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Following is the transcript of remarks (English only) by the Chief Executive, Mr Tung Chee Hwa, at a reception hosted for senior representatives from over 80 overseas companies at Government House this (August 17) afternoon:

Mike, distinguished guests, ladies and gentlemen,

I like to extend to you a very warm welcome to this particular event, but more importantly, to our city Hong Kong.

Together, you and us, we work very hard to make Hong Kong a better place for business as well as a better place to live in because I know Hong Kong is not just our home. From now on, Hong Kong is also your home. There are over 12,000 overseas companies in Hong Kong. Of the 12,000, 3,000 of them are regional headquarters. Over the last few months, more than a hundred regional headquarters additionally have been established here in Hong Kong. These companies come from over the world. Many from the major economies, and the fact that they should choose to come to Hong Kong at this time, a time of major economic downturn in their own countries, is a testimony to the strength of Hong Kong as an attractive centre of international business.

Let me just say a few words about Hong Kong's economy. Our economy over the past 12 months has been affected adversely by two important factors. One is cyclical in nature and the other is structural. By cyclical I mean that, as an open economy, we are obviously adversely affected by what happens in the United States, in Europe and in Japan as well as the rest of Asia. The fact there is a major downturn going on now in the United States and in Europe as well as the continued sluggish economy in Japan has affected us very badly this year.

Now the other factor, as I said earlier on, is structural. The structural adjustment has been taking place in Hong Kong for some time now. This is the result of globalisation or advances in IT as well as a result of the tremendous progress that has been made in China. The achievements of China have given us tremendous opportunities but at the same time we have to recognize many many new challenges. And it is against this sort of background that we in Hong Kong over the last few years have been undergoing structural changes. Adjusting ourselves to a new role as we move forward. Is there a reason to be pessimistic, to be worried? I don't think so.

The fact is that if you look at the Hong Kong economy, compared ourselves with the rest of Asia, we actually fare much better. Hong Kong actually has many strengths, and I just like to recite a few with you. Our infrastructure is really very superior, be they roads, railways, telecommunication, airport, and ports. We have the best anywhere you can find, I think, in Asia. The rule of law here, which we all treasure, is very strong. The ability to move capital freely, to move people freely, and with information being disseminated freely are all very important area of strengths that we have. We have very good quality people, always entrepreneurial and always ready to make changes.

Don't underestimate the clustering effect of many of our businesses. We have one of the largest concentration of financial institutions here. As a result, we get excellent service from lawyers, from accountants, and from investment advisers. We are centre for transport and logistics, and therefore we have a cluster of very important airlines, container shipping companies, brokers, and freight forwarders serving in Hong Kong. Many of these clustering effects cannot be found in other cities. Indeed, most important of our strength is our geographical location here in Hong Kong. We are next to or in the middle of the fastest growing economy in the world, the People's Republic of China. We have all these strength with us. So there is no reason for us to disappear.

Yes, there are difficulties at this time, but I am sure we will be able to overcome them as we move forward. As international companies, as overseas companies, I know where your concerns are. I know you want to make sure there is a level playing field and that Hong Kong continues to be effective and the market continues to be open. I know you will be concerned about continued investment in infrastructure. And you should see the amount of investment we are putting into new roads, new bridges, new railways to make Hong Kong a better place to live in. You should see the investment we are making in education. In 1997, the budget for education was 37.9 billion dollars. By this year, this has risen to 55 billion Hong Kong dollars. It's a huge jump. And we know, education is important for every citizen of Hong Kong and for business community here also. We know how important environment is, how important quality of life is. This is not just to the citizens of Hong Kong, but also to every one of you who have come to Hong Kong and to make Hong Kong your home.

I also know very well the cries out there is that we need to improve the level of our English and also more places in the international schools. In all these areas, I just want to assure you we will spare no effort. We will continue to work very, very hard at these issues.

You are very important to Hong Kong. You are very much part of Hong Kong. And this is not just about business. Yes it is about business. It is also about employment. You bring employment opportunities. But more importantly, you bring social and cultural diversities, and you make Hong Kong a better place for all of us to live in.

And to my fellow citizens of Hong Kong, I like you to know, we have always emphasized how successful Hong Kong can be as an international business centre. And there is the proof: over a hundred new companies have chosen to come to Hong Kong only in the recent months. Indeed, we have created attractive environment to make this possible. I know many in Hong Kong have been affected adversely by the economic downturn. The economy this year may slow down somewhat more, and unemployment this year may go up. They will go up slightly. But we must be confident of our future. The fact is that over 100 overseas companies have chosen to come to Hong Kong at this time.

It is a tremendous vote of confidence, particularly the fact that in their own economies, in their own countries, you can see a marked downturn. As we emerge successfully from the cyclical downturn and from the economic re-structuring, Hong Kong will grow stronger in the months and years ahead as a financial centre, as a centre for tourism, as a centre for transport and logistics, and as a centre for multi-national companies like you, as well as a city in the middle of the fastest growing region in China, the Pearl River Delta. My fellow citizens of Hong Kong, our future is bright. I know together we will make it. Thank you all very much.

End/Friday, August 17, 2001

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