If the Hong Kong SAR is to take its logical place as the driving force in an ever more integrated Pearl River Delta region -- and to be positively recognised in this role globally -- it will need to be both externally competitive and internally pro-competition. Being competitive in this context means ensuring the SAR's cost structures and skill levels ensure its businesses can compete internationally. Being pro-competition means ensuring all sectors of its economy are open to competition, relatively free of restrictive practices and barriers to entry are low. The former is, of course, in some ways, linked to the latter, because internal competition promotes overall competitiveness.

All too often nowadays when I travel overseas I am confronted by those who question Hong Kong's role and competitiveness in the immediate region and, sometimes our commitment to competition in our own market. In these situations, I am at least able to confirm your Chamber supports both by explaining we are active in promoting competitiveness (by urging wage restraint and lowering other costs of business) and competition (by drafting and promoting our own Competition Policy).

In respect to the latter, however, I was personally disappointed that the government did not respond positively to our recent suggestion that its COMPAG initiative (the Competition Policy Advisory Group) be expanded to include representatives from the business community. We believe strongly this would have given new impetus to this important group in promoting competition and a level playing field in the local market and in enhancing Hong Kong's competitive image regionally and globally.

The SAR clearly wants to play an ever more active role in Pearl River Delta integration and in promoting China to the world and the world to China -- the role of "Mr Inside, Mr Outside," as it has been described. If this is to be achieved, we believe these twin aspects of competitiveness and competition become even more important. Hong Kong is without doubt one of the most open and externally-orientated economies anywhere in the world, but more needs to be done to emphasise our commitment to the competitive environment.

In the meantime, Hong Kong's domestic economic situation remains quite weak and, at the time of writing, the gathering storm clouds on the world scene did not bode well for the immediate future, whether from the global, regional or local perspective. For the SAR, there was a glimmer of light evident in the government's most recent economic report for the second quarter of the year. It showed that the economy grew by a modest 0.5 per cent in the three months to June, reversing the 0.5 per cent decline in the first three months and ending three successive quarters of negative growth. This was about the best we could expect given the weak global situation.

Internationally, it would be foolish to expect that will assist the local economy in the near-term future. Global growth is slow and, with some notable exceptions (Mainland China being one of them), the outlook for global trade and investment expansion is not promising. It is certainly not being helped, either, by the current worrying situation, the ongoing anti-terrorism campaign, the prospect of further action against Iraq and various regional conflicts. Hong Kong cannot expect to be immune to the impact of these developments.

Domestically, the SAR faces a series of difficulties, some, but not all of them, stemming from the weaker economic growth we have experienced in recent years. Record unemployment, weak domestic demand and investment, a lacklustre property market, a worsening government fiscal situation and a generally low level of confidence are apparent enough. The new "ministerial" system of government is also going through its "settling in" phase.

Because of the implementation of this new accountability system for principal government officials, this year's Policy Address by the Chief Executive has been postponed from its normal time in October to January next year. The Budget statement will still be delivered in early March. As a result of this change in timing for the Policy Address, the Chamber is now in the process of preparing both its Policy Address letter and its detailed Budget submission.