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Following is the transcript of the question and answer session (English only) by the Financial Secretary, Mr Henry Tang, after delivering his keynote speech at the "Review 200" Conference this afternoon (February 19):
Question: I understand that you are so close to the Budget, it is very difficult for you to be specific, but naturally everyone is very curious here, I would like to ask you first of all, in a way given everything has happened last year, such as SARS, the July 1 procession, whereas about economy, the bounce back, but now also concerns going forward, what do you feel about the Government's image right now?
Financial Secretary: I think ever since I took up office, I have been trying, actually the whole Government have been trying, to give a message to our community that we have experienced some signs of recovery. The v-shaped rebound is encouraging, many of the policies from the Central People's Government, whether the CEPA, the individual visitor scheme, Renminbi (banking) business and the various listings on the Hong Kong Stock Exchange of Mainland enterprises, have given Hong Kong well needed boost. Although I also believe that it is not just the Central People's Government's policies, but rather the spirit of the Hong Kong people that really makes this successful.
Given all of these circumstances, one of the main messages when I gave back in August was: let's give people a time to consolidate, a time when we will continue to build on our strengths. We will allow the market to work. We will allow people to do what they do best. We have been successful on that front, that we have allowed market forces, whether it is housing or other industries, to work. We have given people time to consolidate some of their strengths and to build on them. The Chief Executive in his Policy Address in January actually articulated that once again. So I think we are enjoying a better image than we were a number of months ago. But there is no reason for us to be gloating over it, we can always do better. There are always areas where we can improve - our communication, the inclusiveness of our policy making process etc. And that is why in my Budget formulation process, I try to make it as open, as inclusive and as user-friendly as possible.
Question: You stressed this in your speech, and you are stressing it now that it needs to be more inclusive and to ask the community. What is the feedback you've been getting as you ask the community about the image of the government and the quality of leadership. Do you get any feedback from that?
Financial Secretary: Actually, in the over 600 messages I received after we launched the Budget website, many of them are of very high quality. High quality in the sense that they don't just send the message to me says, "What a terrible job you are doing." or "You should quit." It is not that kind of messages. Many of those messages do have the budget deficit very much in their mind. A consensus I think I built before the October 22 address in Legco, that Hong Kong people are actually very prudent, very realistic and very responsible. I got a lot of messages telling us there are some areas where you can do better. There are some creative ideas, some of them are worth pursuing, and we will. I think this process actually encourages me and the whole government to set up this Economic and Employment Council, so that we can move this inclusive process even further ahead in terms of policy formulation and decision making process.
Question: Mr Tang, had you been the Chief Executive of Hong Kong spring last year, how would you have managed the SARS crisis differently?
Financial Secretary: I was not the Chief Executive last year, but I was the Secretary for Commerce, Industry and Information Technology. I was party to some of the discussion process on the handling of SARS. If we cast our minds back to March of last year, when it first started really becoming a problem, it was a disease we knew very little about. We knew it was communicable, dangerous and we knew some of our neighbours had taken draconian measures in terms of limiting people's freedom to prevent spreading of the disease.
We had a very difficult choice to make. We know Hong Kong people value our freedom very much. We treasure it, value it and we guard it very jealously. We do not want to overly restrict people's freedom in controlling the disease. That is why in the early stages, we probably did not take very draconian measures to restrict people's movement, where in retrospect it might have helped us in controlling the spread of SARS. But it was an unknown disease. We did not know how serious it was going to become. So we were careful not to overly restrict some of those freedoms. Whether it was the right decision at that time, or in retrospect as you said, we could have been more draconian and the Hong Kong people would have supported us. Don't forget when we trucked all of those people at Amoy Gardens to a detention camp, there were a lot of criticisms that we were being overly draconian. So it's easy to look back and said we could have done this and that and the whole thing would have been finished sooner with less damages to ourselves. But being in the Government, we have to weigh up different interests, different rights and responsibilities of a society. Given the circumstances, we made what we felt was the best decision and took the best way forward.
Question: You said earlier that when you were dealing with stakeholders, unions and so forth, to get feedback, can you tell us what is the most sticky point? Is it civil servants' remuneration, for example? And what initiatives are you going to take to address that? Secondly, I know you are not supposed to get into specifics, but assuming Hong Kong's economy is recovering strongly and growing at above the trend growth, how do you see the public sector over GDP on the three to five-year horizon?
Financial Secretary: This year's (2003-04) public expenditure outturn, according to our original projections, will be about 23% of our GDP. And we want to reduce it to below 20% of GDP and by the year 2008/09 when we reach $200 billion of public recurrent expenditure, the total public expenditure will be about just over 17% and that is back to the seventies levels. Arguably, you could say, why go so far, because we have set ourselves a target of 20%? But in public finance there are a lot of forecasts and projections and of course we will review it every single year when we do our Budget.
The answer to [the first part of your question] is exceedingly simple. Everybody has a consensus that we have to deal with the Budget deficit, that we have to achieve fiscal balance, and everyone is prepared to work together to share some of the pain to achieve this common goal - but let others share more of the pain than myself. Basically, every single group I talked to had some vested interest and they said: why don't you do more on other people's lawns, other people's grass is greener, why don't you cut it first? It's pretty typical. I kind of expected this to happen, but there were some useful suggestions as to how we could raise some revenue or start tapping into some people's pockets that have previously been untapped. But I do agree with one thing that many of them have raised, that we should basically get our own house in order, before we try to get into other people's pockets. So unless Government has the will and the way to control public expenditure, we should not go to the people for more revenue and so this is going to be my guiding principle in my first Budget, that we want to demonstrate that we have the will and we have ways to control public expenditure and we will demonstrate it in the first Budget.
Question: What are the implications of the possibility of a change in the value of the Renminbi for the Hong Kong dollar peg, just in broad terms?
Financial Secretary: We have done many, many internal studies, different scenarios, different case studies. It will have very wide implications for us. Today, Hong Kong companies employ, roughly, in the Pearl River Delta alone, 10 million people. Of the three textile items that had a huge surge to the US last year, I remember one of the statistics was on the manufacturing of brassieres - 75% of the surge went to the States actually came from a factory in the Pearl River Delta. It probably had Hong Kong interests in it. Of course, with the revaluation of the renminbi, it would have implications for the cost of those products. It would have implications for food that we buy from the mainland. It would have other implications for us as well.
But on the other hand, it would help us in the price equalisation process, because they would become more expensive. But just yesterday, I was discussing this with one of the Ministry of Commerce officials. He said, well costs in the Mainland have gone up quite a lot. But I corrected him. I said yes, your nominal wages have gone up, but your productivity has also gone up tremendously. So in terms of worldwide competitiveness in this global economy, your competitiveness is still fantastic. The Central People's Government has repeatedly stated a stable renminbi policy, but the implications on us, and the ramifications for our economy would be very wide and diverse, depending on what they do.
Question: Wouldn't you need to have some kind of equalisation because, as you say, of the linkages and this would have implications for the peg, surely?
Financial Secretary: Not necessarily. It would have certain implications for the price equalisation process that we are going through, because it will be more expensive, but on the other hand, I don't think we should use that as an excuse not to make structural adjustments, because the structural adjustments are a challenge, but they are also an opportunity for us to enhance our competitiveness.
Question: On the macro, Hong Kong itself will continually come under fire from other cities competing for industry, for people, what have you, whether it's Singapore or Shanghai. What do you picture as Hong Kong's role 20 years from now vis-ˆj-vis the competition? Where will it win? Where will it lose? And you personally, on the micro level, you've come under fire perhaps locally, whether it's July 1, or whether it's going up to Beijing, indirectly under fire. What have you learned personally that you can help us with about leadership under fire? A lesson you have learned?
Financial Secretary: I'll cite the example of the day before yesterday when I was in a press conference with Mr An Min. That is a good test of leadership under fire. We went up to discuss professional services, on mutual recognition (of professional qualifications) and other topics that are of interest to professionals under CEPA. It went very well. We pretty much got what we wanted. We opened up formal channels. All the professional groups that went with us found they could continue to have direct dialogue with their counterparts to facilitate opening up of the Chinese market to Hong Kong professionals, Hong Kong meaning Hong Kong in general. It went very well.
And then we went to a press conference and one reporter asked: What do you think of patriotism? Completely out of context to the whole event. He [An Min] thought about it and then he went on to answer the question. What he said is famous now. I'm sure I don't have to repeat it. Then he turned to me: Do you have anything to add? Actually I wanted to say that this is an economic event about CEPA, about professionals and this question is totally out of context and I don't think we should use this occasion to discuss what is patriotism or what is not patriotism. He (An Min) actually gave a very long answer, so I just said I have nothing to add. So people are now saying: Why didn't you defend Hong Kong's interests? Why didn't you say patriotism does not necessarily mean that you have to support the Government of the country, which means the Chinese Communist Party. And An Min actually said that, so I just didn't think it was an appropriate occasion. But it's a good interesting lesson that something like that could get completely blown out of proportion, that I should have said: I believe most Hong Kong people are patriotic. But I don't think this was the right occasion to discuss it... Because An Min already said: I believe most Hong Kong people are patriotic. So I thought, well he had pretty much said everything. But personally I feel nowadays, for example, the constitutional development or the electoral arrangement are very hot topics and there is a gap between expectations (with regard to) the Central People's Government's views that the power of two systems comes from one country. All that discussion is still going on.
Question: Is it going well, do you think, the dialogue with Beijing?
Financial Secretary: I think it is a situation where we have to keep our heads cool. We have to engage and consult all the relevant parties in a constructive manner. Rhetorics will not help. This is when cool heads are really necessary.
As far as competition is concerned, if you ask me, I welcome competition, because with competition we will perform better. We will continue to strive to perform better when we have somebody snapping on our heels. So I feel that Hong Kong's success is built on being an open economy. We do not rely on Government to help us out of difficult situations. Each company looks to its own inner strength to compete on a global basis. So as far as I'm concerned the market is the best stage on which to excel and I welcome competition from all over the world. Having said that, I also do see that we are getting some friendly competition from Singapore, from Shanghai, from Guangzhou, from Shenzhen and probably from other places as well. Our stock exchange is now playing in the big boys' league. We are now getting competition from New York. They want those listings from China. They don't want to see all the listings go to Hong Kong. But we are home market, we are in the same time zone, so we do have some advantage. So this is all market economy and I feel we will excel. We welcome the competition; it will keep us from being complacent.
Ends/Thursday, February 19, 2004
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