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Following is the speech (English only) by the Chief Secretary for Administration, Mrs Anson Chan, at the Hong Kong Academy of Medicine 2nd International Congress - The 'David Todd Oration' on Thursday (November 2):

Hong Kong : Cycles of Change

Mr President, Doctor Leong, Professor Lau, David, distinguished guests, ladies and gentlemen,

I am delighted to join you for the opening session of this very prestigious biennial event. I first received the invitation to speak today in early July. I knew then, without even looking at my diary, that I had to accept. There were two reasons. The first is that it is indeed a privilege to be asked to speak before such eminent medical professionals from Hong Kong and overseas. David Todd is highly respected in Hong Kong and internationally for his achievements in medical research and education. David was a driving force behind the establishment of the Hong Kong Academy of Medicine and was a keynote speaker at the Academy's first International Congress in 1998. Having known David Todd for many years, it is a great pleasure for me to have been asked to deliver an Oration in his honour. The second reason is rather more personal - the invitation letter was signed by another David, Dr David Fang, the President of the Hong Kong Academy of Medicine, who, as he has just disclosed, happens to be my brother. This David is also a leading member of the medical fraternity and we are extremely proud of him in the family. So you can see why I had to say "yes".

I would particularly like to welcome all our overseas guests who are joining local medical professionals for an extremely comprehensive set of symposia, discussion papers and lectures over the next few days. And while I am certain that you will find plenty to keep you occupied and interested on the intellectual front, I do hope you will be able to relax just a little and soak up some of the sights and sounds of Hong Kong. I know you will not be disappointed.

I have deliberately chosen not to adopt a medical theme for my speech. With so many medical professionals in Hong Kong for this congress I think it best to leave the medical talk to the experts. Instead, I would like to take you on a journey through Hong Kong's development over the past 50 years. In doing so I hope to impart a sense of the undying spirit and optimism of Hong Kong - a spirit that has transformed this 'barren rock' into one of the world's great trading and financial capitals.

It has been a remarkable transformation in every sense of the word. Hong Kong has no natural resources except for a fine deep-water harbour and an excellent location on the South China coast. Our greatest asset has always been our people - their hard work, ingenuity, courage, flexibility, pragmatism and entrepreneurial flair have built a world-class city in the space of just two generations.

To really understand Hong Kong, you must understand its people. Time after time, in the face of enormous and sometimes seemingly impossible adversity, Hong Kong people have demonstrated this incredible capacity to bounce back. In the words of one of Hong Kong's most eminent entrepreneurs, Hong Kong is like a rubber ball, the harder you throw it down, the higher it bounces. Every decade new challenges have been thrown up. Every decade those challenges have been answered and Hong Kong has emerged more confident than before in its own abilities.

As a somewhat bewildered eight year old, I first stepped foot in Hong Kong from Shanghai in 1948. We arrived during one of the most intensive migrations in the history of mankind. Hong Kong's population was about 500,000 immediately after World War II. Within a year there were 1.6 million people. Our family was among those that brought the population to above 1.8 million in 1948. When I joined the civil service in 1962, there were 3.5 million people in Hong Kong. By 1979, there were five million. At that time, in some older parts of Kowloon, population densities were as high as 144,000 people per square kilometre. Nowadays, there are 55,000 people per square kilometre living in the same areas. Hong Kong's total population stands at 6.8 million people, all living within 1,100 square kilometres.

The vast majority of the human tide that has flowed into Hong Kong has been of Chinese descent. They are mainly Cantonese, but even then from distinctive areas such as Guangzhou, Chiu Chow and Shantow, all with their own dialects, customs and traditions. The same applies for the sizeable numbers from Shanghai, many of whom were industrialists, merchants and traders. The Fujianese, great travellers, naturally found themselves sailing towards Hong Kong.

All of these migrants joined the Chinese who had been well-established in Hong Kong for decades. Among them the local boat people, the Tanka, who lived and worked on their humble sam pan. There were Hakka and Hoklo communities farming the fertile ground in the New Territories. There were the Macanese, an exotic blend of Chinese and Portuguese. Wave after wave of migrant and refugee joining family and friend in Hong Kong, slipping seamlessly into the bustling community that had developed over more than a century, and whose fortunes were inextricably bound to the Chinese nation.

And so we found ourselves, like tens of thousands of other families, settling into a new life in Hong Kong. There was a shortage of accommodation - then, as now, land and housing were at a premium.

With nothing but their wits and ingenuity, they lived in makeshift villages perched on precarious, unstable hillsides. Squatter huts made of flattened tins hammered to a frame of driftwood or scavenged timber were homes for families of six, seven or eight. No running water, no sewerage systems and in many cases, no electricity. With such concentrations of people, diseases found an easy mark. So too did natural disasters. Fires wreaked havoc, as did the typhoons which blew in with regular ferocity across the South China Sea. Some gave up, returning to their villages in the Mainland. But the vast majority remained and rebuilt their shattered homes. They could see a future in Hong Kong for their families and the generations to follow.

So, too, did the expatriates. Initially, mainly British and Commonwealth citizens. But then gradually bigger communities developed. There has been a long-established presence from the Indian sub-continent - Hindus and Sikhs; the great merchants, the Parsee; and those of the Moslem faith from modern-day Pakistan. As they have prospered so, too, have they given much back. Hong Kong University and a host of important medical and community facilities owe their existence to the generosity and foresight of the merchants and traders who came to Hong Kong from the Victorian jewel that was India and all it encompassed.

By the time I arrived in Hong Kong there were about 12,000 expatriates, less than 1 per cent of the population. Today, Hong Kong is home to almost half a million expatriates, or about 7 per cent of the population. Many are domestic helpers from the Philippines, Indonesia and Sri Lanka, an interesting statistic in itself and one that reflects Hong Kong's evolution as an advanced economy. As more couples work, so more domestic helpers are employed.

There are big communities of Americans, British, Canadians and Australians. The Japanese and Koreans are well-represented, and there is a broad cross-section of Europeans. There are ethnic Chinese from Indonesia. There is a vibrant Nepali community, relatives and children of the Gurkha soldiers stationed here during the British administration.

So Hong Kong today is a rich tapestry of Chinese peoples, interwoven with, and enriched by, the threads of other nationalities. Within the loom of an evolving global market, this tapestry has become more colourful and intricate over the past five decades. But most importantly it has become more closely knit and, by definition, stronger.

The strength of this fabric has often been put to the test by events outside the control of tiny Hong Kong. Each time it has withstood the severest of shocks. But at the same time Hong Kong was made painfully aware of its vulnerability as a small, open economy in a world market that just gets bigger and bigger. It is this vulnerability which no doubt helped Hong Kong hone the ability to accept change for what it is - inevitable; and for what it represents - opportunity.

In the early 1950s, when UN sanctions against China's involvement in the Korean War reduced Hong Kong's economic lifeblood to a trickle, virtually overnight, industrialists and workers rallied like never before. Entrepot trade had dried up, but people still needed to make a living.

And so was born the great era of 'Made-in-Hong Kong' goods - textiles, clothing, shoes and leather ware, transistor radios, torches and batteries, paints and varnishes, vacuum flasks and toys. Also, an emporium of Chinese products - brocades, embroideries, carved woods and paper novelties.

When factories reached capacity, families gladly sat down to produce all manner of items for payment on a piece-by-piece basis. The entrepreneurial spirit flourished, and the rewards of hard work and enterprise became obvious to more of the community than ever before. A case in point: Hong Kong's richest man who founded his empire on the humble plastic flower.

It was an era which lasted for more than three decades and helped catapult Hong Kong onto the world stage like never before. It was during this time that Hong Kong began to develop a role for itself as a trading and communications hub for all of East Asia as well as the most important gateway into China. And during these three decades Hong Kong also saw just how closely its fortunes were linked to the Mainland and events elsewhere in the world.

The social upheavals caused by the Cultural Revolution were destined to spill over into Hong Kong. Throughout the turbulent 1960s, Hong Kong again absorbed hundreds of thousands of relatives and friends from the Mainland. It placed a tremendous strain on the community's social services, health care, schools and housing. But Hong Kong coped, and moved on.

The Vietnamese War brought a new wave of arrivals to crowded Hong Kong. It would have been easy to turn them away, given Hong Kong's limited resources and lack of space. Instead, we took them all in. In all, more than 230,000 Vietnamese boat people arrived in Hong Kong from 1975 onwards. No other country did more to help the Vietnamese boat people than tiny Hong Kong. Not once did we flinch from our international responsibilities to feed and clothe them, to provide shelter and medical care, and to educate their children. Refugees were allowed to work before being resettled in new countries; non-refugees were repatriated to Vietnam. And we also did our part, absorbing refugees into the local community, giving them a chance for a new start here.

The opening up of China in the late 1970s had a most profound effect on Hong Kong. Within the space of two decades most manufacturing industries had relocated to the Mainland, taking advantage of cheaper land and labour. In 1978, exports accounted for 35% of Hong Kong's total trade. By 1989 that figure had been almost halved. Today it stands at about 6%. Inversely, re-exports from China have grown from 11% of total trade in 1978 to 43% in 1999. Today, about five million people in neighbouring Guangdong Province are employed by companies wholly or partly owned by Hong Kong concerns.

While local manufacturing industries declined, service industries flourished. Hong Kong became very good at making things happen, rather than simply 'making things'. Management, marketing and design; transport and logistics; accounting, legal and corporate services; finance and insurance. All of these value-added services are carried out in Hong Kong by a well-educated, flexible workforce as much at ease dealing with Americans, Germans or South Africans as it is with traders or business partners from Beijing, Shanghai or Chengdu. The depth of this human capital is one of our greatest strengths as an economy.

China's greater openness brought new opportunities not only for Hong Kong business concerns. International companies flocked to Hong Kong, to tap into our language and cultural links as well as our experience and acumen in dealing with the Mainland.

As local and international businesses reached into the Mainland, the need for investment capital and financing increased. Hong Kong has grown to become the world's fourth largest banking centre. We have the biggest stock market in Asia behind Japan. Our Growth Enterprise Market - Asia's NASDAQ equivalent - is bringing a host of new-economy stocks to the investing public.

Indeed, it was the stock market crash in the mid-1980s that provided Hong Kong with an opportunity to launch a raft of much-needed reforms that would eventually consolidate our position as the most important regional bourse outside of Japan.

We found ourselves facing the same sort of challenges three years ago when the Asian financial crisis swept across the region, sucking Hong Kong into its worst recessionary spiral on record. But again, reforms were introduced to buttress our financial markets, to make them more open and transparent, more efficient and comprehensive.

China's impending accession to the World Trade Organisation will present Hong Kong with perhaps its biggest economic challenge yet. There are many who believe that Hong Kong's role as the pre-eminent gateway to the Mainland will decline as more international corporations opt to go directly into China. In the longer term, only time will tell whether this is true or not. But as The New York Times once remarked : "Nobody has made money betting against Hong Kong." I share those sentiments.

Those who see Hong Kong being by-passed conveniently overlook the strengths, advantages and talents that Hong Kong has built in more than 20 years of dealing with the Mainland market. Hong Kong enterprises have already established a significant presence as the largest external investor in every province in China. Hong Kong businessmen and women have an intricate knowledge of the Mainland market. It is a resource which many international companies have used to their advantage. But, more importantly, it is an advantage that Hong Kong will not surrender lightly.

The 'new economy' is already transforming the way in which we live, work and communicate. As the world's most free and open economy it is no surprise that Hong Kong's professionals, businessmen and women and entrepreneurs - and the Hong Kong SAR Government - have quickly recognised the golden opportunities presented by the Internet and the new horizons it opens up in a world without walls. Hong Kong has thrived on interaction with the global village. Now it is poised to make its mark within the World Wide Web.

The speed and scale of the e-revolution in Hong Kong has been really quite astounding. In the past 15 months, more than 1,400 dot.com companies have been registered. We have more than 1.5 million Internet users, compared to just 500,000 three years ago. E-commerce transactions are estimated to top US$2.4 billion within three years, compared to just US$60 million in 1998.

The opening within a few years of a Cyberport on the western shores of Hong Kong Island - which is a 10-minute drive from here - will help nurture the development of IT applications, software development and multi-media content.

There is a typical Hong Kong irony to all of this. At the time of the Handover in July 1997, there were those ready to write off the fledgling Special Administrative Region. The forecasts of loss of freedoms, civil liberties, the suppression of democracy and free speech, the curtailment of a free press and the throttling of the legal system have fallen to earth with the familiar dull thud of false prophecies. Hong Kong remains as free today as it ever has been.

The reason is simple : survival. Hong Kong people jealously protect the rights, freedoms and way of life promised in our post-Handover constitution, the Basic Law. We are of course proud to have been reunited with our country after a long separation. But we are also aware that our value to China, as it continues to open up and embrace the world, is only assured if we truly adhere to the principles of 'One Country, Two Systems' and 'Hong Kong people running Hong Kong'. In other words, by maintaining the same social, legal and economic systems that have allowed a small, basically migrant community on the South China Coast to develop a role as a leading, international city and a regional hub for finance, trade and communications.

Hong Kong's evolution as an international city has, of course, dramatically lifted living standards over the past 50 years. During that time the government has worked hard to fulfil its social contract with the people of Hong Kong. Housing, health care and education are good yardsticks by which we can measure our progress as a society.

The squatter villages that once dotted the landscape in Hong Kong have been replaced by New Towns - cities within a suburb - that are home to as many as 500,000 people. About half of Hong Kong's population lives in public or highly subsidized housing, standards of which are continually upgraded to meet the higher expectations of residents. It is perhaps a little ironic that the government of the world's freest economy, is also the world's largest public housing landlord. But since the 1950s, when devastating fires razed squatter villages leaving tens of thousands homeless, it has been the government's firm resolve to provide affordable and decent housing for its citizens. Given the relentless pressures of population, and the lack of land in Hong Kong, it is quite astounding, really, that homelessness is not a problem here.

Health care has been another priority area. Fortunately, the diseases that claimed so many lives in the 1950s and 1960s have been eradicated, brought under control or prevented with vaccinations. The flip-side is that Hong Kong people are now afflicted with the same diseases that affect most prosperous and affluent societies: that is, cancer, heart disease and stroke. Fifty years ago, one in 10 newborn children died. Today, infant mortality rates - at 3.2 deaths per 1,000 live births - are amongst the lowest in the world. Hong Kong people are living longer, with a life expectancy of just over 77 years for men and almost 83 years for women.

Our overriding concern as a government has always been to ensure that nobody is deprived of the best medical care possible for lack of means. That has worked well up until now. But the long-term financial viability of the current system - where outpatients pay about US$8 for a consultation, all medicines and X-rays - is under a serious cloud. We do need to overhaul the way in which we deliver public health services if we are to maintain and even exceed the current levels of patient service and care. This issue has been closely examined over the past two years. And we are in the process of putting together a package of reforms that will give us a world-class public health system that the public - and the government - can afford without compromising the quality of patient care or the ability of patients to pay for that care.

Education is perhaps the greatest concern of Hong Kong people. And we know that education is the key to the future prosperity of any community. When I first arrived in Hong Kong, schooling was voluntary, and available to only half the five to 12 year old age group. In the aftermath of the War, a massive school building programme was launched, its ambitious undertaking to provide more than 20,000 school places a year. That figure reached 45,000 new places a year by the mid-1960s. A major milestone came in 1978, with the introduction of nine years of basic, free education for all children up to the age of 15. Families with limited means had, traditionally, placed more emphasis on educating boys rather than girls. But the 1978 initiative helped ensure girls were not deprived of an education because of financial means. They have since been able to compete on the basis of academic merit alone for places in tertiary education. And today an equal percentage of boys and girls graduate from tertiary institutions.

Distinguished guests, ladies and gentlemen, I have attempted to provide a sense of the dynamics at work in Hong Kong; to give you an insight into the peculiar pressures that have moulded such a resilient community and economy. History and fate have dealt Hong Kong a fair hand. We have a colonial legacy which has given us the rule of law, an open and transparent system of government, a clean civil service and a level playing field for business. These are the foundations of our past and our future success.

Hong Kong has a unique geopolitical context, a unique relationship with its sovereign and a constitution within which the people of the Special Administrative Region can to a large extent develop as a community. Our future is intimately intertwined with that of China. We hope, and we work towards, playing an important and meaningful role in the continued economic development of our nation.

But - and it is a big but - future fortune relies on what it always has relied: and that is, the hard work, common sense and stoic determination of its people. And of that you can be assured.

Thank you very much. Ladies and gentlemen.

End/Thursday, November 2, 2000

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Photo: The Chief Secretary for Administration, Mrs Anson Chan, addressing at the opening ceremony and the David Todd Oration at the Hong Kong Academy of Medicine Second International Congress held in the Academy in Wong Chuk Hang.