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Following is the full text of a keynote speech (English only) delivered by the Financial Secretary, Mr Donald Tsang, at a luncheon hosted by the HKETO Brussels, Trade Development Council and Denmark Hong Kong Association at Copenhagen, Denmark today (Tuesday):
Mr Larsen, Mr Hoiness, ladies and gentlemen,
Introduction
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Good afternoon, and thank you for your warm welcome.
I am pleased to say that, contrary to expectations, your spring is as pleasant and promising as anywhere in the world.
Expectations, of course, are all too often created on misunderstandings raised by poor communication.
Let me try to state factually what has happened in Hong Kong since the Handover and let you draw your own conclusions on our future.
As you know, Hong Kong returned to China's sovereignty on July the 1st, 1997. Anyone encountering a large part of what is presented as news might be forgiven for thinking that was the end of Hong Kong.
Much of this negative news emanated from a preconceived notion that Hong Kong was destined to fold once the British departed and China reclaimed it.
However, despite their best efforts to look for social or political ruptures, some 6,000 visiting journalists had to go home somewhat disappointed in early July 1997.
In many ways, the journalists left too soon after the Handover celebration in July 1997, because the real story of Hong Kong has unfolded in the months since then.
It is a fascinating story of achievement, triumph over adversity and human development. Best of all,it is true and I would like to share it with you.
1998 - A year of tension
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Of course, we have not been immune from the regional economic turmoil. It has been the most severe financial setback since the Second World War.
It began when the Thai Baht fell on July the 2nd, 1997, and progressed to engulf every major player in our region and globally for the next 20-odd months.
It has been a watershed for Hong Kong, and it shook us out of the complacency that developed in more than a decade of significant economic growth, increasing wages and escalating asset values.
However, compared with the problems of our neighbours, Hong Kong has fared well.
Financial turmoil aside, it was a significant year for Hong Kong for several other reasons.
Among these were the success of our first legislative elections as a Special Administrative Region of China, the first anniversary of our reunification with the Mainland after an almost seamless transition in 1997; the opening of a world-class airport; the business-as-usual, day-to-day running of Hong Kong under the unique concept of 'one country, two systems'.
Law and Order
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Despite the sharp economic downturn, Hong Kong remains one of the most secure and stable cities in the world.
In 1997, our crime rate fell in 1997 to its lowest in 24 years and stabilised in 1998 at 1,076.1 cases per 100 000 of the population. This was the second-lowest rate for 25 years and below that in most of the world's major metropolitan areas.
And this is in one of the world's most densely populated urban areas. Hong Kong's built-up areas house 27,000 people per square kilometre on average. In some areas it is over 50,000 people.
Overall, Hong Kong has about 5,900 people per square kilometre. By contrast, Denmark has 120, as The Economist newspaper measures it.
Education
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Hong Kong provides free and universal basic education for nine years. About 1.3 million students, or 19.7 per cent of the total population, were in full-time education during the year.
Our investment in education continues to grow, with greater emphasis on basic education and the learning of English. All children between the ages of six and 15 are entitled to free school places and 85 per cent of the students in the appropriate age group also receive secondary level or technical education at highly subsidised rates.
At tertiary level, 18 per cent of the relevant age group can obtain a university education. Tertiary education accounts for about one-third of the education budget.
In the 1998-99 financial year approved public recurrent and total spending on education amounted to 38.8 billion Krone and 48.1 billion Krone, respectively, representing 22 per cent of the government's total recurrent expenditure and 18 per cent of the total public expenditure.
Public Health
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We also look after people's health. We were swift to act when a new form of 'flu was found in poultry in late 1997.
We were forced to put down more than one million chickens and ducks in an unprecedented operation.
Some vociferous members of the local community considered the government was clumsy in doing this.
Subsequently, however, influenza specialists of the World Health Organisation and the Centres for Disease Control and Prevention in Atlanta, USA, joined other world health experts to applaud our action.
They issued a joint proclamation saying Hong Kong's action might well have saved the world from an influenza pandemic.
Our general health climate remains favourable. At 76.6 years for males and 82 for females Hong Kong's life expectancy remains the second-highest in the world. The infant mortality rate last year was 3.2 per thousand live births - one of the world's lowest.
Physical Infrastructure
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We are continuing to improve Hong Kong's infrastructure: Last year, we completed the most modern and largest airport on earth, acclaimed as one of the 10 most important engineering feats in the 20th Century.
Now, we are embarking on an even more ambitious railway development programme, and testing a system of electronic road pricing so that the vehicle-user pays for helping to congest urban centre streets.
Significant new infrastructure developments will further enhance our role as the pre-eminent gateway to the mainland of China and the communications and transport hub in the region.
Cyberport and Technology
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One of these is the $1.7 billion US dollar Cyberport project, which will provide the essential infrastructure for the formation of a strategic cluster of information services companies, as well as a working and living environment of the highest standard.
Other facilities will include media laboratories, high-speed computers for computer graphic design, multi-media equipment and studio facilities for common use by the more than 100 small to medium sized companies which we expect to become tenants of the Cyberport.
So far, firms such as Oracle, Microsoft and IBM have signed deals to set up in Cyberport - and there is room for more.
Planning is well advanced for our Science Park project on a site bordering a beautiful harbour. This 22-hectare site will be developed over the next decade and a half and aims to attract technology-based firms and activities to Hong Kong.
A Separate Identity within China
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While we have rejoined our motherland, Hong Kong retains a distinct identity and we have our own passports.
Countries from Australia to Zimbabwe have granted visa-free entry to holders of HKSAR passports since July 1997. The most recent ones on a list of 58 nations include Canada, Chile, Egypt, Gibraltar, Italy, Pakistan, Peru, Poland, South Africa and Turkey.
A Truly Cosmopolitan Community
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Together with the expatriates living and working in the SAR, the thousands of returnees contribute significantly to Hong Kong's sophisticated, cosmopolitan nature.
Indeed, the number of expatriates generally has risen steadily since the Handover.
The number of US passport holders, for example, increased from 34,700 at the end of 1996 to 39,900 in February last year.
Over the same period, Canadians and Australians rose from 30,600 and 21,200, respectively, to 33,500 and 22,500.
Fiscal Prudence
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Throughout the financial upheaval, and despite the recession, the Hong Kong SAR Government has maintained its traditional fiscal prudence.
Usually we produce a budget surplus. However, as a result of the economic downturn, we are budgeting for a deficit of $4.7 billion US dollars in 1999-2000.
Our reserves of more than $120 billion US dollars give us the financial means to help alleviate the pain of adjustment for individuals and business. We have firm plans to restore budgetary balance by 2001.
Our banking industry and regulations are the best in Asia, fully comparable to the best in Western Europe or the USA.
The Freest Economy in the World
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Hong Kong shines as an open, free economy - retaining the Heritage Foundation's top world ranking for the fifth year running.
In December last year, the World Trade Organisation proclaimed Hong Kong as an outstanding practitioner of free trade principles. The Cato Institute of the US also ranked us as the world's freest economy.
This has lately been qualified by our incursion into the stock market last year but we believe that our commitment to free markets should not be judged on a single, extraordinary event during an exceptional and destabilising attack on our currency and stock markets.
During August 1998, in an unprecedented volatile external environment, we found clear evidence of speculators deploying a double-play strategy. There were strong signs that the markets were beginning to fail and local confidence was in jeopardy.
To ensure the stability and integrity of the financial markets and to end the manipulation that threatened to destroy our economy, the government invested the equivalent of 106 billion Krone in quality shares of Hang Seng Index constituent stocks.
We explained our actions day by day and in October we set up the Exchange Fund Investment Limited (EFIL) to manage the portfolio we acquired.
This is entirely at arm's length from the Government with a Board of Directors comprising mainly non-officials.
It has appointed three independent advisers, all reputable international finance houses, to assist it with this task.
EFIL safeguards the government's interests and rights in the shareholdings, and identifies value-added opportunities for disposing of the shares with minimum disruption of the market.
As it happens, that portfolio is now worth more than 180 billion Krone - on paper.
It is now widely recognised, from the G7 downwards, that there is an urgent need to overhaul the global financial infrastructure.
The predatory attack on the Hong Kong currency and the action we took was very much a catalyst for that global recognition.
During all of this, we remained completely honest and transparent. We have learnt from the episode and are preparing for the wider fields of competition in the 21st Century.
We are committed to openness and transparency. We have well-regulated banks and financial institutions. We have a long record of prudent fiscal policies, spending only what we can afford.
A Robust Constitutional and Legal System
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Most importantly, in China we have a stable hinterland filled with potential, and a leadership in Beijing deeply committed to our long-term stability and prosperity.
That leadership has also recognised the independence of Hong Kong's legal system, which is distinct from that on the Mainland.
Years ago, we turned the tables on public and private sector corruption, to the extent that Hong Kong now has one of the world's most enviable records in this regard.
The reputation of our rigorously independent judiciary has been enhanced by the inclusion of some of the most outstanding brains in the English Common Law to sit on our own Court of Final Appeal which replaced Britain's Privy Council as the ultimate appellate court.
The rule of law reigns supreme in Hong Kong and the Court of Final Appeal established its independence in a couple of recent landmark cases.
Where legal matters touch the shipping industry, Hong Kong remains a leading centre of excellence for Admiralty and Commercial Law in Asia and Hong Kong is a very strong base for maritime arbitration.
In its own right, the Hong Kong SAR is party to 168 international agreed multilateral treaties covering such fields as civil aviation, conservation, customs, the war on drugs, health, human rights, intellectual property, labour, marine pollution, merchant shipping, telecommunications and trade.
A Vibrant Political System
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Politics remain as active as ever. From the day of the Handover to March 31 this year, Hong Kong people held 2,433 public marches and meetings. That is an average of 3.8 events every day when various groups of people freely express their views.
These activities are conducted with a civility that is unusual world-wide, and unique in Asia. It reflects a uniquely tolerant government and a self-confident population.
The first elections for our Legislative Council drew a record attendance last May - despite some of the heaviest rainfall we have ever received.
The resultant body has, for Hong Kong, quite an outspoken, almost radical, flavour. And we are rather proud of it.
A Lively and Independent Press
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Our news media remain as free as ever and a World Bank survey has just reported that Hong Kong has the world's most intense competition among newspapers.
Despite the inevitable love-hate relationship between any government and the news media in modern times, Hong Kong is singularly proud of its news media, not so much the numbers but the independence and variety of thoughts they stand for.
The World Bank's annual survey, entitled "World Development Indicators - 1999", shows that an average of 739 newspapers were distributed daily among every 1,000 people in Hong Kong. In the United States and Britain, the figures were 215 and 332, respectively.
Our thriving free press produces 45 daily newspapers and 684 periodicals.
We have two commercial television companies, a subscription television services, a regional satellite television service, a government radio-television station, and two commercial radio stations.
International news agencies, newspapers with international readership and overseas broadcasting corporations have established regional headquarters or representative offices in Hong Kong.
Regional publications such as Asiaweek and the Far East Economic Review are based in Hong Kong while the Financial Times, Asian Wall Street Journal, USA Today and the International Herald Tribune are also printed there.
The Fairest, Most Open and Mature Market
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The same World Bank survey said Hong Kong people are the third most frequent users of mobile telephones, after Norway and Sweden.
Our 6.8 million people possess about 2.3 million mobile phones, or 343 among every 1,000 people, compared with 381 for Norway and 358 for Sweden.
In January this year, the market for many services and circuits was opened to general competition and further liberalisation will be implemented next January.
We are also opening up the television industry further and have instituted a transparent and open regulatory regime to protect operators and consumers.
In Hong Kong, we realise it is simple not enough to rest on our free market credentials.
Even during such difficult times, Hong Kong continues to open up its markets, encouraging more competition in the area of international telecoms and transport services.
One need only look at Hong Kong's past 'golden decade' to gauge the potential for growth in the first decade of the new century.
In the past decade, Hong Kong's stock market capitalisation has increased five-and-a-half times to more than $400 billion US dollars, while annual turnover has increased 19-fold to $510 billion US dollars.
China's markets are continuing to open up and reform. They will need investment capital - and most investors will find that Hong Kong continues to provide the most effective and efficient entry to China.
Hong Kong aims to implement a three-pronged reform of its securities and futures market - upgrading market infrastructure, regulatory reform and demutualisation and merger of the exchanges and clearing houses.
We have undertaken a review of Hong Kong's financial infrastructure.
Among other issues, we are looking at establishing a single clearing arrangement for securities, stock options and futures; the introduction of a secure, scripless securities market; and enhancing technology to facilitate straight-through processing across the financial markets covering information delivery, trading, clearing, settlement and custody functions.
Some 474 authorised institutions and local representative offices of banks from more than 40 countries conduct business in Hong Kong. The banking sector's external assets are among the highest in the world.
Of the world's top 100 banks, 79 have operations in Hong Kong while 145 subsidiaries or related companies of foreign banks operate as restricted licence banks and deposit-taking companies, and 141 banks have representative offices.
Even before the stock market investors returned, canny traders were already packing Hong Kong Trade Fairs, putting numbers back more or less to where they were two years ago.
I opened one recently and was frankly, delighted at the attendance and the confidence displayed. On reflection, I should not have been so surprised. Hong Kong has always been resilient and the latest moves just indicate the depth of that characteristic.
There you are: the facts on Hong Kong. Better still, come to Hong Kong and experience it for yourself.
Thank you.
End/Tuesday, May 4, 1999
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