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Speech by Financial Secretary


Following is the speech (translated version) delivered by the Financial Secretary, Mr Donald Tsang, at the Symposium in Commemoration of the 11th Anniversary of the Promulgation of the Basic Law of the Hong Kong Special Administrative Region today (April 7):

Ms Ko, Ladies and Gentlemen,

It is my great pleasure to be here today to join this Symposium which is held in commemoration of the 11th anniversary of the promulgation of the Basic Law. The Joint Committee for the Promotion of the Basic Law of Hong Kong has made this a yearly event to mark the anniversary of the Basic Law promulgation since 1997. It has made significant contributions to enhancing the public's understanding of the Basic Law.

The themes of this year's Symposium centre around economic issues. As the Financial Secretary of the HKSARG, I would like to share with you my experience of working within the framework of the Basic Law since the reunification.

The first thing that springs to mind is the Asian financial crisis which emerged with the devaluation of Thai Baht on 2 July 1997. By the time the Government of the Hong Kong Special Administrative Region decided to use our reserves to defend the local market in August 1998, the Basic Law had been implemented in the Hong Kong Special Administrative Region (HKSAR) for a whole year. Under the principles of "One Country, Two Systems", "Hong Kong people running Hong Kong" and "a high degree of autonomy" and in accordance with the Basic Law, our constitutional document, the previous social and economic systems of Hong Kong shall remain unchanged and the SAR shall have independent finances and enjoy a high degree of autonomy on economic matters.

Such economic autonomy was exercised fully during our market incursion. We did not even have to consult our sovereign state in advance as we did in the colonial era. At the time, my colleagues and I had only one goal, that was to uphold the integrity of Hong Kong's monetary system and to prevent international speculators from further distorting our market. The experience in tackling the financial crisis has given me a deeper understanding of the spirit of the Basic Law.

The Basic Law has set out some guiding principles for the management of public finance. Article 107 provides that the HKSAR Government shall follow the principle of keeping expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its gross domestic product. Article 108 provides for the low tax policy which we have always pursued.

I would like to emphasise that the provisions for us to live within our means and to strive for a balanced budget, etc. are by no means dogmas or slogans. For a small and externally-oriented economy like Hong Kong, a solid financial foundation is particularly important. Adhering to the philosophy of prudent financial management does not mean that we are inflexible misers. As a believer in market forces, I certainly do not think that the government should build up unnecessarily huge reserves. You may still recall that we introduced a number of tax concessions a few years ago. The rationale behind that was to leave money in the hands of the people when circumstances allow. On the other hand, we also need to maintain reasonable fiscal reserves in order to cope with contingencies. Otherwise we will not have sufficient resources to meet the challenges when we face a severe financial or economic crisis again. Therefore, we must balance various considerations when making decisions on public finance, and exercise prudence to ensure that resources are properly and justifiably used.

In the Basic Law, there are of course some other provisions that are related to the economic aspect, for example, the requirement for the SAR to maintain its status as an international financial centre and the safeguard for Hong Kong to remain a separate customs territory. I shall leave it to other speakers to elaborate on those aspects. However, I do hope to draw your attention to certain provisions in the Basic Law, which may not appear to be directly related to our economy, but in fact have important bearing on the economic development of Hong Kong. These provisions include the protection of various freedoms and rights, and the safeguards for the courts to conduct trials independently and the ICAC to remain an independent body. All these enable Hong Kong to maintain a good business environment and are vital in attracting international investors. The findings of a survey on foreign investments released last week revealed an 81% surge in inward direct investments in 1999. This clearly demonstrates our success in this respect.

In line with the principles of the "One Country, Two Systems", "Hong Kong people running Hong Kong" and "a high degree of autonomy", the Basic Law provides the framework for Hong Kong's constitutional and political structure, fiscal and economic policies, as well as social systems. It ensures that the previous social and economic systems of Hong Kong will remain unchanged and that Hong Kong will continue to uphold the policy of free and open market economy, that is conducive to fair competition. Furthermore, the Basic Law provides the legal protection and foundation for the prosperity and stability of Hong Kong. As residents of Hong Kong, we should all have a better understanding of this constitutional document that is so closely related to us.

May I wish today's Symposium a great success. Thank you.

End/Saturday, April 7, 2001


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