Following is the transcript of the question-and-answer session by the Chief Executive, Mr Tung Chee Hwa, after a luncheon hosted by the Asia Society at the Waldorf Astoria Hotel in New York on September 11 (Thursday, US time):

Introduction: ...we all here call him C.H. I thought I might just share with you, C.H., by way of warm-up, when I was leaving Hong Kong on July 2nd, and I was remarking to myself how smooth the transition had been, I was sitting next to a media representative of one of the major broadcasters, and he was allowing how they had over-invested in coverage of the transition; that there was no dramatic news that would account for the huge investment. I took that as the highest compliment for the smooth transition.

This is - from the questions that I've received, I should ask the fir--the first question should be economic although that was not my original intention. The question that seems to be on 30 percent of the minds here is will Hong Kong keep its Hong Kong dollar pegged to the U.S. dollar and what's going to be the effect of the currency crisis, if that's what we want to call it, in Southeast Asia on China's and Hong Kong's economic development.

Mr Tung: Hong Kong's peg with the U.S. dollar peg -- many people may not know it -- it is a currency-bag type of a peg. The three note-issuing banks in Hong Kong, when they issue 7 dollar 80 cents of Hong Kong dollars they have to deposit one U.S. dollar with the government. It is a very special type of peg; not very much practised in most other places. It is a very strong link.

We were not spared by the speculators in Hong Kong, but our fundamentals are good; very prudent financial management; tremendous fiscal reserve; and the economy that is expanding; a banking system which is totally transparent; monetary authority which really looks at the bank's functions.

So we, we had some speculative efforts; it had practically no effect on us, and I don't expect this will change for the time being. For the time being we look very seriously at the impact of Southeast Asia currency devaluation on us.

And I was just talking with Victor about this. It's not just Southeast Asia currency that has depreciated against the U.S. dollars, but the mark has done, the French franc has done, the Japanese yen has done -- in fact almost all the currencies around the world has depreciated - some of them quite substantially against the U.S. dollars.

But as far as we are concerned in Hong Kong, the depreciation of Southeast Asia currencies does have some impact on us.

For one thing, we are less competitive; we begin less of a tourist attraction to Southeast Asian people because we are more expensive. We have already been--become less attractive to our Japanese friends - tourism from Japan has dropped.

There is also some concern whether the exports from Southeast Asia will actually be very competitive against those from China because China's currency has remained reasonably stable. And if China's products become less competitive, Hong Kong being the major port for China, obviously we will have an impact too.

So all these things in the short term we have to look at very, very carefully to see how we would be impacted. But I think on the whole, we continue to be very confident. Our economy continues to be very vibrant. So while, for the time being we have to sit back and evaluate all these things, I remain confident that things will go well.

Question: Thank you. I thought I'd proceed through a few political, human rights, then to economics, then to Hong Kong-PRC relations, cross straits; so I think those categories reflect what seem to be on almost all of our minds.

The first question we have here is how has the Asian experience with colonialism shaped the views of you and perhaps others like Mr. Mahathir in terms of the call for reviewing the Declaration on Human Rights and, and more broadly the perspective that you do have on human rights.

MR Tung: I think when we talk about other countries it is important to look at historic perspective. With the return of Hong Kong to China this year and the return of Macao to China in 1999, four hundred years of European colonialism in Asia - the era of that - come to a close.

Fifty years ago, just at the end of the Second World War, just before that, you think about it - how many countries are colonies in Asia -India, Pakistan, Bangladesh, Malaysia, Burma, Singapore, Indonesia, Vietnam, Laos, Cambodia - it goes on and on, the list. Philippine was fortunate being associated with the United States of America. Korea was a, was a colony basically of Japan.

That was 50 years ago. Today, because of the hard work and sacrifice of their people and the vision of their leaders, these countries have achieved a level of prosperity, human dignity and freedom a generation ago they never thought possible!

America's generosity, as I said earlier on, America's open market helped in that process. And I think in Asia we are grateful for that.

But 50 years ago, when the human rights charter was first being drawn up in the United Nations, those countries were not even countries! They were colonies. Today they are successful.

I don't think it's wrong for them to ask that their voices need to be heard! I don't think there's anything wrong with that! As to whether there will be real changes to it or not - that's another matter. But I think the world must - should listen to the views and experiences of Asia with a colonial legacy. Asia, finding prosperity in the way they found it.

And it's very interesting - in Asia we are all very different. Hong Kong is different; grounded in common law. And Malaysia is a Muslim, by and large Muslim-populated country. We are all very different countries!

But I think it is right for the voices to be heard. Maybe there are things that can be learned by everybody else as we shape the 21st Century!

Insofar as human rights is concerned ladies and gentlemen of course I care about human rights. We all care about human rights. Who would not want every human being to live with dignity? To live with pride? To live with freedom? We all care about this!

But each country is at a different stage of development; each country have their own national priority. Some have to be thinking about social stability as more important than the individual liberty. Well, some of us think it might be wrong, but to that nation, social stability means feeding of thousands and thousands and millions of people!

So all I am saying is that we all have our own judgement, but we cannot judge other people by our own standard. We've got to understand the perspective; we've got to understand the history; we've got to understand the culture of other nations in order to pass judgement on other people.

Question: Thank you. We'll move along here to - you have mentioned worries about Hong Kong's competitiveness, economic competitiveness. What steps do you think that both the public and the private sectors in Hong Kong ought to take to assure Hong Kong's future economic competitiveness?

Mr Tung: It is a big, big challenge for my administration, but it is a challenge we must succeed. I believe the competitiveness is affected basically by our inflation --inflation over the last 10 years, between 6, 8 percent per annum.

Part of that inflation is structural as we move our industries north, as Hong Kong dollar is linked with the U.S. dollar. So for many years we had negative interest rate, because of our dollar link - our interest rate actually followed U.S. interest rate also. So we had negative interest rates.

Another reason being that we have supply side problem for both manpower and land. Now these are the areas we need to address to resolve the supply side for both manpower - we have unemployment rate of 2.2 percent; and also to resolve the issue of land supply. And these are the things we will tackle, and we will tackle vigorously, moving forward - hopefully with a higher interest rate, with at least now a positive interest rate - we will be slowly but surely tackling this issue of competitiveness.

And I must emphasize to you for many of you who do business in Hong Kong, we in the government understand your concern about the costs of doing business in Hong Kong. It is very important. We've got to keep our place competitive. We understand that.

Question: I think rather than ask a question, I would just make an observation to follow up on that that comes from one of the questions, and there seems to be some concern about what the impact of these measure, particularly land supply, might be on the property and stock market. There was a thread throughout the questions of concern in that regard. I think it's implied in your answer.

Another dimension of economics is what does Hong Kong see and what do you see at stake in the issue of China's entry into the World Trade Organization - at stake both for the global trading system and for Hong Kong most particularly.

Mr Tung: I think China in the very near future will become a major economic country. I cannot think how WTO can be without China in it. So I would hope very much the day will come very soon when China would have successfully negotiated for entry into WTO.

Obviously, more trade is good for everybody, and more trade is very good for Hong Kong.

I just want to touch on the point about property prices. It is very high in Hong Kong, but I want to say this: that we have discussed many, many measures within the administration, and our conclusion is this --that to bring down the price of properties dramatically is not a good solution for Hong Kong. It will impact our economy; it will impact the wealth feeling of about 50 percent of our population who own apartments and houses.

What we need to do we will do our best to organize a soft landing; a gradual softening of prices so that we will become more and more competitive. It is easier said than done. I know that. But we will try our best.

Question: Tomorrow the 15th Party Congress of China starts formally. What are some of the possible impacts on Hong Kong from what you anticipate may be some of the key decisions of the party Congress?

Mr Tung: I know as much about the goings-on of the 15th Party Congress as what you would read in the New York Times. [Laughter] But I think the most important thing from Hong Kong's point of view is this: that the one country/two systems is the policy of our country.

It's a long-term policy. And I'm sure this policy will survive the 15th, the 16th, many, many party congresses as we move forward.

The other point is that I know the country will move forward after the 15th Party Congress more positively and better, and that I'm very confident about.

Question: I think we have time for two-question - one on China/Hong Kong relations and the other cross-trade relations. America has sent recently large naval vessels into Hong Kong. How were those decisions made on that? And more particularly, how were other categories of decisions made? In short, who do you need to talk to on what categories of decisions?

Mr Tung: U.S. navel vessels have been visiting Hong Kong since July 1st, 1997, and under one country/two systems this is not a decision I can make. It is a decision that involves foreign policy; involves defense. Therefore it is the decision of the central government. Obviously we in Hong Kong are aware of the issues.

How does America approach us on this issue? I think there is now a standard formula between the U.S. Consulate or this defense department and somehow they have some communication directly with Beijing. But we are aware of these developments.

Everything else really it's up to us in Hong Kong. We make the decisions in Hong Kong, because it is really one country/two systems moving forward. If, as you know, the newspapers have been talking about whether we'll cut corporate tax by one and a half percent. Actually it's already very low - only a 16 and a half percent.

But that type of decision we will make in Hong Kong, because these are one country/two systems -- under one country/two systems we make these decisions for Hong Kong.

Question: Thank you. The final question is at the transition ceremony you met with Mr Koo Chen Fu and there was a lot of talk about what role - I would say a lot of speculation about what role Hong Kong might play in cross-strait dialogue and discussion. Can you enlighten us further on that topic.

Mr Tung: Well, Mr Koo was invited to the handover ceremony by the central government, and he was a guest of ours. He was also a friend of my late father, so I was very pleased after the ceremony to have had a chance to talk to him. It's more of a renewal of a friendship. Taiwan/Hong Kong relationship in economic terms is very important. In people terms, also very important. Investment by Taiwan companies onto mainland China very often are made through companies in Hong Kong.

Since July 1st, 1997, all these relationships continue. The airlines fly back and forth. Shipping lanes between Hong Kong and Taiwan has continued. We were able to very creatively make sure that the flat wasn't a specific issue, and people going back and forth from Hong Kong into China - everything in business as usual.

I think to the extent we can continue the economic relationship, the cultural relationship is important to Taiwan! It is important to Hong Kong! And, I would hope, it will contribute to the ultimate re-unification of the country!

Moderator: I hope you'll all join me in thanking C.H. for his presence here today -- [APPLAUSE] On behalf of the Asia Society and the National Committee and the Hong Kong Association, thank you very much for joining us, and we hope to see you soon.