SAR on the road to recovery but the economy faces a number of uncertainties, says Chamber Chairman

"What a year our anniversary year was!" Chamber Chairman Christopher Cheng said in his address to members at this year's Annual General Meeting held on April 30.

"It began in appropriate fashion with the launch, by SAR Chief Executive Tung Chee-hwa, of an entirely new image for your Chamber, including a new logo and colour scheme, signifying our roots and our dynamism."

Mr Tung later kicked-off the Chamber's 140th Anniversary Distinguished Speakers' Series, which continued throughout the year with speakers of global prominence.

In April, the Chamber held a Gala Ball to mark 140 years of service to the community, at which Li Ka-shing was the special speaker.

Celebrations aside, the Chamber played a key role in promoting the interests of the local business community through a number of initiatives and proposals. These included:

At the Annual Business Summit in December, the Chamber forecast that the Hong Kong SAR economy would grow by 2 per cent this year.

Critics said the figure was too optimistic, but as the year progressed, many upgraded their estimates for Hong Kong growth and the consensus forecast is now pretty much in line with the Chamber's original number.

Mr Cheng said the Chamber has no intention of changing its forecast at this stage as there are many uncertainties ahead. This is in spite of a new leading index of the local economy produced by NTC Research of the U.K. -- a Purchasing Managers' style index along the lines of that widely used in the U.S. -- which showed the local economy moving into positive growth territory in February this year. This has continued into March and into April.

"It gives us greater confidence in the future and we still expect a better growth picture in the second half of the year," he said. "Having said that, we would be remiss not to recognise that the economy faces a number of uncertainties."

Internationally, these include the world and U.S. outlook, the uncertain global situation, including on the ongoing war against terrorism, and the impact of WTO for China.

Domestically, higher unemployment, weak domestic demand and investment, continuing deflation, and the ongoing restructuring of the economy could affect the economy.

Mr Cheng said the Chamber will continue to closely monitor the economic and business situation as the year progresses, "but at this stage it looks as though we are beginning to be on the recovery path."

Looking ahead, Mr Cheng said the Chamber will focus on a number of key issues in the coming year, the most important of which is Chinas entry to the WTO and its possible impact on Hong Kong business.

"As part of this, we will also pay close attention to talks on a Closer Economic Partnership Arrangement (CEPA) between the Mainland and ourselves," he said. "We believe the early conclusion of such an arrangement should assist Hong Kong-based businesses in accessing the Mainland China market under WTO."

The Chamber submitted a detailed proposal to the government on what CEPA might look like, and it will monitor talks between the two sides and make further contributions where necessary.

Another key issue with be to continue to press for greater integration of the SAR and southern Chinas economies, especially the Pearl River Delta area, and a more open border between the two for the movement of goods and people, he said.

A Chamber conference, jointly sponsored by the South China Morning Post, in early July will examine this issue in depth, he added.

"Domestically, we will continue to actively pursue all those issues related to the better governance of Hong Kong, with emphasis on the needs of the business sector," Mr Cheng said.

This includes a range of issues, including tackling the Budget deficit problem by spending restraint -- and hopefully without resorting to any new taxes -- and the overall goal of smaller government.

Downsizing and reform of the civil service, outsourcing of service provision, privatisation of government activities, deregulation and the elimination of unnecessary red tape are all part of this process.

"But I am also of the view that fundamental reform of the civil service requires something more -- a complete change of mindset within the service. We must recognise that civil servants are providers of services to the community and should be treated no differently to those in the private sector," he said.