Mr Sze, Mr Young, distinguished guests, ladies and gentlemen,

I am very pleased to be here with you all at the opening of the Hong Kong Toys and Games Fair 1998.

People say that children nowadays are much better off. This is not only due to the better education and the higher living standard, but also of the kind of toys and games that they play with, which are much higher in quality and that much cheaper. Looking at the wide variety and high degree of sophistication of toys nowadays, one would only be amazed at the marvellous development of the toys and games industry in the past few decades.

Back in the 1960s, the manufacturing of toys in Hong Kong was already a major source of income to our economy. At that time simple plastic toys were the main products, characterising the labour intensive nature of the production process. With rising living standards, customers are more quality-conscious and greater sophistication dictates the trend of the market. Our entrepreneurs and our diligent and competent work force have been sensitive to changes in customer expectations and have successfully risen to the challenge. They upgrade the quality of production of their products and diversify their range to include plastic toys, electronic toys and games, remote-controlled toys, battery-operated toys and metal toys. Their untiring effort has earned for themselves the International Organisation for Standardisation (ISO) 9000 certification. The industry now derives a substantial proportion of its sales from contract manufacturing for renowned high-quality overseas manufacturers. At the same time, they are also able to market many proprietary products under their own brand names.

In recently years, we have seen further changes in toys production in Hong Kong to meet competition from other economies with cost advantages. We are now shifting towards retaining the high value-added stages in the production process, where we enjoy a clear competitive advantage in Hong Kong. These involve product design and trial, production planning, quality control, management and marketing. The other manufacturing processes are carried out in the Mainland. This follows the general trend of our economic activity as a whole. As we have seen, both the Mainland and Hong Kong stand to benefit from this efficient division of labour. Apart from cost reduction, transfer of technology and know-how has also helped to raise the quality of production in the Mainland. The overall result, as we can see all for ourselves, is Hong Kong's sustained position as the world's leading exporter of toys despite intense competition from other areas.

I am sure that we would not be complacent of our achievement and would continue to strive for excellence. As manufacturers or traders in toys you will no doubt further expand your markets and reduce your costs. The Government is committed to helping you realise this. We have launched an initiative to reduce tariffs on toys in the Asia-Pacific region, which won the support of an overwhelming majority of APEC members at its recent Summit in Vancouver. The toys sector is now one of the nine sectors of trade that are on the fast track for early voluntary liberalisation. We are working with other member states in finalising the implementation time-table by mid-1998, so that tariffs reduction could start in 1999. We hope to eliminate tariffs on targeted toys preferably by 2000 and no later than 2005. In addition, members of APEC have undertaken to progressively eliminate all identified unnecessary non-tariff measures by 2005.

Coming back to the event here today, I am delighted to see that the 1998 Toys and Games Fair breaks through the restriction of space limitation in the past by moving to this new extension to the Hong Kong Convention and Exhibition Centre. This year's fair is the largest in Asia and the second largest in the world. It also testifies to Hong Kong's role in promoting international toys trade. I commend the organisers, the Hong Kong Trade Development Council, and the various sponsoring organisations for their endeavour in making this possible.

May I wish the 1998 Hong Kong Toys and Games Fair every success and all of you a very fruitful and prosperous new year.

Thank you.