Following is the full text of speech by the Secretary for Security, Mrs Regina Ip, at the "Dialogue Sessions with Celebrities" organised by the Hong Kong Federation of Youth Groups today (April 18):
Lessons to be learned from an Economic Miracle
Dr. the Honorable Rosanna WONG and young friends,
First of all, I would like to thank the Hong Kong Federation of Youth Groups for inviting me to today's forum. This is the second time I attend such a forum and I am very pleased to have the chance to have a direct dialogue with young people such as yourselves. I am not going to talk about security as much has been said on the topic. Instead, I would like to take this opportunity to share with you my observations and thoughts on how young people can overcome the difficulties that they are faced with today.
My topic today is "Lessons to be learned from an Economic Miracle". Talking about economic miracles, one could only miss the good old days. In the 1990's, whenever experts dwelled on the "East Asian economic miracle", they were full of praise in the first place for the economic achievements of Japan and China, then for the high speed economic growth of the "Four Tigers of Asia", namely, the Republic of Korea, Taiwan, Hong Kong and Singapore. I remember when I attended a high-level meeting of the Organisation for Economic Co-operation and Development (OECD) in 1994 in my capacity as Deputy Secretary for Commerce and Industry, I was asked to share with other participants the recipe for Hong Kong's economic success. Our economic success then, in terms of high savings rate, current account and fiscal surpluses as well as low unemployment rate, was the envy of many Western industrialised nations. Yet what has become of Hong Kong in the 21st century?
Nowadays, when people talk about economic miracle, they invariably focus their attention on China. Without doubt, since the adoption of the 'Reform and Opening Up Policy' in 1979, the economy of our country has undergone such far-reaching changes that the economic ascendance of China may well be rated as one of the most momentous events in mankind's development in modern times. Yet perhaps not everybody is aware of another much discussed economic miracle - the economic recovery of the Republic of Korea (ROK).
First of all, let me brief you on the recent economic situation of the ROK. The economy of the ROK has fared well even amidst adversities in recent years. After being hit by the financial turmoil in 1997 along with the other Asian countries, Korea's economy showed signs of recovery in 1999 but since then has managed to achieve economic growth every year. Based on the Korean Government's latest estimate for this year, the economic growth rate will reach 5 per cent while the unemployment rate will drop to 3.5 per cent (as against 4.1 per cent in 2000). It is also estimated that the current accounts will have a surplus of US$4 billion to US$5 billion. Last August, the Korean Government repaid an emergency loan of US$20 billion secured from the International Monetary Fund, thus reducing substantially its external debt. The credit rating of Korean bonds, pegged at BBB before November last year, was upgraded to A3 last month. In addition, Korea has a foreign currency reserve of over US$100 billion, which is the fifth largest in the world.
How did the ROK manage to turn things around? It is largely because the Korean Government has adopted the right policies. There are several noteworthy elements in the economic strategies of the Korean Government.
Firstly, it has launched structural reforms. In four major sectors of the economy, namely the financial, corporate, public and labour sectors, there have been structural reforms and capital restructuring in order to give market forces full play. The previous economic structure, where no distinct lines were drawn between banks and enterprises, has been changed so that emphasis is now placed on corporations and legal entities. Moreover, the original chaebol-oriented economy has been transformed so that there is more room for the development of small and medium enterprises. Companies which had grown too large and unwieldy, such as Hyundai Business Group, have been split into smaller companies. Besides, Daewoo Motor has gone bankrupt and will soon be taken over by General Motors. The restructuring of existing enterprises has resulted in more efficient market operation and better distribution of social resources. At the same time, the Korean Government has not forgotten the importance of improving labour relations and providing stronger protection for the unemployed.
Another important strategy is to step up the use of information technology (IT). The aim is to transform the country from an economy which relies on capital-intensive heavy industries and chemical industries into a knowledge-based economy which focuses on human intelligence. The Korean government has put technology to good use and hence increased the country's overall economic efficiency and productivity. It has also raised substantially the application of IT. Broadband users in Korea now account for 40 per cent of the population with the figure expected to exceed 60 per cent shortly. Meanwhile, 2.5 G mobile telephone users account for 60 per cent of the population. These two utilisation rates are the highest among OECD countries. In the past two years, the increasing number of new IT companies have become the major driving force behind the bullish Korean stock market.
In the face of globalisation, the Korean Government's strategy is to continue to open up the country's domestic market and to promote Korean products, image and culture on the international front. It manufactures globally competitive products such as cars, TV sets etc. and open up new markets to increase its market share. Korea is a major supplier of dynamic random access memory (DRAM) chips in the world. It manufactured 120 kinds of globally competitive products in 2001. A higher target of manufacturing 220 kinds of products has been set for this year. Korean products are well received all over the world. In addition to electronic products such as DRAM, Korean TV dramas and movies have also hit international markets. I believe many of you are familiar with Korean movie stars and have watched Korean TV series and movies. Korea will make use of the opportunity of hosting the World Cup Finals (Note 1)and Asian Games (Note 2) later this year to further open up its domestic market and promote its culture as well as international image.
In the wake of the September 11 attacks, even the US economy could not avoid a downtrend. However, the Korean economy has remained robust. This is mainly because Korean consumers have confidence in their nation's economy and their purchasing power has become the engine for economic growth. According to statistics, in 2000 the output of the Korean manufacturing industry accounted for 32 per cent of their Gross Domestic Product and the service industry 43 per cent. The percentage of domestic consumption, meanwhile, has risen from 50 per cent in 1987 to 58 per cent. With one million jobs added since 2000, it looks like the ROK will be the first country in Asia to make the leap from an industry-led to service-driven domestic economy.
Vigorous consumer spending has also created innumerable business opportunities for the technology and service sectors, thus helping to make the Korean business sector more diverse. Electronic commerce is booming and web portals which produce avatars (Note 3), i.e. cartoon characters that stand in for real people in Internet chat rooms, are having a brisk business. For instance, Internet portal www.freechal.com, started charging for avatars last June. The company has captured some 110 000 Korean customers who spend an average of about US$2.30 a month each on outfits and accessories for their virtual paper dolls. Doesn't sound much, but it adds up to a US$2.4 million boost to the local economy every year-generated by a company with no factory floor, whose only tangible product is intellectual property.
Another factor contributing to the strong economy of the ROK, which we should not overlook, is the solidarity of the Koreans in overcoming difficulties. A case in point is their Gold Collection Campaign. The campaign was initiated in late 1997 by civic and religious groups which eventually mobilised support from 20 per cent of the population. Within a short span of six months, 2 000 tonnes of gold with a value of US$2 billion was raised. At a time when the country was desperately in need of foreign exchange reserves, this sum helped the ROK tide over a looming crisis. The Koreans have fully grasped the importance of social harmony and stability to the economy. Union and student movements are now much less popular with the Korean people than decades ago. The Koreans now readily accept the pains of structural reforms to the economy.
What lessons can be learned from the economic miracle of the ROK?
The management of the economy of Hong Kong does not fall under my portfolio. I do not intend to elaborate on this aspect, nor would I propose any effective solutions to our economic problems. I merely hope that our young people can learn something from the economic miracle of the ROK.
First of all, I hope that all of us, like the Koreans, would realise that globalisation means that our competitors are manufacturers and service providers from all over the world. Therefore, the people of Hong Kong, in particular the younger generation, should be far-sighted and should set their goals high. We should take pains to increase the competitiveness of our products in the world market. To achieve this, we need to better equip ourselves, strive for progress incessantly, enhance our language skills, broaden our knowledge, keep abreast of the times and try to master the application of new technology as well as modern management philosophies. In the absence of young people determined to strive for excellence, to sharpen their competitive edge and make contributions to community irrespective of the professions they are in, Hong Kong cannot hope to compete with other territories and win.
The solidarity and confidence demonstrated by the Koreans in the face of economic adversity have also set a good example. Of course, the economic situation of Hong Kong differs from that of the ROK in many ways and I do not expect people already plagued by negative assets to 'donate gold'. Instead, what we should learn from the Koreans are their realisation that they are in it all together, their solidarity and determination to overcome adversity as well as their confidence in turning the tide. They do not wish to have a divided and unstable society. Their self-confidence is manifested by their willingness to spend. Their purchasing power spurs not only economic growth but also development of the technology and service sectors.
Turning now to Hong Kong, we need not be pessimistic as Hong Kong has already established a sound foundation in many ways. We still have an edge over our competitors in terms of geographical location, the rule of law and being the melting-pot of Eastern and Western cultures. As long as the people of Hong Kong relentlessly strive for progress and give full play to their talents, we will have a bright future.
Finally, I hope young people would take note of the trend of the emergence of intellectual property-based enterprises. The cyber dolls launched by www.freechal.com, which I mentioned earlier, and other web portals have given rise to an avatar craze in the ROK. Online users can outfit their avatars in a range of styles. Their avatars may also chat, fall in love, marry or even divorce other avatars through online games. According to the trade's estimate, over 10 million people in the ROK have avatars to stand in for them in chat rooms. A new cultural phenomenon among young people that crosses over from reality to cyberspace has emerged and has generated handsome profits for web portal companies. Of course I do not encourage young people to indulge too much in online games. I am just using this as an example to illustrate my point that opportunities abound and that young people should keep their fingers on the pulse of the times. Then they will be able to seize opportunities as they come and embark on new enterprises which will create a better future not only for themselves but also for Hong Kong.
End/Thursday, April 18, 2002
Note 1: The World Cup Finals will open on May 31 this year in Seoul and close on June 30 in Yokohama, Japan.
Note 2: The 14th Asian Games will be held between September 29 and October 14, 2002 in Busan, Korea.
Note 3: Avatar is derived from the Sanskrit word "Ava" meaning"descend" and "through". The fairies in Indian myths borrowed the body of objects or animals in order to descend to the world and named them "avatar". On the Internet, avatar goes beyond its original meaning and becomes a keyword which typically means "virtual reality".