XN000022-1993-05-17 — Page 4

MONDAY, MAY 17, 1993

THIRDLY, THE THIRD REASON FOR OUR SUCCESS IS THAT WE HAVE PURSUED FREE MARKET ECONOMICS WITHIN THE FRAMEWORK OF THE RULE OF LAW. NOW, WHEN WE NEGOTIATED THE RESUMPTION OF CHINESE SOVEREIGNTY IN 1997, THE AGREEMENT WHICH BRITAIN AND CHINA PUT THEIR NAMES TO ATTEMPTED TO GUARANTEE BOTH THE FREE MARKET ECONOMY AND THE RULE OF LAW AND THE VALUES ASSOCIATED WITH IT FOR 50 YEARS BEYOND 1997. I TAKE EVERY WORD IN THAT AGREEMENT SERIOUSLY AND I THINK THAT HONG KONG WILL CONTINUE TO BE HUGELY SUCCESSFUL PROVIDED OTHERS TAKE IT SERIOUSLY TOO. THINK THAT THE CERTAINTY THAT THE RULE OF LAW PROVIDES, THE CERTAINTY THAT OUR VALUES AND WAY OF LIFE PROVIDE, IS AS IMPORTANT то OUR SUCCESS AS THE ASTONISHING SHANGHAINESE, CANTONESE ENTREPRENEURIALISM WHICH HAS FOLLOWED ADAM SMITH'S PRESCRIPTIONS WITH SO MUCH ELAN FOR THE LAST DECADES.

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WITH THOSE PROVISOS, HONG KONG WILL, IN MY JUDGMENT, PLAY THE SAME SORT OF ROLE IN RELATION TO THE OPENING UP OF THE CHINESE ECONOMY THAT NEW YORK PLAYED IN RELATION TO THE NORTH AMERICAN ECONOMIES A CENTURY AGO. WHAT IS HAPPENING IN CHINA IS PLAINLY ENORMOUSLY EXCITING, ENORMOUSLY IMPORTANT FOR THE WORLD, AND WITH THAT CONTINUING SUCCESS IN CHINA, I AM SURE HONG KONG WILL CONTINUE TO BE SUCCESSFUL TOO.

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PETER HUSTON (ECM GROUP TRADE PUBLISHERS }; MK PATTEN SPOKE ABOUT NOT BACKING LOSERS. IT SEEMS THAT HONG KONG, IN TECHNOLOGY TERMS, HADN'T REALLY BACKED ANY REAL WINNERS IF YOU COMPARE HONG KONG TO TAIWAN SINGAPORE WHO HAVE BACKED SOME WINNERS, EVEN IF THEY HAVE BACKED SOME LOSERS. DOES MR PATTEN THINK THAT MAYBE IN THE FUTURE HONG KONG CAN BACK SOME WINNERS AND PUT SOME MONEY IN MORE THAN JUST SUPPORT, ACTUALLY TO DEVELOP SOME HARD TECHNOLOGIES?

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GOVERNOR: LET ME REFINE THAT REMARK. WHAT I THINK I SHOULD HAVE SAID WAS THAT GOVERNMENTS ARE BAD AT PICKING WINNERS. CERTAINLY, IN MY EXPERIENCE IN WESTERN EUROPE MOST OF THE WINNERS PICKED BY GOVERNMENTS TURNED OUT TO BE PRETTY EXPENSIVE AND DIDN'T ALWAYS FINISH UP AT' THE FRONT OF THE FIELD. I DON'T THINK THAT HONG KONG CAN OR SHOULD BEHAVE IN JUST THE SAME WAY AS TAIWAN OR SINGAPORE. WE'VE MANAGED TO GO UP-MARKET TECHNOLOGICALLY, WE'VE MANAGED TO INCREASE OUR ADDED VALUE, WE'VE MANAGED TO KEEP OUR COMPETITIVE EDGE IN THE LAST FEW YEARS, WITHOUT GOVERNMENT INVOLVING ITSELF IN THE SORT OF PRO- ACTIVE INDUSTRIAL POLICY WHICH HAS BEEN TRIED, PERHAPS NECESSARILY, IN OTHER COMMUNITIES. AND HAS THAT BEEN UNSUCCESSFUL WELL, THERE WAS

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SOME OF YOU MAY HAVE SEEN IT - AN EXTREMELY INTERESTING SURVEY, A COMPARATIVE STUDY DONE BY MIT OF THE SINGAPORE AND HONG KONG ECONOMISTS WHICH COMPARED USE OF CAPITAL, USE OF LABOUR, IN HONG KONG AND SINGAPORE AND INDICATED HOW MUCH MORE SUCCESSFULLY WE HAD MANAGED OUR CAPITAL INVESTMENTS, HOW BIGGER OUR RETURN HAD BEEN, THAN WAS CASE IN SINGAPORE.

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I DON'T THINK THAT IT IS SENSIBLE FOR US TO PUT LARGE AMOUNT'S OF TAXPAYERS MONEY INTO A PRO-ACTIVE INDUSTRIAL POLICY BUT I DO THINK IT IS SENSIBLE FOR US TO GIVE GREATER ASSISTANCE TO APPLIED RESEARCH AND DEVELOPMENT. I THINK IT IS IMPORTANT AND VALUABLE FOR US TO GIVE THE SORT OF SUPPORT WHICH I MENTIONED EARLIER, TO SOME FORMS OF TECHNOLOGICAL DEVELOPMENT, FOR EXAMPLE ENVIRONMENTAL TECHNOLOGY. BUT I THINK WE CAN BEST SECURE OUR POSITION BY BEING AN UP-MARKET, HIGH VALUE-ADDED BUSINESS SERVICES, FINANCING,

DESIGN CENTRE, TELECOMMUNICATIONS CENTRE, FOR THE REGION I THINK THAT IS HOW WE WILL MANAGE TO INCREASE OUR ECONOMIC IMPORTANCE, NOT RY APING WHAT HAS BEEN PERHAPS A NECESSARY INDUSTRIAL. TOOL ELSEWHERE.

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/MANUEL MORALES