October 19, 2008

The 2008-09 Policy Address

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Dear Erwin,

      As you will have heard through Linda from Selina, I've been busy this week with my annual Policy Address. I've found time for a short break, so I thought I'd send you a quick note about how things are going here in Hong Kong.

      The market turmoil of the past few weeks has been occupying much of our energies. The main thing we must do in the foreseeable future is to maintain confidence - not just in the integrity and resilience of our market, but also in the ability of the entire community to overcome this crisis.

      You've probably also heard about the tainted milk scare. This of course has caused great anxiety in the community, because it impacts directly on public health and the safety of the food we eat.

      Although we wouldn't normally link food safety and financial services, both of these crises show just how much globalisation is affecting our daily lives.

      And even though the world's markets are now in turmoil, we know that in the long term, globalisation will continue to link economies more closely than ever before.

      Financial flows, goods and services, manufacturing and food processing will continue to become even more intertwined and interdependent.

      This will continue to create important opportunities for economic growth. But it also presents challenges that governments everywhere will have to face - and they are especially significant challenges for Hong Kong.

      We have thrived because we are a small and totally open economy - and we will never move away from our commitment to free trade and open markets.

      The flip side, though, is that we will always be vulnerable to many and varied external shocks beyond our control.

      But as long as we know that, we can try to buttress and reinforce our systems to absorb the shocks that come our way. Decisive action in time of crisis, and planning for the future, are essential and must go hand-in-hand.

      These two crises - food and finance - have shown us that the role of government is also becoming more important and complex.

      When problems arise, we can't just deal with them in isolation. We need to co-operate and communicate closely with other governments and international organisations, as well as with our own community.

      So, the issues themselves result in the globalisation of experience and best practice - our collective pain can also be used for collective gain.

      The globalisation of information is another fact of life that has had a huge impact on governance and public expectations.

      Before the Internet and digitised telecom networks, we relied on media outlets to provide us with news and information about major global stories and events.

      Nowadays, there is near-instant access to information as soon as anything happens - which has given a whole new meaning to issue management and crisis control.

      E-mail, streaming video and SMS are the favoured sources of information for the younger generations – they trust what they hear from their peers more often than they do from established news media, or the government.

      This is another development that we need to deal with in formulating policy and reaching out to the public.

      Communication networks, risk management, and crisis control will all become more important elements of good governance.

      So too will our ability to plan for the future.

      The ageing population, the increasing wealth gap, environmental degradation and pollution are all issues facing many advanced economies around the world - including here in Hong Kong.

      If we don't start trying to deal with them now - to devise pragmatic and sustainable solutions - then we are compromising the future viability of our economy.

      There is no denying that Hong Kong has benefited enormously from globalisation - it has helped build our famous skyline and increased living standards considerably.

      It has also been the catalyst for a gradual shift in the focuses of society.

      Where once there was little discussion or concern about unfettered and breakneck economic development, now there is much greater concern about heritage protection and environmental conservation.

      Where once people gave little thought to politics or activism, now we have a flourishing civic society that actively engages the public and government on every conceivable issue.

      Where once Hong Kong society had a long-held aversion to market intervention by the government, now there is an acknowledgement that the market is not omnipotent and that sometimes the government does need to intervene to restore calm and stability.

      All of these issues require careful handling by the government working in tandem with the legislature and civic society. We need to be pragmatic and realistic, try to seek consensus, and work for achievable goals.

      At times of great uncertainty, it's more important than ever to keep calm and stick to our game plan for long-term development. If we have a goal in sight, it is easier to keep focused even when the shockwaves of the financial tsunami are buffeting us.

      At the same time we should try to see these challenges and crises under globalisation as opportunities to reform and strengthen our systems.

      Inevitably, there will be another crisis that starts in one market and spreads around the globe. What we’re doing now will not just help Hong Kong ride out this storm, it will help us deal with all the storms yet to come.

      As you know Erwin, we've all come through tough times before and I know in my heart we'll come through them again.

			Donald TSANG Yam-kuen, Chief Executive

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