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Chief Executive stresses short-term pain,
long-term gain

Coming barely a month after the terrorist attacks on the United States and the subsequent increase in global uncertainties, this year's Policy Address from SAR Chief Executive Tung Chee-hwa was long on economic realism and in the provision of short-term relief to help underpin local confidence.

"Recently we have seen dramatic changes in the world around us and there are even tougher challenges ahead," Mr Tung said. "We are facing the most acute economic problems for many years."

He said the serious terrorist attacks in the United States had 'not only caused major losses and deep grief,' but had 'also depressed consumer sentiment in overseas markets and created greater uncertainty in the global economy.' In such circumstances, the open SAR economy could not help but be affected.

"As a result, Hong Kong faces an accelerated economic downturn, a rise in unemployment, an increase in the fiscal deficit and a delayed recovery," he warned. "The sharp downturn of the external economy at a time when Hong Kong is undergoing structural adjustment has put us in a particularly difficult position. We have to prepare for drawn out economic hardship," he said.

The address, Mr Tung's fifth and final 'state of SAR' speech before the elections for Chief Executive in March next year, was generally well received by the local business sector (in both its domestically and internationally owned forms), despite being subject to some criticism in the broader community.

Leveraging Hong Kong's advantages

Referring to Hong Kong's 'unique position' in relation to the Mainland, Mr Tung said that though the global economy was generally slowing, China distinguished itself with continuing economic growth. "This creates new business opportunities for us and provides the impetus for Hong Kong's continued development," he said.

"Compared with other places, Hong Kong is indeed fortunate," he said. "At a time when foreign investors are vying to enter the China market, we are already well positioned to seize the opportunities they seek."

He added that Hong Kong's open and free economy, its world-class infrastructure and its enterprising population were hard to match. "Our robust systems and a large reservoir of talents, the results of years of hard work, cannot easily be replicated," he said. "We have every reason to be confident in our future."

• Expanding investment in education and upgrading the quality of the Hong Kong SAR's human resources;

• Upgrading its hard and soft infrastructure and improving the business environment;

• Enhancing the quality of the living environment;

• Relieving hardships and creating jobs;

• Improving the quality of government administration;

Investing in Education

"Regardless of the economic situation in the next few years, the government should steadfastly continue to increase its investment in education," Mr Tung said. "Education sits at the top of our social policy agenda."

Outlining his education plans, Mr Tung said Hong Kong needed to further upgrade its education system to meet the human resource needs for the SAR's transformation to a knowledge-based economy. Initiatives to help achieve these goals included:

• HK$5 billion to subsidise continuing education and training programmes to stimulate life-long learning in the community;

• Upgrading the quality of teachers from kindergarten through to secondary school;

• Increased subsidies for kindergartens to employ more qualified teachers;

• A 50 per cent increase in the allocation to secondary schools to create a better environment for teachers;

• Employing native English-speaking teachers or teaching assistants to strengthen English-language teaching in primary schools from the next school year;

• Reviewing the academic structures of secondary schools and universities. The review will look at a '3+3' secondary school structure and a four-year university programme structure.

Infrastructure and Business Environment

"In developing our knowledge skills, we must not overlook the need to upgrade our hard and soft infrastructure, pushing ahead with large-scale projects and improving our business environment to take account of the changing economic landscape," the Chief Executive said. Included in his Policy Address programme for improving the business environment were:

• HK$1.9 billion to provide financial assistance to small and medium enterprises (SMEs). This is HK$600 million more than the proposed HK$1.3 billion recommended in a report released in June by the SME Committee;

• Investing up to HK$2 billion to construct a new exhibition centre in conjunction with the Airport Authority at Chek Lap Kok;

• Setting up the Steering Committee on Logistics Development and Logistics Development Council to promote Hong Kong's development as a major international transportation and logistics hub;

• A HK$100 million fund to support, on a matching basis, projects to enhance professional services in Hong Kong;

• Making it more convenient for Mainland business people to visit Hong Kong. Multi-entry business visas will be extended from the present six months to a maximum of three years, with each duration of stay extended to 14 days;

• Looking at ways to relax immigration restrictions for overseas investors;

• Establishing an economic and trade office in Guangzhou next year to strengthen business liaison between Hong Kong and Guangdong;

• Agreement reached with Mainland authorities to abolish the quota system for the Hong Kong Group Tour Scheme from January 2002;

• Greater travel convenience in visiting the Mainland for Hong Kong permanent residents who are foreign nationals. Agreement in principle reached with Mainland authorities to grant three-year multiple visas for this category of residents.

Commenting on the government's infrastructure programme, he said HK$600 billion would be spent by the administration and the two railway corporations over the next 15 years, including:

• A proposed high-speed railway from Hong Kong to Shenzhen to link with a planned Shenzhen-Guangzhou express line, cutting travelling time between Hong Kong and Guangzhou to one hour;

• Agreement with Mainland authorities to target 2005 as the completion date for the Shenzhen-Hong Kong Western Corridor. This will strengthen transport links with the Pearl River Delta.

Enhancing the Living Environment

"As a world-class city, Hong Kong must provide its people with a clean and comfortable living environment," Mr Tung said. "Together, we will build a civil society in which everyone can take pride, as well as enjoy a healthy and positive lifestyle in a rich cultural environment."

He said the government would provide more resources to improve environmental hygiene and greening efforts, speed up the redevelopment of older urban areas while preserving their characteristics and cultural heritage and examine ways to make sports activities more popular and constructing more quality sports facilities.

Relieving Hardships and Creating Over 30,000 Jobs

"At this time of economic downturn, it is our responsibility to help relieve the hardships faced by the community," Mr Tung said.

• A rates payment reduction of up to HK$2,000 for each rateable tenement, with about 840,000 ratepayers having to pay no rates in 2002. This concession will cost about HK$5 billion in lost revenue;

• A proposal to go to the Legislative Council to approve raising the tax deduction for housing loan interest to HK$150,000 per year for this and the next year of assessment;

• A HK$300 million grant to establish a 'Community Investment and Inclusion Fund' in which public donations will also be welcomed. The Fund will encourage the local community and grassroots organisations to develop their own initiatives.

Improving the Quality of Administration

"The Government is fully aware of the need to move with the times, to better respond to the demands of the people and to raise the overall standards of our services," the Chief Executive said.

Outlining the government's initial thinking on ways to improve the system of accountability for senior officials, he said a new system of appointing principal officials would apply to the top three secretaries (the Chief Secretary for Administration, the Financial Secretary, the Secretary for Justice) and most Directors of Bureaux.

He said the new system would more clearly define the roles, powers and responsibilities of top government officials. It would also build on the civil service's existing strengths such as permanency, professionalism, neutrality, high efficiency and freedom from corruption.

In its own reaction to the Policy Address, the Hong Kong General Chamber of Commerce said that, within the constraints imposed by the global economic climate and the government’s own budget situation, the Chief Executive was able to offer some important new initiatives for business and individuals.

HKGCC Chairman Christopher Cheng noted with satisfaction that the five priority tasks outlined by the Chief Executive had all been canvassed in the Chamber's own submission to Mr Tung back in August this year.

"The Chief Executive's Policy Address this year targeted the issues we thought were important for the local economy," Mr Cheng said.

"While we might debate the level of emphasis given each, or the scope of actions taken, but the general direction is on the right track. I was personally pleased to hear more details of the administration's thinking on the measures to improve government accountability, including the appointment of the three top officials as well as the new equivalents of Policy Secretaries."

Mr Cheng said the continued emphasis on education in this year's address was especially important if Hong Kong is to be able to offer its young people the best opportunities available, stay ahead in the new 'knowledge economy' and enhance its competitive position in the global market place.

"Mr Tung's commitments to raise general education standards, increase the number of post-secondary places and pursue life-long learning were all important," he said.

"We agree totally with the Chief Executive's emphasis on economic restructuring and the need for Hong Kong to encourage a knowledge economy, higher value-added economic activities and the opportunities to come from the Mainland's WTO entry. We totally agree with Mr Tung's statement that at the end of the day, human capital is what Hong Kong must develop," he said.

All in all, the HKGCC felt that the Policy Address met the challenge of balancing the community's immediate needs with initiatives to strengthen Hong Kong's positioning, all in a very difficult economic environment.