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Tung's sight is clear

June 1999

        
Vision in leadership is as critical in good times as it is in bad times, this was the experience of Hong Kong Chief Executive Tung Chee-hwa in his analysis of the financial crisis that battered the region, speaking at the first day of the PBEC 32nd IGM.

During his speech the Chief Executive explained how Hong Kong had weathered the crisis and the challenges the city had faced in the first 22 months as a Special Administrative Region of China.

First, Hong Kong faced the change from being a British colony to becoming part of China under the "one country, two systems" principle.

Tung said: "The results of the successful implementation of 'one country, two systems' are for every one to see. Since the handover, the leadership in Beijing has given us their maximum support. But they have made it clear it is up to Hong Kong to run its own affairs with a high degree of autonomy under the Basic Law."

The second challenge Hong Kong faced was how to deal with the impact of the Asian financial turmoil. The economy shrunk by 5.1 per cent and unemployment increased to 6.2 per cent.

The Chief Executive said that during much of the 1990s, years of close to double-digit inflation had eroded Hong Kong's competitiveness and that an adjustment was necessary.

In the last 18 months, values of residential units had fallen by 50 per cent; values of commercial premises had fallen by 60 per cent and there had been adjustment in salaries and wages.

"I believe that at the end of the day, when the process is completed, our cost structure will become more reasonable and we will be more competitive," he said.

Mr Tung defended the Government's intervention in the stock market.

"What we saw in the months immediately leading to August was speculative pressure on the Hong Kong dollar. There was also short-term capital flows that were taking advantage of this, building up huge positions in the currency markets and stocks and futures markets. It came to a point that our market was no longer free. The purpose of doing what we did was to protect the integrity and the freedom of our market place," he said.

Mr Tung said to adapt to the economic downturn the Government took effective measures; firstly, to alleviate the pain; secondly, to spur economic growth and thirdly to pave the way for long-term recovery.

"In the 1999 Budget, we introduced selective increases in expenditure as well as tax cuts with a view to stimulating the economy and to building for our long-term future," he said.

Mr Tung said that 20 months after the financial turmoil began, stability had returned to the financial markets, property prices had been corrected and confidence was slowly recovering.

"We should now build on our traditional and existing strengths, we need to help our economy respond to change and seek out new engines for growth," he said.

Mr Tung said the areas Hong Kong should focus on were IT, telecommunications, education, Chinese medicine and creative art.

He added China's expansion will benefit Hong Kong particularly after it joins the WTO.

"Hong Kong is well positioned to be the premier international city in Asia as well as one of the major cities in China," he said.

Mr Tung said the Government would make a determined effort to reform the civil service so as to meet the new challenges of the Millennium.

"We will make the civil service even more efficient, accountable and responsive," he said.

Finally, Mr Tung said that as the region that bore the brunt of the crisis, it was up to us to push for the true realisation of the new global financial architecture as pronounced by the G7 countries in 1998.