symbol of our position as Asia's most international city. And a symbol, in some ways, of what One Country Two Systems means in effect.

What you think matters to us. We want to hear your views on these and other issues because they are matters which have a significant bearing on our future progress and on our prosperity. You all have a stake in that.

Thank you very much.

End/Wednesday, July 5, 2000

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