This is a very challenging time for Hong Kong. Only a few weeks ago we anticipated a steady recovery in our economy and progress in stabilising prices. But since the onset of the SARS epidemic, many of our near-term assumptions have had to be shelved, and it is now clear that the ordering of the Chamber's priorities -- indeed, those of Hong Kong as a whole -- need to be revised.

[In April] your Chamber has been working very hard to help business and the government focus on the immediate steps necessary to minimise the economic impact of the outbreak of atypical pneumonia. As an organisation, we are not medical experts, and so we leave that work to those who better understand the subject. Rather, we have looked at the most urgent needs of our members and of Hong Kong as a whole, in this time of crisis. We went out to our 4,000 members and almost 200 of you answered us in less than 48 hours. Many of the input were very thoughtfully written, filled with anguish and concern and good ideas. The staff and the General Committee pored over each of them, and then we decided, after considerable deliberation, on the final 26 recommendations which we forwarded to the government [on April 17].

Two issues top our list of priorities. The first is cash flow, particularly for smaller and medium-sized companies that would otherwise remain healthy. To this end, we welcome the announcement by the Chief Executive, Tung Chee-hwa, of a series of measures, many similar to our input, to help good companies remain viable.

As you know, each year new policy initiatives are put forth, regulatory changes proposed and plans for the future mapped out. Because we are able to draw on the talent and expertise you so willingly and freely give, the Chamber's views are held in high regard, both within government and among the community at large. It is a responsibility that we take most seriously.

In the past year, we have reviewed, discussed and put forth our views on longer term issues such as the Closer Economic Partnership Arrangement -- or CEPA -- with the Mainland, Pearl River Delta integration, our public finances and accountability system, stock market regulation, competition policy, the environment, creative industries, culture and heritage, and national security legislation. These are issues that will have a lasting effect on the growth and prosperity of Hong Kong, which is your Chamber's main concern.

2002 was another busy year at the Chamber. The year started with a series of China-related events including assessment of the impact of China's WTO membership and a Distinguished Speakers Series speech by People's Bank of China Governor Dai Xianglong on financial reform. The Distinguished Speakers Series has turned out to be one of the most popular and prestigious in Hong Kong, with over 500 attendees for each of the five distinguished speakers events we held last year.

From the Women Executives Club and the China Business Series to roundtables on corporate governance, the Middle East situation, and a host of finance and technology-related topics of particular interest to SMEs, your Chamber held nearly one event each day of the year.

In addition, your Chamber last year led study missions to several cities in China, especially a fascinating visit to Tibet, and to Central Europe.

At this time last year, Hong Kong was pulling out of recession. Our nimble, trade- and services-oriented economy was among the first in the world to capitalise on the upsurge in world demand and China's role in satisfying that need.

However, the beginnings of the up-turn have now stalled in the face of a dramatic loss of travel, tourism and retail business. Where we previously saw the opportunity for 2003 to be the year for tackling our structural adjustments, there is now clearly a different set of priorities.

Yet, those structural challenges have not gone away, and will still need to be addressed, at the appropriate time. In particular, our public finances remain a major cause of concern, both at home and abroad. Your Chamber has been a strong voice in advocating the urgent need to redress this imbalance, one that we hope is now being heard.

As part of the effort to win some progress on tackling the major issues hampering the HKSAR's return to fiscal health, the Chamber late last year commissioned a highly professional study comparing pay levels in the public and private sector. The results, released early this year, were shocking, to say the least.

In public and in private, we have time and again stressed the need for a more business-like approach to the civil service employment, management and remuneration system; further progress in out-sourcing non-critical government functions; and a shared commitment to bringing the SAR back to fiscal health.

On a wider scale, the on-going threats to world peace were brought home in a number of ways during the year, most tragically in the Bali night club bombing in September that cost so many lives, among them some of our friends.

As the most international city in the world, we are not immune to affairs far from home. Beyond sluggish economic growth and war, the international business community faced intense scrutiny during the year, as major corporations and accounting firms abroad were found to have misstated accounts to an unprecedented extent. In comparison, Hong Kong's record as perhaps the best regulatory regime in Asia stood up well.

At our December Business Summit, we predicted a gentle easing of deflation this year and a mild rise in economic activity, resulting in 2 percent real growth in GDP. Now, both of those key factors appear too optimistic and we have thus revised our forecast to 1.5 percent.

Yet, the fundamentals that make Hong Kong work -- the excellent regulatory environment, the superb physical and institutional infrastructure and our unassailable position as the international business centre for China -- remain secure.

Throughout the year, newspapers, magazines, the electronic media and renowned commentators pressed forward the theme of China's emergence as the most important new manufacturing site in the world. The Mainland's role as the key consumer of our services was never more important, and so the outlook for this year bodes well for Hong Kong.

If we are successful in our efforts to contain the virus outbreak, and to re-launch Hong Kong to the world at the appropriate time, we will be able to look back on this time as a turning point in our society. Never, in my memory, have I seen such a willingness to pull together on a single issue, to tackle the challenge and work for the good of all sectors of our society. It is that spirit, the spirit of Hong Kong, that gives me confidence.

In this time of difficulty, it is up to us, as leaders of the business community, to continually and consistently remind the world-and ourselves-of the numerous unique advantages Hong Kong has to offer.

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