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Following is the full text of the speech (English only) delivered by the Financial Secretary, Mr Donald Tsang, at the Annual Dinner of the Hong Kong Trade Development Council in London on November 3 ( UK time):

Sir Andrew,Victor, distinguished guests, ladies and gentlemen.

It is an honour for me to be addressing such a distinguished and influential gathering, and on this important occasion. I'm very conscious of Somerset Maugham's dictum, "dinner is a time when one should eat wisely, but not too well - and talk well, but not too wisely". I hope I can accomplish both : but in this case eating well and speaking wisely!

I am delighted to be back in London, a place I like to call my second home, and one which we in Hong Kong are trying to emulate in becoming the world city of Asia. I can understand why Disraeli was moved to describe London as "a nation not a city".

The Annual Dinner of the Hong Kong Trade Development Council (as Victor mentioned) has become something of a tradition since the very first one back in the early eighties. Tonight, I don't wish to dwell on recent history.

But I do want you to cast your minds back to this time last year when our Chief Secretary, Anson Chan, was your guest speaker.

At the time, we were in the midst of the Asian financial turmoil - a crisis that someone had likened to a "wrecking ball" because of its devastating impact on the economies firstly in Asia, then South America, Russia and eventually landing on the doorstep of LTCM in the United States.

Now, 12 months down the track, I'm pleased to say the horizon is starting to look much brighter. The Asian economies are turning the corner. A quick look at the second quarter GDP figures for the countries most seriously affected all show positive growth. For Hong Kong, real growth was 0.7 per cent - the first positive GDP figures since the last quarter of 1997.

But, I don't want to give you the impression that we were down and out for the count. That we were somehow not performing as well as our neighbours.

Figures often don't tell the real story. We need to compare like with like - in other words comparing our GDPs today with what I like to call the peak of the 'golden era of the tigers' in 1996/97. And, of course, expressed in US dollar terms, the international currency for trade and investment, as the benchmark.

When you do this, I'm afraid none of our neighbours has returned to the halcyon days of 1996. However, look more closely, and you will see how each of the economies has fared.

In our case you may be surprised to find that the fall has been only 0.9 per cent. Taiwan has slipped back by 1.1 per cent. Singapore by 8.6 per cent; with others trailing much further.

This clearly shows the economies that have performed the best in emerging from the Asian financial crisis are Hong Kong, Taiwan and Singapore. How well we continue to recover depends on the level of reforms we put in place.

It is very easy for me to simply recite these figures. They roll off the tongue naturally.

But we cannot, nor do we wish to, deny the fact that the figures belie the pain that Hong Kong businesses and the community at large have had to endure over the past two years. And the suffering has been real. Employment, property prices, asset values, trade, self-esteem, have all taken a severe jolt.

The crisis exposed weaknesses in our economy - in particular our over-reliance on property as an economic driver. The market was over-heating and it was only a matter of time before the graphs, pointing ever skyward, were reversed.

And the Asian financial crisis certainly saw to that, chopping up to 50% off the value of properties over a relatively short period, pushing unemployment beyond 6% and digging deep into other asset values.

But no one should ever write off Hong Kong. Even in the face of what was the worst recession in our post-war history, the resilience of the Hong Kong spirit never waned.

That the economy is beginning to turn around so soon is a tribute to the resourcefulness of the people of Hong Kong and their faith in the future of our "home". If there's one thing we don't do in Hong Kong - that's sit around wringing our hands lamenting what to do.

The Asian financial turmoil was a re-awakening. A shot in the arm to get the adrenalin pumping. To keep us at the apex of the Asian recovery. We have the initiatives. We have the reforms. We are refining and adjusting what is still one of the world's freest economies - if not the freest - a position we have held for the past few years.

We are targeting seven areas of Hong Kong's economic fabric to strengthen our systems and to introduce bold initiatives as we position ourselves to lead the region into the 21st century. To make Hong Kong even better.

We're revitalising the banking sector; reforming the securities and futures markets; revamping the public sector; liberalising telecommunications; transforming the tourism and recreation industry; cleaning up the environment; and hitching a ride on the information super highway.

It's what I like to call Hong Kong's variation of the 'dance of the seven veils' - as each veil is stripped away it reveals a new and stronger Hong Kong.

In banking, where we are arguably the most efficient and best regulated in the Asian region, we are making it even better by gradually deregulating the remaining deposit interest rate rules and encouraging greater participation from foreign banks.

This further liberalisation will help maintain our position as a leading international financial centre. And, no doubt, in the longer term, lead to the merger of some of Hong Kong's smaller banks as a way of strengthening their position in the new highly-competitive global environment.

In the securities market, we are carrying out fundamental reforms to make it more attractive to market makers. We are demutualising, merging and listing the stock and futures exchanges and the clearing houses; enhancing the overall regulatory framework; and introducing the latest technology for a secure, scripless and single clearing infrastructure.

The Hong Kong Stock Exchange itself is opening up opportunities for small enterprises to be listed - and to raise capital - on a new disclosure-based second board known as GEM, an acronym for Growth Enterprise Market. Listings are expected to begin shortly.

With the exchange operating both a main board and GEM - Hong Kong will become more attractive for the listing of Chinese enterprises and as a fund-raising centre for Asian and multi-national companies.

And the significant amount of assets generated by our new Mandatory Provident Fund, running into billions of dollars a year, will enhance the development of the debt market and create additional demand for investment products.

Our public sector is already small by any current yardstick in and probably one of the most efficient. But we still believe there is scope to shed another layer.

We are pushing ahead with further privatisation of public assets, including our profit-making and highly successful mass-transit railway.

And we are even venturing into several non-traditional market areas by privatising some of our social welfare services - initially with home care help and special services to our elderly and people with disabilities.

But the privatisation of a substantial minority share of the MTRC has the potential to be the largest float of its kind in recent history. This ground-breaking initiative will become the benchmark for privatising other government-owned assets, should the occasion arise, in the future.

In telecommunications, we have turned the market on its head, and brought about what I can only describe as a revolution. This is the result of our successful negotiations on the early surrender of [the former] Hongkong Telecom's exclusive licence for international telecommunications.

The intense competition it has spawned has been a bonanza for the consumer, in particular, with the price of phone calls tumbling - a phenomenon I notice you're also enjoying here. And the response to recent invitations for applications for local fixed telecommunications services and television broadcasting has also been 'hot'.

We have completely liberalised the market for Internet services and mobile phones. As a result, a new trend has started. Now it seems many people have taken to wearing around their neck the latest tiny cell phone - like some piece of avant garde jewellery : or logging onto the worldwide web through one of the 130-plus Internet service providers in Hong Kong.

In tourism and recreation we're creating a whole new image. Spearheading this will be Hong Kong Disneyland which will breathe new life and bring a new dimension to Hong Kong as the tourism capital of Asia.

I'm delighted with the agreement we reached earlier this week with The Walt Disney Company. It's a good deal for Hong Kong. We can afford it. And it will have tremendous benefits not only for the economy, but the enjoyment it will bring to millions of people in Asia. The economic return to the community over the life of the theme park is estimated to be close to 12 billion pounds sterling.

I, for one, am eagerly looking forward to opening day in 2005. And I hope many of you here tonight will also be in Hong Kong for the big day.

Our plans to reinvigorate tourism will be developed in harmony with the environment, our 6th veil being taken off, that will reveal a cleaner more environmentally-conscious society. Protecting the environment is essential for sustainable economic growth.

The measures we are putting in place over the next few years, some in co-operation with our nearest neighbours across the boundary, will dramatically clear the air over Hong Kong, as well as enable the right conditions for sustainable development.

We're getting rid of the vehicles that belch out black diesel fumes into the atmosphere. We're cleaning up the quality of our water supplies. We're expanding our pollution-free railway network by some 40 per cent to make it the backbone of our transport system.

We're expanding pedestrian zones and encouraging the use of less polluting modes of transport. In fact, we'll be spending some 2.5 billion pounds sterling over the next few years on enhanced environmental measures.

But don't get me wrong. Hong Kong is not about to disappear in a cloud of black smoke. If you look at the bottom line - the life expectancy rate - Hong Kong compares very favourably with those of most developed countries. Our women live to the mature age of 82 and our men manage 77. That's not bad. In fact, it is second only to Japan in that regard.

The seventh and final veil to be shed reveals Hong Kong's growing position as a new IT hub for Asia. We are developing a technical infrastructure that is putting Hong Kong at the threshold of tomorrow's digital world.

Our city has probably the most highly developed fibre optic system of any leading financial centre in the world today. This intricate web of fibres reaches every building to ensure our businesses have the best communications to the four corners of the globe. Our broadband service also now covers some 75 per cent of buildings.

And the one billion pounds sterling Cyberport project in Pok Fu Lam is already attracting a cluster of companies involved in the development of advanced IT applications and services.

A dozen leading international companies have signed up as anchor tenants and many more have expressed an interest in becoming tenants. The Cyberport will help us develop a critical mass of professional IT talent in the shortest possible time and enhance our reputation as a new 'Silicon Valley' for Asia.

So, the last veil has been shed to reveal what is probably the most dynamic economy in East Asia. A government that far from being a laggard, is a leader in turning the ravages of the financial crisis into the advantages of tomorrow.

There are those who fear that our approach to the development of Hong Kong - particularly in relation to our participation in the Cyberport project, the Disney theme park and last year's market incursion - marks a significant departure from our hands-off, free and open market policies.

Let me give you this cast-iron guarantee tonight, we will never abandon our basic private sector philosophy of maximum support minimum intervention.

What you are seeing are examples of the government reacting judiciously to the manifestation of private sector demands. As I have said on previous occasions, the government does not want to stifle creativity or entrepreneurial flair. We let the business people get on with the job they do best and keep government "interference" to the minimum.

I have dwelt quite a lot on the reforms we are making in Hong Kong and the opportunities that are available as we position ourselves as Asia's world city for the 21st century.

But we can't do it on "hardware" alone. We have to ensure the right "software" is in place. And here I mean the skills, the knowledge, the educated workforce, and first and foremost the systems.

As one who was born and has grown up in Hong Kong through some of its most tumultuous history, I cannot let this moment pass without making some reference to the pillars of our success story, which, incidentally, are part of Britain's legacy to Hong Kong. The rule of law, the freedom of speech, the freedom of expression, the level playing field and our clean and efficient administration.

Even though we are in the midst of an exciting transformation, we are ever mindful not to interfere in, or tinker with, those traditions, those systems, our respect for the rule of law and of human rights.

You only need to look at the Observer's Human Rights Index to see how well we have scored. These are carefully nurtured systems put in place over the years as Hong Kong developed into one of the world's top 10 trading economies.

They are the foundations of Hong Kong society today.

But, like time itself - we don't stand still. Our reunification with China in 1997 was a defining point in history - the day when we were reunited with the motherland. It was a proud and moving moment.

Hong Kong always was a Chinese community and the reunification was part of an historical process.

But that does not mean we forget our friends and I believe our ties with Britain today are stronger for it. In a way, the manifestation of that was in President Jiang Zemin's successful visit to Britain a fortnight ago. It's hard to believe, but it was the first ever by a Chinese head of state.

In conclusion, ladies and gentlemen, tonight has been a wonderful experience for me. I know I am among true friends of Hong Kong. I also realise that, when you look at us from over here in London, the view might seem a little distorted through the kaleidoscope of our free-wheeling and plural politics relayed by the freest news media in Asia.

So, let me leave you with this thought - look carefully at what is happening. Cut through the political noise and journalistic licence.

With the economies of Hong Kong and the region showing signs of recovery, with major market reforms being put in place, and a new found sense of identity, you will find, in Hong Kong, a confident city, dedicated people and a free society passionately committed to the preservation of the rule of law. A leaner, more competitive city, ready for lift-off into the new millennium.

Thank you

End/Thursday, November 4, 1999

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