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Following is the transcript of the question and answer session (English only) given by the Chief Secretary for Administration, Mr Donald Tsang, at Asia Society Luncheon today (November 29):

Question: As Mr Tsang mentioned, I also hope that more international companies will set up their headquarters and regional headquarters in Hong Kong so that we can have more nice places and nice food, just like here today at Hang Seng Bank.

Of course, besides being the centre of a very nice place of Asia, I will ask a question on the role of Hong Kong in Asia. Most importantly is that what Hong Kong can contribute to the building up of an Asian common market?

Mr Tsang: That, perhaps, might take a bit longer time but I will try to be brief and perhaps concentrate on the key points. You are right, we are the centre of multinational headquarters in Hong Kong. In fact, we have 3,200 of them here today in Hong Kong, and the largest concentration compared with any other city in Asia. But moving into a common trade area in Asia, I think, or moving even on the currency side, is very much a longer term objective. What Hong Kong can contribute is the role model. This is what it means. This is what free trade means. We have not reached what people might say is nirvana, but close to that as far as trade is concerned. It means zero tariff. It means zero non-tariff barriers. It means convertible currency. It means minimal government intervention in the business sector. It means low taxation. All these, and it means a very free-wheeling business sector. This is what we are able to offer, a role model of it all. Write all that Hong Kong can offer and say that is the recipe for free trade, then I think we are getting somewhere. But I am afraid there aren't many places like that on earth. But perhaps as a role model, Hong Kong is a good one.

Question: Basically, Hong Kong is going through a difficult period, we all know, along with the rest of the world. The government is instituting different policies now to try to address some of the problems, some of the mistakes that were made in the past. How quickly - and this is a question that is on many people's minds - how quickly do you foresee Hong Kong getting back to where it was before? Will it ever get back to where it was before? What do you see, what do you really see for the future and when can we expect the turnaround? A difficult question.

Mr Tsang: You should have asked Antony that question. Let me say this: people might feel - particularly when we have some visitors coming here, like Henry and others - that this is a funny city, they complain like hell. Look in the newspapers, they are all critical. But these are our strengths. The very strength of Hong Kong is a very vocal community. But underlying this, we are probably the most diligent work force, pragmatic in its approach and highly flexible in adapting to things. Well, things are getting bad, but look at the man in the street, how does he react to it? Our taxis become cleaner, smarter and with drivers with a smile. Look at the shopkeepers, they are more forthcoming, they are more happy to serve. This is how we react to it, we work harder. But they still complain, they still scream, they do still criticize us, but this is the real Hong Kong. With that, really, Alan, the present time is tough; perhaps next year will be tough, as Mr Tung quite rightly said, but we will be very hot on the heels of any recovery that is going to take place. If you are able to tell me when the US economy will turnaround, I will say add one quarter to it and Hong Kong will be there.

Question: You mentioned that we have to change in response to changes that are happening around the world and we understand that we do have to change. Would you consider that the exceptional ability to respond to changes and to adapt to changes is a unique feature, an exceptional feature of Hong Kong that makes it a different city from other cities in China? And would you consider it is a matter of speed? Is Hong Kong competent in changing more quickly and more better in terms of quality than other cities?

Mr Tsang: I can't claim that Hong Kong is supreme and better than anywhere else but we have a lot of things going for us. Even in the case of adapting to change, talking about Hong Kong University, recently the Hong Kong University SPACE - you know the SPACE Programme, the School of Professional and Continuing Education - conducted a survey in Hong Kong recently and the survey tells us that 700,000 Hong Kong adults today are taking part in some form of continuing education. And that is more than 10 per cent of Hong Kong's population, a lot higher percentage in terms of adults, and they spend, on average per year, not less than $20,000 for that very purpose. This is what change is all about. It is not a question of sitting on the hands and doing nothing. But this is Hong Kong people trying to improve themselves in all sorts of things and this is what change means.

That is the reason we encouraged my boss, C.H. Tung, to put in $5 billion more to encourage more people to study and learn about the new tricks. I cannot say that they will be doing all the right things. But one thing is Hong Kong people are enterprising, they work hard, and they know the need in the immediate future is to change and change the way of doing things and become even more competitive.

Compared with the main Mainland cities we have certain strengths and we have certain weaknesses. As a community we thrive on pluralism. Pluralism means that we do not work in unison all the time. But what I know is, we have a lot more energy in it, a lot more enthusiasm in it, a lot more creativity in what we do. And for that reason, I think we are second to none at the end of the day when it comes to competition in the market place.

Question: Mr Tsang has portrayed a future full of hopes and also challenges and so I would like to ask Mr Tsang, does the Government have any comprehensive plan to help the young people of Hong Kong prepare for the future role and also to increase their competitive edge?

Mr Tsang: That is a very large question. The amount of resources we are now putting into education, for a start, is something. At the moment over 20 per cent of our entire public spending programme goes to education. That is probably one of the highest among developed economies in the world today. And what is education for? All for our young people. And then, of course, beyond that we have various training programmes suited to bring our young people into the community. But our young people do not need to be spoon-fed at the end of the day. They want to have a free rein on things. They want to decide for themselves what they want to do at the end, whether it should be banking, whether it should be adventurous - maybe an archaeologist or a poet.

So I believe we have the makings, in terms of human resources, to make a very dynamic city and we are putting the right resources into bringing this merger, these human resources, into a very powerful organ of growth in the years to come. But I think it would be a wrong notion to have in one's mind that this Government should fashion out the entire career pattern for all our young people, making sure they all individually succeed in a predetermined way. This is not Hong Kong's style. What is important is that sufficient resources will be put there, that a creative environment is placed there, and we must make sure that we are able to provide the economy to create the jobs for them at the end of the day.

And I would ask all our young people to look beyond the present state of difficulties. Times are tough but perhaps it is the best time to face up to the world, the best time to come out and work, now, in order to appreciate the fruits of our labour in the years to come. I think the opportunities really abound at this very stage, although times are tough, as I said.

Question: I think we all agree that Hong Kong's greatest strength is its resilience and entrepreneurship. But no matter how much we work or how creative we are, the one thing that limits that ability to just go all the way is the peg, which is making us such an uncompetitive place. Do you really think that we cannot withstand the impact of a de-pegging?

Mr Tsang: I can't agree with you that the handicap is the peg. We don't call it a peg, by the way, I hate that term, it is called the link. That link has served us very well over the last 28 years. We have seen through a number of financial crises through it. It will be painful for us to adjust, yes it is. But then, of course, compare it with the consequences of a massive deflation, a massive devaluation of currency on the other. The most important thing we have to remind ourselves in this day of age, the most important thing that we must maintain is stability - stability in the marketplace. What will be the most important anchor of stability in the marketplace? I would suggest it is the currency. Why has Europe banded together into a Euro zone? They want stability in their currency. This is what they are going to deliver to us on January 1st when they are all circulating the same currency too. So remember this, it is not a weakness. The weakness is in your mind. There is no such thing as a perfect monetary system. If someone says that, he is cheating you. The most important thing is we must have a monetary system that suits Hong Kong. All I can say to you now, and something which I can say to you with confidence because I know what Antony is thinking and working on, and I know what Mr Tung is thinking of on this point, is nothing can take our link away at this point. And it would be disastrous if we do that, or even think about those things at this point in time.

Question: First, let me express thanks from the students to be able to be here. Thanks to the Asia Society and also to the sponsors. Mr Tsang, I wonder whether you could say a few words on Hong Kong's relations, especially economic relations with Indonesia, especially after the dreadful atrocities that happened in Jakarta around the fall of Suharto? A number of Chinese Indonesians fled to Hong Kong at that time. Maybe you would be able to say a little bit about the relations between Hong Kong and Indonesia. I remember President Wahid had been a guest of the Asia Society a year ago, or so, as well.

Mr Tsang: We have a very friendly and cordial relationship with Indonesia. Even through the worst of times we have been in dialogue with them and talking to them when they were thinking of they were trying to apply our currency board system in Indonesia. So we discussed with them about the technicalities involved and we discouraged them from doing so at that time because I did not think they had the prerequisites for doing so. But we have been on friendly terms and cordial terms with Indonesia and we have a reasonable level of trade between ourselves and Indonesia. Indonesian businessmen travel and commute frequently into Hong Kong and we work together in the same organizations, such as the Asia-Pacific Economic Co-operation, the Chief Executive meets with the head of the Indonesian Government from time to time every year on this. But the most important relation is not between the governments themselves, it is in the business sector and there I think they are closely intertwined over the last century, a whole host of things ranging from import-export, banking, manufacturing and so on.

Question: I agree with Donald in saying that the link is not a problem for Hong Kong. This has been something which has often been mistaken by a lot of Hong Kong people. And I also support the Government policy of putting more money into education. However, I want to ask this question: Hong Kong is still in need of a lot of talented people and one of the ways to do it is to attract more people from elsewhere, from China or from other parts of the world. Are there any concrete steps, more positive steps, for the government to do it?

Mr Tsang: Hong Kong, in terms of human resources, probably we have the freest regime as far as the whole world is concerned, other than the Mainland of China. Anyone who has a job here can come here and most people can come to work and stay, and to vote after staying here for seven years. So perhaps we have one of the most liberal regimes one may get in this regard among all international cities in the world.

But as far as the Mainland is concerned, we have a limited regime. We have a system which has built up from long ago, it is a rather restrictive regime. But at the moment we have 150 people coming into Hong Kong every day from the Mainland for family reunion purposes. And for those who are coming here for business, they can have a much longer visa now, with the agreement of the Central Government. And what is more, those people who have the skills, particularly in the financial services and in the IT field, may come to Hong Kong to work as well under the new system. And any specialists or experts in any field may come under the talent scheme which we have, from the Mainland too.

On top of that, as you know, Francis, we have students coming in to our universities. There is in fact a quota for nearly up to 300 - 400 of these students over 20 years old coming here to do undergraduate programmes, never mind the post-graduate programmes. But I agree with you, these arrangements may not be adequate to meet our need for talent in the years to come and I am open to ideas as to how it may be achieved. We are now reviewing our professional scheme with the Mainland in the next two months, I think. We started the scheme four months ago and there are another two months to go and then it is due for review. I am waiting, I am open to ideas. But we must not ignore the fact that we still have a pretty high unemployment situation in Hong Kong. Whatever arrangements we make must not undermine the job opportunities for the local people and they must come first.

End/Thursday, November 29, 2001

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