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Speech by the Chief Executive


The following is the full text of the speech by the Chief Executive, Mr Tung Chee Hwa at the Joint Chambers' luncheon today (October 12):

Ladies and Gentlemen

Two days ago, I delivered the last of my five Policy Addresses as the first Chief Executive of the HKSAR, in what was certainly the worst of times for a long time for much of our business sector and, in fact, for much of the entire global business world, on which we so depend and to which we are so tightly tied.

The downturn of economy of our major markets since the beginning of the year has adversely affected our growth. The terrorist attack upon the United States on September 11 has brought about deepening economic uncertainties around the world and here in Hong Kong. Here, if I may, just one more time say, how shock and saddened we have been by this barbaric act of terrorism. Our sympathy goes to all those families who lost their loved ones. We stand squarely behind the global effort to eradicate the terrorism from the face of this earth. What we do know is that our earlier forecasts have to be significantly revised. More jobs will disappear before they re-appear. Government revenue will fall short of its target, whereas expenditures will rise, in part because we will need to spend more to take care of the greater number of people who need to be taken care of in this downdraught; we will be running an unexpectedly large budget deficit this year.

In such a situation, a good government does two things: it must respond quickly to the vagaries of the moment and deploy resources in a timely manner to solve the problems of the day, and, perhaps more importantly, it must keep in mind and not lose sight of the bigger picture, of the trends, of the forces driving things in the long run. A good captain will always be able to know his true bearings, even while dealing with shifting winds and confused seas in a heavy blow.

And, perhaps most important of all, the government must have the confidence that it will carry the day for the people, and be able to communicate that confidence to the people, and inspire them to dispense effort to deal with the situation together. It must become the rallying point of society, which at the same time can provide a clear direction. Confidence the SAR Government certainly has, because it is constantly aware of the inherent strengths of our institutions, our infrastructure, our resources, our people and their indefatigable fighting spirit. And, last but certainly not least, we have the unfailing moral and tangible support from our own country. Hardly any other place in the world can count on so many blessings! Furthermore, we, as a government, know where we are headed for. Last year's Policy Address already confirmed the vision of the Commission for Strategic Development put forward last year: we will be Asia's world city and the most cosmopolitan city of China. We have decided to take the route to and the challenges of a knowledge economy. We are not looking back.

These were very much in our mind when we approached the drafting of the latest Policy Address. When the cyclical downturn became serious, we immediately divided some of our attention to address short-term relief issues, devised various measures and palliatives to help those who are smitten most badly. We decided to give a break on rate payments to every household next year, up to $2,000. We also decided to raise the $100,000 limit on mortgage interest deduction on people's income tax to $150,000. The Government will, by speeding up public works projects and providing more needed social services, create 30,000 new jobs within the coming months. I am sure that all of you would agree that these measures that I announced in the Policy Address are very much the right ones, in terms of both kind and magnitude.

But other than tackling short-term issues, I can tell you that the main efforts of the Government have been concentrated on a number of longer-term problems. Central to our policy thinking and activities in the period since the publication of the CSD Report is how we can as a society best make the transition to a knowledge economy from our current starting point in the shortest time possible, ride the waves of progress of China with the greatest success and least economic and human dislocations, and adapt ourselves to the era of globalized competition and in the end come up with an economy that can perform brilliantly in the most demanding and competitive situations.

To these ends, the major tasks that the Government has decided to set out to do, as reflected in the latest Policy Address, are five. First, we must invest in human capital in a sustained manner and on a vast scale, sufficiently to form a deep, strong base of brainpower to support a knowledge economy with high value-added economic activities. Secondly, we must enhance the hard and soft infrastructure and generally make HK even more business-friendly and efficient. Thirdly, to improve our environmental qualities so as to make HK a better place in which to work and live and enjoy life. Fourthly, to make life easier, hardships more bearable and jobs more accessible for the less fortunate members of our society who find it difficult to weather the process of economic restructuring. And finally, to make government more efficient and responsive to the needs of the people.

We have already been working hard and investing heavily on education for several years, in spite of the economic situation. Our three-fold objective is clear: first, we must vastly improve the quality of teaching and learning in our basic education system; secondly, we must further enhance our tertiary education with systemic reforms and efforts to make it available to many more of our young people - 60% is our goal in ten years; and thirdly, we must make lifelong education the norm of our adult workforce poised to enter the knowledge economy.

Accordingly, annual government spending on education has increased by 46% since 1997 and is likely to accelerate following the series of education reforms that began last year. Much of that money goes into improving the quality of teaching and learning at all levels of basic education. Providing teacher support and time and resources for their self-improvement is given high priority. Special emphasis is paid to the teaching of English. We have been providing secondary schools with native-speaking English instructors. Starting this year, we will do the same with primary schools, with the aim of providing at least one native-speaking English instructor in each. We are also paying special attention to high achievers and those who exhibit high potential in different areas, and make sure that they get a good chance to excel. We are not doing any of this by the old method of cramming more into the kids' brain, but by giving them more space to develop on their own, opportunities to stimulate their curiosity and resources to help them acquire an all-round education. Education reform is a complex process which will take time for the result to really come through. I am happy to see some initial signs of success already. At the tertiary level, we are also working on reforming our university system to make it more conformable to world trends.

Education is a long-term investment, and reforming education is never an easy task, anywhere, at any time. So I am calling for patience and sustained effort in this area, even while we are indeed seeing some positive results coming out.

Of course, investing in our school system is an important but not the only component in our overall game plan of investing in human capital. An unfortunate fact about knowledge economy is that knowledge has ever shorter half-lives. What is learned today in school will be useful for a few years and then a good part of it will become obsolete. For a person to remain competitive in the labour market of a knowledge economy, constant renewal of knowledge is imperative. In other words, people need to invest in lifelong education. Now clearly, the government cannot undertake all such investment for all our citizens: they themselves will have to put in the time and the money. What the government can do is to provide some stimulus, some help. For that reason, in the Policy Address, I have announced that we would set aside five billion dollars to give partial tuition support to individuals who engage in lifelong education. According to our statistical projections, this year there are about 700,000 individuals taking at least one continuing education course at various institutions in Hong Kong, at a combined cost of about $1 billion. No doubt these numbers could have been higher, and we would be moving to a knowledge economy faster, if more people could afford to take those courses, which, being valuable, are by no means cheap to many people. The five billion dollars I mentioned would give needy and determined individuals a lift.

I have spoken of the Government's investment in formal education, and the individuals' need and demand for investment in lifelong education. The little challenge that remains, and which I am bringing to you today, is whether our companies here in Hong Kong are doing their share to enhance the pool of human capital of their workforce.

The best companies in the world have a clear view of their human capital structure, as much as they have a clear picture of their financial capital structure. They give their employees sufficient support to acquire additional human capital that they are likely to need well into the far future. They spend aggressively on R&D, and not just in good times. In short, you make sure that their workforces from top to bottom are fit, not for the eighties or the nineties, but for the coming decade and beyond. Companies that are of far-sighted and have a well supported human capital policy will certainly succeed in the long run. And here I know, I'm sharing the vision as all of you.

So my challenge to all of the corporate chieftains sitting here today is: redouble your effort to make your company a knowledge company, starting right now.

If individuals, companies and the Government all join together to invest in human capital in a serious and sustained manner, then HK will definitely be able to become what we want to be - a economic powerhouse where high-value-added economic activities is the norm. Let us all work in that direction.

After knowledge enhancement, we need to work hard to improve our hard and soft infrastructure and to make HK into a more business-friendly city. The Government is committed to spending up to $600 billion in the next dozen or so years on transportation and other public works projects, to make HK a more efficient city in which to live and work.

Many of these projects would be geared to facilitate closer economic cooperation with the Pearl River Delta, a market of 40 million people that we cannot afford to ignore, and the development of HK into a regional logistic centre. We are considering the construction of an express railway linking Hunghom to Shenzhen, which would link up to a new Shenzhen-Guangzhou express railway already planned by the central government. Such a connection would cut the travel time from Kowloon to Guangzhou to one hour.

We now have six railway construction projects due for completion by 2007 and we are planning for several more. Work on the Container Terminal Number 9 is under way, so is that of Phase 1 of the HK Disneyland. The Science Park in Pak Shek Kok is taking shape. There will be more MTR and KCR extensions. We also have a plan to build a second convention and exhibition centre at the CLK airport site, with the Government committing up to $2 billion and the rest coming from the Airport Authority.

Let me tell you, ten years from now, compared to what we are today, HK will be a very different - vastly superior - city. Many major construction projects are already under way; many changes are occurring right under your eyes. Just look, and you'd be amazed. Let me tell you, HK is really moving!

To make HK a truly business-friendly city, we are taking concrete steps that will bear results quickly. We will simplify business-relevant bureaucratic procedures; we will work with the central government to expand the business opportunities of professional service companies on the Mainland; we will also try our best to make it possible for more and more Mainland companies to use the service and legal infrastructure of HK, such as coming here for arbitration of disputes with foreign corporations. We are also making it easier for foreign and Mainland companies to come to HK to set up offices and headquarters; the Invest Hong Kong provides one-stop service for them. We are also doing things to make HK a more attractive home for the employees that these companies would like to bring with them. In particular, we will make sure that there will be enough places at international and other English-speaking schools for their children. We will also make it easier and faster for multinationals to import foreign talents into HK; we have also devised new and more efficient schemes to import talents from the Mainland.

But perhaps very important to many of you here today is the Government's decision to devote $1.9 billion to help small and medium-sized enterprises. The money will mostly go into establishing four new funds and enhancing one existing fund, all geared to the growth and development of SMEs. In view of the prolonged recovery process in the economy, loans for SMEs to acquire installations and equipment will be enhanced; the maximum loan amount will be $2 million per enterprise, up from $1 million as originally suggested by the SME Committee. SMEs are an integral part of our economy. As in the past, they are going to be very effective job creators once the recovery gets under way. With the funds set up and strengthened now, we are preparing exactly for that to happen.

On the environmental enhancement front, the Chamber and others made important contributions in terms of giving ideas to the Government in fighting pollution two years ago. We made strong efforts and achieved good initial results. We have put most diesel taxis off our roads, and we are working with the transportation sector on other diesel polluters. These days, the air in HK is much cleaner. But we need to work closely with our counterparts across the boundary to treat regional air pollution. I am pleased to say that the Governor of Guangdong and I have agreed to reach a consensus by April next year on a plan to implement long-term measures to improve the air quality of the region. We have made similar efforts in treating other pollution problems, such as solid waste disposal and sewage effluence into the Harbour. On the positive side, we are embarking on an urban greening programme. Urban renewal is also given a shot in the arm with the setting up of a more powerful Urban Renewal Authority, which will push ahead with urban redevelopment at the same time that it strives to preserve important cultural heritage sites. We vow to make HK a better living space, for all our citizens and all the people that we want to attract to come to HK to tour, work or do business.

On the social policy side, I discussed the need for social harmony and the concept of a vibrant Third Sector in my last year's policy address. The Government understands that the solution to many social problems, problems which are likely to be aggravated by the current economic downturn and the restructuring process, requires a strong tri-partite partnership - the coming together of the government, business corporations and the volunteer or "Third" Sector. To foster this partnership, this year in the Policy Address, I announced the setting up of a "Community Investment and Inclusion Fund", with an initial injection of $300 million of Government money. The Fund also accepts private and corporate donations, and will support grassroots activities that aim at spurring volunteerism, empowering individuals and groups, strengthening families and promoting healthy lives for all.

Other than the fund, our commitments to the elderly, the handicapped and other less fortunate members of our community continue unabated. In good times, we want people to be able to share in the prosperity. In more trying times, we want to lessen their pains.

On better governance, I am sure many of you would be interested in more details on the accountability system for top government officials beyond what I have announced in the Policy Address. We will make more of our thinking public as we go along. As you can imagine, the basic idea is simple but the devil is in the details. We in the Government are proceeding with the utmost effort and care, and want to come up with the exactly right structure at the top. That said, I want to remind you that whatever we come up with will not be implemented before June 30, 2002; and whatever that will be implemented will be the decision of the second administration of the SAR Government, which will come into existence on July 1, 2002.

There are other dimensions of good governance on which we are working hard to improve. These include fostering a more service-oriented government that responds better to the changing times and evolving needs of the community.

A government that delivers better service at lower cost - theme of our Productivity Enhancement Programme: which has achieved substantial annual savings, and by the year of 2002/2003 the annual savings will be $6 billion.

A smaller government that does not stand in the way of the market and the individual - this we are always trying hard to do better, as for example in our implementation of the Voluntary Retirement Scheme: 9,000 early retirement applications have been approved, annual savings of almost $1 billion.

A government that promotes citizen participation and democracy, in full accordance with the letter and spirit of the Basic Law.

And, a government that stresses rule of law, safeguarding of the freedoms that its citizens enjoy, and public security especially in times that demand heightened vigilance.

My friends, as you can see, we will have our plates full. After more than four years, some of the more generous among you might say that the government has delivered a lot, but, really, a lot more remains to be done. My colleagues and I are working hard, often burning the proverbial midnight oil, to get things done, and done better, because we feel that we owe this place so much that it is only right to give whatever we can in return; that we have so many strengths to build on and so much resource to invest on our future with that it would be a shame if we just lay them to waste; that we can get things done because we have a good citizenry, a most supportive business sector and a most generous and accommodating central government.

The times are indeed rough, but I am sure that none of us are daunted. Come another happenstance, and our fortune may sink yet lower. But, together, we can and will overcome all adversities. A better HK is in sight. In fact, a better HK is every day in the making - this I find it hard to overlook, seeing confidence brimming on your faces.

Thank you.

End/Friday, October 12, 2001


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