B. Seizing Opportunities to Expedite
5. Over the past six years,
the Hong Kong economy has been undergoing a difficult
process of restructuring. Restructuring has been particularly
painful and protracted for several important reasons.
First, we inherited serious and unresolved old problems
including a bubble economy, and a mismatch of human
resources leading to an inability to move quickly towards
a knowledge-based economy. Second, the sudden onset
of the Asian financial crisis pierced the bubble economy,
which led to a sharp drop in property prices, the evaporation
of considerable personal wealth and, for many people,
the problem of negative equity. The serious adverse
impact this had on consumer spending contributed to
continued deflation. Third, due to globalisation, neighbouring
economies have been growing and increasing their competitiveness.
Higher production and operating costs in Hong Kong have
seen our industries relocate elsewhere, leading to job
losses and reduced incomes. Fourth, the adverse economic
situation has affected public finances, causing a serious
fiscal deficit. If not dealt with properly, this will
undermine our financial markets. However, dealing with
it too hastily will seriously affect people's livelihood
and the momentum of economic recovery.
6. We have carefully evaluated the
challenges and opportunities posed by these changes,
and fully appreciated our own strengths and weaknesses.
What we have relied upon for past success is no longer
a sufficient guarantee for our long-term prosperity
and stability. Hong Kong must be far sighted in defining
its role in order to promote successful economic restructuring
7. In previous Policy Addresses, I
have explained my thoughts on economic development,
and established the strategic direction of 'leveraging
on the Mainland, engaging ourselves globally, capitalising
on our advantages, strengthening our core industries,
deploying new knowledge and new technologies and moving
up the value chain'. We are promoting Hong Kong as Asia's
world city, on par with the role that New York plays
in North America and London in Europe.
8. In order to achieve this objective,
we have, from a macro perspective, invested heavily
in education to raise the quality of our manpower. We
have attracted talented people to come here to work,
and strived to improve the living environment. We have
embarked on the road to high added-value by encouraging
new technologies. We have promoted competition, lowered
costs and supported innovation. We have worked hard
to preserve the rule of law, the various freedoms we
treasure, a level playing field, and the many other
advantages we presently enjoy. At the same time, seizing
upon the historic event of the handover, we have vigorously
promoted exchange and co-operation with the Mainland.
In the process, we will not only boost Hong Kong's economic
development but also make a greater contribution to
our country's modernisation.
9. Our strategic direction and positioning
has been supported by the community, investors and the
Central People's Government (CPG). Various policies
are being implemented and are producing results. Last
year's SARS attack caused a temporary setback to economic
growth, but the economy has since recovered strongly.