Season's Greetings to Chamber members and all readers of The Bulletin. If there is one message I want to deliver at this, the end of another quite difficult year for the local economy, it is that there is an overwhelming need for all of us to work together to restore confidence in the Hong Kong SAR. And this confidence will enable us all to make the tough decisions necessary at this time.

Despite the modest improvement that gradually became apparent as we worked our way through 2002, real progress in turning around the economy continues to be slow. What can we do to improve things in the year ahead in one of the world's great business cities?

It will not turn around if we merely leave it to government; it will not turn around if we leave it to business; and it will not turn around if we leave it just to the other fellow on the street next to us. If we want things to improve then we are all going to have to work for it together. Premier Zhu Rongji in his visit here in November said the same thing, that we should have confidence in ourselves, and if we make the tough decisions, Hong Kong will do just fine.

For government, this means providing the vision and leadership to inspire the business sector and the broader community to greater heights. The new administration under Tung Chee-hwa, with its new team and new accountability system provides the basis to achieve this.

The government needs to come up with sound policy initiatives, and to be resolute and determined in seeing them through. Government needs to show it has a clear and consistent plan, a roadmap for the SAR's future development. The recent housing policy revamp is a good example of a more well thought out and comprehensive plan.

The government cannot, however, afford to be "heavy handed" in its approach. The government also has to listen to suggestions for improvement, as I saw the entire Shanghai city leadership paying attention in a brainstorming session with international advisors last month. In other words, the government has to find the right balance in being firm and being responsive. This means if the government feels the policy is right, it should defend it with determination. But if the government feels that different times warrant a policy adjustment, it should not be afraid to change.

Let me illustrate with some examples: On housing, I believe that the original "85,000 units" housing policy was based on sound reasoning, but when times change, especially due to the Asian financial crisis, the government should have been quick to announce a change without worrying about criticism. On Pearl River Delta integration, not moving forward right after 1997 because of concern about "one country, two systems" was based on sound reasoning, but now we should move faster in this integration without being ashamed that we did not do so two years ago.

The government also should not let noises in the media deter us from doing the right thing. Football betting is long overdue and is the right policy for Hong Kong, but the government has been too deferential to pressure groups who waged a successful media campaign. On the issue of Mainland talent and investor immigrants, we think the government is too hesitant due to protests from protectionist labour unions.

One of the toughest decisions the government needs to make despite strong pressures is to push ahead with proposals for "smaller government". Smaller governments are invariably less "red-tape," less rigid, and more business friendly. The spending programmes must be trimmed to lower our deficit, which is being noticed around the world and beginning to affect our ratings in the eyes of foreign investors.

To get a smaller government, the civil service must be reformed with the help of the ministers who should look carefully at every layer and every line item of services being provided by the government. For a start, we advocate undertaking quickly a long-needed comprehensive pay level comparison survey between civil service pay and private sector pay to ensure there is equivalence in remuneration.

Finally, it means pushing ahead faster with such initiatives as the Closer Economic Partnership Arrangement with the Mainland (CEPA), even more urgent now that China and ASEAN have begun discussions on their own free trade agreement.

Above all else, it means restoring community confidence in Hong Kong. The recent Heritage Foundation survey again showed us leading the way in global competitiveness -- the ninth year we have done so. But it also showed others are catching up. We need to do more to stay ahead. We hope to hear something in the Chief Executive's Policy Address next month.

For business, creating a new sense of community confidence means creating new business strategies, seeking out new business opportunities (especially on the Mainland, but globally as well) and providing new job prospects. It means opening our horizons to look at China, especially the Pearl River Delta, as an employment destination. It means finding more Mainland customers, whether you are a lawyer or a shopkeeper. We must compliment many in the latter category for their successful efforts to focus on mainland tourists these past eighteen months.

It also means creating new opportunities for Hong Kong people, especially our talented and up-and-coming young people, through new investments, here and on the Mainland, through advances in research and development and through education, training and retraining programmes.

For the wider community, restoring confidence means showing a renewed faith in Hong Kong's future, through making the sacrifices now that will make for a better longer-term future, and through opening up to the world to make Hong Kong a truly international city. Protectionism and insecurity will lead to Hong Kong's fading as a global business centre.

Jack Welch, former chairman of General Electric, once said: "If the rate of change on the outside exceeds the rate of change on the inside, the end is near." The world is changing around us, and we in Hong Kong must have the confidence to change even faster.