Distinguished guests, ladies and gentlemen,

It gives me great pleasure to be invited to the "Hong Kong, Shanghai, Osaka Economic Co-operation Conference" and speak on how the Basic Law protects investment in Hong Kong. Before I do so, I would like to congratulate the organizers for holding the Conference in Hong Kong this year, which is a most historical year for us as we are re-united with China after 156 years.

Many pundits predicted massive capital drains from Hong Kong before and after its reunification with China. Yet what has taken place since July 1 has proved, beyond an iota of doubt, the complete fallacy of their prediction. Commerce and business retain their vibrancy in Hong Kong. New foreign investors have come to Hong Kong, while the ones already in situ have continued to remain and some have even expanded their operations in Hong Kong. For example, Hong Kong is home to more than 2,000 multi-national companies.

Hong Kong continues to practise a free trade and open market economic policy. We welcome businesses from all parts of the world to come to Hong Kong. As an open economy, we have no special approval procedure for foreign investments. We impose no conditions for admission. And we do not interfere with management of investments in Hong Kong. We also put no roadblocks before investment overseas by our own entrepreneurs or by others who wish to invest in other places through Hong Kong. It thus comes as no surprise that Hong Kong is the world's fourth largest source of foreign direct investment and the largest external investor in the Mainland of China.

As the world economy becomes increasingly globalized, Hong Kong believes the best way to attract and protect investment is to institute an investment regime that is free, open, transparent and stable. And these principles are firmly enshrined in the Basic Law, the constitution of the Hong Kong Special Administrative Region. The Basic Law was promulgated and adopted by China's National People's Congress in 1990 and came into effect on July 1, 1997. It delineates and institutionalises the unprecedented concept of "One Country, Two Systems". It protects the rights, freedoms and lifestyle of the Hong Kong people. It guarantees the independence of our judiciary and, apart from foreign affairs and defence, it gives the HKSAR full responsibilities to manage its own affairs.

Written into the Basic Law are detailed provisions requiring the Hong Kong Special Administrative Region to:

(a) practise the capitalist system for at least 50 years after 1997, thereby giving a firm basis for the operation of our free market economy;

(b) pursue a free trade policy and remain a free port;

(c) operate its own independent finances and formulate its own monetary and fiscal policies; and

(d) uphold a freely convertible Hong Kong currency, free flow of capital and no foreign exchange controls.

These clearly stated provisions in our consitution ensure that Hong Kong is, and will remain, one of the most liberal, if not the most liberal, investment regimes in the world. The Government of the Hong Kong Special Administrative Region sees its role as following sound macro-economic policies, putting in place the infrastructure necessary for business development, providing the education and training necessary for meeting the needs of a knowledge-based economy, and enforcing the rule of law.

Rule of law is the vital guardian of a free and open investment regime, and the Basic Law stipulates the rule of law in Hong Kong. It prescribes the operation of an independent system of law in Hong Kong, including statute law, common law, rules of equity and customary law; and an independent judiciary with the power of final adjudication which is now vested in the Court of Final Appeal. All the laws and regulations are published and publicly announced for compliance.

Hong Kong's judiciary enjoys a long-standing reputation of being fearlessly fair, impartial and independent. Our legal system is highly developed. The law does rule in Hong Kong. The rule of law makes sure that contracts entered into are enforceable. It ensures that the generators of wealth - investors and entrepreneurs - have the confidence in obtaining fair redress in our courts, in the full knowledge that their rights will not be impinged upon by any party or subject to governmental whims. The Government in Hong Kong can be, and is often, sued in Hong Kong; and suffers its share of defeats in the law courts.

Besides the rule of law, the practise of a level playing field is also vitally important to investors. In Hong Kong, anyone can start any legitimate business in Hong Kong - without hidden constraints, import duty or non-tariff barriers; without prejudice to the nationality of the owners of the business; be they Hong Kong residents, Mainland Chinese, Japanese or Americans; and without favouritism or partiality on the part of the Government. In Hong Kong, everyone has an equal opportunity to work, thrive and prosper.

Investors flock to places where the public service is corruption-free. The reasons are obvious - lower operating costs and more certainty in the business operation climate. Hong Kong takes its anti-corruption activity very seriously. Since the establishment of the Independent Commission Against Corruption in 1974, Hong Kong has gained a reputation as one of the cleanest places in the region to do business. The success of the ICAC is internationally recognised, and its existence is mandated in the Basic Law.

Investors want to know whether their property will be protected in the places of their investment. In Hong Kong, we place the utmost importance on protection of private properties. Again, the Basic Law mandates the Hong Kong Special Administrative Region, in accordance with law, to protect the right of individuals and legal persons on the acquisition, use, disposal and inheritance of property, and compensate for the lawful deprivation of their property. This protection not only covers tangible property such as land or estate but, equally important, intellectual property rights.

The Basic Law stipulates the formulation of its own polices by the Hong Kong Special Administrative Region Government on science, technology and culture and protect by law any achievements in scientific and technological research, patents, discoveries, invention, and rights and interests of authors in their literary and artistic creation. The protection of such property is particularly important to the development of Hong Kong as our economy continues to move up the technological and value-added ladder. Hong Kong has developed a robust regime against all forms of infringements against intellectual property rights.

From an investor's point of view, a low and predictable tax regime is another important consideration in deciding where to invest. Hong Kong's tax regime is not only simple, its rates have also remained consistently low. And a low tax regime is stipulated in Hong Kong's constitution or the Basic Law, which also requires the Hong Kong Special Administrative Region to have its own independent taxation legislation. It specifically states that investors in Hong Kong will not be subject to taxation by Mainland China.

The Basic Law empowers the Government of the Hong Kong Special Administrative Region to conclude and implement agreements with foreign states, regions and relevant international organisations in the appropriate fields, including the fields of trade and economic. This enables us to conclude specific investment protection agreements with our trading partners which provide an additional safeguard for their investment in Hong Kong. Since 1991, Hong Kong has been actively negotiating for a network of bilateral investment promotion and protection agreements, or IPPAs. These agreements provide our foreign investors with specific benefits such as national and most-favoured-nation treatment, protection against non-commercial risks, safeguard against expropriation, right to international arbitration and so on. So far, we have concluded a total of 13 IPPAs with our trading partners including one with Japan which was signed in May this year.

With an extremely smooth change of sovereignty over Hong Kong, with the Basic Law providing a sound legal basis for progress, with Hong Kong people ruling Hong Kong, and with the three branches of the Government - the Legislative, the Executive and the Judiciary - operating effectively and in an accountable and open manner, the economic and social fabric has remained completely stable. With the basic ingredients already in place for further growth, Hong Kong has greater strength than ever before to forge ahead into the new millennium. I hope all of you will continue to partake of, and realize, the greater potential Hong Kong has to offer to the international business sector. I am totally confident that we shall all prosper together in the process.

Thank you.