Following is the speech (English only) by the Chief Secretary for Administration, Mrs Anson Chan, at a business luncheon held by the Hong Kong Trade Development Council in Melbourne, Australia, today (Thursday):
Mr Charles Goode, distinguished guests, ladies and gentlemen,
Thank you Mr Goode for your kind introduction. I will now try to live up to a definition I read the other day of what constitutes a good speech - it should have a good beginning and a good ending, both of which are kept very close together - although I'm not sure I can achieve the latter!
But before I deliver my speech, I just want to say how delighted I am to be back in Australia and, once again visiting the great "southern capital", Melbourne - a city, I'm told that was rated as "the world's most liveable". I'm not surprised given the wonderful network of parks, gardens and tree-lined boulevards that seem to be everywhere in the city. The city fathers obviously had a great deal of foresight when they laid out the plans for Melbourne all those years ago.
It's three years since I was last in Australia and, like the waters flowing down the Yarra, a lot has happened in that time - from our perspective. I don't wish to dwell too much on the past as I know you are well informed on what has been happening to, and in, Hong Kong from the sometimes lively reports I read in the Australian media. But I'm sure you'd like to hear it "straight from the horse's mouth", to clear up any misconceptions you might have.
From the outset, I believe every fair minded person would agree that our return to Chinese sovereignty on July the 1st, 1997, after more than 150 years of British rule, could not have gone more smoothly: despite the many doomsayers and commentators who were predicting that somehow we would just quietly slide off the map. By saying that, I'm not trying to sweep under the carpet the genuine concerns expressed both before the change of sovereignty and since then about the protection of our systems and our way of life.
The very fact we are operating under a system that has never before been put into practice virtually guarantees situations will arise that may cause a degree of disquiet in sections of the community. But I believe whatever problems we have encountered in the past two and a half years have stemmed, not from any deliberate actions taken by the central government in Beijing, but mainly as a result of the Asian financial crisis. Fortunately, the economic data coming out of the region over the past few months all points to recovery. In Hong Kong's case, from the worst recession in recent decades.
Figures for the second quarter this year show that our economy grew by 0.7% - the first positive GDP figures since the final quarter of 1997. Our third quarter figures, due out tomorrow, are expected to show continued improvement in the economy - reflecting the strong rebound from last year's 5.1% contraction. Certainly the past 18 months to two years have been pretty tough - our economy shrank, property prices plummeted by 50%, rents tumbled, unemployment rose to just over 6%, trade dipped and people's self confidence took a severe blow. From that scenario you might think we were down and out. Or to put it more vividly in Australian slang, that we'd "kicked the bucket".
Not so. Hong Kong's resilience and "can do" attitude, which has enabled us to overcome so many seemingly impossible odds in the past, again prevailed. We didn't wait for someone to wave a magic wand. We have taken advantage of the crisis to introduce fundamental reforms to our economic fabric, to strengthen our position as a leading international financial services centre and to position ourselves for the new millennium. In turning around the economy, as the present trend indicates, we have not had to resort to artificial means, such as across the board pay cuts or currency devaluations. Our linked exchange rate to the US dollar does not give us that latter option, and we do not intend to abandon the link. What you are seeing is the world's freest economy adjusting naturally to market forces. That's how it was meant to work. That's how it is working.
So, despite the fierce pain we all felt at the height of the crisis, Hong Kong is on track for recovery. Property prices have stabilised, trade and tourism have picked up and consumer confidence is returning. And that brings me back to the reforms and new directions I mentioned earlier that cover key sectors of our economy. In essence, we're "doing it better and doing it differently" - in the public sector, in banking, telecommunications, tourism, financial services, the environment, and innovation and technology.
Our public sector, for which I am directly responsible, is already small by any current yardstick and is arguably one of the most efficient in the region. But where there is scope to privatise services we are prepared to take the initiative. That's why we are venturing into several non-traditional market areas by privatising some of our social welfare services.
On a much larger scale - and similar to reforms I notice you have successfully implemented in Australia with the float of companies such as Telstra - is our decision to privatise a substantial minority share of our highly successful Mass Transit Railway. This has the potential to be the largest float of its kind in recent history and will become the benchmark for privatising other government-owned assets, should the occasion arise.
However, I should add that, unlike many other countries, Hong Kong has a much lower level of public ownership of utilities. And the ones we do have an interest in, such as the MTRC and the Kowloon-Canton Railway, have been run on strictly commercial lines and are expected to make a profit.
Our banking sector is arguably the most efficient in the Asian region. And it will become even more competitive with the gradual deregulation of the remaining interest rate rules from the middle of next year coupled with our moves to encourage greater participation from foreign banks. With the volume of external banking transactions reaching US$845 billion at the end of July, Hong Kong is ranked the world's 8th largest banking centre. We're also home to some 450 foreign-owned licensed banks, restricted licence banks and deposit-taking companies from 40 countries, including Australia's big four.
Fundamental reforms to the securities and futures markets are currently under way as part of our ultimate goal to build the leading securities and futures exchange in Asia and one of the top five equities markets in the world. As a first and critical step, the exchanges and the clearing houses voted overwhelmingly at the end of September to demutualise, merge and eventually list on the Hong Kong Stock Exchange. I understand ASX (the Australian Stock Exchange) is one step ahead in this regard, but only so far as demutualisation and listing are concerned.
Hong Kong, as a communications hub of the region, has seen a virtual explosion in this sector. From a rather restricted market four years ago to one that ranks amongst the most liberalised and competitive anywhere in the world, the sky's the limit. To give you an idea of how the market has developed, we now have four fixed network operators with a fifth waiting in the wings; six mobile operators running 11 networks; and 140 licences have been issued to companies for operating IDD services. As a result, we have some of the highest fixed and mobile phone penetration rates in the world - in both cases well over 50 for every 100 people.
And you can imagine what a bonanza the competition is providing for consumers. We estimate that with the liberalisation of the external telecommunications service market since January, consumers will save up to 500 million Australian dollars in IDD calls in 1999 alone - that's a huge saving. The popularity of the mobile phone has even spawned a new trend. The latest tiny cell phone is now being worn around the neck like a piece of avant garde jewellery!
As there are no foreign ownership restrictions in our telecommunications market, Australian companies are competing for a slice of the Hong Kong pie. And one such enterprising company [One-Tel] is offering some of the cheapest call rates from Hong Kong to the world's most popular destinations. This revolution in the communications market has also embraced the Internet in Hong Kong where roughly one person in every six is now logging onto the world wide web through more than 130 Internet service providers. And Rupert Murdoch was in town a fortnight ago - just long enough to jointly launch a very significant deal with Cable & Wireless HKT to bring together the Internet and television - a multi-media convergence that is setting the trend of the future. It is an exciting and serious joint venture, which involves plans to list in both New York and Hong Kong.
I'm sure even Mickey and Minnie Mouse will be Internet veterans when they come to Hong Kong in 2005 - that's when Hong Kong Disneyland is due to open. The world-class theme park will provide an enormous boost to the repositioning of our tourism and recreation industry. The fact that we have forged a partnership between two of the world's best-known brand names - Hong Kong and Disney - should spell success for the venture. Disney's investment is a vote of confidence and a clear indication of the continued interest in Hong Kong of international investors in projects ranging from tourism to communications amounting to billions of dollars.
I accept there has been some criticism of our A$4.5 billion involvement in this project. And it was expected. But we are confident Hong Kong Disneyland will be a sound investment - attracting millions of visitors each year; earning a reasonable return on equity; the repayment of loans in full and with interest; and the subordinated shares, which represent land premium, can be converted into ordinary shares. The deal has been concluded without cash subsidy, without free land, no tax concessions or any exclusivity provisions. We believe it's a good deal and the economic return to the community over the life of the theme park is estimated to be close to 30 billion Australian dollars.
There are other significant projects in the pipeline to revitalise tourism - which contributes about 4% to our GDP and attracts over 10 million visitors a year - and they will be developed in harmony with the environment. Some of you who have been to Hong Kong recently may have been a little disappointed with the quality of the air. It doesn't happen every day, but enough to know that we have to clean up our act. And that's exactly what we are doing.
Over the next few years, we will be implementing measures, some in conjunction with our nearest neighbours, Guangdong, that will dramatically clear the air over Hong Kong, as well as enable the right conditions for sustainable development. And we're creating new open plazas and landscaped areas on both sides of the harbour.
I think you can have a pretty good idea of what I'm talking about as you have done a lot in Melbourne to make the city more people-friendly. Its understated elegance, and the effort that has gone into upgrading the areas along the banks of the Yarra River, particularly Southbank are most impressive. I'm sure the work we will be undertaking in Hong Kong to improve the environment will provide opportunities for some of your companies that have expertise in waste water treatment and alternative fuel technologies.
As we diversify our economy away from its over-reliance on property, we are developing a more knowledge-based society. One that is adopting innovation and technology as the new engine of growth for the future. Cyberport, our two and a half billion Australian dollar joint venture with the private sector, is but one example of the direction in which we're headed. This project 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.
Investing in technology and infrastructure provides the hardware for advancing as a leading player into the digital world of the 21st century. But having the software, the human capital, is far more important. So, we are improving our education system to create the right environment for our young people.
And I would like to acknowledge the role that Australia is playing in this respect, particularly in the vital area of English-language skills. More than one third of the 440 specialist English-language teachers we have recruited from overseas in the past year or so have come from Australia. On the other hand, more than 17,000 Hong Kong students are studying at schools and universities in Australia.
The fact that so many of our students are studying here reinforces the close ties between our two communities, and the continued outward-looking nature of Hong Kong in general. Our reunification with the Mainland has not changed, in any way, our right to cultivate trade, economic and cultural ties with the world and nor was it meant to. Our freedoms, our way of life, our commitment to the rule of law, our level playing field for doing business, our free and open markets, and the free flow of information, all remain in place. They will not change.
These fundamental pillars of our society have been a great advantage for companies investing in Hong Kong and setting up base for entering the China market. Now, with the Mainland poised to become a member of the World Trade Organisation, they will be an added attraction. We are delighted at the agreement reached last week between the Mainland and the United States. As the springboard to China, Hong Kong has no equal. We are part of that great country with a unique cultural, constitutional and commercial access to its markets. And, as one of the most service-oriented economies in the world, we will continue to play an important role in the provision of services in China.
The further opening up of the market through WTO membership will create tremendous investment opportunities, not just for the big multi-nationals, who are already going into China directly, but for the medium-sized companies. We believe they will continue to use Hong Kong for their technical, financial, legal advice and language skills, and for investment and shipping requirements. The kind of services that are essential for a successful entree into the Chinese market. After all, given the experience and knowledge that our businesses have built up over many years of trading in the Mainland, who could do it better? However, we realise that there is no room for complacency on our part. We realise we must continue to make ourselves more competitive. To contain our costs. To retain our advantages.
Perhaps one of the clearest signals yet to the continuing confidence of the international community in our adherence to the rule of law can be seen in the agreement we concluded with The Walt Disney Company. It is based on the laws of Hong Kong, and Hong Kong has been chosen as the place for any arbitration - not that we are expecting any complications. I simply want to stress the fact that our common law system still commands the respect, not only of the corporate world, but jurisdictions around the globe. And reinforcing this is the presence of two eminent Australian jurists - Sir Anthony Mason and Sir Daryl Dawson - on our ultimate appellate court, the Court of Final Appeal.
Hong Kong and Australia do share a great deal in common - our rich multi-cultural societies committed to the freedom of expression, with open and transparent markets and a rules-based approach to doing business. And we are now amongst each other's most important trade and investment partners.
Total trade last year was valued at six-and-a-half-billion Australian dollars. Australian investment in Hong Kong at the end of 1997 was put at A$1.14 billion and Hong Kong investment in Australia in 1996 reached A$16.1 billion. But our links go a lot deeper, the Australian consulate estimates there are now some 45,000 Australians who have made Hong Kong their home. Quite a number are Australian Chinese who have returned to Hong Kong to work, but who still feel passionately about Australia and express their views at the ballot box.
Because of these close ties there is a lot of interest in Australia about what happens in Hong Kong. We welcome and we encourage this. But from a distance images can become distorted. My appeal to everyone present here today is to come and see for yourselves what Hong Kong is today. I think you will find an exciting, cosmopolitan city full of energy. A world-class city that is diversifying and consolidating from the impact of the Asian financial turmoil. A people who have an unbridled commitment to the rule of law, and are facing the challenges of the new millennium with renewed confidence and looking to a brighter future in the 21st century.
End/Thursday, November 25, 1999