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Following is the transcript (English only) of the remarks by the Chief Secretary for Administration, Mr Donald Tsang, at a question-and-answer session after a luncheon in New York today (September 17, New York time):

MC (John Holden, President of National Committee on US-China Relations): ...A question on Article 23: Do you anticipate that the bill when reintroduced will have precisely the same form that it has today, or do you think that this consultation process might involve some amendments?

Chief Secretary: Well, I've said something in my speech already; maybe I'll repeat the point here, which is very important to put the whole thing in context. We have a constitutional duty under the Basic Law to implement Article 23. All countries have laws protecting the national security. And we in Hong Kong also have that obligation to our sovereign. The people in Hong Kong understand that our constitution imposes this duty on us to enact the law, and they also appreciate the need. But the enactment of Constitutional laws in any country is controversial and is bound to be a sensitive and a difficult subject, open to debate. Hong Kong is no different. Look at how now you in the United States are debating the Patriot Act. So it is natural that people are concerned how this proposed bill in Hong Kong will effect us.

Well, in hindsight, John, given the complexity of this subject, the administration (of which I form a part) should have been more careful in explaining to our people and been more sensitive about their reactions and feelings. The July 1st demonstration was a watershed. It was a defining moment for Hong Kong. We understand the people of Hong Kong were dissatisfied with the government, in the way in which we communicated to the people in the enactment of this bill and some of them were unhappy with certain provisions in the bill itself. We have done a transformation. We have withdrawn the bill. We have no fixed program to enact it. But we will consult widely. We're going to adopt an open mind on this, about the form in which it will take. We will listen to everybody's views: views from people who like us, views from people who do not like us as an administration. We will respect their views. We will examine each and every article they have commented on, on this subject.

And I'm sure by the time that we decide to put it back on the legislative agenda it will be on the basis of a community consensus with the support of our people and the support of the legislature in this. As I said, what happened on July 1st was a defining moment for Hong Kong. An incident of which I am personally very proud of. But it also has given us a chance to become a little more enlightened as an administration. But as I said I have no fixed views on this, and it would be a very careful and thorough exercise when we re-embark on it.

MC: I would note that the government's approval ratings have actually been rising since July 1st. But also point out that they haven't been extremely high so far and the CE's approval ratings ranged in the low 40s. Yours, I'm pleased to announce to the group and it shouldn't be surprising, are the highest of all the secretaries in the government, at 62%. (Which in my opinion is always a recipe for certain friction with one's boss ... but I wouldn't want to speculate on that.) But I think your remarks are important in the sense that there is room for improvement in the way that the government has communicated with the population and I take that as a clear indication of changes to come in the future. On that subject, the basic law provides for progress towards democracy in Hong Kong. How do you see things evolving over the next several years?

Chief Secretary: Well on democracy there was a clear timetable envisaged in the Basic Law. It lays down a 10-year timetable from 1997. And since then we have had two elections to the Legislative Council and the composition has been changed to be more democratic during that process. The next election to the legislative council will take place next year, by which time half of it will be from the functional constituency and half would be from the geographical constituency. So it will be entirely open affair. As far as the election of the chief executive is concerned, we in the future ... arrangement for the Legislative Council. What we have in mind is we are going to consult the people carefully on this. We are doing the groundwork right now. We wish to put ideas and consult people's views next year. And then from there on, subject to their wishes, we hopefully will put the legislation forward by the time we have the next stage of our evolving electoral constitutional arrangement taking place, which is 2007. So as I said the timetable is there already. That definitely is a clear goal.

But it is important for us to realize we must find our own way to reach universal suffrage. But we must have to remind ourselves we have to do it in our own way. Not simply cloning it from other systems. We are not starting with a clean slate. We had a very efficient public service system, before 1997. But it was on a colonial arrangement. But the Basic Law mandates us to introduce a system, which is similar to the US congressional system with a complete separation of powers: powers between the executive and the legislature. So that is not a clean slate. We changed and introduced an accountability system of government last year, which then bring in new blood from the private sector into the Government of Hong Kong. But that is at best an intermediate stage. We will bring it to the final destination in a way that will preserve first, our set of values, values very similar to yours in the Unites States, and at the same time preserve our own prosperity, which underpins our political stability. These two are the most fundamental elements in moving forward but we are clear that we have to reach there. But it cannot be simply cloning a system, either from the United States or from the British Parliamentary System. It must be something, which is unique to Hong Kong, which suits Hong Kong's circumstances. And the consultation on this, as I've said, will begin next year.

MC: Several of you have asked questions having to do with CEPA and I'll read to you one of them, which I think summarizes in many ways the brunt of them - the essence of the question. This questioner asks: "We are in the process of developing manufacturing partners in Mainland China to outsource products we make at a fraction of our cost. How will CEPA and working with Hong Kong help this businessman?" The other question has to do with, "will CEPA in fact make it easier to go through the immigration control in Shenzhen?" - which one person said took him two hours the last time he went through.

Chief Secretary: Well let me answer the second question first. You see the time you get through Shenzhen is a problem for us, because the rate of growth of the number of passengers going through our land boundary has been rising phenomenally. At the moment we have a third of a million people using our land boundaries every day. It is the busiest checkpoint on earth by far.

So whatever facilities were built in the 60s, 80s and now 90s are inadequate to cope with that throughput. That's why we have to have a completely new think on what we are going to do. But our present target is, the time of any ordinary passengers going through should be about half an hour, going through all the checkpoints.

So maybe your friend came through on a bad day.

As far as CEPA is concerned this is an important arrangement. It will allow Hong Kong products to enter the Mainland of China duty free. Covering about 90% of Hong Kong's products by value. But the product must be made in Hong Kong. The rules of origin follow that generally accepted by internationally under WTO, although the final details are yet to be worked out. But it will be nationality-blind in respect of who the owner is, but the firm must be a Hong Kong company, registered in Hong Kong, making investment in Hong Kong, manufacturing in Hong Kong and producing goods that comply with the rule of origin. So I'm sure investment in Hong Kong, producing something in Hong Kong will definitely eventually be entitled to a tariff-free, duty-free import into China. And duty free, zero tariff of course is much more advantageous and more attractive than what China has been bound under the WTO, which is still with tariff attachments.

MC: Let me follow up with two questions on that. One has to do with ocean shipping. "As zero tariffs give a boost to Hong Kong's manufacturing, this will create a larger market for ocean shipping. How will that play out, will CEPA help this ocean shipping grow and what role will there be for foreign shipping lines?"

Chief Secretary: Well I'm sure shipping lines, which bring goods between Hong Kong and the Mainland, will enjoy a large volume of trade. And I'm sure also, that when the service industry is extended to our various ... when CEPA arrangement gets extended to a more service industry, then I'm sure shipping is one that we have to consider. I'm not in possession of all the details here, particularly in relation to shipping. But please follow the events on the website, there is a website on CEPA on the Hong Kong website and you will find all of the details there. But all the negotiation is now continuing on the rules of origin, which will be resolved, I hope, as far as goods are concerned, by the end of the month, then there will be further details to be filled out as far as the service industry is to be concerned impacting on financial business, professional services, bank deposits, and so on and hopefully including services like shipping. But do check our website and follow events. And we have economic offices in New York, and economic offices in Washington DC and San Francisco to help answer questions of this kind.

MC: Okay good. One other quick question relating to economic growth. One questioner is concerned about the reclamation of the Hong Kong harbour and environmental damage. Is there enough room for Hong Kong to grow in the future economically?

Chief Secretary: Well we are not going into a land intensive industrialization of Hong Kong. We passed that phase. Hong Kong is concentrating on financial services, logistics and so on. We wish to protect our harbour as much as everyone would protect their own beautiful harbour. It is a wonderful essence of Hong Kong. And it is good for Hong Kong to have "green groups" who come out here to make sure that we don't put even one spoonful of earth into our harbour. But at the same time we would be making good use of the land that we have already reclaimed to ensure that the Hong Kong harbour and skyline would be the most spectacular in the world.

Well, thank you very much for your attendance and I'm sure that the best thing for you to do is to check out what I've said by flying in.

Thank you very much. Bye.

End/Thursday, September 18, 2003

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