Speech by the Chief Secretary for Administration,
Mrs Anson Chan,
at the luncheon for the launch of the
1998 Index of Economic Freedom

Monday, December 1, 1997


Dr Holmes, ladies and gentlemen,

I am delighted that you have invited me here today and given me the opportunity to respond on behalf of the Special Administrative Region Government of Hong Kong to the result of the 1998 Heritage Foundation Index of Economic Freedom. After recent events in the region, it is an added pleasure to be able to comment on such good news.

I very much welcome the announcement that for the fourth year in a row the Heritage Foundation has found Hong Kong to be the freest economy in the world. There is even more to savour in this accolade for us, as it comes so soon after the establishment of Hong Kong as a Special Administrative Region of the People's Republic of China, a transition that some predicted would be the harbinger of bad news, rather than good. How wrong they were.

The Heritage Foundation study reminds us all once again about the fundamentals of our economic faith. Above all, it recognises that Hong Kong's economic structure remains unchanged after the Handover, as has been promised in the Joint Declaration and promulgated in the Basic Law.

In more detail, what does that mean? Encouragingly, it means firstly that the Heritage Foundation's study of the benchmarks of economic freedom covering 156 of the world's economies has resulted in Hong Kong topping the class, as it were, in most of the key areas under assessment.

It shows that Hong Kong has one of the world's most accessible markets; that taxes are low and predictable; that government intervention in the economy is minimal; that trade is free and that there are virtually no restrictions on foreign capital or investment.

The study goes on to find that Hong Kong has one of the world's most stable banking environments; and full protection of private property rights. The black market is virtually non-existent, and regulations are transparent and consistently and uniformly applied.

That's quite a report card. I would only add to it that it is an economy that flourishes within the rule of law and an independent judiciary; which operates on a level playing field; and in the company of a clean, accountable and apolitical Administration which believes that it has a duty to maintain law and order; provide the physical infrastructure and human resources for growth; to regulate with a light but reassuring touch; and to leave business decisions to businessmen.

It is always a comfort to be given a clean bill of health by the Heritage Foundation. It is a memorandum to us, and the rest of the world, that we have not strayed from those paths of virtue so carefully and sensibly paved by Adam Smith. I think recent events have underlined that in even more tangible terms.

We are all still coming to grips with the turmoil which has shaken the region, and the faith of some in its future. I am not one of those who is faint-hearted about our own future, or that of the Asia Pacific. Nor, obviously, were the APEC Leaders in Vancouver who I believe demonstrated that we have the vision, the commitment and the capacity to overcome the present problems in the region, and to face the new millennium with confidence and poise.

Speaking for Hong Kong, that's precisely what we intend to do. And we will do that by staying true to the principles and practices which have won us so much recognition from our peers, and from honest arbiters such as the Heritage Foundation.

The pressure that was applied to our linked exchange rate, and the way we dealt with that pressure was, I suggest, a clear statement of commitment to first principles. There were a number of critical points that arose from our recent experience:

- Firstly, we demonstrated beyond doubt our political will to defend the HK/US dollar link.

- Secondly, we showed that we have the mechanism and resources to mount that defence, and sophisticated, effective and determined officials to execute it.

- Thirdly, that our community has faith in its currency, and in the government's unswerving determination to preserve the link.

- Fourthly - and perhaps most significantly - the leadership in Beijing has demonstrated in the most powerful and public way that they respect Hong Kong's autonomy in running its own affairs. China means to honour its guarantee of Hong Kong people ruling Hong Kong. The Administration intends to continue to govern Hong Kong without fear or favour.

- And finally, the moderate adjustments to our property and equity markets immediately following the attack on our linked exchange rate will make our economy even more competitive.

We in Hong Kong do not underestimate the problems of the region. Neither are we complacent about the need to nail down over the longer term the building blocks of the future laid out for us in the Joint Declaration and the Basic Law. Hong Kong people are above all practical, flexible - and very competitive. We did not turn this unpromising place into what it is today through day dreaming or resting on our laurels. We are an enterprise culture where we are taught from a very early age that you must never take your eye off the ball. We will turn the recent turbulence in our markets to our advantage.

Being great competitors, we like to win. That's at least part of the reason why we are so honoured in collecting the first prize in the 1998 Heritage Foundation Index of Freedom.

That also presents us with a challenge and an incentive to preserve and enhance the freedoms which have led to these achievements; to guard against their erosion; and to build on them to ensure a better future for our children; and in the process contribute to the greater good and prosperity of the mainland, our friends, neighbours and business partners throughout the world.

Dr Holmes, ladies and gentlemen, thank you very much.