**************************************
Following is the text of the speech by the Chief Executive, Mr Tung Chee Hwa, at a dinner for the President of the European Commission, Mr Jacques Santer, at Government House today (Tuesday):
Mr President, Mrs Santer, distinguished guests, ladies and gentlemen,
It is a great pleasure to welcome you, Mr. President and Mrs Santer to Hong Kong. It was just over a year ago that I met you in Brussels on my first official visit to Europe. I was very grateful for the warm welcome you extended to me at that time, and, in particular, your vote of confidence in the Hong Kong Special Administrative Region so soon after our establishment. I am very delighted to see you here in Hong Kong. On behalf of all Hong Kong people, may I extend again our warmest welcome to you and to Mrs Santer.
Mr President, I am glad to know that your visit to China over the past few days has been a great success. I take particular note of the fact that the European Union is becoming China's second largest trading partner. As the new century unfolds, China's economic potential is enormous. Indeed, in the World Bank issue, titled "China 2020", it is stated that China will become one of the major economies in the world in the 21st century. I hope as European Union and China's relationship grows, Hong Kong can continue to play an important role in that relationship.
Mr President, Hong Kong has come a long way since reunification on July 1 last year. Enormous and fundamental changes have taken place, both politically and economically. At the political level, we are charting our own course and taking up responsibility for our own affairs under the "One Country, Two Systems" concept. The Central Government is determined to uphold the Basic Law and to ensure the full implementation of this particular concept. So are the people of Hong Kong. Our way of life has been preserved. In May this year, we saw the highest-ever turnout in our Legislative Council elections. There is increasing recognition internationally that the "One Country, Two Systems" concept is being fully implemented here. Indeed, I believe that we have been managing this change well.
On the economic front, we are facing enormous changes in Hong Kong as a result of the international financial turmoil, and the need for structural adjustments. The financial turmoil and the resultant instability of our financial markets have accelerated the pace of our adjustment which would in any case be necessary because of the existence of a bubble economy in Hong Kong. Unfortunately, the sharper is the adjustment, so is the level of pain. Our economy is expected to contract by 4% and our unemployment rate has been doubled to 5%. The adjustment, although painful, is necessary for us if we are to remain competitive. Out of all these adjustments, I am confident that we stand to gain a leaner, more competitive economy and a community drawn closer together in overcoming difficulties. If the economic problems of the region have proved one thing, it is the resolve of Hong Kong people to tackle adversity head on with unswerving commitment to the future of their home. Mr President, now that you are in Hong Kong, I hope you can sense our commitment to maintain Hong Kong as a vibrant international trading and financial centre and, of course, as the pre-eminent gateway for business and investment in the mainland of China. We also are determined to uphold the rule of law, the free market principles, clean and efficient government, sound and transparent regulations and prudent fiscal management, the hallmarks of our past success.
Mr President, what began inconspicuously on July 2 in Thailand with the devaluation of the Baht last year has become an international financial turmoil which if unchecked, will have devastating effect, not only to the economies of developing nations, but indeed to the entire world. China's commitment to maintaining the stability of RMB and Hong Kong's determination to maintain the linked exchange rate have provided the stability in a sea of uncertainty. Indeed, greater international coordination effort is required. Following the work of Group 22 in Washington, I am most heartened by the G-7 initiatives announced last Friday, I am glad to know the G-7's determination to ensure sustained economic growth. I am particularly pleased with G- 7's call for greater transparency, accountability and supervision in short term capital flow, particularly that of hedge fund. We now look forward to the full implementation of these lofty intentions as contained in the declaration. In the process of designing new international financial architecture, I hope some of the Asian economies including Hong Kong will have an opportunity to fully participate in the deliberation. After all, many of us have been at the receiving end and have borne the blunt of what has happened and have suffered considerably as a result of the instability of the financial markets. Our experience, I believe, could be most valuable.
Mr President, we here in Hong Kong have been following very closely the development of the European Union, a Union whose development is a strength and stay to the world economy, not just to its own members. In particular, we are watching with interest the economic convergence for European Monetary Union on 1 January next year. We believe the birth of the Euro will not only contribute significantly to economic efficiency in Europe. It will also have a profound effect on global financial markets. As one of Europe's biggest trading partners, Hong Kong has taken a very keen interest in the development of the Euro and its effect on trade and investment in goods and services.
Mr President, Hong Kong and the EU already have a very broad, deep and solid partnership upon which to build an even more prosperous relationship in the next Century. The EU is one of our most crucial partners -- you are our third largest market, while we are your ninth largest. Hong Kong is the most important entrepot for trade between the EU and the Mainland. In terms of investment, the EU is the largest investor in our non-manufacturing sector and the third largest investor in manufacturing. More than 700 EU companies use Hong Kong as a regional headquarters or a regional office. More than 45,000 citizens of Europe live in Hong Kong.
I am happy to note that today, the HK-EU partnership took another step forward with the initialling of an important agreement on customs co-operation. This agreement will help ensure effective application of our respective customs laws through the exchange of information and co-ordination between our customs authorities. This agreement is special for one reason, in that it is the first binding customs co-operation agreement we have negotiated as a separate customs territory since reunification. I am most grateful for the European Union's continued staunch support for Hong Kong in this regard.
Mr President, business is not all that draws us together. International schools offer British, French and German/Swiss curricula to ensure that those living and working in Hong Kong can provide their children with an education that is compatible with that in their own countries. Numerous associations in Hong Kong promote the culture and language of European countries. Even more numerous restaurants, I might add, treat us to the excellent cuisine available in Europe. Fashion, cars, perfumes, aeroplanes, electrical goods, telecommunications, construction, manufacturing, financial services -- the European presence in Hong Kong is so great that we can hardly notice it actually.
Mr President, tens and thousands of Europeans make their home in Hong Kong. The vibrant and active European community is a tremendous asset to Hong Kong. It not only contributes considerably to our economic fortune, but also has helped Hong Kong to become one of the world's truly great cosmopolitan cities.
Mr President, the Hong Kong-EU partnership is heading into a promising new era as we approach the threshold of the millennium. The advent of the Euro, coupled with the continued opening up of markets in the Mainland will, I am sure, present tremendous and exciting opportunities in the not too distant future. Hong Kong and Europe already have a strong and vibrant relationship. I can only see it getting better for both of us.
Thank you very much.
End/Tuesday, November 3, 1998
NNNN