ENG-2003 — Page 98

THE ECONOMY

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Economic Policy

Under the 'one country, two systems' principle, the HKSAR shall continue to adopt economic, social and political systems distinct from those in the Mainland following reunification in July 1997. The Basic Law, as the constitutional law of the HKSAR, gives a firm protection to this principle. The HKSAR shall continue to uphold the rule of law, maintain an effective executive-led Government, sustain an efficient and clean Civil Service, foster free enterprise and free trade, render a sound financial system and a robust monetary regime, practise prudent public finance, and keep a simple and predictable tax system with low tax rate. This serves to provide a favourable overall business environment and helps instil confidence for foreign investors coming to Hong Kong.

The Government firmly believes that the market can allocate and utilise resources more effectively and has a greater capacity to foster creativity, provide economic impetus and create employment opportunities. Moreover, the Government is determined to enhance those areas of strength instrumental to upholding Hong Kong's competitiveness as a premier business hub in the region, as well as to remove obstacles to the economic growth process. The guiding principle is the 'market leads and government facilitates', as this ensures optimal resource usage and greater efficiency. Primarily it is market forces that drive the overall economy forward. The role of government is to create the best environment for business, and to facilitate the smooth functioning and promote the healthy development of the market. Throughout the past few years, the Government has taken proactive moves to reduce rigidities in the economy, redefine its role, and minimise bureaucratic 'red tape'.

Meanwhile, faced with the challenges posed by globalisation and closer integration with the Mainland, Hong Kong needs to restructure and re-position itself, in order to stay competitive and attain sustainable growth. Hong Kong by itself can hardly compete purely in cost terms. The strategy to enhance competitiveness is to go up the value chain through speeding up structural transformation to a knowledge-based economy, through pursuing education reform and population policy to amass the pool of talent, as well as through leveraging on the immense business opportunities in the Mainland. The vision is to build Hong Kong as Asia's world city, by consolidating its unique position in the region as well as reinforcing its role as a pivotal gateway to the Mainland.

Focusing on areas where Hong Kong has a clear comparative advantage is key in competing with the rest of the world. Financial services, logistics, tourism, and professional and producer services are the four high value added sectors in the economy in which Hong Kong possesses a competitive edge. The Government strives to maintain Hong Kong's competitiveness as an international financial centre, through streamlining the rules and procedures to attract more financial product issuers, through increasing the breadth and depth of the market, and through strengthening the infrastructure for the market. On the logistics industry, the Government has support measures including reinforcing facilities to expand sea transport and liberalising air rights to create a broader mass in air transport. On tourism, the Government, working closely with the trade, pursues a strategy that enhances the attractiveness of Hong Kong and entrenches its markets. As for producer and professional services, the Government continues to remove business barriers, streamline licensing procedures, and provide upgraded services for the business sector. CEPA is of much significance in enabling the various professional services to gain a better foothold in the Mainland economy.