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Following is a speech (English only) delivered by the Secretary for the Treasury, Miss Denise Yue, at a luncheon meeting of the Institute of Directors today (May 17):
Ladies & Gentlemen,
I am honoured to be asked to speak to you today. I would like to share with this illustrious body of business leaders, the further efforts by the Hong Kong Special Administrative Region Government to increase its transparency and accountability to the community and, as a result, to enhance its standards of Corporate Governance.
Good Corporate Governance has always been an important issue to the SAR Government. We have endeavoured to set regulatory standards for that purpose. However, while we can insist on transparency and full disclosure by companies, we depend very much on your Institute and you, as individuals, to bring to your companies, the qualities of integrity and professionalism in your daily business activities and to ensure that Corporate Governance is maintained at a high level.
I liken the relationship between the Government and you as being similar to the Royal and Ancient Golf Club of St Andrews, Scotland setting out the Rules of Golf, but on the course, it is the golfer himself who, by his own standards of integrity, declares his ball to have moved or to be subject to a penalty.
I applaud your actions and your mission to contribute towards enhancing the status of Hong Kong both in Mainland China and internationally. Last week's Fortune Global Forum is ample demonstration that world business and political leaders recognise the relevance of our city to Mainland China and to the rest of the world. Joseph Berardino, one of the speakers at the Forum, and the Chief Executive Officer of Andersen, wrote a very informative article in the SCMP last week, in which he identified the need for Asia to address Corporate Governance reform if it is to maintain or elevate Asia's competitive position in the global marketplace. I am sure that the combination of the SAR Government's legislative framework and your professional behaviour standards puts Hong Kong well in the forefront in this particular area.
We in the Government recognise that we can only remain a leader if we continually strive to improve our standards - our competitors will undoubtedly catch and pass us if we do not. To that end the Financial Secretary has stated quite unequivocally in the last two Budget Speeches that it is the SAR Government's intention to set the framework that will enhance the already high standards of Corporate Governance in our companies which are the economic backbone of Hong Kong.
While we in Hong Kong and the SAR Government set the regulatory standards for corporate reporting and depend on you and other professional bodies to set the ethical behaviour rules to ensure that all stakeholders of companies are adequately served, we also understand that we should not adopt a "Do as I say" attitude, but rather set an example for others to "Do as I do".
In recent years, we have developed a very comprehensive set of targets and initiatives which are disclosed in the annual Policy Address and shown alongside the actual achievements of the year that has been completed.
For example, the 2000 Policy Address is supported by 34 Policy Objective booklets reporting on hundreds of initiatives and results - a huge undertaking and one that is generally welcomed by commentators and analysts. We must be careful, however, to continue to focus on specific initiatives and targets and not be fooled into thinking that we are doing a good job merely because we have met 90% or 95% of our targets. The weekly journal, The Economist, reported recently that the Ministry of Agriculture, Fisheries and Food in Britain had declared proudly that it is meeting 10 out of its 13 targets. Sadly, one of the ones that it is not meeting is a pledge to prevent outbreaks of serious diseases!!
We are now embarking on a new and important development to extend and enhance our standards of disclosure and accountability. We have, for the last 150 odd years or so, produced each year a set of cash-based Accounts for the Government, reflecting the cash-based Appropriation regime that the Legislature uses and demonstrating the Government's compliance with the budgetary guidelines. However, from the financial year 2002/03 onwards we intend to publish an additional set of the HKSAR Government's Annual Accounts which will be produced on the accrual accounting basis. This set of Accounts, as I said, is "additional" and will be supplementary to the cash-based Accounts. This arrangement, we believe, will help tighten our management of public finances, increase the transparency of government accounts, and enhance cost-control and cost-effectiveness. These are all attributes central to good Corporate Governance. This initiative underlines the HKSAR Government's approach, namely we practise what we preach.
The main features of our new, additional set of Accounts are:-
Firstly, we shall recognise the core government's assets, to the extent that they contribute to the provision of government services or those that generate revenue Assets such as our Toll Tunnels, Sewage Systems and the Lantau Link are in this category. As a corollary to recognising these assets, we shall recognise, for the first time in our Accounts, the liability that exists for the pensions due to be paid to present and retired civil servants.
Secondly, we shall expand our expenditure analysis which at present is only cash-based, to try to reflect the full cost that each government department incurs, bringing together actual cash and notional costs which reflect better the full operational resources for which departmental Controlling Officers are responsible and which are consumed in the delivery of their services to the community.
Thirdly, we shall include, for the first time, all entities and organisations over which the Government has full or major ownership interest. Notable inclusions will be our share of the net asset value of the MTR Corporation Ltd., the KCRC, the Airport Authority and the Trading Funds which have been set up since 1993. And in addition, we shall also include the Exchange Fund's net assets.
And lastly, one important additional document that will be prepared and published in the new package of financial Accounts will be a Stewardship Statement - a Statement expressed in non-financial terms which will represent the full extent of the stewardship responsibility of the Government. This will show in broad terms the major physical assets, for instance, kilometers of roads by type, and areas of land devoted to public housing or recreation and so on.
Our new package of Annual Accounts will thus continue to supply information about how well we have managed to spend within our budgetary guidelines, but will also demonstrate in a more complete manner, the full extent of the HKSARG's influence in the public sector of Hong Kong - its financial performance for each year and its overall financial position at the end of each year, while at the same time providing a more comprehensive insight into the resources consumed by individual departments in the delivery of their services.
These proposals are the end-product of a study period of almost two years under the auspices of a Task Force which I chaired and which comprised colleagues from Finance Bureau and the Treasury. The Final Report was published last Monday as a Consultation Document, the consultation period for which will last until 30 June 2001. I commend the document to you - and my colleagues and I will be pleased to receive any views you may have on it.
The timing of the publication of our Report was not intended to coincide with the Fortune Global Forum which was held so successfully last week, but by chance it was really quite fortuitous that it happened to come out overlapping with the Forum.
As the world in general, and Asia in particular, is addressing the need for greater Corporate Governance in not only its business enterprises but in the regulatory bodies, both at the individual economy level and internationally, it is entirely fitting that the Government of the Hong Kong SAR, which the Financial Secretary called "a first-class international financial and business centre", should at this juncture announce its intention to increase the transparency of its financial activities and publish them to Hong Kong and the international community.
I hope that the combination of our governmental efforts and your continuing standard-setting for the ethical behaviour of the directors of our companies will continue to keep the HKSAR high in the league table of excellence and the envy of our local and international competitors.
Thank you.
End/Thursday, May 17, 2001
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