*******************************************

Following is the speech by the Secretary for Economic Development and Labour, Mr Stephen Ip, on "Invest in Success : Invest in Hong Kong" at the BusinessWeek CEO Forum Breakfast Session in Beijing today (October 23) (English only):

Good morning, Ladies and gentlemen,

I'm pleased to see so many of you here this morning, particularly at this time of the day when an extra hour's sleep would have done a lot to assuage the excesses of the previous evening! That's assuming you were allowed to indulge in one of China's favourite pastimes - eating. I know when you're in our capital city, Peking duck is almost a must.

When I first saw the draft agenda for the 6th annual CEO Forum, several aspects immediately caught my attention - in addition to the list of co-chairs and keynote speakers, which reads like the latest 'Who's Who' of business and politics. Two Plenary sessions, in particular, raised issues that I could immediately identify with Hong Kong and, in one way or another, are intimately connected with the theme of this session: 'Invest in Success: Invest in Hong Kong'.

The agenda background notes on Plenary session 2 'The Core is the Crux : Profiting from Corporate Competencies', refer to a growing body of evidence which suggests that companies focusing on their core business perform well over long periods. The notes go on to say, 'the key to sustained profitability depends on doing three things well : exploiting the full potential of the core business; expanding into meaningful adjacent activities or businesses surrounding the core; and, pre-emptively re-defining the core business in response to market turbulence'.

This is a scenario that could have been stamped 'made in Hong Kong'. It is a philosophy we are following in our efforts to steer Hong Kong out of its current economic downturn - a downturn that has been affecting much of the global community, but one that is proving particularly debilitating for our community.

I won't canvass all the issues now as I will be elaborating on them in a later session this afternoon, but we are restructuring and reforming our economy without straying from our core business. We are moving up the value-added chain; consolidating and expanding the four economic sectors that we believe will continue to be our engines of growth in the future - financial services, logistics, tourism and producer and professional services.

In other words, we are concentrating on our core strengths, and adding value to them with a touch of the basic essentials of quality, speed and creativity. Making sure we provide exactly what the customer wants in today's highly competitive environment. But more than that, we are leveraging on the synergy between Hong Kong and its hinterland, the Mainland of China, particularly the affluent Pearl River Delta area.

In case the figures may have escaped you, the Pearl River Delta comprises 12 cities in southern Guangdong Province as well as Hong Kong and Macau. It has a combined population of 50 million, which is more than some medium-sized European country. The interesting part is the synergy between Hong Kong, which has its own legal system and regulatory framework close to those of the Western countries, and Guangdong, which has abundant resources, quality workers and huge production capacity.

And this brings me to the background notes relating to Plenary session 8, entitled, 'Beyond the Hype and the Superficial: An Insider View of Managing in China'. The notes raise a number of questions about managing business in China; whether workers are as productive as media reports say; whether profits are being realised; whether there are opportunities that are not being exploited; and how not to manage in China. Without wanting to pre-empt this afternoon's session, I can say without doubt, Hong Kong offers you your best solution to all these issues. We are part of China, but we operate under our own separate system that is familiar with the West. There is simply no one more experienced, more involved, with the right expertise, the right connections, the language skills, as well as the history of trading with China than the Hong Kong business community.

By way of illustration, the rich experience in managing Mainland operations comes from tens of thousands of Hong Kong-linked companies employing over 5 million people in Guangdong province alone. And Hong Kong is the biggest investor in every other province in China. We have a critical mass of expertise in professional services covering the whole spectrum, whether it is in finance, banking, accounting, legal services, consulting and marketing in many fields.

These services clusters are increasingly being used by Mainland companies wanting to expand their operations to the rest of the world; and of course, in the other direction, by international players wanting to get a piece of the action in China. We are also attracting talent from China and other parts of the world to build on this critical mass. With China's policy to encourage its enterprises to go out and compete in the world markets, Hong Kong is China's springboard to the world. As Mainland entrepreneurs are thriving, and their presence in Hong Kong will certainly add to our already diversified and dynamic business environment.

Today, there is no disputing the Asian market will become an even more prominent factor in the global economy. Indeed, many would agree that China is the brightest star in the region. Its economy has been growing by over seven per cent a year. For years now, China has been attracting the majority of foreign direct investment in the region, with about half of it coming through Hong Kong. And as China further opens its markets in compliance with the rules-based trading system of the WTO, we are strategically placed to act as the facilitator - connecting companies and people, and providing advice on a host of issues that need to be addressed when deals are being brokered with the Mainland.

Let me give you a recent example of what I mean. A little over two months ago, an Australian consortium won a 14 billion US dollar contract to supply liquefied natural gas to our neighbouring province of Guangdong. Helping the consortium to secure that deal was the Hong Kong office of an Australian legal firm, which had been the principal legal adviser for the consortium throughout the 18-month bidding process. Lawyers on the team included specialists in Chinese law and the tender processes in China - in fact, all aspects of Chinese law relevant to the project. This kind of activity is going on all the time in Hong Kong and it will continue to gather pace as foreign enterprises continue to invest and expand their operations in the China market. In other words, Hong Kong is the world's ideal partner to China.

Our unrivalled geographical location has given us that edge as the natural trading and business hub in the region. However, globalisation demands more transparency; open markets; less government control and more faith in the power of the market; good corporate governance and the free flow of information and ideas. These are part and parcel of what makes Hong Kong tick. They flow from our institutional strengths of the rule of law, which provides an added degree of comfort when deals are being made; a level playing field for business; a clean and efficient government; a simple tax system and the lowest tax rate in Asia; and a cosmopolitan lifestyle.

Ladies and Gentlemen, these are the benchmarks on which we test ourselves against the region. We are not found wanting; and I'm sure you will come to the same conclusion - investing in Hong Kong means investing in success. And to help you make your business a success, we have set up Invest Hong Kong, a government department that provides a one-stop investment support service free of charge. So, what more can I say, except make Invest Hong Kong happy by letting them do the hard work in locating your business in our city. You'll be joining the 3,200 other international companies that have already established their regional headquarters or offices in Hong Kong - Asia's world city.

Thank you very much. And now I would be pleased to take a few questions.

End/ Wednesday, October 23, 2002

NNNN