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FS's Speech


Following is a speech by the Financial Secretary, Mr Henry Tang, at a luncheon organised by the Federation of Hong Kong Industries today (August 22)(English only):

Andrew, distinguished guests, ladies and gentlemen,

Thank you very much for the warm welcome. It is indeed my pleasure to be among so many old friends, particularly as this is my first speaking engagement since taking up the new post of Financial Secretary three weeks ago. It has only been a couple of weeks that, as the Secretary for Commerce, Industry and Technology, when I welcomed Andrew as the new chairman of the Federation of Hong Kong Industries. And now, I am speaking to you as Financial Secretary, and as the master of ceremony has pointed out, it is a surprise! Hong Kong is full of surprises and the life of a politician sometimes is full of surprises as well.

What I really want to say is, I am indeed honoured and I am humbled to have been nominated by the Chief Executive and appointed by the Central People's Government to take up the reins of this very important job. I pledge to you, I will do my utmost to serve the best interests of the people of Hong Kong. I will try to improve our economic fortunes and also manage our public finances prudently. I am sure that I can rely on your support, as Andrew has so kindly given me, in achieving those goals.

In taking up this job, I believe it is important for me to communicate to you, to the market, to understand the principles which I will stand by during my tenure as FS.

I believe strongly in greater transparency and greater responsiveness - I will seek the views of a wide range of interests and different sectors before making any major decisions. I will do this in an open and transparent manner. An example is the issue of sales tax, which I raised the subject when I met the media at tea several days ago. I would like to emphasize that we are still at a very early stage of studying this issue. Yet, I have to bring it up for discussions and debates in the public arena because it is important that for all policy issues that are going to have a major impact on our community, we provide an open platform for adequate airing of everyone's views. We also need to anticipate the needs as well as the challenges on various sectors of our community. I emphasize again, we are at a very early stage, we will not begin earnest consultations until our internal task force has formulated an initial think piece.

I also believe very strongly in policy consistency. It is imperative that our Government provides a stable environment for businesses to invest and prosper. A predictable and business-friendly environment is crucial to attracting long-term investment in Hong Kong in ways that will provide secure and sustainable employment and opportunities for our very hard working people. The community rightly expects government policies would not be changed hastily.

I am also a firm believer in market forces. Hong Kong as we see today, the success and vitality has been built on a foundation of free enterprises. Our hard-working and enterprising people have long been given the freedom to pursue their business aspirations without the heavy yoke of government interference. We should basically leave the market to function. "Small government, big market" is definitely the way to go.

It is on this basis of what I have just said that I will address the unprecedented challenges we are facing - economic restructuring, high unemployment, fiscal deficit and deflation. These four are very, very big questions and very, very challenging issues.

It is easier said than done, but we feel that together we can overcome these problems if we act together and work towards our common goal of reinvigorating the Hong Kong economy. And that is what I will make my first and primary goal as Financial Secretary.

I wish to say from the outset that, despite the difficulties we face, I have always had the greatest confidence in the future of Hong Kong because of our people. In every decade since the end of World War II, we have faced many serious problems; we have dealt with them; we have emerged stronger than before. Admittedly, our current run of bad karma has persisted longer than most - it has been six years since the Thai Baht buckled and turned Asia's economy on its head. And while Hong Kong did recover from the Asian financial crisis and Thailand has repaid all its IMF loans ahead of schedule and amid great patriotic fanfare, we have not overcome our economic restructuring yet.

But now I believe that the worst is over. We are seeing the beginning of a recovery. We have some great opportunities that we should seize and run with. It is not unfounded optimism - the latest indicators point to a recovery and a steady pick-up in a number of business sectors.

This recovery is particularly noticeable in inbound tourism and related sectors such as airlines, retail, catering and business services. The average daily passenger flow at the Hong Kong International Airport has nearly returned to the pre-SARS level. The number of visitors in July was more than 1.3 million, 78 per cent up from June. The "individual visit" scheme for residents of several Guangdong cities has been one of the major boosts, with others to come. These Mainland visitors spend more and stay longer than average visitors. It ignites our retail and catering sector and the local consumption market.

On the jobs front, we are obviously troubled by the record unemployment rate of 8.7 per cent. But the growth of 0.1 per cent, which I announced, shows a clear trend that unemployment is moderating. It is also encouraging to see that the Labour Department recorded a substantial 60 per cent increase in vacancies listed at its Job Centres in July. While part of this increase was due to employment initiatives rolled out by the government in June, but the bulk of it came from companies such as yourselves. This is good news and reflects the growing recruitment needs of employers, along with the revival in economic activities following SARS. I am hopeful that the next time we release unemployment figures, they will be going south.

The base note of our economic recovery is of course the enhanced cooperation with the Mainland. CEPA is our major initiative. I am sure that most of you are well aware of what CEPA offers to the manufacturing and services sectors. This landmark free trade agreement will definitely provide a new platform - and new impetus - for businesses wishing to tap the vast potential of our Mainland market. It gives our companies a good head start on our competitors and in some important areas they are above and beyond WTO commitments.

Since the signing of CEPA, there has been a surge of enquiries received by our economic and trade offices overseas. Companies worldwide are indeed proactively seeking for new ways to take advantages of this new platform, which of course means more investments in Hong Kong. It is no wonder that companies embracing the "CEPA concept" are leading the way in our stock market.

The signing of CEPA also breathes new life to our industrial sector, which plays a significant role in our economy. Ask no one but me coming from the industrial sector myself. With tariff free treatment and better intellectual property protection, it is much more attractive for manufacturers of high value-added products to establish their plants in Hong Kong. This is a very important aspect of our intellectual property protection. I have read in the papers in the last few days, that many of our Mainland visitors come to Hong Kong to buy products because they know they are getting a genuine product. I pledge to you that the HKSAR Government is serious in our intellectual property right protection. We will not tolerate privacy.

Besides manufacturing and services, we must not overlook the importance of the third leg of the CEPA pillar, trade facilitation. With better cooperation on customs clearance, a higher degree of transparency on laws and regulations, streamlined licensing and accreditation regime, the trade flow between Hong Kong and the Mainland would be smoothened out, further strengthening our role as a premium two-way platform for the Mainland.

Besides CEPA, our economic recovery is also underpinned by stronger cooperation with our immediate neighbourhood, the Guangdong province. The joint conference between Guangdong and Hong Kong has recently been "upgraded", with the Guangdong Governor and our Chief Executive themselves leading this initiative. The bridge linking Hong Kong to Macau and Zhuhai is top on our agenda. Besides being an awe-inspiring feat of engineering, this bridge will enable people and goods to cross between here and the western part of the Pearl River Delta within half an hour. The possibilities for trade and commerce will be limitless, and so will the growth of Hong Kong.

In fact, I am now just beginning to hold talks with various groups on how best to revitalise our economy. I hope we can build consensus on the best way forward to develop a prosperous, diversified and vibrant economy.

Before I stop, I would like to say a few words on our budget. We all know that we are facing a structural deficit, and coupled with what happened in the last few months, achieving a budget surplus in 2006/07 is not quite realistic. Yet, we must positively address the issue, and show that we have the determination and we have the ability to solve this problem. This is important not only to our long-term fiscal health, but also to our economic recovery. With the linked exchange rate firmly here to stay, we shall never let speculators in the financial markets speculate that we are not able to tackle our deficit. I would, as I have undertaken, listen widely and welcome views from all sectors of our community when I prepare for my first budget. I look forward to seeing your suggestions. Together, we would have a constructive and realistic review to set targets in order to achieve fiscal balance.

Looking further ahead, say six months or a year from now, we should be seeing the signs of a marked improvement. Enhanced co-operation with the Mainland, the signing of the Closer Economic Partnership Arrangement, a surge in Mainland visitors, and the gradual return of long-haul travellers will all have positive effects on our economy.

On the external front, the Mainland is set to meet, if not beat, the 7 per cent growth target they have set for themselves. We are also seeing better-than-expected economic indicators in the U.S. The Euro region is slightly expanding and even Japan is showing some positive signs. Given the external nature of our economy, all of these together would also help to underpin our economic recovery.

Next week, we will announce our GDP figures for the second quarter as well as the revised forecast of GDP growth for 2003. I am cautiously optimistic that we have indeed turned that corner.

Ladies and gentlemen, I do not underestimate how serious the task is before me. Hong Kong is facing some very unique challenges. We need to tackle them head on. We must not let any confidence crisis overcome us. Hong Kong people have always been resourceful and resilient and never shied away from difficulties. This is what the Hong Kong spirit is all about. Together, we will bounce back. Together, we will all build a brighter future.

Thank you very much.

End/Friday, August 22, 2003


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