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Legislative Council (Legco) sitting on 15th January 2003
Speech by Eric Li Ka-cheung
Debate on the Policy Address 2003 (Vibrant Economy)

Madam President,

Economic integration - A solution easier said than done

The Policy Address presented by the Chief Executive this year is very different from those in previous years. It is more practical and less theoretical and abstract. In particular, I believe that of all the Policy Addresses presented by the Chief Executive, the Government's analysis this year of our financial and economic situation is the most objective and most realistic. In addition, the analysis is able to pinpoint the causes of our present problems and set the future of Hong Kong in a direction welcomed by many professionals in the industrial and commercial sectors. I sincerely hope that the Chief Executive can practise what he preaches and set a good example for Government officials of all ranks to work in real partnership with the professionals in the industrial and commercial sectors so that the Policy Agenda can be implemented with concerted efforts and the general public can, in the long run, enjoy the fruit of its success. Regarding the issue of financial deficit, I have stated my views many times, and the Policy Address, which shows a much better grasp of the actual situation now, echoes some of these views. In this speech, therefore, I will focus on the economy. As for the issue of public finance, I will wait till the details of the Budget are announced.

It is accurate and appropriately dashing of us to say that Hong Kong is geared to the needs of the world and enjoys the backing of the Mainland. But to capitalize on this advantage is a matter easier said than done. I would like to prescribe three doses of "political" Chinese medicine for our Government so that she could think more flexibly and with a broader vision. The first , a refreshing herbal potion, is "follow local practice". The second, a life-restoring tablet, is "be accommodating". The third, a vitality-enhancing supplement, is "Government and the People should all work together".

"Follow local practice" to enhance mutual understanding

It has been twenty years since the start of China's economic reform and the opening up of its markets. Hong Kong businessmen investing in the Mainland have, from the very beginning, learned to establish good relations with local Government bureaus, and they have acquired a wealth of practical experience and useful connections on the Mainland. In contrast, most Government officials in the SAR are only beginners. They are totally unfamiliar with the Mainland situation. After several years of preliminary contacts, both sides are now conducting bi-lateral co-operation at a level that goes beyond the mere discussion of political principles or exchange of views and concepts. We have reached the stage of implementation and this calls for the concerted effort of both Governments. Senior and middle-level officials of the SAR, and even those from the rank and file, must learn to familiarize themselves with the mode of operation on the Mainland and with its political culture. If officials from both sides only talk to one another in a bureaucratic manner rather than work hard at achieving mutual understanding and good relations, they will find it difficult to solve problems that are going to emerge from much more complicated issues later on. Urgent action is therefore required. The Administration should select high quality officials from various departments to undergo intensive training, both locally and on the Mainland. If possible, these officials, like their counterparts in other provinces on the Mainland, should be sent to attend courses in Communist Party schools as well, so that they can establish long-term relationships with Mainland officials of all ranks. Hong Kong businessmen familiar with the Mainland all know that Chinese people value interpersonal relationships very much. If officials from both sides get on well, things can be done with half the effort and twice the result.

After China's accession to WTO, its door is open wide for business, and even experienced Hong Kong businessmen are now facing new challenges. For a long time, Hong Kong businessmen investing in the Mainland were engaged mainly in export-oriented enterprises, i.e. enterprises that process and assemble materials and parts from foreign suppliers, as well as compensation trade. These enterprises operate on a comparatively simple model, and the governing principle is that the processed and assembled products for export must be commensurate in amount with the imported raw materials. Nowadays, however, markets for "domestic trade" can also be developed. Certainly there are business opportunities on the Mainland for our services industries, especially those in the public services sector such as accounting and medical services. But since these services industries are subject to government supervision, they will have to deal with more complicated problems if they are to expand into the Mainland. The junior Government officials of the SAR are not entirely in touch with the real business world in Hong Kong, even though they always pledge to protect local interests. And yet they are entrusted with the task of negotiating, in a spirit of mutual understanding and mutual give and take, the Closer Economic Partnership Arrangement (CEPA) with the Mainland. What an enormous challenge! How difficult such a task is!

Be accommodating to the Central Government and the Guangdong Provincial Government

Economic integration with the Pearl River Delta (PRD) is built on mutual cooperation and mutual benefits. Guangdong has been developing at breakneck speed in recent years and is closing the gap with Hong Kong. This has led to some positive competition between both cities and such competition is likely to persist for quite a while. The outcome will depend very much on the competitive edge and the strength of each city. The Policy Address has made clear the Government's position on the development of human resources: in the long run, nurturing talents and upgrading the quality of our people are the key to success. It is for this reason that I suggest even Government officials should undergo retraining.

Some people said that the Chief Executive's proposal to expedite economic integration with the PRD is "old hat", and "a belated spring". I must disagree. The strengthening of Hong Kong's economic integration with the PRD is an issue that involves the authorities of both the Central Government and the local government. If Hong Kong wishes to push ahead with this project, the approval of the Central Government and the support of the Guangdong Province must be sought. That's why we must "be accommodating". Hong Kong can certainly gain the backing of the Central Government if her decision is made in the overall interests of the country. By the same token, the project can only win the support of the Guangdong authorities if it brings substantial benefits to Guangdong. As for the industrial and commercial sectors in Hong Kong, the advantages of such integration lie in the further strengthening of the PRD region as a hinterland providing Hong Kong with manpower, resources, land and regional liaison networks support. This would pave the way for further and smoother expansion of economic activities further into the Mainland. Government's support and facilitation will have immediate positive effects on the industrial and commercial sectors, especially on local, and even overseas, SMEs with limited resources and manpower. The financial services sector, which has yet to explore the Mainland market, will also be benefited.

However, the Government should also attend to the interests of the more established enterprises in Hong Kong. They have expanded their businesses into the Mainland long ago. Naturally, they would think that economic integration does not have to be restricted to the PRD region. To cater for their needs, the Government should set the objectives of her policy of economic integration higher and expand her horizons to include regions of significant potentials for development.

A broad outline but no concrete measures

Madam President, the Chief Executive's Policy Address has given us a broad outline of the plan for economic integration with the PRD and for the economic development of Hong Kong. However, while the general direction is clear, effective and concrete measures for implementation are lacking. This is most disappointing! The pursuit of economic integration under the policy of "one country, two systems" is a new endeavor. To succeed, the Chief Executive, our Government officials and the business sector all have to tackle a number of questions head-on. What are the political and investment risks involved? What role does each person have to assume? How should one position oneself and cooperate and collaborate with others? In tackling these questions, it is worth bearing in mind the age-old dictum by a master of traditional Chinese dialectics: "When the will to power is in charge, the higher the ideals, the lower the results." (note 1)

"Government and the people should all work together" to push ahead with integration

Will the ministers conceal the unpleasant facts from the public and exaggerate their achievements? This is a question which troubles me, as the ministers did not have to make any formal pledges on this matter. Will they draw a clear line between themselves and the Chief Executive's Policy Address or shirk their responsibility if, due to the lack of details, the policy fails to win the consensus of the entire Government team in the course of its implementation? Though the Chief Executive claims that the Policy Address and the Policy Agenda are the outcome of a collective effort, where economic recovery is concerned, there are no clear measures for implementation, neither is there a special setup in charge of this task. It seems that each minister is involved in the policies listed in the Policy Address, but they enjoy considerable freedom to deviate from the direction of the Policy Address, or interpret it in their own way.

Economic integration with the PRD should not be a mere slogan or a flowery speech. It should be followed by detailed preparations and the establishment of a special setup for an effective, step-by-step realization of the goal. Only when the community can get some real benefits from this development will their confidence in Hong Kong's future be restored. I would further suggest that competent people should be invited to join this setup, which could take the form of, say, the Trade Development Council. The direct involvement of professionals from the industrial and commercial sectors, in particular, of people from SMEs, is especially timely. With their business know-how and good business networks on the Mainland, they could play the role of a navigator and provide some much needed tips on dealing with the Mainland for our relatively inexperienced Government officials.

It appears to me that the policies set out in the Address will be enforced by ministers under the leadership of the Chief Executive in a top-down manner. To achieve true and effective economic integration, however, we need more than a flash in the pan. A bottom-up approach should also be encouraged so that professionals from the industrial and commercial sectors as well as SMEs would all put their heads together for the betterment of Hong Kong. The Government should be more proactive in consulting the views of the public and in soliciting help from people of the right calibre so that feasible and practicable business models can be established. At the same time, the Government should seek to accommodate the interests of the Mainland so that the partnership would be mutually beneficial. In this way, we can pool our strengths and get to enjoy the sweet taste of success.

Madam President, it has been one year since China's accession to WTO and the remaining four years will pass "in the wink of an eye". This period of transition will be a crucial moment for economic integration between Hong Kong and the PRD as well as a great opportunity for Hong Kong to explore the new and enormous market on the Mainland. We should capitalize on our advantages, ride on the crest of the wave, and form a close partnership with the people of the Guangdong Province to build the third miracle of Hong Kong's economic development!

Note 1: Excerpted from chapter 58, Dao Te Jing, by Laozi.

     If a country is governed with tolerance,
     the people are comfortable and honest.
     If a country is governed with repression,
     the people are depressed and crafty.
     *When the will to power is in charge,
     the higher the ideals, the lower the results.
     Try to make people happy,
     and you lay the groundwork for misery.
     Try to make people moral,
     and you lay the groundwork for vice.
     Thus the Master is content,
     To serve as an example,
     And not to impose her will.
     She is pointed, but doesn't pierce.
     Straightforward, but supple.
     Radiant, but easy on the eyes.


Legislative Council (Legco) sitting on 15th January 2003

Speech by Eric Li Ka-cheung

Debate on the Policy Address 2003 (Enlightened People with a Rich Culture)

Madam President,

Abandon the "close-door policy" and open wide the door to education

In his Policy Address, the Chief Executive stressed the need to enhance the quality of our people. However, the emphasis is mainly on how to attract overseas talents to invest or work in Hong Kong. I agree that this concept is important and the policy timely. But I believe that developing our own local human resources is a long term policy that must be achieved not only by introducing talents and professionals into Hong Kong on an effective and ongoing basis, but also by strengthening and opening wide the local education system to help our future generations to adapt to an economy that is undergoing restructuring.

As I have already pointed out in the Q&A Session, tertiary education in Hong Kong must take immediate action to catch up with other countries. The close-door policy should be abandoned and the universities should open their doors wide to overseas students. The presence of a large number of overseas students will certainly help to bring vitality to the local tertiary education.

Higher education has become an important industry in foreign countries

According to statistics, tuition fee, miscellaneous school fees and the living expenses of overseas students studying in the US amount to over 12 billion US dollars in 2002. The US Department of Commerce has already listed higher education as the fifth largest industry in the US. Renowned universities in the US become even more prestigious with the enrolment of high quality students from overseas. Local US students can also enjoy the benefits of being exposed to the rich and diverse cultures of the world without the need to go and study abroad.

Meanwhile, China is one of the countries that have the largest number of students studying abroad. Each year, there are as many as 25,000 students from China studying abroad. According to a survey by UNESCO, by the end of 2000, there were 380,000 students from China studying in over 103 countries and locations around the world. Of these, 59,939 were studying in the US in the 2000-2001 academic year. Many universities and colleges in the US set up special desks to greet and welcome their overseas students.

How did Hong Kong, a close neighbour of Mainland China, respond to such a huge market? According to the University Grants Committee (UGC), the total number of non-local students in Hong Kong in the 2000-2001 academic year was 1,781. Though the majority was from the Mainland, the total only stood at 1,462. Why is the number so low? Is it because the standard of the universities in Hong Kong is not high enough? Certainly not. According to the Financial Times 2002 International MBA rankings in the UK, the Chinese University of Hong Kong once again ranked No. 1 in Asia, and the 20th worldwide. In the 2002 Economist Intelligence Unit MBA Ranking, the Hong Kong University of Science and Technology ranked the 80th in the world. In addition, HKUST topped the world again in the number of research articles published in the top five academic journals in accounting in the year 2001.

The concept of industry investment absent in local education policy

Let us study another set of statistics. The number of Hong Kong students studying abroad has started to go up again in recent years. According to the Education Department, the number of Hong Kong people studying in the US, Canada and Australia has risen by nearly 34% - from 11,259 in 1999 to 15,075 in 2001. Significantly, these are the three years when Hong Kong experienced severe deflation, when the predicament posed by negative assets worsened, and per capita income declined. Obviously, Hong Kong people are expressing their discontent with the education system by their action. And yet, every year our Government spent as much as HK$55.3 billion on education. From the point of view of investment in industry, therefore, this simple but staggering figure shows how completely lacking the concept of competitiveness is in education in Hong Kong. Indeed, where the market for the provision of international education services is concerned, Hong Kong has already lost a decisive battle.

Think creatively and stop being fatalistic

As English is used as the medium of instruction in local tertiary institutions, Hong Kong is well qualified to develop this new industry and win a share of the Asian market. Moreover, this would bring an end to the fatalistic mode of thinking about education in Hong Kong ‘that education cannot but be a major item of expenditure and a tremendous financial burden on the Government, and hence it is an investment for which no target rate of return can be set.' Developing this services industry would also help our students improve their academic competence, language proficiency and cross-cultural communication skills.

Going back to history, one could say that modern Chinese history is one that sought to make for foreign things serve China. The richness and profundity of Chinese culture is developed through the incorporation and assimilation of the essence of foreign cultures – a process can be dated all the way back to the Han and the Tang Dynasty. To be a strong and prosperous nation, China must learn from the advanced technologies and management skills of the West. English, as a language, is just a tool for communication. In this day and age of global economic integration, if Hong Kong is to maintain her competitive edge, she must, among other things, show an excellent command of English – the international language of business & commerce. What is more, Hong Kong, being a metropolitan city of China, must first liberate herself from the shackles of narrow nationalism. Only then could we highlight our advantage as a hub of Chinese and Western cultures. Only then could we pride ourselves on being an enlightened people with a rich culture.

Don't foxtrot over reforms , be proactive

Madam President, both the future of Hong Kong and the prospects of our younger generations hinge on our education policy, but the education reform in Hong Kong has been standing at a crossroads for many years. The Chief Executive said that we should revitalize our economy by capitalizing on our advantages. He has hit the nail right on the head. It is time for action now, not flowery words. To coordinate our efforts, we need a concrete education policy.

In my speech on vibrant economy, I said that in the long run, what enables us to win the economic competition is the upgrading of the quality of our people. In the process of competition, we need to think positive and be proactive. Right now, the tendency is to take "three steps forward and one step back" and foxtrot over the implementation of reforms. It is only when the locomotive of education reform regains its momentum and speeds ahead on a straight track that we can proclaim loud and clear: "We have done our best for our future generations!"

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