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The following is the transcript (English only) of the Question and Answer session given by the Chief Secretary for Administration, Mr Donald Tsang, at the 11th Annual Asia Leadership Forum today (June 26):

Question: I would like to understand, sir, Hong Kong's immigration policy with regard to bringing in talent from China?

CS: Here, we in Hong Kong has a very open policy. But as regards China, there has been a long established practice from time immemorial that there will be restraints. And in fact in the Basic Law of Hong Kong we are mandated to ensure that there would be a boundary between Hong Kong and the rest of Mainland. But the system is now liberalized quite a lot. As you know, every day 150 Mainlanders come and settle in Hong Kong. In addition, businessmen now can come readily and flow with permit arrangements issued by the two sides. And for people coming to schools, for people coming to our universities, they flow readily as well. For those having expert skills, they have no difficulty getting a work permit in Hong Kong through our immigration system. For there has been a sea change in the way we look at skilled labour from the Mainland. It is particularly important to us to ensure the vitality of Hong Kong and cultivate and nurture our knowledge of the Mainland to have these professionals working in Hong Kong. That is despite the fact that we are running a historically high unemployment problem here.

Question: Thank you for being here. In the last five years Hong Kong has seen the suicide rates in this city escalate almost to catastrophic levels compared to any other cities in the world. I am interested to know what initiatives the Government is taking to address this issue, the social issues and environmental issues. In the same five years we have seen environmental conditions of the city decrease also and pollution increase and I think this is becoming a more and more important issue for citizens of Hong Kong.

CS: As far as I read on the statistics, the suicidal rate in Hong Kong is among the lowest in all major cities in the world. It is true that recently, we as a government are acutely conscious of the rising trend that we might at some stage reach the international cities' level but that is what we dread. We have formed a task force within the Government led by social welfare experts, police experts and with the participation of NGOs, to find out ways in which we are able to deal with the issue on a more broad front basis. But it is of course a very complex issue. It may be economic, it may be social or maybe the pace of change is too fast for certain people. But I think we must put it into perspective; as far as absolute numbers is concerned, Hong Kong, in terms of suicide rate is still among the lowest.

As far as the environment - I think it has been a pretty good story. If you just step out of the hotel you can see immediately blue skies. It is not only today but in fact the whole of the last year the quality of air in Hong Kong has improved remarkably. That has not happened suddenly or as a matter of a fluke, it is the result of heavy investment. We have already replaced, for instance, the entire taxi fleet. Our taxi fleet used to be driven on diesel; it is now changing to LPG. And we are using the highest quality diesel for our trucks and for heavy vehicles. So for that reason, gas emissions from all our rolling stock in Hong Kong has been cured. Air quality has distinctly improved. But it is not a Hong Kong issue as such, it is a regional issue. For that reason we are talking seriously with the Guangdong authorities who are equally anxious to improve the air quality in the Pearl River Delta, to see the way in which we can work together with a common programme. And in fact one common programme has been developed and was announced earlier in April. I hope it will bring us further into cleaner air and clearer waters in the years to come.

Question : My question is with regards to our education system. As you said, your vision is for Hong Kong to become a knowledge-based society, so education is the foundation of that. But, as well, you have been educated in the US and Hong Kong as well. Our fundamental philosophy in the current education system is a different philosophy (from) the US system or the Western system where a lot of freedom of expression (and) exploration contradicts the culture of our current teachers - the body of teachers. Can you describe your vision of how you can evolve to this more creative and knowledge-based type of education system?

CS: Well, there is always a stock interest in terms of the style of education and the quality of products. A lot of academia have been doing this, measuring the end product of children at the age of 12 having done six grades and those who have done 12 grades in Asia, particularly in Korea, in Japan, in Hong Kong and Asia, as compared with the performance of those in the United States and Europe. Whereas in the former in the Asian context it's more concentrated on books and reading and learning by rote and the others are more freestyle ones. Hong Kong is a mix of the two in that we have well-motivated teachers adopting new ideas and there are traditional teachers bringing up pretty solid citizens as well.

But what is more important here it is not a question of what is the better formula of teaching our kids, the most important thing is that we must have an open mind and accept new styles of doing things and at the same time ensure there is sufficient investment in this very important programme to get ourselves up to the knowledge-based economy of today. In Hong Kong we are devoting a quarter - a quarter of the entire public spending into education, training and re-training - 25% - and that is probably the highest dedication of funding over this area of programmes than in any other developed economy. So for us, tough times, good times, we want to put a lot more into educating our young, making sure that they will remain competitive, so they are able to deal with the challenges of tomorrow.

Question: I am a great fan of Hong Kong, I have been coming here for various reasons since 1995 for various clients and one of the things that interests me is that - you spoke about this I think at the last CEO Forum here - this perception about Shanghai taking centre stage. Not to necessarily revisit that but not long ago in Foreign Affairs Quarterly there was an interesting article about states having brand value - cities in terms of perception. I wondered what you attribute the perhaps erroneous impression that Hong Kong's centrality is going to become eclipsed by Shanghai and whether you think that perception or misperception is something Hong Kong needs to address, even if it is erroneous?

CS: I think the facts speak louder than anything. You know in my speech today I have, in fact, not mentioned Shanghai at all because I think it is no longer an issue in that everybody knows that the hardware is beautiful in Shanghai. But in terms of software, in terms of strategic growth, you do not look at the city alone. And city on city, there is no comparison, and Hong Kong is right up there in terms of per capita GDP and in technological advancement. But what is important is don't look at that as well but look at what we represent in a cluster. You have Shanghai working with the Yangtze River Basin, with Hong Kong (working with) the Pearl River Basin. In terms of strength, in terms of complementarity, in terms of attainment and growth potential, the Pearl River Delta has always been ahead of Shanghai together with the Yangtze Basin Delta. And it will continue to be the case. In fact the whole Yangtze River Basin is growing pretty fast but the Pearl River Delta is still growing in double digit.

So I think the most important thing is, when you are talking about hypes, then of course you will be looking at glitzy buildings and neon lights. But if you are talking about hard-nosed businessmen, they will go to the place and look at the tax system, look at the software, look at its rule of law, then look at its level playing field, look at how clean the government is, how efficient the place is, and eventually come to a decision of where to put their money. Shanghai is a great city; Shanghai will be a great financial centre for serving the country as a whole. It will be dealing with Renminbi; it will be a big industrial city. But Hong Kong will be another type; Hong Kong is a greater city in that it is Asia's world city. It is also the nation's most important international financial centre circulating a currency which is totally convertible and the configuration is very different. We are just like two engines of an aircraft taking-off now in the 21st Century, taking the country into an economic superpower in the next ten years or so. Well, that is how I envisage our position with Shanghai. It is not that one is greater, one is inferior, but that there is a different composition. One is concentrating on industrial and manufacturing productivity, like Shanghai; and here is one concentrating on services and the international dimension for the country as a whole.

Question: Now that we have a much more accountable government, according to what you described in terms of the realignment, what are its plans for the increase of the pace of democratization, i.e. a majority, if not the totality of the Legislative Council being directly elected by the populace as well as the direct election of the Chief Executive?

CS: Well, I think as quickly as people want it. The only thing is that as a public servant I have to be very careful and very humble in noting that at this point in time the public, the people at large are gripped with economic issues. They are worried a lot more about jobs, about prices, about competitiveness and our business prospects and it would be very arrogant on our part to impose what we believe is right for them. I believe that democratization is a common goal but the form it will take is crucially important. Hong Kong is not starting with a clean slate, we inherited a system. We are now developing it into an accountability system. We are bringing our system forward by one major step but where exactly we will be going, it depends on the wishes of the people. And I think it will emerge. People will discuss more about it as the accountability system matures and as we take on the 2004 election of the legislature and running ahead to 2007 where we know that we need to make a decision by then. So I think there is no need to hurry. We have to look at these things at the pace at which people want it. But it is all in our mind - it will come in good time.

But we must remember one thing: it is something which must be homegrown, of our own; fully representative of the people but universally recognized as such to be representative but not necessarily the same which is cloned simply from Westminster or from the US Congress. It will be something which must produce the economic goodies of Hong Kong, capable of laying the golden-egg every day, producing the goodies of life for Hong Kong people, and at the same time giving economic and social satisfaction.

Question: It has been a wonderful keynote address, my complements to you. What I need to know from you is - you talk quite extensively about restructuring and systems and corporate governance and so on and so forth which is extremely laudable - since you are sitting at a very advantageous position in terms of the economy, the trade, the financial institutions, well-oiled machinery, services and logistics as you mentioned - of course there is going to be competition between various provinces, whether it is Shanghai or elsewhere in China, what exactly would your vision be to increase or accelerate the learning curve so that the other provinces in Mainland China are on par or even better? Because all eyes are on China today worldwide in terms of its economic growth. What, from Hong Kong, would you be able to export into China in terms of the learning processes so that the acceleration of the economic development could be much faster, not just along the coastal belt but maybe even in the interior? Would you have any long-term visions? Would you like to share your experiences? And would you like to have more competition as good as Hong Kong in the near future?

CS: Hong Kong thrives on competition, so there is of course a continuous urge for us to ensure that we are working in a healthy competitive environment. As far as the Mainland market is concerned, as I mentioned in the speech, Hong Kong is the Mainland's number one investor for a long while. And not only that, we are the number one investor in the 32 provinces and municipalities. In each one of them we are number one so we are penetrating into the market in various fields. What is important is to leverage that to produce a new product. Just imagine, with Hong Kong's skilled labour, with our innovation and our financial resources we have leveraged the manufacturing capability of the Pearl River Delta and we have been able to find a very decent market niche in the most competitive markets in North America, in Europe. Now, what is important is to turn and leverage that sort of energy to master the same resources we have in the Pearl River Delta and deal with this growing market in the Mainland. I think indeed this opening up of the WTO, allowing Hong Kong to compete on equal terms with the domestic manufacturers in the nation, will propel Hong Kong's economic growth to a much higher plateau than in the past. I think the golden era of Hong Kong is yet to come.

But what we are able to export in Hong Kong is not the shirts and shoes of this world, we are out of that game already. What we should concentrate on is the services we provide, the sort of thing which I mentioned in the speech - our legal services, our accounting services, our trading services, our marketing skills, and our international network and our concept of legal implementation of contracts, the way we administer things, how we organize our stock market, how we look at the rest of the world, how we deal with businessmen from overseas, these are the sorts of things which China would like to embrace and these are the things we would freely wish to go and give and share with our brothers and sisters on the Mainland.

I think one should not underestimate the speed at which the Mainland is gearing-up to the whole new brave world under the WTO regime. I can see more opening-up; there will be more business to be done. There might be even more disputes to be brought in front of Geneva under the WTO discipline but this is part of, what you say, sir, the learning curve. But Hong Kong will be helping it along, helping it see the rest of the world, the challenges and the benefits it will bring to the nation as a whole by trading in a more liberal manner.

Question: Mr Chief Secretary, if I can exercise my privilege to ask perhaps one last question. I am a visitor to Hong Kong and I may very well be misinformed - I try to be as informed as possible - but one cannot help but notice the general sense of gloom. And that may very well be just a reflection of the economic times we live in, in this part of the world at the moment but it may also be symptomatic of some of the issues that were touched on in the questions and in your remarks, namely that Hong Kong may be - and again I use the word the gentleman used - eclipsed by other locations within China. I know you have addressed many of these issues but my specific question to you is: What steps are you and your administration and your colleagues taking to redress that sense of, perhaps, reduced optimism or pessimism, if that is the right word, among the people? What do you do? What sort of messages are you trying to deliver, are you trying to convey to your people?

CS: I believe that the new accountability system might be able to project the government, project the new administration in a more positive light with a more focused and coherent programme geared to the problems of today. And I also believe that we cannot expect too much that just by creating a new image, by beautiful words, we can overcome the gloom and doom of the day, which are more symptomatic not of only people's feelings but rather of the economic sufferings that we see today. But Hong Kong people are intelligent people, they are well-travelled people, they know they are not alone in this. They look around them; they will go around South-east Asia to look at what is happening in Singapore, an equally dynamic city, and how they are suffering. And they go to Malaysia, they go to Indonesia, they go to the Philippines, they have experienced it and they know what is happening. But what is different in Hong Kong is the free spirit in Hong Kong. You can see them happier than most other people when there are good times and of course you see them gloomier when there are bad times. And our press will happily report that too. So this is what Hong Kong is like, this is what we are.

But all I ask of you is, don't write it off. These are very dynamic people, they work hard. You come through, sir, through our customs in immigration procedures in our airport, you will see the efficiency has not declined, in fact it has grown. If you go and ask for a driving licence it will be issued right away. If you go down to the street it is the safest city in the world. That reflects the vigour, the tenacity and the professionalism of the place. These people will never give up, they will fight. But in this sort of mismatch, where some people belonging to the old economy are losing out and screaming aloud, when those belonging to the new economy are working hard, keeping very quiet and making loads of money, then you have this little mixture of noise and doom and gloom and quiet happiness. Well, that's life, and that is what we are.

Thank you very much.

End/Wednesday, June 26, 2002

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