Distinguished guests, ladies and gentlemen,

It is an honour and a pleasure for me as the first Chief Executive of the Hong Kong Special Administrative Region to come to Malaysia for my first overseas visit. I am most grateful for the warm welcome that you and your Government have given to me, and I am delighted to be here to wish you all a very happy fortieth birthday as an independent nation.

I am sure that everyone in Malaysia can understand why July 1, 1997 was a special day for us in Hong Kong. It was a day that we had looked forward to with a natural pride in at long last being reunited with China, and with a happy confidence in finally being masters of our own home. Those are feelings that people in Malaysia and across most of the region can appreciate. Fifty years ago, most were colonies. With Hong Kong's return to China this year, and Macau's return in 1999, 400 years of colonial history in Asia is finally at an end.

Most of the countries in this region, after gaining their independence, have created a level of prosperity, liberty and human dignity for their people that few would have dreamed of a generation ago. Today, Asia is taking its place on the world stage, ready to work with all nations to shape our common destiny. Just look at these figures. Ten years ago, the combined GDP for the 10 leading Asian economies was US$3,265 billion. Today it stands at over US$7,015 billion. Although Malaysia's population has doubled since 1970, your income per head has been increasing at four per cent a year, lifting up the quality of life for your citizens. As with other Asian countries, your savings rates are far higher than in America and Europe. By early in the next century the Asian economies together will exceed the European Union or NAFTA in absolute size. Trade flows within the Asian Region have been growing fast as well. In 1987, trade between the main economies within our region amounted to US$334 billion, today it stands at over US$1,240 billion. We have all benefited greatly from that, and have contributed to each other's development by these exchanges.

Asian countries have very different histories, cultures and religions not just from the rest of the world but from each other. They certainly have different priorities. But through co-operation, accommodation and respect for each other's way of life, we have improved over the past few decades the livelihood of our citizens and built societies in which we can all take pride. This is clearly shows that we don't all have to adopt similar beliefs and cultures in order to work together to mutual benefit. Our unique experiences have much to contribute to the development of the global community of the 21st Century. Our voice needs to be heard, and I am glad that leaders in this region are speaking out clearly on this issue.

It is my duty to speak out clearly for Hong Kong. Let me tell you that it is business as usual in Hong Kong. Since July 1 our three branches of Government - the Executive, the Legislature and the Judiciary - have all been functioning normally. There have been no changes to the lifestyle to which we have become accustomed. Our economy continues to forge ahead. Hong Kong people are running Hong Kong.

Now, I would like to set out for you the reasons we have for confidence in our future as a Special Administrative Region of China.

The first ground for our confidence is in China: in the commitments that China has made to us, in the prospects she holds out for us, and in the determination and capabilities of her leaders to achieve their vision for a better society in the next century.

It is always well to remember that the concept of "one country, two systems" was China's idea, not anyone else's. This concept was created by men who were mindful of the fundamental interests of China as a nation and of the Chinese as a people. Chinese leaders are completely committed to making "one country, two systems" work. They trust Hong Kong people to administer Hong Kong; they have pledged their full support for us. From my own experience over the last eight months I can tell you that the Central Government has given us a free hand in dealing with our own internal affairs and has given us every encouragement to succeed.

This is not surprising, because essentially Hong Kong and the Mainland have the same long-term interests. Time and again, Chinese leaders have emphasized the importance of maintaining Hong Kong's stability and prosperity so that we can contribute to the modernization of the whole country. Our economic interests have long been intertwined, and I firmly believe that if Hong Kong succeeds, China will benefit. And if China is prosperous, Hong Kong will benefit even more. This complementary relationship provides a solid foundation on which "one country, two systems" will work.

The Basic Law, the constitutional framework for the Hong Kong Special Administrative Region, has given us a high degree of autonomy under the "one county, two systems" concept. The Basic Law guarantees that Hong Kong will maintain its existing legal, social, and economic systems. It allows us to keep the existing freedoms and life style of our people; it protects the right of private ownership; retains for Hong Kong a separate currency and customs territory; and it reaffirms our long established policies of prudent financial management and low taxation. These guarantees are firm and legally binding.

China has undergone dramatic changes since she opened up to the outside world in 1978. The economy has grown at a remarkable rate, averaging almost 10 per cent per annum. Everyone who has visited China can feel the sense of vigour and see the great change that is taking place. Today the leaders of China have a global outlook. They have a clear vision of the future and have the ability and the understanding needed to steer China successfully into the 21st century. Their ability and understanding make us confident in the exercise of a high degree of autonomy for Hong Kong under the "one country, two systems" concept.

Apart from our trust in China, we have much else to base our confidence on. There is the solid foundation we have in the rule of law. This underpins our free market, the work of our civil service and the quality of our community. We will maintain this legacy. The rule of law has kept our society open, fair and law abiding. Our excellent police force and vigorous anti-corruption body have cracked down hard on anyone breaking the law. We will maintain that effective enforcement and will uphold the principle that everyone, Chief Executive included, is subject to the law.

Hong Kong is blessed with a superb civil service, committed to the very highest standards of public administration. Thanks to their careful management, we have a very solid fiscal position, steady revenues, well controlled expenditure and extremely strong financial reserves. To that we add a fundamentally strong economic position, with growth of around 5.5 per cent expected this year.

Ample reserves are a comfort, but my greatest reason for confidence is the indomitable spirit of the people of Hong Kong themselves. What they have achieved within my lifetime is staggering. What we still hope to achieve together is no less ambitious. We have experienced entrepreneurs and investors and an increasingly well educated, forward looking pool of young people, giving us the talent and the drive to keep on succeeding in whatever the world holds for us.

Hong Kong's prosperity is built on the firm foundations of a free market, free enterprise and free trade, maximum competition and a level playing field. None of these will change under my administration. My Government will continue to provide a stable economic environment, facilitating, not directing the market so that the private sector can maximise its contribution and make the best use of the opportunities available. We will continue to encourage foreign investments and attract multi-national corporations to come to Hong Kong. We will provide a favourable investment climate and the necessary infrastructure to support their operations in Hong Kong.

As well as our own strength and China's backing we also have the benefit of tremendous international interest and goodwill towards Hong Kong, not least, here in Malaysia. Hong Kong and Malaysia are close associates. In trade you were our tenth largest partner last year, with over 16 billion Ringgits worth of goods and services exchanged between us, up 20 odd per cent over 1995, and Hong Kong has over three billion Ringgits of direct investment here. As well as trade we have established friendships over many years and through many channels, not least by educational exchange - the main hall of our oldest university is named after a Malaysian businessman who helped the reconstruction of the university after the last war. For the future, I trust that we can build on every aspect of our partnership.

Together we stand in the midst of the most hopeful and vigorous economic area in the world. Our potential is breathtaking - like the Petronas Towers that soar above this great city of Kuala Lumpur. In those towers, you have made a statement about your aspirations. In your plans for the multi-media super corridor, you have set out how those aspirations are going to be met, providing the environment that will bring the benefits of the new information age to your citizens and helping you to be a leading player in that new age.

The present difficulties in regional financial and stock markets have come as quite a blow. I understand the frustration caused by the set-back to treasured hopes and plans. If it is any consolation, we have had some hard times in Hong Kong too, and have had to learn some painful lessons, particularly in 1987 when the capitalization of our stock market halved almost overnight. Let me share with you the thought that we should not be unduly troubled by these difficulties. Yes there are things we need to learn, but remember the underlying process that is going on and will not stop. Malaysia is rich in human and natural resources. The underlying economy is strong and your leaders have a clear direction for your future development. The fact is that Malaysia, like Asia, has found its feet in the world. We are building better lives for all our citizens, and Malaysia has been, and continues to be, a leader in that process.

I have come here to see for myself what you are achieving, and to talk with your Prime Minister and others about how we may deepen our partnership both with Malaysia and in the ASEAN region.

Our relationship is already well-entrenched and expanding. Our trade with ASEAN nations rose by an average of 21 per cent per annum from 1992 to 1996. Last year, the ASEAN economies were our fourth largest trading partners. Trade with Malaysia has risen markedly since 1991 - an average of 25 per cent per annum - and to the extent that you are now our tenth largest trading partner.

In all of these endeavours we have served us the major gateway for your trade with China. And we want to continue to develop that role.

I want to have a look at what you are doing in response to common challenges and opportunities that we face, particularly in the extraordinary new environment that information technology has the potential to create for us. Your great vision of the multi-media super corridor has helped everyone to see that information technology is far more than a new high-tech industry, far more than a quick way of sharing information. It has the capacity to change whole patterns of communication and civil relationships, of education, of health care, of commerce, of almost any other aspect of human activity. Awakening people's imagination to the potential of these new tools and giving them the skills to use them are going to be fundamental to the success of our societies in the next century.

In Hong Kong we have reason to be proud of our achievements in the past thirty years, but we have to be alert to challenges which lie ahead. We face keen competition in trade and services, and our competitiveness is threatened by persistently high inflation. We have to face challenges arising from a growing and ageing population, meet the pressing demand for more and better housing, and deal with employment dislocation due to restructuring of the economy. To keep our economy and society flourishing, we need to take well considered and effective steps to respond to new conditions.

My Government's foremost task is to enhance Hong Kong's economic vitality and sustain the economic growth that provides the means to improve the livelihood of the people of Hong Kong. We aim to create a business environment and provide an educated, well trained workforce, that will promote the services sector and the development of value-added and high technology industries. As our world moves rapidly into the information era, we will encourage growth in our information industry and infrastructure, and nurture expertise in this area, so that Hong Kong, like Malaysia, will remain at the forefront of the new age.

We will also carry on with the development of our institutions of Government to the timetable laid down in our constitution, the Basic Law. We are doing that not because we have been told to by people in long established democracies, but because we know how important it is to Hong Kong.

I have been chosen as the first Chinese Chief Executive of Hong Kong for a five year term by an Election Committee composed wholly of Hong Kong people, drawn from every walk of life. In 2002, my successor will be chosen by a similar committee of Hong Kong people.

In May next year, elections for first full Legislative Council will be held. Members of every political party will be welcome to take part, every adult permanent resident eligible to vote. Those elected will serve for two years. In the year 2000, the second Legislative Council will be elected for a four year term, and in 2004, for the third election, half the seats will be returned by direct elections.

The framework for electing the Chief Executive and the Legislature that I have described has been firmly fixed in the Basic Law. After 10 years, the Basic Law again makes clear that it is for Hong Kong people to decide for themselves how to develop the Executive and Legislative elections, with the ultimate aim of universal suffrage. It is a document drawn up for Hong Kong's condition, providing stability in the organisation of our government while maintaining the steady evolution of democratic institutions.

There is much that needs to be done in Hong Kong, but we have a solid foundation upon which we can build our future, and we have the commitment and support of our sovereign to make "one country, two systems" a success. All of us in Hong Kong are confident that as we move into the 21st century we can write wonderfully new and successful chapters in the history of our city.

It is not just in Hong Kong that history is being made in Asia. I see every reason for people throughout this region to take confidence for the future. Occasional setbacks notwithstanding, the benefits of a competitive, open approach in business and commerce have been realised around the region, and Hong Kong and Malaysia now stand at the centre of most rapidly growing economic region on earth. There is every prospect that we will see a sustained, substantial rise in the quality of life for our citizens and in our standing within the world economic order in the decades ahead. We look forward to working with you to achieve that.