XN000022-1997-01-06 — Page 3

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In citing the telecommunications sector as an example, Mr Tsang noted that free enterprise, free access to and free application of latest technology transfer as well as deregulation and government encouragement of competition had together resulted not only in reduction in costs to consumers, but also in one of the best telecommunications systems in the world.

Commenting on the relevance of technology on the economic progress, Mr Tsang said that the industrial future of Hong Kong lay in our ability to use higher technology processes to produce higher value added products.

As a result of the globalisation process, Mr Tsang said that the idea of a vertically integrated manufacturing architecture wholly based in Hong Kong had become impractical and irrelevant.

"Increasingly we see that value chain in the production of goods being divided geographically based on the principle of comparative advantage.

"We have seen in the past fifteen years or so a major expansion of Hong Kong manufacturing base in the region." Mr Tsang added.

The expansion of the manufacturing base would not have been possible, according to Mr Tsang, had Hong Kong not been able to secure the necessary technology to manage a widening network of offshore production processes radiating from the base in Hong Kong.

While addressing recent comments on the social consequences of the structural change in our economy, Mr Tsang said "the line between manufacturing and services is getting very fine as they become strongly related to, and dependent on, on another."

"The increase in outward processing of our manufacturing industry has spurred the demand of services. And the upgrading of our services industries had enabled our manufacturing network to grow both in its footprint and output. A major link between them is technology."

In explaining the role of government in technological development, Mr Tsang cited the well known policy of "minimum intervention, maximum support", and said the government had put in much resources in education, training and had set up various funding schemes to facilitate applied industrial research.

He added that the Government had put in place a scheme to encourage collaborative efforts between Hong Kong and mainland firms and institutions. Two studies were in progress and these were designed to explore the opportunities of co- operation between Hong Kong and the Mainland in the fields of information technology and biotechnology.