Following is the transcript of the question and answer session of the Chief Executive, Mr Tung Chee Hwa, during the 1997 Annual Meetings Program of Seminars - Asia and the World at HKCEC this (Saturday) morning:

Question (Peter Wong - HK): Mr Tung, in your speech you mentioned in your last point about the need for a sustainable economy. The environment is quite an important thing for the quality of life. Do you find that, now, in the Asian cities, the headlong drive to economic success will now have to be tempered with looking at the environment to make sure that people, in spite of having a good GDP per person, they are getting a decent quality of life?

Mr Tung: I think each country, each society, at different stages of development has different priorities. And speaking for Hong Kong, I would say that our GDP per capita is probably one of the highest in Asia. But as we move forward we are moving upscale in the level of services we can provide in the high technology sector and you need to attract the best people around the world to come and work here, to come and live here, and to retain our best citizens to remain committed to Hong Kong, and I think we are not going to be able, even from an economic point of view, to achieve our objectives if we do not have a good environment, apart from the fact that the environment is very fundamental to all of us. So, certainly in Hong Kong, we will be committed, as we move forward, to be very conscious of the need for a better environment for everybody.

It is always easier said than done, especially when I am sitting in the position that I am sitting, because, for instance, we are pushing very hard to create more land for housing. As you know, we have an acute problem in housing and housing obviously needs to be the priority for our community. So when you are in my position you try to define the priorities, try to make sure things go ahead, but at this moment our priority is housing. But we will do so very mindful of the importance of the environment and the need, not just because it is the right thing to do from a human point of view, but because it is the right thing to do from an economic point of view.

Question (Margaret Wilson - US): In view of the global economy and global world in which we now live, and I know you have recently been in the United States meeting with our President, but I wonder what suggestions you might have of either what the US Government or business policy and relations and actions, and your role as well, might be with Hong Kong, China and Asia, in order to make this an even more productive world for business and finance so that we can all prosper more?

Mr Tung: I think the most important thing is really the open global system for free flow of capital investment and trade. I think the inclusion of China into the WTO is a very important part of that process and I would hope that this will happen sooner rather than later. Asia is moving forward very well, as I said when I was in America, but many of the Asian nations, 50 years ago, were colonies, and over the last 50 years they have achieved success in terms of prosperity, human dignity, which a generation ago people would not have even dared to dream about.

This was made possible because of the very open trading system of the West, because of a peaceful environment after the Second World War, and because of the very open trading system, particularly the United States market, and the generosity of the United States after the Second World War. And many of these countries now have achieved a level of prosperity and success that they justifiably are proud of and I think it is important that the voices of these countries are heard. As to how we in Asia has built up these communities, and increasing dialogue in this sort of area will always be helpful in improving understanding which in turn will improve capital flow, human relationship, in the building of a global village. So I think it is a subject which I can spend hours with you on but I need to be very brief in my remarks.

Question (Singapore): Lately, I find that not only in Hong Kong but also in Singapore, Malaysia and many other countries, the governments are inviting the best brains from foreign countries. Does this mean that there is sufficient amount of talent not available in the countries? And don't you think that by putting too much emphasis on this, you will give a distinct feeling of an inferiority complex among the local talents?

Mr Tung: I think the world is becoming increasing global. It is right for countries to attract some of the best talents and we should remain open to the best talents in the world. I don't think, certainly in Hong Kong, we will not be afraid of this competition. I hope, and I don't believe we have this inferior complex. We need all the best brains we can get in America. The fact that America has been very successful is their ability to attract all the best brains from around the world to be there and this is quite evident. So if we can create an environment in Hong Kong to attract some of the best people, we will be very happy to do that. And as I said in my speech, the international community is a very important part of Hong Kong and we will want them to contribute to our success.

Question (HK): Mr Tung, you have mentioned many times that housing is a serious problem in Hong Kong. In fact most property companies in Hong Kong have land banks supply adequate to supply any growth in five to ten years. And the reasons why land supply are being used for the cost of holding land in Hong Kong is low due to the ... of interest ... because of the peg ... even though the peg will not be broken by ... circumstances. So in terms of the cost for maintaining the peg, isn't it time to re-examine the economic cost to the Hong Kong community of maintaining the peg? And many experts have told me that Hong Kong dollar, because of the peg, have ... against any currency.

Mr Tung: It is a loaded question. Firstly, I would say the peg has served us very well for 14 years. In these 14 years we have seen our economy continues to sustain growth, we have seen the benefit to Hong Kong, and there is no reason, absolutely no reason for us to move away from that peg. 83% of our economy is now in the service sector and there the competitiveness - one is cost and the other is the quality of service we can provide - and we aim to provide that service, we aim to be competitive not only thinking about the costs but thinking about the quality of the service we can provide, thinking about the uniqueness of service we can provide. And this is not to say that we are not conscious of cost.

But we feel that one of the reasons we have inflationary pressure is from areas of housing where we have a supply side bottleneck because not enough land has been released into the market place to build more homes. And the other side, the supply side bottleneck is in fact people in terms of the fact that we have now an unemployment rate of 2.4%, I think. And that supply side bottleneck is not just in the labour sector but also in the areas of managerial and professional ranks where we have some bottlenecks. So these are the ways we are going to try to resolve these problems and we feel this is the right way forward. We provide a unique service, we are mindful of our costs, we tackle it not by competitive devaluation but by providing better service and opening up the bottlenecks.

Now, as far as housing is concerned, government is the largest landlord in Hong Kong and we will provide more land to achieve the objective of building 85,000 homes every year. And I, myself, and the whole government, and Donald Tsang who is sitting here, our Financial Secretary, is responsible for all this. And we will make it work. We are very confident that it will work.

Question (Karen Lang - HK): You talked about the need for financial stability. Are you not concerned about the recent volatility of the stock market and high inter-bank interest rates here in Hong Kong?

Mr Tung: Obviously, the volatility of the stock market is a concern for us but we felt that the best way to address this issue is to continue to make sure that our market mechanism is good, our regulation is transparent, and that we will make sure that every day all the settlements can be completed during the day, and then let the market forces take care of itself because we believe this is the best way forward for us. We believe this is the essence of success, letting market forces look after it and making sure that we have the proper regulation and proper oversight of these areas.

You know, ladies and gentlemen, we learned the lesson hard way because in 1987 our market cap (capital) halved overnight and from there we begin to pick up the pieces, learn all the lessons of what need to be done. So, I think we are very confident in our stock market.

Question (Colombia): You have been, world-wide, admired because of your leadership in this process with China. What do you think will be your role with Latin America for the future - Hong Kong's role with Latin America?

Mr Tung: I'm sorry, I didn't quite catch that.

Speaker: Hong Kong's role with Latin America in the future. What is the role of Hong Kong with Latin America in the future?

Question (Colombia): You have been playing a very important role in Asia but what about Latin America? Do you think you're friends?

Mr Tung: I attended the Chilean National Day celebration yesterday and to find out that it is going to take 40 hours of flying to get there. So, obviously our major partners in trade, apart from our own country, China, are the United States, the European Union, Japan and also the ASEAN countries. But I would hope very much that as the new century unfolds and as Latin America becomes more important, certainly we should be looking at doing more things together. You know we are a member of APEC and so is Mexico and so is Chile, and I think it is a good beginning that we now have some trade. It is not a whole lot but since our development - even from Chile, I was told yesterday, a lot of wine and foods and so on are moving from Chile actually all the way into Hong Kong. So things are happening and global trading won't be developed overnight but I am sure that as the 21st century unfolds we will be doing more with Latin America. From Hong Kong's point of view we will always say: the world is our home. We will be looking at the whole world. We have wonderful 6.5 million very entrepreneurial people and they are looking at the world all the time. Thank you very much.