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Following is the keynote speech (translation) by the Chief Executive, Mr Tung Chee Hwa, at the Pan-Pearl River Delta Regional Co-operation and Development Forum held in Hong Kong today (June 1):

Party Secretary Zhang Dejiang,

Chief Executive of Macao, Ministers, Leaders of Provinces/Regions,

Distinguished guests and friends,

This morning Mr Zhang and other leaders and guests systematically outlined the significance, principles, substance and initiatives of Pan-Pearl River Delta (Pan-PRD) regional co-operation and depicted a broad vista for us. Despite being a regional project within a single country, the Pan-PRD group is comparable to the 10-nation ASEAN in terms of its population, size of economy, total volume of external trade and intake of foreign investment. Working as one it can produce powerful scale-economy effects. Moreover, the region is endowed with versatile production elements, with vast areas of land, abundant labour supply and natural resources, as well as the more sophisticated ingredients such as capital, skills and talent. It also has a huge domestic market and an extensive international network. The provinces each have their unique economic structures which allow enormous scope for co-operation to benefit and complement one another. It helps improve the overall regional economic strength and propel its sound development. Last year the region registered a collective GDP of US$630 billion, accounting for about 40% of China's total economic output. This regional GDP is forecast to exceed US$1,000 billion by 2010 and reach US$2,000 billion by 2020.

Guangdong is the major economic powerhouse within the Pan-PRD region, ranking first in the nine Mainland provinces in terms of the level of economic advancement. In effect, Pan-PRD is the development and extension of the Greater PRD economic zone comprising Guangdong, Hong Kong and Macao. As the initiator and architect of the Pan-PRD concept, Guangdong will be at the helm of the Pan-PRD regional co-operation. With its integrated assets and economic strength, Guangdong is fully capable of assuming a leading role in facilitating collaboration and development in the Pan-PRD region.

An important way forward for the Pan-PRD regional partnership will be the establishment of a unified and open market system under the principle of "One Country, Two Systems". To this end, we need to step up the unified planning, construction and co-ordination of regional infrastructure; expediting the construction of a comprehensive cross-border transportation network which is safe, convenient and fast; and accelerating a number of key infrastructure projects. On the other hand, we have to remove barriers to the movement of people, goods and information; facilitate the two-way free flow and integration of economic fundamentals; create an open and level playing field giving full play to the unique attributes of various provinces; achieve a fusion of advantages and rational division of labour; and enhance the region's overall competitiveness.

Another important direction for promoting this regional synergy will be to raise the level of opening up to allow regional enterprises to participate more fully in international competition and co-operation. China's accession to the WTO, the implementation of CEPA, and the anticipated establishment of the China-ASEAN Free Trade Zone, have created the necessary conditions for the Pan-PRD region to tap international resources and markets. Promoting Pan-PRD regional collaboration will mean capitalising on the opportunities afforded by the enhanced level of opening up; working for the full implementation of CEPA; actively launching international economic and trade activities; bringing in more foreign capital, technology, talent, management and services; combining the internal and external advantages to achieve economic take-off; and, while participating fully in international competition, striving to build the Pan-PRD into a "dream team" for China as an international player in the 21st century.

The third important direction will be to support the co-ordinated development of the regional economy with a view to realising mutual benefits and a win-win situation all-round. A crucial aspect is the need for exploiting the opportunities arising from regional co-operation to achieve industry gradient transfer and reintegration of resources; giving full play to the unique strengths and assets of individual provinces; speeding up the application of new technology and knowledge; facilitating the structural adjustment and upgrading of industry; creating a cluster of superior industries; and enhancing overall output capability. At the same time, the Government may, while respecting market operation, play an active part in the co-ordinated development of Pan-PRD through overall planning for the region. As long as we proceed from a macro perspective and take a long-term view in planning for and fostering symbiotic co-operation, we will be able to bring about regional economic advancement.

The economic bonds between Hong Kong and the Pan-PRD region date back to very early times and have been seeing further progress in recent years. The scale and frontiers of co-operation are expanding and the modes become more and more diversified. Hong Kong has always been the biggest source of foreign investment in the region. As at the end of 2003, about 120,000 Hong Kong businesses have been set up in the nine Mainland provinces, with actual investment amounting to some US$150 billion, constituting more than half of the actual intake of foreign investment. This illustrates their significance to the local economies. Under the new framework of CEPA, Hong Kong and the rest of the Pan-PRD region will no doubt have an even greater prospect of co-operation.

The major driving force behind closer co-operation between Hong Kong and other Pan-PRD provinces comes from the unique and different advantages each of us possesses, which enable us to stagger our individual focuses and complement one another. The Mainland Pan-PRD provinces are important manufacturing bases and consumer markets, and, in terms of resources and market access, stand at the forefront of the country. Hong Kong, on the other hand, boasts advantages in the areas of capital, finance, information, services, marketing, etc. and may serve as a high value-added services centre to help upgrade the regional economy. With its highly open and cosmopolitan outlook, Hong Kong can also act as an intermediary for external economic co-operation, so linking the Pan-PRD region and the rest of the world. It will play a positive role in facilitating the opening up and future development of the Pan-PRD region. Through co-operation with this expansive region full of potential, Hong Kong can bring its unique advantages into better play and make further contributions towards the reforms, opening up and modernisation of our country.

Against this new landscape, closer partnership between Hong Kong and the other provinces calls for new directions, new formats and new areas of co-operation. The service industry is the mainstay of the Hong Kong economy, making up 87% of our total economic output. In particular, financial, logistics, tourism and professional services are our economic pillars. They are also some of the fastest-growing, most promising sectors emerging in the rest of the region. Stepping up co-operation in these key areas should be the best way to leverage individual strengths and create a collective synergy.

Firstly, our financial sector is the most competitive sector in Hong Kong and an important area which has yet to be further explored in collaboration with the Pan-PRD region. Pan-PRD co-operation will broaden our market access to more ventures in project financing, trade financing and capital-raising through public listing, thereby stimulating the further development of Hong Kong's financial markets. We will continue to upgrade our market operation, enhance the breath and depth of the financial markets, improve the corporate governance of listed companies, maintain our advanced level of financial innovation and monitoring, and consolidate our position as an international financial centre in order to provide better services to other Pan-PRD provinces.

Secondly, logistics is another prominent sector of Hong Kong that can be further developed with the Pan-PRD region. CEPA gives us a head-start in distribution, freight forwarding and logistics services. It is a powerful boost to the local sector. It can also attract multi-national logistics enterprises to Hong Kong, thus helping Hong Kong move closer to being Asia's premier logistics hub. Pan-PRD regional co-operation accelerates the opening up of the region, thus stimulating external trade and increasing cargo movement. We will grasp the opportunities afforded by Pan-PRD regional co-operation to improve logistics infrastructure, reduce costs, expand supply chain management services, and fully apply our strengths in business management and international marketing, to provide the provinces with effective and efficient logistics services and make way for more Pan-PRD products to access the world market.

In addition, the Pan-PRD region is rich in tourism resources. The Mainland provinces complement one another as each possesses their own natural and human heritage, including many world-acclaimed attractions. Hong Kong, on the other hand, is a shopping paradise, the City of Life, a business and convention centre, as well as the gateway to the Mainland for overseas visitors. Through better collaboration and co-ordination, we can jointly open up the market and build a regional brand name in tourism.

Lastly, in accounting, auditing, legal, engineering design, information consultation, investment consultation and other professional services, there is ample room for greater collaboration. Hong Kong and the Mainland have already reached an arrangement on mutual recognition of certain professional qualifications. Local enterprises can set up office in the Mainland to provide professional services. For Hong Kong enterprises, the Pan-PRD region is an important market. Hong Kong service providers will offer quality services to some better-developed core cities in the region.

Although Hong Kong's industrial and human capital mainly fall on the services sector, both Mainland and overseas investors recognise our strengths in brand name design, quality control, research and development, branding and business reputation, and Hong Kong products are well received. The zero-tariff arrangement under CEPA enhances the attractiveness of our manufacturing industry and provides a new platform for our co-operation with other Pan-PRD provinces. We can have extensive and in-depth collaboration in areas such as the upgrading of traditional industries, research and development, commercialisation of research results, building and protection of brand names, and the application of technologies etc, to promote high value-added manufacturing businesses.

For Pan-PRD regional co-operation to take off, there must be, first of all, major infrastructure including power, telecommunications and road networks, and also promotional activities to solicit investment. With our excellent experience and advantages in capital-raising, operation and management, engineering services and so on, Hong Kong businessmen are well-equipped to support such efforts in the region.

Collaboration between Hong Kong and other Pan-PRD provinces should also take a holistic, two-way and open approach. Hong Kong would make the most of its assets as a cosmopolitan city to encourage regional enterprises, in particular private enterprises, to come here and establish organisations for trading, investment and financing activities, and at the same time taking Hong Kong as the base to launch international operations. Various provinces will hopefully assist by actively creating the conditions for local enterprises to take advantage of Hong Kong as the springboard to "go global".

To launch this regional co-operation more effectively, I agree to putting in place a new mechanism for strengthening communication and co-ordination. Above all, a Pan-PRD government leaders joint conference system should be set up, and the functions of policy research institutions, intermediaries and enterprises should be brought into play. I trust the new co-operation framework will be better geared to promoting regional economic integration and synergy.

Ladies and gentlemen, a successful Pan-PRD regional collaboration will give a tremendous boost to the economic strength, status and influence of various provinces and help realise the objective of co-ordinated regional development. The integrated advantages engendered by this regional synergy will be a more powerful force in driving the economic development of our country. Looking ahead, Hong Kong and the Pan-PRD provinces will complement one another and benefit from their productive partnership. Let us join hands and exert ourselves in promoting the regional co-operation and development. Together, we shall build a better future for the Pan-PRD.

Thank you!

Ends/Tuesday, June 1, 2004

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( Floor(Putonghua) / Cantonese / English )