"A free market economy does not mean an economy completely free from regulation. It means an economy in which the Government knows its place.
"Small government should not be made an excuse for passive government," Sir Hamish added.
said.
There are tasks and responsibilities which only a government can perform, he
"It is the Government which must provide the bulk of our social and economic infrastructure, the essential framework within which the private sector can work its wealth-creating magic.
"The Government must provide the leadership necessary to create this framework, and we have an obligation to do so as efficiently as possible, but in partnership with the private sector where that makes sense."
Sir Hamish said people were Hong Kong's greatest resource.
Education remains the largest single component of the Government's recurrent budget, he added.
"We are reducing class sizes, improving student/teacher ratios and upgrading the training and qualifications of teachers.
"Institutions funded by the University Grants Committee now offer 57,000 degree places and over 16,000 sub-degree places," he said.
Next year, the Vocational Training Council will spend $1.4 billion on training over 43,000 full-time and over 66,000 part-time students.
The Employee Retraining Board will have provided retraining for over 50,000 by the end of 1995-96.
Noting that wealth was created best in a safe city with social stability, Sir Hamish said that the Government was investing heavily in improving access to the courts and speeding up legal proceedings.
Investment in the physical infrastructure is also vital, he added.