Measures taken to stabilise the currency board system and the futures and stock markets are catalysts for a quick recovery of the Hong Kong economy, Mr Donald Tong, the Director of the Hong Kong Economic and Trade Office of the Hong Kong Special Administrative Region (SAR) Government said today (October 14).

Speaking to bankers, businessmen and lawyers at a luncheon organised by the Royal Bank in Montreal Mr Tong said the recent actions taken by the SAR Government have had the support of the population and the business community in Hong Kong.

He pointed out that the incursion in the equity and futures markets in August was not a rash but a very carefully considered decision.

The intervention was aimed at maintaining the integrity of the linked exchange rate and to restore order to the markets. "Our action has not altered in any way our absolute commitment to our long-standing philosophy of free and open market and non-intervention."

Mr Tong told the audience that the manipulative attacks on the markets in August could have brought utter chaos and a loss of confidence in the Hong Kong dollar.

"We have generally been out of the markets since August 28. In September, we introduced a number of measures to strengthen the currency board arrangement, to provide certainty to the banking sector, boost liquidity in the interbank market, and dampen excessive interest rate volatility. We have succeeded in bringing stability and normality in the market place." Mr Tong said.

"There will also be even greater transparency in the system. As for securities and futures trading, we have put forward a programme to tighten up the discipline and stock market rules and regulations, especially with regard to short selling and borrowing shares, and the settling of positions.

"These measures which were warmly welcomed in Hong Kong, should enable us to better withstand cross-market manipulation and help restore a level playing field for investors."

To enable the territory's economy to recover at a quicker pace, the SAR Government has also introduced tax relief measures for employers and workers.

In addition, the Government will be spending C$47 billion over the next five years on infrastructure developments including railroads, highways, schools, residential developments, etc.. One of the projects that would start soon is the C$ 13 billion West Rail project which would connect Kowloon to the Northwest New Territories. A total of 14 contracts would be awarded by mid-1999 for this project alone.

"These would not just be business opportunities for Hong Kong companies but also for overseas firms including those from Canada. I can assure you that we practise a level playing field and will not show favouritism towards any firms including those from Hong Kong or China," Mr Tong said.

"Moreover, we are working on the development of value-added industries, in particular information technology (IT) and telecommunications. To establish Hong Kong as the pre-eminent hub of IT and telecommunications, we have recently announced a package of proposals to further open up the telecommunications market.

"We have also announced a range of proposals to liberalise the TV market in Hong Kong, including network sharing among existing cable TV network and telecommunications network; and opening up the pay TV market.

"We are also working on electronic commerce and plan to take the lead to deliver government services on-line or what we call the Electronic Service Delivery Scheme."

Mr Tong also pointed out to the audience that the Chief Executive, Mr Tung Chee Hwa has mapped out his long-term strategy for Hong Kong in his Policy Address of 7 October.

In addition to bolstering the established pillars of its economy such as the financial services sector, small and medium enterprises, tourism, and import and export, Mr. Tung aims to diversify Hong Kong's economy by creating conditions for growth in sectors with a high value-added element, in particular those industries involving use of high technology.

To achieve this, the SAR Government will support technological developments; build a critical mass of fine scientists, engineers, skilled technicians and venture capitalists; and encourage the development of a significant cluster of technology-based business.

In this connection, Mr Tong added, the SAR Government will establish, among other things, an Applied Science and Technology Research Institute, specialising in mid-stream research; and an Innovation and Technology Fund to stimulate collaboration among academic institutions and industry.

Mr. Tong said he is confident that Hong Kong would ride out the financial turmoil and the measures taken would enable Hong Kong to maintain competitiveness in the long run.

For further information please contact Chief Information Officer, Frank Chuan at telephone no. (416) 924-5544.