The following is the transcript of the opening remarks by the Chief Executive, Mr Tung Chee Hwa, at the Hong Kong General Chamber of Commerce Annual Business Summit this (Thursday) morning:
C C, friends, ladies and gentlemen,
I was trying to listen how a brother will introduce another brother. I thought it was reasonably appropriate. First of all, let me tell you that the HKSAR Government attaches a great deal of importance to the work of the General Chamber of Commerce. We always listen very carefully to your views and if you look at your submission to me about what I should say in the Policy Speech, you will find that much of what you wanted has been reflected. It's not just because you are important, but it's also that you and the Government and I myself share much of what needs to be done in Hong Kong as we move forward into the Millennium. So thank you very much for your hard work and for your input and please keep it up.
It has been a very difficult two-and-a-half years, but in November we have the string of good news. And I thought it's time for us to take stock and also for us to look forward. First let's look back at what did happen. I am not going to go into details as to the causes of the Asian financial turmoil, because it is very well-known, very well-documented and very well-argued. But it is important for us to really see what did happen to Hong Kong as a consequence of the Asian financial turmoil. From an external point of view, as the Asian economies contracted, all the economies in Asia contracted except the People's Republic of China. But as the economies contracted, external trade from Hong Kong declined, tourism fell off dramatically, the need for financial services also fell off. These are all the areas of traditional pillars of our economy - trade, financial services and tourism - they were all very badly affected, directly affected. Internally, property market fell very sharply, consumer confidence began to evaporate, economy began to contract, unemployment rate went up. And as this happened, consumer confidence evaporated even further. It was a vicious cycle. To be sure, bubble economy did exist in Hong Kong for some time, our property prices were too high, salaries were one of the highest in the world, our competitiveness, our cost competitiveness has become a really serious problem for Hong Kong as a whole. Without the Asian financial turmoil, the adjustment would come anyway. But the Asian financial turmoil accelerated this particular process of adjustment.
How did the Government respond? The Government responded by cutting taxes, by freezing rates, by freezing charges, by increasing rapidly capital expenditure, with a view (a) to put money into the pockets of consumers and (b) in our infrastructural projects, to try to lay the foundation for the future. And as C C said earlier on, some of the decisions we took, such as freezing the sale of land, such as what we did in August when we entered into the stock market, were really very difficult decisions. It was not something we wanted to do but we felt it was necessary if we were to recover from these very difficult circumstances.
I believe that what we did is now beginning to work. But throughout this difficult time, we actually never lost sight of the longer term - where our future lies, what we should be doing when the new Millennium comes, what is the positioning of Hong Kong, how do we keep maintaining the prosperity of Hong Kong. We would never lose sight of that, so we were very pleased that in early November, after 15 months of very difficult negotiation, we were able to reach an agreement with Disney. It was a well thought through project, not just because Disney itself means a lot to Hong Kong - a boost of confidence, the fact that an international company decided to invest in Hong Kong - but also Disney is really part of our long-term thinking as to how we further expand our tourism industry as a whole because we recognise the tourism industry is absolutely vital to Hong Kong's future. We were able to successfully launch the Tracker Fund and to get the GEM Board going. And through these you can see people's confidence is recovering, people are investing in the Tracker Fund, people are investing in the GEM Board. And again these are not isolated issues because in the process of doing these, in the process of recovering of confidence, we are also consolidating our position as a financial centre. Together with many of the actions we took, such as to merge the two markets, to strengthen the operation of the linked exchange rate, I believe we have enhanced our position as a financial centre.
Actually if you look at this whole thing, you can see - not just in November - throughout this period of time, foreign investment was interested in Hong Kong. They wanted to invest in Hong Kong. A little bit hesitant in the beginning, but today, for instance, the Cyberport is going well. The science park first stage, I was recently told, is going very, very well. There is a lot of interest from overseas companies to participate. And again Cyberport and science park - they are not isolated issues - together with GEM Board, they represent part of our major effort in making Hong Kong into a centre for innovation and technology in Asia.
We are all very happy as consumers that we are able to telephone overseas for a fraction of what it was used to cost. It has been very tough for the companies operating in that environment. But the broader issue is that the telecom deregulation put Hong Kong in the map as Asia's premier telecom centre. And as to consumers, telecom is a driver of our economy in the future. And I am very pleased to say that there is enormous interest around the world to come to Hong Kong, to invest in Hong Kong's telecom businesses because it is a good business and Hong Kong is really attractively placed for telecom industry.
So I mention these things just because I want you to know that nothing is isolated. The Government thinks through every issue - what needs to be done, how do we move forward - and I am pleased that all these things are now coming around. The good news of course for November was that we were able to tell you that in the third quarter of this year our growth has resumed. It has been very substantial compared with a year ago, with a growth rate of four-and-a-half per cent as compared with a year ago. And also we are reasonably optimistic that next year would be a good year and that the growth from now on should be reasonably sustained. The reason of optimism is not just what is happening in Hong Kong but what is happening around the world. The recovery in Asia by all the economies has been very helpful to us here in Hong Kong. US, despite all our worries, seems to be moving ahead. Europe is also coming around. And we see short-term capital flowing back to Hong Kong. But we also see long-term capital flowing back to Hong Kong - whether it is Disney World, whether it is investment in telecom. So these are all very good signs for us as we move into our future.
And of course one of the most important piece of news that happens recently was the agreement between China and America on the WTO accession. There might be a lot of argument out there that - would WTO hurt Hong Kong in the medium term? But let me tell you this, Goldman Sachs recently came out with a good paper which talked about foreign trade from the People's Republic of China would be doubled in the next six years. Direct investment every year into China will increase from 45 billion dollars to over 100 billion dollars. Whether these figures are exactly correct is arguable but the fact remains that the cake is going to be much bigger and I am sure part of it will flow through to Hong Kong. Our expertise in financial services, be it in accounting, legal, hotel management, and then you can think of so many of them will all benefit from China's opening. So we are not looking at the six-and-a-half million people, we are really looking at 1.2 billion people as we move our economy further.
The challenges that we face as China improves, as the gap reduces in Mainland China's ability to provide good services, they will be there anyway, whether WTO or no WTO. Therefore the very entry of China into WTO is to me plus plus plus plus or over. So I think at this time we can see that international confidence in Hong Kong is recovering and international confidence in China is growing very strong. Those are very, very important to us here in Hong Kong. You know we really have a good story to tell and that throughout this very difficult period, actually the Government is basically on top of this situation, planning forward, solving short-term problems, doing both and moving as fast as we can. But faced with the press which is normally more critical, as our international business advisers told me, "C H, you have such a good story to tell, why don't you tell them? More often, do it every day, so that the whole world knows what you are doing." And unfortunately, we probably need to do a lot more of this, both in Hong Kong and internationally, and we would do that as we move forward. So it's not the question of telling a good story, it's a question of making sure the international confidence in Hong Kong is here. But just as important is to make sure Hong Kong people recover our own confidence in our future and this is surely my job and the responsibility of this Government. And as we move forward, we will definitely emphasise on that aspect of the work that needs to be done. But being optimistic is really not my nature, because I spend a lot of time thinking through what other problems that we may face, and we actually may face a lot of challenges as we move forward, and we need to constantly remind ourselves these difficulties are there so that we all don't get carried away because there are still difficulties out there.
I have just said a moment ago the external environment looks good. But the Japanese recovery is at best very tentative. The strengthening of the Yen at this sort of level is not helpful to the Japanese economy. And we have to be concerned whether the Japanese recovery ... out. We all know how well the American economy is moving. But one of our international business advisers said to us recently when I asked him, "What's your view about the American economy?" And this is Paul Volcker who, as you know was the Federal Reserve Chairman before Alan Greenspan. And his answer was this, he said that recently an American Government official said everywhere you go, the whole world says to him "we are all relying on the American economy, would you make sure it goes well? "And the American official said, "Our economy really relies on Wall Street, and Wall Street relies on the two indices, the Dow Jones and the NASDAQ." He said they really relied on 50 of the stocks that are listed in the exchanges, and 25 of them never made any profit at all. And he said that's the health of the world economy. He is also one of those who is always looking critically at problems. But he did conclude by saying that in the foreseeable future, America seemed to be moving on alright.
But we need to constantly remind ourselves there are worries out there and we have to look for signs, making sure that things are alright, not something we can do but at least we need to prepare ourselves if things do go wrong. Hopefully it won't and I believe it won't. C C said just earlier on that our real interest remained high, investment in the private sector in Hong Kong, the appetite for investment remained low although I would like to say that Cathay Pacific is now buying new aeroplanes. All these are good news. James, keep it up! The investment appetite is still very low, and loan demand for 17 months in a row has been negative. And these are obviously worries for us, all of us here in Hong Kong. But hopefully as the economy continues to recover, all these will begin to change.
And the other thing we must constantly remind ourselves is that we are an expensive place to do business, and our economic structural adjustment which has been going on for the last two years must be allowed to continue so that our competitiveness can be recovered and we will be better, in a better position as we move forward. And this is not to say Hong Kong will be the cheapest place to do business because ... London or New York is very cheap as you all know. But we need to be conscious that competitiveness is very important to us and we should not as a community get carried away with what's happening today and say the worst is over, it would be life as before, and that will not be good for Hong Kong. And particularly I want to emphasise that the success of the American economy, much of that is due to the use of e-commerce, the use of internet as they move forward. And much of today's American vitality in economy is a result of the use of e-commerce and internet. And I cannot emphasise to you more the need for business to participate totally and fully in this effort because only this way you can improve your competitiveness and cost-effectiveness. Serving as the Government, we would do our very best in this respect.
It has been, to say the least, a challenge for me to be the Chief Executive over the last two-and-a-half years. But it is important to remind myself and for our Government officials to remind ourselves that work is out there, and that the people's expectation in Hong Kong is very, very high. Demand from the press, the legislature, is very, very high. And that all we can do is keep on doing better and better every day.
But I'd like to conclude by saying to you that in my Policy Speech, I said we want to make Hong Kong the most international and cosmopolitan city in Asia, the equivalent of what New York is to North America, and what London is to Europe. And in saying this I said two of the most critical tasks ahead of us in the years coming, particularly beginning next year, are our effort in improving our education system so that we can meet the need of a knowledge-based economy, and to improve the environment in which our citizens live. Because what I would like to see in Hong Kong, which as we move forward in prosperity, we must be sure that there is a clean and healthy environment where our talented people, where our entrepreneurial people can thrive and prosper. And I hope you as a business community will join me, and join the Government, in this particularly important effort. Thank you very much.
Photo: The Chief Executive, Mr Tung Chee Hwa, attended the Hong Kong General Chamber of Commerce Annual Business Summit on "Hong Kong, China: Into the next millennium" at Hong Kong Convention and Exhibition Centre. Picture shows Mr Tung delivering an opening remarks at the summit.
End/Thursday, December 2, 1999