Dr. [Edwin] Feulner, ladies and gentlemen, it is a great pleasure for me to welcome you and your colleagues from the Heritage Foundation and the Wall Street Journal back to Hong Kong. It is especially gratifying to know that you come bearing glad tidings: that Hong Kong has once again emerged as the world's freest economy on your Index of Economic Freedom. This is an honor that has been bestowed on us since the inception of the Index seven years ago.
On behalf of the Special Administrative Region Government of Hong Kong, I would like to thank the authors of the Index for their continuing recognition and support. In doing so, I want to make it clear that we in turn recognize that it is an honor not lightly given. We also acknowledge that it carries with it the heavy responsibility of keeping the faith and leading by example. This I pledge Hong Kong to do. We are a small government with the big idea that the market knows best.
Over the past three years our region has been shaken by a financial earthquake that reached dangerous levels on the economic Richter scale. There have been those who cast doubts on Asia's future prospects. Others raised questions about Hong Kong's commitment to the free market principles and practices which have earned us the recognition I mentioned at the beginning of this speech.
Recovery in the region is by no means complete. The picture is somewhat patchy. There undoubtedly remain concerns about particular economies and, more generally, about their commitment to and compliance with the reforms that were required in the wake of the crisis. But on the upside, the remarkable recovery of the more solidly based economies such as Hong Kong have indicated once again the underlying strength and dynamism of the region.
In our own case, the evidence is there for all to see. From the depths of the negative economic growth we recorded--for the first time in history--in 1998-1999, Hong Kong has bounced back spectacularly with growth of 14.3 percent and 10.8 percent in the first and second quarters of this year. This has led us to revise our original growth forecast for the year 2000 from 5 percent to 8.5 percent. Our property sector has stabilized, unemployment is falling, tourist arrivals are once again reaching record levels, consumer confidence is returning, and there has been a watershed shift away from an over-dependence on property towards the New Economy. I believe we are seeing the beginnings of yet another new chapter in the ever-absorbing Hong Kong story.
All of this has been driven by the market, and not directed by the government. This is not to say that our administration has daydreamed its way through the crisis. We have tailored our economic and social policies to cope with the effects of the downturn in the short term and to provide the physical, intellectual, and cyber infrastructure that will be critical to our continuing success in the longer term.
We have done so by following what you may regard as the Heritage Foundation textbook, although I would venture to suggest that Hong Kong must have been a role model for your script as we have always regarded Adam Smith as one of the founding fathers of Hong Kong. Indeed, if you look at our constitutional document, the Basic Law, you will detect the invisible hand of our free market mentor. The Basic Law sets out in considerable detail the social and economic policies Hong Kong is obliged to follow as a Special Administrative Region of the People's Republic of China.
It outlines the parameters of our open-market, free-trade economy underpinned by the rule of law and an executive-led government accountable to a fully elected legislature. It even requires us to follow the principles of prudent fiscal management and balance our budget. What other economy has such a requirement enshrined in its constitution?
There is a fundamental truth about Hong Kong that I have pointed out before, but it bears repeating over and over again: We stick to free market economics not just because decades of experience and success have shown us what works. Our own constitution obliges us to maintain this course. You can be sure that we will continue to follow it religiously.
I believe that our experience since the Handover bears that out. Frankly, like many others in the region and elsewhere, we were caught off guard by the financial typhoon that roared through the region out of the collapse of the Thai baht just a day after our historic return to China on July 1, 1997. But once we had battened down the hatches--we have learned how to protect ourselves from typhoons in Hong Kong--we set about creating the conditions for sustainable recovery. Let me mention just a few initiatives:
- Decades of practicing prudent financial management, resulting in the accumulation of formidable fiscal and foreign exchange reserves, enabled us to vigorously pursue a US$30 billion program of rail and road infrastructure that will bring enormous benefits to the ever-growing population of the northwest New Territories and, at the same time, greatly enhance our existing sophisticated cross-boundary links with the Mainland.
- We undertook a major reform of our financial markets in remarkably short order, demutalizing and merging our stock and futures exchanges and their clearing houses and underpinning them with state-of-the-art e-trading technology.
- We created the atmospherics, dynamics, and cyber-structure for the business community to reposition Hong Kong in the New Global Economy with the establishment of a high-powered Commission on Innovation and Technology and setting up of a Cyberport and a Science Park. We view this as the provision of New Economy infrastructure, in the same way, for example, that we have provided the physical infrastructure for the Old Economy.
- We liberalized the telecommunications market to make it arguably the freest and cheapest in the world.
- We are radically reforming the education system to produce the creative talent that we will require to be competitive in the Information Age.
- We have cut back the bureaucracy and introduced 21st century reforms to produce a leaner, more cost-efficient civil service that already enjoys a reputation for being one of the world's best and most productive.
- We are continuing to expand our container port to ensure that, along with our new airport, we maintain our premier position as the communications hub of the Asia Pacific.
We have strategically repositioned our tourism sector, spearheaded by the Hong Kong Disneyland deal, to stay ahead of the competition as the premier tourist destination in Asia outside of the Mainland.
- We have launched a drive to clean up our air quality so that we match the standards of New York and London by the year 2005. We have made significant investments to improve our water quality. We are committed to the greening of Hong Kong, firstly, because our citizens deserve a better environment and, secondly, because we will lose our attraction as a base for our large international community if Hong Kong ceases to be a good place in which to live.
There is much more. I mention these only to give you a sense of the scope and scale of the strategic thinking behind our goal to turn Hong Kong into Asia's World City. We see it as our job to have a vision of the future and to provide the framework in which businessmen and entrepreneurs will see opportunity for growth and profit. This in turn will add value to our human capital, provide jobs and a higher standard of living and quality of life for our people.
We have always attracted investment and talent because people see Hong Kong as a place where opportunity knocks, where hard work and enterprise are rewarded. Hong Kong people do not envy success, they want to emulate it. We come from a culture where we don't depend on government. We would rather government stay out of our hair and stick to its essential tasks of providing the framework which enables free men and women to build a decent life for themselves and their families.
That does not mean that in an increasingly complex and global world government can be a passive bystander. Its first and overriding obligation is to protect and further the interests of the people it serves.
This is the context of our intervention in the stock market in the summer of 1998. Our stock and futures markets had become so distorted by calculated manipulation that they ceased to function properly. Our intervention was not a careless act of economic theological heresy; it was a judgement call made on the basis of some pretty stark options: see the markets cease to function and the currency and the economy collapse, or use the community's hard-earned savings to rescue them from catastrophe by getting the markets back on a level playing field. None of us lives in an ideal world, nor, more to the point, in an ideological vacuum.
I believe our subsequent program of disposal of the shares, in a way which follows the rhythm of the market rather than distorts it, is proof enough of our good faith in what was an exceptional situation which we hope never to see again.
The Heritage Foundation, the Wall Street Journal, and many others have followed closely and have been involved in the fortunes of Hong Kong over many years. The establishment of the Heritage Foundation office in Hong Kong in 1996 is a fine example of that, and so is the Asian Wall Street Journal, which has been headquartered in Hong Kong since the paper's inception back on 1976. We have all seen Hong Kong's position on the international radar screen wax and wane over the years, particularly in the sometimes tense and testy years leading up to the Handover in 1997. I believe we were all delighted that the transition was effected so smoothly. Indeed I think, it is true to say that even some of the more starry-eyed optimists were pleasantly surprised.
Now, almost three and a half years on, I think it is time to take stock and to ask ourselves if we need to adjust the prism through which we view Hong Kong. Let me make it clear that I welcome and encourage international interest in Hong Kong. It would be disastrous if we disappeared from the radar screen or generated nothing more than the occasional fretful blip.
What I am suggesting is that with Beijing having demonstrated its determination not to interfere with Hong Kong's high degree of autonomy, we should not allow ourselves to be spooked by every light bulb that pops, every floor-board that creaks or every faucet that leaks. I have in fact noticed that more and more Hong Kong issues are being seen for what they are--that is, local issues being debated and decided by local people.
That is as it should be. That is what enjoying a high degree of autonomy is all about. That is the freedom we enjoy under One Country, Two Systems. And it is up to Hong Kong people to protect those freedoms and that autonomy.
But there remains a tendency to judge some things that happen in Hong Kong in the context of China. I'm not suggesting we ignore that dimension, because it is a reality. But I would like to see Hong Kong issues placed more deeply in the framework of Hong Kong's autonomy. The differences that exist in our community on all kinds of issues from social provision to civil liberties to governance are, in my view, natural and entirely healthy. They should not cause anybody any alarm. This is what happens in a pluralistic society.
Ours is a free-wheeling and argumentative but law-abiding community with very firm ideas about how Hong Kong should be run. I am not fussed about that. I will just add this: It is crucial to our autonomy that we settle our arguments here in Hong Kong. Hong Kong people running Hong Kong means just that: Hong Kong people running Hong Kong here in Hong Kong.
This is part of the process of political maturity that has been developing here over a long period of time, in particular since the reversion of sovereignty in 1997 became a fact of life with the signing of the Sino-British Joint Declaration in 1984. I think if you look at some of the controversies that have arisen in Hong Kong since the Handover, relating to the rule of law and press and academic freedom, the record shows that they have been debated vigorously and passionately by a community which is highly sensitive and vigilant about any perceived weakening of its rights in these areas. To me, this sends a positive signal about the Hong Kong people's understanding of what a high degree of autonomy means for them.
We have many issues to face, many problems to solve. I mentioned a few of them a moment ago, including the question of governance. We will need to forge a Hong Kong consensus on these Hong Kong issues. They may not produce the same solutions that apply everywhere else, but Hong Kong is not quite like any other place. We need to find home-grown answers to matters which rest within our constitutional autonomy. We must not lose sight of the fact that Hong Kong has a unique geopolitical context, a unique relationship with its sovereign, and a constitution within which the people of the SAR can to a large extent develop as a community.
What is important to remember is that the foundations of the house of Hong Kong remain strong and dependable. Our past success has been predicated on the fact that we were a free society under the rule of law. We remain a free society under the rule of law. Fears that our legal system would be undermined, for example, by the referral to Beijing in the right of abode case have been unfounded. The system is as robust as ever and our judiciary jealously guards its independence. That is not just my view, but that of a number of most senior judges, including two from the Court of Final Appeal who were involved in the right of abode issue.