File Ref : TIBCR/21/08/4 V (99)

Purpose

This paper informs Members of the outcome of the first meeting of the Chief Executive's Council of International Advisers (the Council).

Background

2. In his 1998 Policy Address, the Chief Executive announced the establishment of the Council to reinforce Hong Kong's links with the international community. The main function of the Council is to advise the Chief Executive, from the international perspective, on strategic issues pertinent to the long-term development of Hong Kong. In particular, the Council advises on -

1. how global and regional development trends might affect Hong Kong's long-term development;
   
   
2. how the international business community perceives Hong Kong's plans and programmes of activities; and
   
   
3. what investments Hong Kong would need to make in order to enhance its role as a world-class commercial and financial centre, and as a dynamic Special Administrative Region of China under the concept of "one country, two systems".

3. The Council is chaired by the Chief Executive and comprises distinguished international business and corporate leaders from Europe, North America and Japan. The Chief Secretary for Administration, the Financial Secretary, the Secretary for Trade and Industry and the Head of the Central Policy Unit are ex-officio members. A list of the members is at Annex. The Council is serviced by the Trade and Industry Bureau.

4. The Council is expected to meet at least once a year.

First Meeting of the Council

5. The Council held its first meeting on 20 January 1999. The following subjects were discussed at the meeting -

1. Asia's adjustment to the financial turmoil;
   
   
2. improving Hong Kong's competitiveness; and
   
   
3. the long-term development strategy for Hong Kong.

Financial turmoil

6. The Council advised that the economic outlook for our major markets, namely the US and Europe, would remain restrained in 1999. As for Japan, members hoped that the economic packages recently introduced by the Japanese Government would have a positive impact. The Council was not overly optimistic about a quick recovery of Asia, including Hong Kong. However, members shared a positive view on Asia's developments over the long term having regard to its basic strength.

7. The Council discussed the impact of short-term international capital flow on Asian economies and the need for a stable environment to conduct international business. The Government took the opportunity to brief the Council on Hong Kong's experience in dealing with the financial turmoil, in particular the stock market intervention conducted last August.

8. Members recognised the need for a new international financial architecture and the relevance of Hong Kong's experience in its design. The Council also agreed to the importance of Hong Kong upholding the dollar link to maintain economic confidence and stability.

Hong Kong's competitiveness

9. The Council noted that Hong Kong was undergoing rapid downward adjustment in its cost structure and highlighted the need for further adjustment in order for it to stay ahead in the region. Members realised that the adjustment process was painful but believed that it was necessary for Hong Kong to remain competitive in the long run. In addition, they advised that Hong Kong must improve further its efficiency in order to expedite the adjustment process.

10. Members stressed the need for Hong Kong to uphold a free market and a level playing field for both local and overseas investors.

11. The Council advised that Hong Kong must upgrade the quality of its environment including living conditions in order to improve Hong Kong's overall competitiveness.

Strategy for Hong Kong's future development

12. Members recognised the vast opportunities that were open to Hong Kong as a result of the economic growth on the Mainland of China and increasing co-operation between the two places. They also noted Hong Kong's determination to maintain and enhance its role as an international financial centre and a premier international city in Asia.

13. To sustain Hong Kong's long-term development, the Council advised that Hong Kong should build on its existing strengths, including -

1. ensuring adequate supervision of the financial markets;
   
   
2. enlarging the base of attraction for tourists, particularly in developing new recreational and cultural facilities; and
   
   
3. establishing and enhancing the quality of its services and products through more value-added efforts and Hong Kong-brand building in the international market.

14. Members shared Hong Kong's vision for expanding the base of its economy, particularly in the areas of innovation and technology. These included information technology, telecommunications and commercialisation of Chinese medicine. Members advised that Hong Kong must develop excellence in education and attract outside expertise to realise this vision.

15. Finally, members advised that all the above efforts must be coupled with intensive publicity efforts by the Government in Hong Kong's major overseas markets in order to project Hong Kong's positive image forcefully. Follow-up

16. The Government will reflect further on the recommendations of the Council, which are mostly broad and strategic in nature, and take them into account in policy formulation and implementation. Relevant bureaux will follow up on specific proposals made at the meeting.


Trade and Industry Bureau
February 1999

Annex