Speech by the Financial Secretary Thursday, July 3, 1997 Following is a speech by the Financial Secretary, Mr Donald Tsang, at a panel briefing at Hong Kong Convention and Exhibition Centre this afternoon (Thursday): Introduction ------------ Ladies and Gentlemen, May I first, on behalf of the organisers and the other panellists, welcome you to this Briefing. I hope you have enjoyed the last few days, when we saw the birth of the Hong Kong SAR. Today Hong Kong is back to business as usual. Everywhere you go, be it banks, restaurants, photo-processing shops or wherever, you will receive the same, first class service you and the rest of the world have come to expect in this dynamic city. I think this shows how sophisticated our society has become. It shows how effectively and professionally the people of Hong Kong have prepared themselves for the transition. And above all it shows the determination of the people in both the Hong Kong SAR and the Mainland to make the concept of "one country, two systems" work. Nothing can be more convincing on this point than the plain fact that it is business as usual everywhere you look. Hong Kong's Service Economy --------------------------- The Briefing today focuses on Hong Kong's service economy. It signifies the fact that the Hong Kong SAR earns its money by the much more elusive commodity called knowledge, rather than just sweat and labour though of course those two elements are still present. Underlying our service economy is also the success story of how Hong Kong has outgrown the confines of its physical boundary and developed into a hub that supports, services and controls a huge range of business activities in Asia and beyond. A look at some key figures reveals the extent of Hong Kong's service orientation. The service sector now accounts for over 83% of Gross Domestic Product and over 78% of our employment depends on service. Hong Kong is the 9th largest exporter of services in the world, with its service exports growing at an average annual rate of 16.4% in value terms. Hong Kong is the world's busiest container port; the world's fifth largest centre in external banking transactions and foreign exchange transactions; the world's second in terms of facsimile lines per 100 business lines; and the most popular tourist and visitor destination as well as the second most popular convention venue in Asia. The facts are clear. Hong Kong has a powerful and prosperous service economy. Many of its service industries are internationally competitive. Hong Kong is remarkably successful in servicing China, Asia and beyond in many business hub functions such as headquarters, banking and finance, transportation, and telecommunications. Past or present glory does not imply future success. We know our job is to build on the successes of the past to ensure an even better economic future for the Hong Kong SAR. Hong Kong as Asia's Manhattan ----------------------------- What is our vision of Hong Kong's economic future? At the risk of over-simplification, I think that no two words can better describe it than - "Asia's Manhattan". Here I am not just talking about a Hong Kong full of glass-panelled skyscrapers, banks and multi-nationals. Of course we already have many of these and will continue to do so. But we are also talking about other important things. Taking the Manhattan analogy, I envision a Hong Kong that leads and sets the trend for the region in fashions, design, arts and culture and, perhaps most important of all, new ways of thinking and doing things through taking advantage of the cultural diversity and the quick and free flow of information that we enjoy; a Hong Kong that focuses on the highest part of the value chain, thereby allowing us to operate on a high but sustainable cost base; a Hong Kong which excels in processing information and adding value through it on the strengths of one of the best telecommunications infrastructures one can find in the world; a Hong Kong that is superbly effective in integrating and organising buying, selling and production activities spanning vast geographical territories; and a Hong Kong that is strikingly externally oriented, always on the lookout for business opportunities no matter where they are and ready to learn from economies near and far. This is the Hong Kong envision. The Public Sector's Role ------------------------ Does the Government have a role to play in this vision? Yes and no. Yes because the public sector can support and facilitate business in areas that individual entrepreneurs and firms find difficult to contribute to if left alone. These include infrastructure, education and manpower development, fighting corruption, cutting red tape, safeguarding the free flow of information, and upholding the rule of law. No because in the final analysis business decisions are for businesses to make. They, not the government, stand to profit or perish by those decisions, with the market as the final judge. The further the government stays away from these areas, the better it will be for Hong Kong's economy. Hong Kong's recent economic development is a classic example of this "minimum intervention, maximum support" approach adopted by the Government. Our increasingly heavy emphasis on higher value-added economic activities, many of which fall within the statistical classification of services, has been purely market-led. What the Government has done has been simply to follow the market and provide the support that the market demands. The detailed story of what we have done in the past few years in support of our service sector, much of which was kick-started by a Government Task Force which I chaired, is in the Task Force's Final Report available at the reception counter. I do not propose to repeat it here. Some Key Issues --------------- I think I have talked enough about generalities and it is time to invite our guest panellists to speak more specifically on a few key issues. I hope they will give you some idea of how Hong Kong is tackling the challenges posed by a high value-added economy at various levels. A key concern overseas, and to some extent in Hong Kong, is the relationship between services on the one hand and manufacturing on the other and whether an economy is sustainable without a substantial manufacturing sector. The argument often used is that a bank does not provide as many jobs as an assembly line. So getting more banks does not mean an economy can afford to lose its assembly lines. Well, there are not so many assembly lines in Hong Kong these days but unemployment stays low. Dr. Victor Fung, Chairman of our Trade Development Council, will share with you his views about the close and often inseparable relationship between Hong Kong's manufacturing and service sectors and how, instead of one weakening the other, both have become much stronger together. Another important area is service productivity. Simply put, this measures how effectively our service industries turn input into output. Hong Kong shares the common concern of many developed economies that service productivity usually grows more slowly than manufacturing productivity. Mr. Kenneth Fang, Chairman of our Productivity Council, will share with us the Council's experience in raising service productivity for Hong Kong. Finally, after talking so much on issues affecting the entire spectrum of our service industries, we believe it would be useful to share with you our experience in relation to a particular service industry. We have chosen tourism in this case and Mr. Y S Lo, Chairman of our Tourist Association, will speak on that. We also have Mr Brian Stevenson, Chairman of the Hong Kong Coalition of Service Industries, to share his thought with us. May I now invite Dr. Victor Fung to speak.