Few would disagree that free and open competition keeps prices down and promotes operational efficiency. This is readily apparent to anyone who does business in Hong Kong. But what about operational standards? Does competition-driven self-regulation work in promoting higher standards?
It does in Hong Kong, where only the strong survive. A case in point: Hong Kong adopted the new international capital adequacy requirement for banks at the end of 1989 three years ahead of the official Basle Agreement deadline.
In fact, at the time of implementing the new ratio, the aggregate capital adequacy ratio of locally incorporated institutions stood above 12 percent half as much again as the ratio stipulated by the Basle Agreement.
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In essence, Hong Kong's early adoption of the new requirement more-or-less a formality. But the intent was to send a message to the international business community reinforcing the Territory's image as a reliable global financial centre.
The same philosophy is behind the Territory's on-going efforts to strengthen the framework for regulation and self- regulation. Since the 1987 world stock market crash, Hong Kong has taken a long, hard look at its weaknesses and corrected them with a thoroughness few other markets even now can match.
Of course, there is always work to do. The closure of the Bank of Credit & Commerce International had knock-on effects all around the world. The challenge for Hong Kong now is to make sure we learn the right lessons. The aim as always remains to underscore Hong Kong's reliability and efficiency as international financial centre.
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But becoming a strong international financial centre takes more than creating a free yet firm regulatory environment. Το attract investors, institutions and clients, you need that "critical mass" of financial skills and entrepreneurial talent which breeds new ideas and new opportunities and fosters creative solutions to old and new problems.
As regards entrepreneurial talent, Hong Kong is second to none. Probably nowhere else in the world will you find more entrepreneurs per square foot than along Des Voeux Road Central, the heart of the Territory's business and financial district.
Smith New Court plc Conference
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