Promoting New Growth

27. We must continue to consolidate our core industries. Judging from our experience of repeated exposure to the impact of external factors, we must also seek to broaden the base of our economy and consolidate our existing strengths to promote new areas of growth. This will require people from all sectors and enterprises to innovate and to branch out into new areas. The Government will actively provide the necessary support and co-ordination in respect of policy, infrastructure and software.

New Opportunities for Manufacturing

28. CEPA has brought new opportunities for industrial development in Hong Kong. As CEPA allows 273 items of Hong Kong products to be imported into the Mainland tariff free, new industries and high value-added production processes may be attracted to Hong Kong. We have an advantage in areas such as intellectual property protection, design and innovation, finance and marketing. Our products have long enjoyed the confidence of Mainland consumers. Of course, due to cost and other factors, a revival of manufacturing locally will not be easy. The key is to apply new technology and innovation to develop high value-added products. Since the signing of CEPA, many Mainland and foreign enterprises have explored the prospect of setting up factories in Hong Kong. Our own enterprises are exploring the location of high value-added production processes in Hong Kong and some traditional manufacturing industries now have the opportunity to re-launch locally. We particularly welcome the development of the more competitive, high-technology manufacturing industries in Hong Kong. We will make policy adjustments to facilitate as necessary.

New and High-tech Industries

29. A key to promoting economic restructuring is the introduction and application of new and advanced technologies to enhance Hong Kong's longterm competitiveness. This has always been our long-term view. The application of technologies to products, services, infrastructural building and processes can generate many business opportunities. Over the past few years, we have built facilities such as the Science Park and Cyberport. We have promoted research and development through the Research Grants Council, the Innovation and Technology Fund, the Applied Science and Technology Research Institute and the support given to various technology enterprises and 'incubator' projects. Of course, technological development cannot be achieved overnight. Our investment in this area is relatively limited and must necessarily concentrate on developing a few areas where we have the strength. Hong Kong has amassed a group of high quality researchers who are capable of pursuing innovation in areas such as integrated circuit design, photonics, wireless communications, digital media entertainment, applied nanotechnology, biomedicine and Chinese medicine. Local enterprises have made progress in the application of new and advanced technologies ¡V between 2001 and 2002, the total number of local organisations and enterprises engaged in research and development grew from 887 to 1 223, an increase of 38%. The number of R&D personnel employed by commerce and industry and spending on R&D also registered appreciable increases and this trend continued for 2003. We have made a good start and the Government will continue to support the application of new and advanced technologies, and promote the transition to a knowledge-based economy.

Creative Industries

30. For many decades, Hong Kong has been a place where the cultures of East and West meet. This is conducive to the development of creative industries, which have already established a solid foundation. For example, films, music, publishing, architecture, advertising, various types of design and digital entertainment have created their own markets overseas. Having regard to the needs of the respective industries, the Commerce, Industry and Technology Bureau and the Home Affairs Bureau will promote the development of creative industries, including their linkage with the resources and markets in the Mainland so that they can reach new heights. Following CEPA, local films can be released in the Mainland without import quota restrictions starting from this year. This provides an unprecedented opportunity for our film industry to prosper. We will continue to provide the necessary support.

Local Community Economy

31. Under the joint efforts of the Home Affairs Department and District Councils in recent years, many events and projects featuring unique district characteristics have achieved good results. Sai Kung is a typical example. Through beautification of the environment and promoting creative leisure activities, it has really lived up to its name as the 'Back Garden of Hong Kong'. The Computer Festival in Sham Shui Po, Tsuen Wan Jewellery and Goldsmith Square and other creative activities organised for young people have all been well received. There have been isolated cases where we may not have achieved our objectives, but overall, the local community economy has indeed strengthened social cohesion and generated economic benefits. Looking ahead, we will continue to facilitate such projects hand in hand with our District Councils.

Developing Education and Health Care Industries

32. As Asia's world city, Hong Kong should be where talents from around the world congregate. The Capital Investment Entrant Scheme has been well received and since its implementation last year, overseas Chinese and foreign nationals have applied to reside in Hong Kong. We will continue to improve our living conditions in such areas as environmental protection, education, recreation and culture, and promote high quality services to attract those who meet the criteria to settle here. Hong Kong's education, medical and health care services enjoy high professional standards. Apart from catering for local needs, they can be further developed into industries to serve people in the Mainland and elsewhere in Asia. We will study how our immigration and related policies may support such development.

International Asset Management

33. The bulk of the world's savings are generated within Asia. This is expected to be a long-term trend. Located in the heart of Asia, Hong Kong is well placed to further develop as an international financial services and asset management centre such as Switzerland. With the Mainland as our hinterland, we are working on providing Asia with high value-added services in fund management, corporate investment management, personal banking, insurance sales and various investment and savings instruments. We will work with the industry to create even more favourable conditions for these goals to be achieved.

Environmental Improvement

34. The SARS outbreak last year reminded all of us of the importance of good personal and environmental hygiene. The efforts of Team Clean have produced outstanding results, and various places in the city have become tidier than before. We attach special importance to building a high quality living environment in keeping with our status as Asia's world city. The efforts we have made to improve water and air quality have begun to deliver results. Compared with 1999, the number of hours during which air pollution levels at roadside air quality monitoring stations exceeded the Air Pollution Index dropped by 35% in 2003. Water quality in Victoria Harbour has also improved. The declining levels of bacteria have changed the living environment of marine life for the better. Protecting the environment is a longterm task. We will continue our efforts in this area.

35. The construction industry has always been important in Hong Kong. Our achievements in urban development have enjoyed a good reputation internationally. However, we have to admit that many areas in our city are showing signs of decay and there are many old buildings. The urban renewal process includes redevelopment, rehabilitation, revitalisation and preservation. Accelerating urban renewal and improving our urban landscape and environmental hygiene can provide the impetus for long-term sustainable development as well as job opportunities for the local construction industry. As this subject involves wide-ranging implications, we will consider various options, promote discussion in the community and put forward proposals.