Following is a speech by the Financial Secretary, Mr Donald Tsang, at the reception hosted by Kowloon-Canton Railway Corporation on the occasion of the 1997 World Bank Group/International Monetary Fund Annual Meetings in Hong Kong today (Sunday):

Distinguished delegates to the World Bank Group/IMF Annual Meetings, Honourable guests, Ladies and Gentlemen,

On behalf of our host this evening, the Kowloon-Canton Railway Corporation, I would like to welcome you all to Hong Kong for the first Annual Meetings of the World Bank Group and International Monetary Fund ever held here.

It is indeed Hong Kong's great honour to have been chosen as the venue for this very important event. The fact that the World Bank Group and the IMF have chosen to hold their Annual Meetings here is I believe a vote of confidence in Hong Kong as an international financial centre.

The holding of the Annual Meetings here has provided an excellent opportunity for you to see for yourselves that it is business as usual in Hong Kong wherever you go.

The four important pillars which underpinned Hong Kong's economic success before the changeover, which are the rule of law, a level playing field for all who do business in Hong Kong, a corruption-free public service and free flow of information, have all remained to ensure Hong Kong's continued success as it takes on its new role as China's premier international financial centre.

The "one country, two systems" concept works, right in front of your eyes.

And I see Hong Kong approaching the next Century in extremely good financial shape.

At the moment, Hong Kong has something like $95 billion US dollars in the bank, of which some $81 billion is held in foreign currencies. And we have no debt.

At the same time we continue to plan for, and build, the massive infrastructure needed to keep our economy competitive.

We have spent almost $20 billion US dollars on our new airport and related developments, which include two of the world's longest bridges, a dedicated express railway line, a new town which will ultimately house 200,000 people, a new cross-harbour tunnel, 32 kilometres of six-lane expressways and major reclamation to provide new land for commercial development and housing.

To keep up with the pressing needs of our rapidly growing population and their growing demands for efficient transport links between home and places of employment, we are poised to embark on major expansion of our railway networks over the next few years.

A most important element of this transport strategy involves the Kowloon-Canton Railway Corporation, or KCRC for short.

At present, KCRC operates several railway networks. It provides heavy rail, light rail and cross-border passenger services, bus services, freight services and participates in joint venture property developments.

KCRC has become one of the best run, highest quality and most profitable, mixed-use railways in the world. Its history goes back to 1910. In 1982 it became a government-owned corporation, operating on prudent commercial principles. It is a world leader in the railway industry in ISO certification and has won numerous awards for its commitment to quality service.

In 1996, KCRC carried more than 1.1 million passengers a day and achieved a profit after tax of $3.1 billion Hong Kong dollars. It has a very strong balance sheet.

Thus when we looked at how we could take forward our railway developments, we invited KCRC to produce a proposal and feasibility study on how Hong Kong's western corridor could be provided with high-speed and efficient rail services.

Last December, the Government gave KCRC the green light to continue its planning for the first phase of West Rail project, a 30 kilometre passenger railway that will provide a much-needed passenger link between the Northwest New Territories and urban Kowloon.

As you can see from the various placards around the room, West Rail will have nine stations and will carry about 400,000 passengers per day when completed in 2003, making construction of it one of the largest railway undertakings in the world.

In considering what would be the most appropriate financial arrangement for West Rail's construction, it is useful to look at Hong Kong's track record. Over the past three years, we have contributed HK$60 billion to the Airport Authority and the Mass Transit Railway Corporation, or MTRC for short, which at present operates our underground train system, to help finance construction of the airport and airport railway. On these projects and others, I am pleased to say that Hong Kong has an excellent record of completing major infrastructure projects on time and within budget.

While an investment by the SAR Government would be an important part of any financial package for the West Rail, we believe that the project will be attractive to the financial markets as well.

First, West Rail is itself financially viable, providing a satisfactory rate of return in line with other major publicly funded infrastructure projects.

Second, West Rail has the full support of the Government and the community at-large.

Third, West Rail is being undertaken by the KCRC, who, as an experienced railway operator with record of consistent profitability, has already received investment-grade credit ratings equivalent to those of the MTRC.

Thus we believe that the KCRC will be able to secure borrowings from the international financial markets to finance a major share of the project, and make effective use of them.

West Rail is an important project to keep Hong Kong on the fast track. Construction will begin later next year. Working with the KCRC, the financial community will clearly have a key role to play.

As a footnote to the investment in West Rail, let me say that the KCRC remains committed to improving its railway system as a whole, taking every opportunity for expansion but, of course, within the bounds of prudence and financial viability.

On this note, I would like to thank you again for coming this evening. I hope that you will find time out of your busy meeting schedules to see more of this "Pearl of the Orient".

Thank you.