*EPF515 05/16/2003
Text: U.S. Consul General Praises Hong Kong's Handling of SARS
(U.S. Consul General James Keith May 16 remarks) (3080)

The deadly disease SARS (Severe Acute Respiratory Syndrome) has hurt Hong Kong's economy, but city's response has been remarkable, says U.S. Consul General James R. Keith.

In a speech to the Hong Kong General Chamber of Commerce May 16, Keith said "Hong Kong has demonstrated impressive assets in the face of this public health crisis."

He said Hong Kong's health care workers "deserve tremendous thanks from the whole world for fighting so valiantly against SARS. We salute them."

Keith added that the United States "stands ready to help however we can, including by sharing our experience with infection control in hospitals."

The economic impact of the disease around the world has been serious, Keith acknowledged. But, he added, "The macroeconomic effects in Asia may not be severe if the spread of the disease can be controlled soon. Major Asian economies might suffer total losses amounting to less than 2% of total GDP."

According to Keith, "it will take the measured, professional judgment of health professionals to convince people that SARS is not a threat. This is not an evaluation that can be cajoled, negotiated, or demanded. Much will depend on the Hong Kong public health authorities' ability to effectively screen borders and account comprehensively for so-called 'sporadic' cases."

"But I take solace from the flexibility and entrepreneurship of the Hong Kong people," he added. Hong Kong, he said, "is not sitting on its hands. It is actively seeking solutions to real problems."

Keith said he believes that Hong Kong's trade prospects are good despite the impact of SARS and the threat of worldwide terrorist attacks.

"Hong Kong's current account surpluses are high, it enjoys a large net international investment position, it has no government debt, substantial fiscal reserves, and an excellent financial market infrastructure. Hong Kong has relied on strict adherence to the rule of law; the free flow of information, capital, and goods; and clean, efficient, non-interventionist government. So long as these fundamentals remain sound, there is every reason to look to the future with confidence," he said.

Following is the text of the May 16 speech in Hong Kong:

(begin text)

"Challenges and Changes in U.S.-Hong Kong Relations"
Remarks by U.S. Consul General James R. Keith
Hong Kong General Chamber of Commerce
Conrad Hotel
May 16, 2003

(As prepared for delivery)

I am grateful to the General Chamber for giving me a chance to be here with you today. Once again, the international community is facing a wide variety of serious challenges, and Hong Kong is, as usual, on the frontlines of many of them. Even so, Hong Kong's resilience and the advantages of its free market system should help it prosper in these difficult times.

Let's review where things stand. For those who watch such things, the Year of the Sheep got off to a rather ominous start. We had both war and pestilence in quick succession, and both dealt blows to Hong Kong's economy. Neither the SARS outbreak nor the conflict in Iraq has been fully resolved, though great progress has been made. SARS presents a severe challenge, but Hong Kong is working hard to overcome it. It has been said that experience is a hard teacher because she gives the test first, the lessons afterwards.

The end of the 20th and beginning of the 21st centuries have not been kind to Hong Kong and thus it has been tested, and is building up a portfolio of lessons since 1997. Its integration with China has been one of the ingredients of its success. Indeed, trade from China through Hong Kong has been crucial for Hong Kong's development as a prosperous, cosmopolitan city. And Hong Kong's economic relationship with the mainland has contributed to China's successful economic reforms. The two economies are helping each other as their interdependence grows.

SARS has intruded abruptly into this picture. Economic integration with the mainland has huge benefits, but it has become even more evident that there is risk to be managed as well. Hong Kong has demonstrated impressive assets in the face of this public health crisis, beating back a new disease that broke without warning from across the border. Hong Kong went first and the rest of the world learned from your experience. Hong Kong health authorities provided the public with a wealth of information about the outbreak and authoritative advice as to how to prevent spread of the disease, advice that was refined on a daily basis by productive dialogue with the World Health Organization (WHO). As all affected areas now know, more can and should be done around the world to improve both the "hardware" and the "software" of public health crisis management.

So we are all in this together. One of the first Hong Kong victims was a Chinese-American businessman who stayed at the Metropole Hotel. The U.S. Centers for Disease Control and Prevention (CDC) sent professionals to Hong Kong under the auspices of the WHO. Our health care workers supported Hong Kong's selfless doctors and nurses on the frontlines of the fight. We mourn with you the loss of your citizens to SARS, including nurses and doctors. The U.S. stands ready to help however we can, including by sharing our experience with infection control in hospitals. Hong Kong's health care workers deserve tremendous thanks from the whole world for fighting so valiantly against SARS. We salute them.

Looking ahead, we are encouraged by indications that the general picture is improving in Hong Kong. That is a hopeful and welcome sign, but we must remain vigilant, as the recent news out of Singapore highlights so poignantly. Our collective work on SARS is not yet over, and it may continue well into the future.

I am no cynic. One of America's most hardened journalists once said "a cynic is a man who, when he smells flowers, looks around for a coffin." There is no place in Hong Kong for that sort of defeatism. But we do have to be realistic. 2003 is a very challenging year. We know that the economic numbers are not good, and people are concerned about livelihood issues. The Hong Kong Tourism Board suggests that tourist arrivals fell 70% in April. Most hotels have occupancy rates in the single digits. At the airport, passenger traffic in April fell by 70% and flights were down 35%. Overall, economists forecasted Hong Kong's 2003 growth downward to 2% or less. No question, these are stark figures. And we ought to be realistic about the prospects on the mainland as well, a sobering thought since China has such remarkable influence on Hong Kong's economy.

The macroeconomic effects in Asia may not be severe if the spread of the disease can be controlled soon. Major Asian economies might suffer total losses amounting to less than 2% of total GDP. Travel, convention, entertainment, retail, and financial service sectors, as in Hong Kong, will be hardest hit. This year's Guangzhou trade fair booked a fraction of last year's orders, for example. Even a 2% hit might be too optimistic if the tourism sector takes longer to rebound. Long-term damage on the supply side will depend on how quickly the affected economies can restore business confidence. I know that people in this audience are anxious to do just that. My only comment is that it will take the measured, professional judgment of health professionals to convince people that SARS is not a threat. This is not an evaluation that can be cajoled, negotiated, or demanded. Much will depend on the Hong Kong public health authorities' ability to effectively screen borders and account comprehensively for so-called "sporadic" cases. This is a steep challenge, I know, and one that strikes at the heart of Hong Kong's economic vitality.

But I take solace from the flexibility and entrepreneurship of the Hong Kong people. To give just a few examples of this: at the end of April, Cheung Kong (Holdings) announced a $300 million loan guarantee fund to help its tenants rebound from the SARS retail slump. A leading property developer recruited 500 "anti-SARS ambassadors" for its commercial and shopping centers to restore public confidence. Towngas extended credit to 8,000 restaurant and hotel customers through July. The Hong Kong Jockey Club donated $500 million toward the establishment of a centralized disease control center to monitor Hong Kong and Southern China. So Hong Kong is not sitting on its hands. It is actively seeking solutions to real problems.

There are no guarantees about the way forward, of course. Warren Buffet said, "In the business world, the rearview mirror is always clearer than the windshield." Public confidence is one indicator as to what might loom ahead. Signs on the street suggest that Hong Kong people are getting on with their lives. SARS may be here for a while, but Hong Kong has the capacity to adapt to this new factor in every day life. Greater attention to public health will increase the quality of life in the long run, helping Hong Kong combat other diseases such as tuberculosis and dengue fever. As public hygiene improves, so will the lives of the Hong Kong people, and that will be a permanent change for the better.

Hong Kong must labor against the backdrop of continuing turbulence on the world scene, as this week's terrorism in Saudi Arabia makes clear. The war on terrorism is well begun, but we still have a long way to go. I won't dwell here on the political and human cost of the war in Iraq: Americans don't need to be reminded since we paid with our citizens' lives for freedom in Iraq. Looking at it from a global economic perspective, the relatively quick resolution of the conflict in Iraq should be good for the regional economy. Though the Coalition still has much work to do in the transition to Iraq's new government, the end of hostilities means increased stability in oil prices and the elimination of a major element of uncertainty in global markets. This is to say that we shouldn't lose sight of the war on terror. It will continue to weigh heavily on the minds of investors and traders the world over. Like SARS, terrorism is a fact of life for now.

Closer to Hong Kong, the U.S. is actively working with China and our allies in Asia to promote stability in the region and to resolve the North Korean nuclear situation. President Bush and South Korean President Roh reiterated this week their strong commitment to work for the complete, verifiable, and irreversible termination of North Korea's nuclear weapons program through peaceful means based on international cooperation. If Pyongyang were to address the international community's long-standing concerns, we and North Korea's neighbors might find ways to generate a more predictable, stable, and prosperous region and significantly improve the lives of the North Korean people. That is our goal. The DPRK's actions this week underline the need for patience and a long-term view, but we will persevere.

The war on terror and the SARS epidemic can't help but leave us with a sober view of global developments, but we can point to positive developments in U.S.-Hong Kong ties.

-- After years of negotiations, last fall we reached agreement to liberalize air services in ways that benefit both sides.

-- Hong Kong is participating in the Container Security Initiative, or CSI. The CSI team from U.S. Border Control and Protection arrived in Hong Kong last week and is already at work in support of Hong Kong Customs. Our goal is both safer and more efficient trade.

-- Law enforcement cooperation and counter-terrorism efforts are key to our mutually beneficial relations. Given Hong Kong's role as an international financial center, it has a special contribution to the international effort to deny financing to terrorists. The U.S. appreciates Hong Kong's leadership in this important area, including as a leader in the Financial Action Task Force.

-- The Hong Kong government is moving anti-terrorism legislation required under UN Security Council Resolution 1373. The bill was recently gazetted. The first reading will take place later this month. We support early passage of this legislation.

-- Hong Kong's strong, autonomous export control regime has allowed for continuing U.S. licensing of high technology exports to the separate customs territory of Hong Kong.

Our common efforts against terrorism and in pursuit of international criminals have a strong foundation. Hong Kong and the U.S. share basic values and principles. Some criticize Hong Kong's "live to work" culture, while Americans recognize something of ourselves in it: our own Puritan work ethic, our market-based economy, and the "melting pot" vibrancy of a multi-ethnic society. There is deep support in the U.S. for the values Hong Kong represents in Asia: open markets, free trade, and the rule of law.

It is on the basis of these shared values that the U.S. closely follows the debate on new legislation to implement Article 23 of the Basic Law. What can the international community contribute to this debate? First and foremost, we have underlined our abiding interest in as open and transparent a process as possible to ensure that all of the interested voices are heard. Our own experience is that the more transparent the process, the better the ultimate outcome.

In addition, we have an obligation to convey to the Hong Kong government and people our sense of the consequences of policy choices. For example, only Hong Kong can decide whether there must be an explicit reference to mainland law as part of the new legislation's provisions regarding proscription of social organizations that might be deemed national security threats. Where is the anchor of Hong Kong's jurisprudence? Is it in the long history and tradition of the rule of law in Hong Kong or is it in the emerging and as yet incomplete system of laws and regulations that is developing on the mainland? The answers to this question as the new law in Hong Kong emerges and is implemented will affect the degree to which Hong Kong can sustain the confidence of the international community, confidence not only in the rule of law in the Hong Kong SAR but also with regard to the vitality and sustainability of "one country, two systems."

The American people maintain a strong commitment to preserve the greatest possible degree of autonomy for Hong Kong. We want to see its continuing evolution as a model of free market capitalism and believe that in doing so it must take on another mandate arising from the Basic Law, that is the elaboration of Hong Kong's democratization in 2007 and beyond. What do we as outsiders look for in Hong Kong in the decades ahead to instill confidence and promote greater trade and investment? We look for a strong civil society, a well established and unfettered press, increased involvement of the people of Hong Kong from all walks of life in a more representative government, the preservation of an independent judiciary, and strong political leadership. "Laws alone cannot secure freedom of expression; in order that every man present his views without penalty there must be a spirit of tolerance in the entire population." That is a quote from Albert Einstein, but it seems more like common sense than rocket science. Toleration and unity are the hallmarks of a society that is stable and knows its own strengths. If that kind of unity can be sustained in the difficult area of political reform in Hong Kong it will go a long way to build confidence in the international community about Hong Kong's future.

So let us take stock: yes, SARS has seriously challenged Hong Kong. The terrorist attacks of September 11, 2001 and the Bali bombing hurt Asian tourism and trade. Hong Kong was vulnerable to SARS due to its very openness -- its close integration with China, its open borders, and its generally non-interventionist government. Unfortunately, SARS will be with us for the foreseeable future and the course of the disease on the mainland will impose significant burdens on Hong Kong's economy. We were buoyed by the cooperation we saw in Bangkok a few weeks ago at the ASEAN-PRC leaders' conference. More of the same will come with the APEC health ministers' conference, scheduled for July. We must learn to live with this new reality in much the same way we all have learned to live with the ongoing war against global terrorism.

I promised to end on a positive note, and here it is: Hong Kong's trade prospects are good, and sources of international instability have been and are being reduced. The situation in Iraq is less and less a global economic concern. The recent Beijing talks on North Korea hold promise. The U.S. commitment to Hong Kong remains strong, and the SARS outbreak has not undercut the fundamental basis for robust Hong Kong-U.S. trade. Hong Kong's current account surpluses are high, it enjoys a large net international investment position, it has no government debt, substantial fiscal reserves, and an excellent financial market infrastructure. Hong Kong has relied on strict adherence to the rule of law; the free flow of information, capital, and goods; and clean, efficient, non-interventionist government. So long as these fundamentals remain sound, there is every reason to look to the future with confidence.

Hong Kong has long been an example for the rest of China. Even though it is a city of just seven million people, it can play a pivotal role for all of Asia. Everyone knows there are more tough times ahead, but Hong Kong has seen this before. Hong Kong's unique history has created a culture that thrives on innovation and creativity. And I have seen over the course of the SARS crisis that Hong Kong citizens can unite impressively to confront formidable challenges. And to overcome them.

But, as famous American businessman Henry Ford said, "You can't build a reputation on what you are going to do." Now is the time for Hong Kong to take steps to strengthen the medical, social, political, and economic infrastructure necessary to succeed in this most competitive world. The United States stands ready to help in any way that we can.

(end text)

(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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