Measures taken by the Hong Kong Special Administrative Region Government (SAR) to recover from the economic turmoil will also pave the way for the establishment of the territory as the regional hub of innovation and technology, the Director of the Hong Kong Economic and Trade Office in Canada, Mr Donald Tong, said today (Wednesday).

Speaking at a breakfast seminar in Montreal, which was attended by government officials, industrialists, bankers and business people, Mr Tong said the SAR Government is resolutely committed to invest heavily in creating more jobs and at the same time train and build a pool of talented workforce in high-tech and high-valued added industries.

He pointed out that 1998 was the worst year in Hong Kong's economic history because of the problems created by the Asian economic crisis, resulting in significant losses in property and stock prices, contraction of the Hong Kong economy by around 5%, and a high unemployment rate of 5.8%.

"We know too well that these are the heavy prices that we have to pay for keeping the US-HK dollar peg. However, these economic adjustments have helped bring down the cost of doing business in Hong Kong. These are certainly a very welcome sign to overseas investors who previously avoided Hong Kong because of the high operating cost," Mr Tong said.

Mr Tong said 1999 would remain a difficult year given the fact that the territory's recovery depended on external factors, in particular Japan's economic performance. However, there are some positive signs recently e.g. the property and stock markets have stabilized, the interest rate has been cut by several times, and increasing number of visitors are coming to Hong Kong.

"Our official economic forecast for this year's growth will only be available in March, but we note that two reputable organisations have come up with a positive assessment. Both the International Monetary Fund and the OECD forecast that Hong Kong's economy will show signs of recovery in the second half of 1999."

Mr Tong also cited a number of reasons why Hong Kong is poised to recover from the economic downturn. These include:

• Investing C$50 billion in the next five years on education, especially in primary education and language training to ensure its population are well educated
• Spending C$47 billion over the next four years between now and 2002 in infrastructure projects such as a new railway, highways, reclamation, new housing estates
• Diversifying its economy by investing heavily in the development and application of technology and innovation in all industrial and service sectors, with particular emphasis in information technology and telecommunications

"Preparation for the construction of our science park is underway and on completion both local and overseas technology based companies can build their own technological research centres or operations.

"Montreal is particularly strong in innovation and technology and we believe there are lots of business opportunities between Montreal and Hong Kong."

Turning to recent rumours on Renminbi, Mr Tong repeated the assurances given by the Chinese leadership not to devalue Renminbi, adding that the devaluation of the yuan will trigger another round of devaluation of currencies in the region.

"Let's not forget that China also has the second largest foreign reserves in the world -US$145 billion and healthy current account surplus and foreign direct investment in 1998. The strong balance of payment position will lend support to a stable Renminbi exchange rate.

"Chinese products remain very competitive as the cost of production in China is still way below that of its neighbouring economies which have devalued their currencies.

"Under these circumstances, we do not see any reasons why Renminbi needs to be devalued."

During Mr Tong's two-day visit to Montreal, he has met with influential business and community leaders, including Mr Jacques Girard, President and General Manager of Montreal International, a leading business organisation, and the city's Mayor Pierre Bourque.

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