The first Policy Address in the second term of the Chief Executive, Tung Chee-hwa, has aroused vastly different views among the community, and hot debates from within the Legislative Council. However, some critics have taken to bickering over minor points, and ignored the fact that the Policy Address sets out a clear direction for Hong Kong.

The Policy Address as a whole and can be divided into two parts. Internally, it proposes consolidating Hong Kong's economic strengths, developing the four pillars of our industries, eliminating the fiscal deficit and following the principle of "big market, small government." Externally, it aims to forge closer economic integration with the Mainland, especially the PRD, to maximise our complementary competitive advantages.

All these points are critical for Hong Kong to prosper. If they are not implemented, Hong Kong's competitiveness will be undermined.

There have also been criticisms that Hong Kong should not adopt a "Backed by the Mainland" position. They believe that integration with the PRD will eat away at Hong Kong's capital, jobs and talent. As a result, Hong Kong will lose its competitiveness and economic advantages. I totally disagree with these suggestions which seem to be out of touch with reality.

Hong Kong is going through its third economic restructuring. The shift of manufacturing and some service industries to China is an irreversible trend, so is the flow of people, goods and capital. In addition, global competition is increasingly intense. If the SAR Government does not embrace this change and work with the Mainland more closely, it will only hinder the transformation process and harm Hong Kong's future prospects. As the Financial Secretary Anthony Leung said, the aim of greater integration is to make use of economic activities north of the border to facilitate the united development of both areas.

Mainlanders can currently apply for a two-way business visa for Hong Kong, valid for up to three years. However, they are prohibited from establishing companies here or holding the office of director, though there are no such restrictions on foreigners. I believe that the SAR Government should lift these restrictions to facilitate capital flow and drive the economy, and at the same time promote the principle of fair treatment.

The SAR Government has also indicated that it aims to encourage more overseas investors to settle in Hong Kong, but no decision has been reached regarding Mainlanders. I understand that allowing more Mainland investors to live in Hong Kong might lead to the problem of foreign exchange run-off from the Mainland. However, this is a problem that can be solved, and the SAR Government should continue discussions with the Central Government to relax restrictions.

Again, I echo Mr Tung's comment in the Policy Address that the position "Backed by the Mainland and Engaged Globally" is the right way to go for Hong Kong.

Specific measures of the economic co-operation, of course, still need further work from the SAR and Guangdong governments. I suggest that the SAR Government invite the local business community to join in discussions with Mainland authorities. Through expressing their opinions on some Mainland business initiatives, the business sector has already maintained good dialogue with the Mainland authorities. Moreover, as construction projects require private investment, the business sector's participation should help speed up the negotiation process and remove any barriers.