Identifier
Created
Classification
Origin
07HONGKONG2587
2007-10-10 10:42:00
CONFIDENTIAL//NOFORN
Consulate Hong Kong
Cable title:  

HONG KONG CHIEF EXECUTIVE'S POLICY ADDRESS:

Tags:  PREL PGOV PINR ECON EFIN SENV SOCI CH HK 
pdf how-to read a cable
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C O N F I D E N T I A L SECTION 01 OF 03 HONG KONG 002587 

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DEPARTMENT FOR EAP, EAP/CM
NSC FOR DENNIS WILDER, KURT TONG

E.O. 12958: DECL: 10/10/2032
TAGS: PREL PGOV PINR ECON EFIN SENV SOCI CH HK
SUBJECT: HONG KONG CHIEF EXECUTIVE'S POLICY ADDRESS:
SOMETHING FOR (ALMOST) EVERYONE

Classified By: E/P Chief Laurent Charbonnet; Reason 1.4 (d)

C O N F I D E N T I A L SECTION 01 OF 03 HONG KONG 002587

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NOFORN
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DEPARTMENT FOR EAP, EAP/CM
NSC FOR DENNIS WILDER, KURT TONG

E.O. 12958: DECL: 10/10/2032
TAGS: PREL PGOV PINR ECON EFIN SENV SOCI CH HK
SUBJECT: HONG KONG CHIEF EXECUTIVE'S POLICY ADDRESS:
SOMETHING FOR (ALMOST) EVERYONE

Classified By: E/P Chief Laurent Charbonnet; Reason 1.4 (d)


1. (C) Summary: In his third annual Policy Address on
October 10, Hong Kong Chief Executive (CE) Donald Tsang
touched on all the major issues of concern to the people of
Hong Kong. He described a concept of "progressive
development" to achieve three major goals: economic
development through infrastructure projects, community
development through revitalization, and promotion of social
harmony by helping people help themselves. Economic
development was the primary goal -- without economic
prosperity, "all visions are just empty talk." Development
also, however, should be "sustainable, balanced and
diversified" and include environmental protection and
cultural conservation. Tsang listed ten large-scale
infrastructure projects to generate "huge economic benefits;"
many of the plans would further enhance Hong Kong's physical
integration with the Pearl River Delta region of southern
China. He also described measures to reinforce Hong Kong's
status as a global financial center, including steps to
promote integration of the Hong Kong and Mainland financial
systems. Noting that not all Hong Kong residents shared
equally in its economic growth and development, Tsang listed
measures to provide avenues for upward mobility and enhance
the ability of low-income families to help themselves. To
assist less-poor residents, he promised to lower the salaries
and profits taxes. He said he would extend free education,
implement "small class teaching," and expand the
international school sector. As expected, Tsang did not
devote much attention to political reform issues, only noting
that he would "try my utmost to forge a consensus on the

implementation of universal suffrage . . . and strive to
secure the Central Authorities' trust and understanding for
its early implementation." End Summary.


2. (C) Comment: Tsang's focus on socio-economic issues of
concern to the Hong Kong public, such as air pollution and
education reform, together with his announcement of tax cuts
and other "goodies," were expected and politically prudent:
with district council elections scheduled for November, a
contentious Legislative Council (Legco) by-election in
December, and an enormous budget surplus, he could not pass
on an opportunity to distribute largess as broadly as
possible. As politicians and other commentators pick apart
the speech over the next few days, however, they undoubtedly
will find some fault with nearly every section. For example,
when one foreign diplomat attending the Hong Kong
Government's (HKG) advance briefing for the consular corps
asked who would not benefit from the new programs, Professor
Lau Siu Kai of the Central Policy Unit admitted that the
elderly and the working poor would gain the least; Lau said
he expected to see the latter group protest. When another
diplomat noted that the measures to address worsening air
pollution did not seem to reflect the public's urgent
concern, Lau resorted to the HKG's claim that Hong Kong
needed cooperation from across the border to improve air
quality. Finally, Tsang's relatively scant attention to
political reform also came as no surprise: although the
three-month public consultation period for the political
reform "green paper" coincidentally ended today, Lau noted
that the HKG now needed to analyze the various comments,
inform the central government in Beijing, and then "await
their feedback before taking the next step." End Comment.


3. (SBU) In the first Policy Address of his new term of
office, CE Tsang spent nearly two hours setting out a
"blueprint" for the next five years. He said he had "full
confidence" regarding Hong Kong's future because of strong
economic growth, low unemployment, and mild inflation since

2004. He observed that the "various ups and downs" of the
past ten years since Hong Kong's reversion to the PRC had
given the people of Hong Kong a stronger faith in the future.
Tsang also noted that, after ten years under the "one
country, two systems" framework, the "advantages are there
for all to see."

Theme: "Progressive Development"
--------------


4. (SBU) Tsang described a concept of "progressive
development" to achieve three major goals: economic
development through infrastructure projects, community
development through revitalization, and promotion of social
harmony by helping people help themselves. He said economic
development was the primary goal because, without economic
prosperity, "all visions are just empty talk." He
emphasized, however, that the development should be

HONG KONG 00002587 002 OF 003


"sustainable, balanced and diversified" and should include
environmental protection and cultural conservation. He also
said development should "bring about social harmony" by
facilitating social mobility, helping the poor, and creating
job opportunities.

Aggressive Infrastructure Construction Plan
--------------


5. (SBU) Over the next five years, Tsang said the HKG's newly
created Development Bureau would coordinate ten large-scale
infrastructure projects that would generate "huge economic
benefits" in the form of job creation, economic growth, and
improvement of the living environment. Many of the projects
would further Hong Kong's physical integration with Shenzhen
and other cities in the Pearl River Delta region of southern
China. Tsang estimated the annual "added value to our
economy" of the projects would be about HKD 100 billion (USD
13 billion),with creation of 250,000 new jobs. The list
includes projects within Hong Kong, such as new mass transit
rail lines and highways, development of the West Kowloon
Cultural District and the old Kai Tak airport site, and
creation of several "new development areas" to ease pressure
on already developed districts and address the growing demand
for land. There also are several proposals to improve
cross-border ties, including development of the "Lok Ma Chau
Loop" area along the Shenzhen border, the
Guangzhou-Shenzhen-Hong Kong express rail link, the Hong
Kong-Zhuhai-Macau Bridge, and a high-speed rail link between
the Hong Kong and Shenzhen airports

International Financial Hub and Integration with the Mainland
-------------- --------------


6. (SBU) Tsang said it was necessary for Hong Kong to
"reinforce our position as a global financial center" in
order to maintain economic growth and development. A major
part of this effort would be further integration of the Hong
Kong and Mainland financial systems through the "Qualified
Domestic Institutional Investors Scheme," a pilot program for
Mainland individuals to invest directly in Hong Kong
securities, expansion of Hong Kong's capability to handle PRC
renminbi-denominated transactions, and strengthening
cooperation with Mainland financial markets. Tsang also
noted that Hong Kong's inclusion in the PRC's Eleventh
Five-Year Plan and conclusion of the multi-phase Closer
Economic Partnership Arrangement (CEPA) had laid a "sound
foundation" for Hong Kong-Mainland economic cooperation.
Beyond the PRC, Tsang said Hong Kong would work to develop an
"Islamic Bond Market" and otherwise promote Hong Kong's
financial services to Islamic countries and regions.
Finally, Tsang said Hong Kong would continue to promote
itself as an international arbitration center.

Not Just Economic Development
--------------


7. (SBU) Tsang said his concept of "progressive development"
meant "overall progress rather than economic development
alone." The aim was to promote a "quality city and quality
life" by addressing cultural, social, and environmental needs
to achieve "sustainable, balanced and diversified
development." Under this rubric Tsang listed various
measures to address environmental pollution and to promote
conservation of cultural heritage, both of which have become
major sources of public discontent. Acknowledging that power
plant emissions constitute a major local source of air
pollution, Tsang said the HKG would finalize by year's end a
new regulatory regime linking the power companies' permitted
rate of return to achievement of emissions caps. He also
said the HKG would propose legislation requiring use of
low-sulfur diesel fuel by the end of 2007 and study various
other measures to improve air quality, encourage use of clean
technologies, improve waste management, expand park areas,
and lower development density. In the area of heritage
conservation, Tsang outlined policy proposals to require
"heritage impact assessments" for new public works projects
and to encourage "revitalization" of historic buildings.
Finally, Tsang said the HKG would introduce a Food Safety
Bill, establish comprehensive food safety standards, and
enact food labeling legislation.

"Caring Society"
--------------


8. (SBU) Tsang acknowledged that "the extent to which
different sectors of the Hong Kong community share the fruits

HONG KONG 00002587 003 OF 003


of prosperity varies." He said the HKG would take steps to
reduce "inter-generational poverty" by providing avenues for
upward mobility, principally in the form of expanded training
and retraining programs. This, he said, would enhance the
ability of low-income families to help themselves. To assist
less-poor Hong Kong residents, Tsang also promised to lower
the salaries and profits taxes. On the highly contentious
issue of a minimum wage, which Hong Kong currently lacks,
Tsang said he would pay close attention to the mid-term

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review of his "Wage Protection Movement," a voluntary and
largely unsuccessful program initiated in late 2006 to
encourage employers to raise wages for certain low-paid job
categories. Finally, Tsang described some new health care
and housing benefits for elderly and disadvantaged persons.

Education Reform
--------------


9. (SBU) With Hong Kong's low birth rate and long life
expectancy, Tsang said the HKG needed to "expedite the
development of human capital." To this end, he promised to
offer 12-year free education starting from the 2008-09 school
year (currently, Hong Kong provides nine years of free
education). Fulfilling a campaign pledge, Tsang said Hong
Kong would begin to implement "small class teaching" in
2009-10. As a "global metropolis," Tsang said Hong Kong also
needed to expand its international school sector, so the HKG
would offer new sites for international school construction
and introduce measures to attract more non-local students to
local tertiary institutions.

Democracy and Good Governance
--------------


10. (SBU) As expected, Tsang did not devote much time to
political reform issues, which are being considered through
the ongoing "green paper" process. He noted, however, that
he would "try my utmost to forge a consensus on the
implementation of universal suffrage . . . and strive to
secure the Central Authorities' trust and understanding for
its early implementation." Tsang also pledged to enhance the
role of the district councils and work closely with Legco on
formulation of new policies. On a rather patriotic note,
Tsang said he would continue to support the "one country, two

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systems" principle, promote the Basic Law, and promote
"national education" so the people of Hong Kong would have a
stronger sense of national and cultural identity.
Marut