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Following is the speech by the Chief Executive, Mr Tung Chee Hwa, at the fourth annual Forbes Global CEO Conference tonight (September 21):
Steve, Governor Huang, distinguished guests, friends, ladies and gentlemen,
Good evening. I am pleased to welcome all of you to Hong Kong for the fourth annual Forbes Global CEO Conference.
Steve, I would like to thank you and your colleagues for again choosing Hong Kong to stage this prestigious business conference. I'm told that some 350 regional and global senior executives are participating in this year's Conference - and that two-thirds of these business leaders are from outside of Hong Kong. To all of you, welcome to Hong Kong, welcome to Asia's world city.
When we look back on the past seven years, since the return of Hong Kong to China, it's hard to believe what Hong Kong has been through: the bursting of the asset bubble, the collapse of the property market, years of deflation, the erosion of personal wealth, high unemployment - as a result of globalisation, consumer pessimism, reduced public revenue and then the top of all, the SARS. It was enough to cause anxiety in even the most confident of communities, and Hong Kong was of course no exception.
While the Asian financial turmoil and the bursting of our bubble economy and the effect of globalisation and the migration of work to lowercost regions were the immediate causes of Hong Kong's post-handover economic downturn, it is the long-term factors that should be attributed with equal if not greater causal significance. The inexorable process of economic globalisation, the rapid rise of the knowledge-based economy driven by technological development, the successful pursuit of economic reform and opening by China since the late 1970s, the increasing competitiveness and openness of our other neighbours, our weak technological base, our comparatively high costs of production and doing business, and the growing mismatch in human resources were the underlying long-term factors which brought about Hong Kong's prolonged economic downturn and made its course of economic adjustment and revival lengthy and painful.
Throughout this difficult period, we were constantly evaluating our competitive advantages and disadvantages. How can we emerge from this economic restructuring and be more successful than at any time in our history? One thing was clear: our main thrust must be on how to benefit from the rapid and orderly development of China, by far the fastest-growing, large economy in the world.
For three decades, until 1979, much of Hong Kong's prosperity was a result of the Mainland economy being closed. Today, Hong Kong's prosperity hinges on a Mainland economy that is open, prosperous and rapidly integrating into the world economy. Hong Kong's role is even more important now, as the world beats a path to the Chinese market.
It was clear to us that Hong Kong's future depended on securing greater access to the Mainland market for our businesses, for our professionals, and on building on our expertise in servicing the Mainland's trade and investment needs. It was also clear that Hong Kong's future depended on ensuring the two-way free flow of goods, people and, when the time is ripe, capital flow between Hong Kong and the Mainland.
It was this thinking that led to CEPA, our Closer Economic Partnership Arrangement with the Mainland. It was this thinking that led to greater co-operation with the Guangdong Provincial Government on Pearl River Delta and on Pan-Pearl River Delta. And tonight I am delighted that Governor Huang Huahua is here with us. He will be able to tell you more about the very inspiring and awesome development Guangdong is now undertaking and also the importance of the relationship that Hong Kong has with the Guangdong Province. It was also this thinking that led to giving our banks the opportunity to do personal Renminbi (RMB) business. This was the first step in putting ourselves in a favourable position as the offshore RMB centre for the future.
Therefore, throughout the last few years, we have been exploring with the Central Government how Hong Kong's competitive advantages can best be leveraged and how the Central Government can help us to eventually emerge from our economic restructuring. These discussions accelerated in 2002 and came to fruition with the signing of CEPA on June 29, 2003.
The economic difficulties that Hong Kong faced over the past several years were severe, but they did lead to the bursting of an unsustainable bubble. High costs and inefficiencies had crept into our economy during the long boom that we enjoyed. I believe that, over these last few years, a lot of excess fat has been burnt, and we are today once again on our way to becoming an extremely competitive and dynamic economy. Deflation has been painful, but it has brought down the cost of doing business here. The currency peg with the US dollar has proven to be a hard economic taskmaster. And with the US dollar weakening, we are reaping the benefits.
This was the course we charted, and now we are seeing results. With the end of SARS, the global economic recovery and the support of the Central Government, confidence has been returning and the Hong Kong economy is recovering quickly. We posted seven per cent GDP growth in the first quarter of 2004, and 12.1 per cent growth in the second quarter. Property prices have stabilised, unemployment has been slowly declining, and deflation is at last disappearing. The prospect for Hong Kong, despite the beginning of a new interest-rate cycle, high oil prices and geo-political uncertainties, is encouraging.
Where do we go from here? How can we sustain our economic recovery? First, we need to deepen and broaden the CEPA agreement signed on 29 June 2003. We will of course do this incrementally. Last month, we reached agreement with the Central Government on CEPA II, which extends greater market access to considerably more Hong Kong products and services. We must also continue fostering greater co-operation with Guangdong Province and the Pan-PRD region which ultimately will create an economic region of 400 million people, with GDP equal to one-third of China's total GDP. Furthermore, we will continue to pursue initiatives to ensure Hong Kong's role as an offshore RMB centre.
As we move up the value chain in the knowledge economy, one key Government initiative is to enhance our human capital. Investment in education continues to be our top priority. Another crucial aspect of this policy is the training and retraining of people through various vocational training institutions. We are also actively promoting lifelong learning. Furthermore, our policy involves attracting the best foreign and Mainland talent to come to Hong Kong. More often than not, they are highly motivated and have the skill and knowledge to enrich our society.
We need to continue to create a better living environment for all of our citizens. Environmental protection and sustainable development will continue to be our priority areas of concerns. The recent level of air pollution, particularly, is not acceptable and needs to be vigorously tackled.
For the last few years, we have been building on the theme of Hong Kong being the world city of Asia - the role that New York plays for North and South America and London plays for Europe. What is a world city? A world city is a city that has developed tremendous strengths in internationally oriented service industries and other high-level corporate service functions, which generate significant levels of added value as well as good employment opportunities. The most important of these include financial and business services, corporate and regional headquarters, news and information services, tourism and creative and cultural activities. The world city is a city that is typically characterised by an outstanding enabling infrastructure, in terms of both 'hard' infrastructure, for example, transportation and telecommunications, and 'soft' infrastructure, such as education, training, research and development, and urban planning. The world city is also a city which is underpinned by the rule of law, freedom of expression and association and free flow of information. By definition, a world city is cosmopolitan and outward looking. Another feature of a world city is that it typically enjoys strong links with its hinterland, supported by a free flow of goods and services and people. The world city is where people from all over the world want to visit for fun, for work, for the children to join schools and universities, and for medical treatment. The world city such as New York and London has per capita income which is higher than others within their country. We will continue to push all policy initiatives to enhance and enrich our position as the world city of Asia.
Steve, thanks again to you and Forbes for demonstrating your confidence in Hong Kong. Your support will encourage us to work even harder to strengthen Hong Kong's competitiveness.
Ladies and gentlemen, let me conclude by wishing all of you every success in your business ventures, locally, regionally and globally. I hope those of you who are visiting Hong Kong enjoy your stay in our city and, of course, contribute to our economy.
Thank you very much.
Ends/Tuesday, September 21, 2004
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