Revival of Hong Kong's economy depends on the private sector : FS

The Financial Secretary, Mr Antony Leung, said tonight (October 10) the revival of the Hong Kong economy depended heavily on the private sector.

Speaking at the CNBC/TNT Business Leader Awards dinner, Mr Leung said revival hinged particularly with the entrepreneurship of talented business leaders in taking on new projects, making new investments and creating job opportunities.

"The government will keep investing heavily in education and training; constantly improve our business environment; and relax our immigration policy to encourage talented entrepreneurs to settle here and create more jobs. That way, Hong Kong can continue to contribute its share of Asia's business leaders, and more," he said.

During his speech, Mr Leung outlined an eight-point strategy to nurture the business leadership Hong Kong needed to face the challenges of the future.

He said starting a business and leading it to profitability required creativity and a willingness to take risks.

"These qualities cannot be taught...we have to make the necessary investment in human capital," he said.

Mr Leung said education was at the top of the strategy. The reforms being put in place are aimed at nurturing people to think creatively and independently and to communicate well in both English and Chinese.

Second, the government has to maintain an environment in which businesses can thrive. "Our business excellence hinges on our institutional strengths - the rule of law, a level playing field, the free flow of information, a low and simple tax regime, and a clean and efficient government," Mr Leung said.

Third, the size of government has to continue to be reduced. The target is to cut government spending to 20% of GDP or less by 2006-07.

Fourth, Hong Kong has to continue to strengthen economic ties with the Mainland. Hong Kong has much to offer Mainland entrepreneurs in terms of experience and expertise, international business connections, and financial and professional services.

Fifth, the government needs to pursue its investment in infrastructure, including transportation links with the Pearl River Delta, as well as reducing pollution and improving the living environment.

Sixth, promote the development of high value-added sectors such as financial services, logistics, producer and professional services, and selected innovation and technology sectors.

Seventh, develop sectors such as tourism and personal services to provide employment for people with less advanced skills.

"The final element of my eight-point business plan has raised some controversy over the past two weeks - we need to stabilise property prices," Mr Leung said.

The government had long played an important role in Hong Kong's property market and his colleagues were presently studying options for stabilising the market.

"A stable and active property market will improve public confidence in the economy, and help revive consumption and investment spending," he said.

The full text of Mr Leung's speech follows:

Thank you, Christine, Martin and Bernie. Good evening, distinguished guests, ladies and gentlemen.

It's an honour to be here tonight, both personally and as a representative of the Host City for the second annual Asia Business Leader Awards. I want to extend a warm welcome to all of our out-of-town guests, and particularly to our friends at CNBC who may have been missing the bustle and hustle of Asia's world city. You know you're welcome to come back any time you like.

The theme of this event is 'Growth Through Leadership', and I'd like to let you know what Hong Kong is doing to nurture the business leadership we'll need to face the challenges of the future.

Nurturing entrepreneurs

Starting a business and leading it to profitability require creativity and a willingness to take risks. These qualities cannot be taught. Yet, somehow, the
Government has to ensure that we are nurturing future ABLA winners; and to do so we have to make the necessary investment in human capital. Aside from our superb
deep-water harbour, Hong Kong's only natural resource is our hard-working people - including our famously talented entrepreneurs. To nurture entrepreneurs, we have to provide a vibrant economic environment for them to make money, as well as to lose. While I believe that the Government should be small and limited, there is certainly need for it to proactively enable the market, to make our market even more attractive for entrepreneurs, both local and foreign. Let me briefly summarise the eight aspects of our strategy.

Education

First and foremost, education sits at the top of our social policy agenda. This is a subject that is dear to my heart. As you may know, I was the Chairman of the Education Commission before I assumed my current role as Financial Secretary. Among other things, our reforms in education aim to nurture our people to think creatively and independently and to communicate well in both English and Chinese. In the past 5 years, the government has increased education expenditure by some 60%. And we have earmarked 5 billion Hong Kong dollars to subsidise continuing education to stimulate life-long learning in the community.

Business environment

Second, the government must maintain an environment in which businesses can thrive. Our business excellence hinges on our institutional strengths - the rule of law, a level playing field, the free flow of information, a low and simple tax regime, and a clean and efficient government.

This year, Hong Kong has retained its rating as the freest economy in the world by the Heritage Foundation and the Wall Street Journal, as well as by the Cato Institute. We are a bastion of free trade, as TNT knows well. We have long-established and comprehensive financial networks - just ask the folks at Citigroup. We also value the free flow of information. Some 50 newspapers and 740 periodicals are published in Hong Kong, 12 satellite broadcasters up-link signals from here, and about 120 international media organisations have offices in the SAR. Terrestrial, cable and satellite operators offer more than 170 broadcasting channels, including of course CNBC.

Small government

Third, although the government is efficient, we need to keep it small, and even smaller going forward. Public expenditure, now at 23% of GDP, consumes scarce resources that could be used more efficiently by our talented private sector. That's why I set a target in the current Budget to reduce it to 20% or less by
2006-07. We will use the Three Rs - reprioritise, reorganise and reengineer - to achieve this target. By so doing, we would be able to lower the cost of bureaucracy, as well as taxation, to the private sector. The reduction will also allow more operating space to the market.

Mainland ties

Fourth, we need to strengthen economic ties with our hinterland. Entrepreneurs in the Mainland are thriving, and their presence in Hong Kong will certainly add to our already diversified and dynamic business environment. As you know, the number of foreign companies using Hong Kong as their regional base has increased by a third since 1997, to over 3,000. Hong Kong has much to offer them in terms of experience and expertise, international business connections, and financial and professional services. To capitalise on these complementary advantages, we need to enhance the two-way flows of people, cargo, capital, information and services with the Mainland of China, particularly the Pearl River Delta, and we are making good progress, especially in the past year.

The Pearl River Delta is the fastest-growing and most affluent part of China. With a population approaching 50 million and an overall GDP of 258 billion US dollars, it is a manufacturing powerhouse, a huge market for consumer goods, as well as a destination for investment. Hong Kong, at the centre of the Pearl River Delta, is a premier financial, business and services centre, with well-developed clusters of bankers, lawyers, accountants and consultants. Our businessmen and industrialists have rich experience in managing Mainland operations, with more than 36,000 Hong Kong-linked companies employing over 5 million people in Guangdong province. Hong Kong is well positioned to capitalise on the complementary strengths to capture the huge opportunities in the Pearl
River Delta.

Infrastructure

Fifth, the Government needs to continue its investment in infrastructure. This includes strengthening our transportation links with the Pearl River Delta, as well as reducing pollution and improving our living environment.

Value-added

Sixth, like any business, we need to assess our strengths and compete in those sectors in which we have advantages. With Hong Kong's low-cost manufacturing industries having moved across the border into the Mainland, we need to promote the development of high-value-added sectors. These include financial services, logistics, producer and professional services, and selected innovation and technology sectors. Hong Kong has developed niches in certain areas, such as wireless communications, integrated circuit design, Chinese medicine and related biotechnologies. I talked to technologists and venture capitalists during my recent visit to San Francisco, and they shared my view of the potential of Hong Kong in these fields.

Helping the unskilled

Seventh, for people with less advanced skills, we need to develop sectors such as tourism and personal services to provide them with employment. To that end, we are building new tourist attractions and removing restrictions on Mainland visitors.

The final element of my eight-point business plan has raised some controversy over the past two weeks - we need to stabilise property prices.

Property market

The Government has long played an important role in Hong Kong's property market. It owns virtually all the land, and provides public rental and subsidised housing to half the population. Land sales, premium payments, property taxes, rates, Government rent and stamp duties contribute the lion's share of Government revenues. So inevitably, the Government's land and housing policies have considerable influence on the property market.

We certainly do not want the asset bubble to repeat itself. Nevertheless, a stable and active property market will improve public confidence in the economy, and help revive consumption and investment spending. My colleagues are studying various options for stabilising the market.

Ladies and Gentlemen, the revival of the Hong Kong economy depends heavily on the private sector, particularly the entrepreneurship of talented business leaders in taking on new projects, making new investments and creating job opportunities. The Government will keep investing heavily in education and training; constantly improve our business environment; and relax our immigration policy to encourage talented entrepreneurs to settle here and create more jobs. That way, Hong Kong can continue to contribute its share of Asia's business leaders, and more.

Finally, may I take this opportunity to congratulate the winners of the Asia Business Leader Awards, and wish you all an enjoyable dinner. Thank you.

End/Thursday, October 10, 2002