Financial Secretary, Mr Donald Tsang,
at the Annual Spring Dinner of the
Hong Kong Federation of Industries

Tuesday, March 10, 1998


HONG KONG STILL WORKS

Ladies and Gentlemen,

Thank you very much for your welcome, and thank you too for the generally kind words that you have had for this year's Budget. I must say, I have been greatly relieved by the change in mood that has occurred in Hong Kong since mid-February. I get the sense that the feelings of anxiety and alarm over the region's economic problems have given way to the determination to buckle down to the hard work that is needed to carry us through.

I don't attribute that change of mood to the Budget itself. Time, reflection and Hong Kong peoples' own good sense are the most important ingredients. But certainly it was one of my chief objects in the Budget to help that change along. As I said in the speech, most of the Budget measures are not going to have immediate effect. They will take time to work through into the economy. For the moment, we still face the risk of more turbulence from regional events. What I set out to do was to remind everyone that here in Hong Kong we have a system that works. It doesn't just work in the summertime - when "the cotton's high and the livin' is easy" - it works in the tough times too.

That system isn't raw capitalism. It's a free market, operating in a free society, grounded in the rule of law. It isn't a system that holds out illusory guarantees of jobs for all or extravagant promises of industrial success. It doesn't insulate us from risk. Risk is part of reality. Change in society, change in employment, is part of life. Our system recognizes that reality, helps us to respond positively to change, to build upon it, not be broken down by resistance. Our system affords to everyone protection of the fruits of their enterprise and effort; gives to everyone the responsibility of free citizens; recognizes that by doing so this city stands to be invigorated by each citizen in return.

Well, that's all rather heavy stuff as tonight's appetiser. Let me turn to a rather lighter theme and look a little bit at the working of Hong Kong industry within our system.

Everybody, every company, has their own part to play within our system, and what you make of it is pretty much up to you. But that is not to say that we each work in isolation. One of Hong Kong's great strengths is the close networking between people and companies, the vigorous exchange of views and ideas: if you like, you could describe it as the positive interactionism that flourished alongside that old idea of positive non-intervention.

The Federation of Hong Kong Industries is a splendid example of that interactionism at work, and yours is a positive role not just in relation to your own members, but in your relations with Government too. My colleagues and I welcome your thoughtful and honest comments, and always endeavour to respond in kind.

A set of questions that you often raise is whether we should be concerned about the relative decline of industry in Hong Kong, whether it is good for our economy or whether it might be better to adopt a more "pro-active" approach to encourage industry.

I don't mind revisiting these old questions. As you all know from experience in your own businesses, it's often through reasking old questions, challenging assumptions, that you reach new insights, find better ways to do things.

So, should we be worried about the state of industry in Hong Kong, and should we be more pro-active towards it?

In reply, let me share with you a couple of maxims. First, always subject statistics to scrutiny. Those who claim that industry has declined point out that manufacturing's contribution to our GDP fell from 23 per cent in 1980 to seven per cent in 1996. But if you look at the real money, not the percentages - and Financial Secretaries always look at the real money - you see that in 1980 manufacturing contributed $31 billion to GDP. In 1996 it contributed $80 billion. Discounting for inflation, that was a small decline, nothing like the over 200 per cent drop the percentage share statistic suggests.

But then again, all those statistics are completely meaningless given the change in the nature of industry in Hong Kong. Many functions that used to be performed in-house have been farmed out, but statisticians' definitions have hardly changed. So, much of what used to be counted as manufacturing is now called services. Frankly, in the sense that you and I understand it, I'd be surprised if industry wasn't making at least as big a contribution to our economy now as it was ten or twenty years ago. It's just that the nature of industry and its environmental impact has changed.

My second maxim is this : beware buzz-words!

Take the word "pro-active", that many people tell me I should be. What does it mean? There's actually no such word in the dictionary.

There are various definitions for the prefix 'pro'. It can mean "before", but does anyone really want me to be in a state of "before-action"? The usual complaint is that Government spends too much time there.

It can mean "primitive", but do you really want me to take "primitive-action"? I hope not.

It can mean "instead of", but I guess you don't want something "instead of-action" either.

It can mean "in favour of", and I guess we are all "in favour of-action", but so what?

It can also mean "publicly", and I reckon that brings us closest to what the coiners of the unfortunate word had in mind, they want to see "public action". But just think, how much public action is actually PR or presentation. I don't imply any criticism by that. Look at it in another way, and, just as in industry you have to market your goods, so in public service we have to market our ideas. But isn't what you really want not marketing but action pure and simple? I hope so, because that's what I have to offer to you.

I'll come back to Government's action for industry in a moment, but before that I'd like to probe a bit at another buzz-word, or buzz-phrase rather, namely "high value added industry". What does that actually mean? Let's subject a few more statistics to scrutiny! You may be interested to learn that our industries that have the highest value added per worker engaged are tobacco manufactures and products from petroleum and coal. Our workers in computers and electronic components add much more value per head than those in food production, whereas, in the USA, a worker making computer chips adds barely more value than a maker of potato chips. But hold on. $358,000 of value is added each year for each worker in our computer industry. A bottler of beer or coke adds $408,000; a maker of electronic toys adds $436,000, while a producer of basic metal products adds $472,000. As for those high value added makers of coal and petroleum products, well, all 134 of them each adds over $900,000 of value each year.

My point is simple. It is not that you should all rush into the petroleum products business. Nor is it that "high value added" should not be equated with "high tech". After all, to get high value added in tobacco manufacture or basic metal products, increasing quantities of highly technical equipment is being applied, as it is too in textiles and almost any other area of production in Hong Kong. My point is that if we are not careful, terms like "high value added" and "high tech" distract us from what is really important for Hong Kong, and that is productivity.

The year in, year out increases in productivity that the industries of Hong Kong achieve are one of the most important contributions to the health of our economy and to the living standards of our community. Average increases of 13.7 per cent a year in productivity set us apart from most regional competitors. Just ask what Singapore's productivity increases are like.

I and my colleagues are determined to act vigorously and act consistently to ensure that you have an environment in which you can maintain those vital gains in productivity. There is a tremendous amount to do to improve the quality of education. We have massive programmes to upgrade the infrastructure of the territory to make movement of goods and people easier. We are working hard to improve the framework for telecommunications. Industrial estates; the science park; industry technology centres; the Productivity Centre's programmes; support for applied research and development; new technology training; credit guarantees for small and medium enterprises - all these actions are designed to help towards increasing the productive capacity of our economy.

What use you make of all our actions is up to you. That's the way the system works. We tax you lightly; we don't tell you what to do; we do everything we can to take away any obstacle to your opportunity. We provide all the help we can in terms of resources within the limits of our successful economic formula. That system has worked very well for Hong Kong in many hard years before now. I have no doubt that even in the difficult days ahead, you will show the world that that's the way Hong Kong still works.

Thank you.