The cost of doing business today in the Hong Kong Special Administrative Region (SAR) is much more attractive and cost effective than in the past year, the Director of the Hong Kong SAR Government in Canada, Mr Donald Tong, said today (October 2).

Speaking at a business seminar organised by Renison College of the Waterloo University in Ontario, Mr Tong said that in spite of the Asian financial turmoil which has affected the SAR, there is a silver lining in the dark cloud.

He pointed out that Hong Kong's economy is adjusting rapidly and efficiently due to the various initiatives of the SAR Government.

"Our inflation is now down to its lowest levels since 1986, the wages are softening and property prices and rentals have fallen substantially - all these indicate that the cost of doing business in Hong Kong is moderating," he said.

"We expect the economy will continue to adjust in the rest of the year and perhaps early next year. However, this will ultimately lead to the emergence of a much leaner and more competitive Hong Kong."

"Some companies, including Canadian firms, have been able to look beyond this short-term turbulence and take advantage of the opportunity to invest in the territory."

Mr Tong told his audience comprising businessmen, government officials and academia that although Hong Kong has been impacted by the turmoil, the SAR Government has introduced a series of measures to soften the hardship of the adjustment process.

These include investing C$47 billion in infrastructure developments over the next five years and establishing Hong Kong as the hub of information technology and telecommunications in the region.

On the infrastructure projects, Mr Tong said that only two weeks ago the Executive Council of the SAR Government authorised the construction of the territory's second railway which is estimated to cost C$12.4 billion.

Work on this project, to be known as West Rail, will start in the next few months, and will create more than 13,000 jobs in the next few years. By the middle of next year, a total of 14 civil contracts will be awarded.

Apart from the new railway, initial approval has been given for the construction of subway and railway extensions in several parts of the territory, building of new roads and bridges and housing projects.

Regarding IT and telecommunications, Mr Tong said the government has announced a range of proposals to liberalise the telecommunication and television markets.

"We are also working on the introduction of electronic commerce and the implementation of government services on-line to be called Electronic Service Delivery Scheme as soon as possible." He said this would mean good business opportunities for Canada which is a strong leader in IT/telecommunications.

On the intervention in stock and future markets recently, the Director emphasised that action was taken to maintain the integrity of the linked exchange rate and to restore order to the markets which were manipulated by speculators.

He said SAR Government would not depart from its longstanding policy of non-intervention and would not prop up the financial markets.

"It was not a rash decision. We are fully aware the government should not be a long-term player or a short-term player in market. Our aim was to halt the wave of manipulative attacks.

"We have achieved this. In early September, we announced a number of measures to strengthen the currency board arrangements, to provide certainty to the banking sector, boost liquidity in the interbank market, and dampen excessive interest volatility. There will also be greater transparency in the system.

"As for the securities and futures trading, we have put forward a programme to tighten up the discipline and order in the markets. The programme should enable us to better withstand cross-market manipulation and help restore a level playing field for our investors."

In conclusion, Mr Tong said that Hong Kong will ride out the storm, helped in part by China's expected economic growth of 8 per cent per year. "You will find that there is no better place than Hong Kong to tap the huge potential of what one day will be the world's largest market."

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