*EPF408 12/11/2003
Text: Keith Urges Hong Kong to "Invest in Its Future"
(U.S. Consul General's Dec. 11 remarks in Hong Kong) (3740)

"If Hong Kong wants the rest of the world to invest in its future, it must be prepared to do so as well," says the U.S. Consul General to Hong Kong James R. Keith.

Speaking to members of the American Chamber of Commerce and the Asia Society in Hong Kong December 11, Keith said that the United States wants to see "a stable, prosperous, and successful Hong Kong, and it seems self-evident that continuing progress on constitutional development is an important contribution toward that outcome."

According to Keith, "the most salient point in support of Hong Kong's recent resurgence of confidence in the future is the remarkable demonstration on July 1 [against proposed national security legislation] and its aftermath."

Hong Kong's government "has listened to the people, and in a commendable display of humility and respect for its own citizens the government realigned its course," he said. "National security legislation has been withdrawn pending more extensive consultation with the Hong Kong people. The government organized a new team and a new agenda to advance fundamental objectives, including a ... [discussion of] Hong Kong's future role in the world, in Asia, and with and in mainland China."

U.S. ties with Hong run deep, Keith noted. Some 45,000 American citizens live in Hong Kong, and 1,000 or more American firms have offices there. U.S. direct investment in Hong Kong totaled almost $29.4 billion by the end of 2001, making the United States one of Hong Kong's largest investors. Hong Kong is the 14th largest market for American exports and America's 16th largest overall trading partner.

Keith praised Hong Kong's "pioneering participation" in the U.S. Container Security Initiative to monitor the shipment of goods in an effort to combat terrorism. He noted that Hong Kong has also been "an important partner" in the fight against money laundering and the financing of terrorism.

"Hong Kong has developed a strong anti-laundering regime," Keith said, adding that Hong Kong passed the United Nations Anti-Terrorism Measures Ordinance last year criminalizing the supply of funds to terrorists, and that it continues actively to search for terrorist assets using United Nations lists.

"As Financial Action Task Force (FATF) President in 2002, Hong Kong worked energetically to build international support for effective measures to impede terrorist financing," Keith said. "This is an important area where Hong Kong continues to show leadership."

Following is the text of Keith's remarks:

(begin text)

"Investing in Hong Kong's Future"
Remarks by U.S. Consul General James R. Keith
AmCham/Asia Society Luncheon
Conrad Hotel, Hong Kong
December 11, 2003

(As prepared for delivery)

As I recall the early days after my arrival, Hong Kong's economic future in the face of near-overwhelming challenges from the mainland was virtually the sole topic of discussion at speeches or seminars. That subject was all but forgotten as the prospect of new national security legislation became the priority topic in both public and private debate. Then that, too, disappeared from view as the attention of every level of Hong Kong society was captivated by the SARS epidemic. Perhaps that was one period when we were altogether too able to focus on the present, but we quickly shifted attention to the future once again as SARS receded and the prospect of passage of new national security legislation loomed large through the spring and summer of this year.

The people in Hong Kong deserve high praise for their conduct on July 1. They spoke for more representative, more effective, and more decisive government and did so in the form of an orderly, patient, respectful, and narrowly focused argument for the people's priorities, squarely within the overall framework of the "one country, two systems" formula for Hong Kong's post-1997 development. The wisdom and maturity of the people's call for better government was unmistakable, and the world took note. I should add a personal note of respect for the disciplined services in Hong Kong. The police deserve credit for handling professionally the unexpected numbers of Hong Kong citizens on the streets of Central and Wanchai on July 1. District Council elections on November 23, featuring a record turnout of Hong Kong voters, further enhanced the Hong Kong people's reputation and underlined the productive role of participatory democracy in the SAR.

In many respects the Hong Kong people have achieved what they asked for on July 1. From the perspective of an outside observer the Hong Kong government appears to be listening and responding to the people's stated concerns, and as a result the popular mood in Hong Kong is as good as it has been at any time since I arrived last year. There may be many contributing factors to the new-found confidence and optimism evident in Hong Kong. The U.S. economic recovery is strengthening, which is clearly of direct benefit to the Hong Kong economy. Economic growth in the mainland continues apace, and Japan's economy, too, shows vital signs that have not been easy to detect in recent years. The government is seeking to take advantage of these more favorable external factors with its establishment of the Closer Economic Partnership Arrangement and other steps to make the SAR a more attractive and profitable tourism destination. And Hong Kong's own economy seems to have pulled out of recession and shows signs of gathering strength. But I would argue that more than any of these factors, the most salient point in support of Hong Kong's recent resurgence of confidence in the future is the remarkable demonstration on July 1 and its aftermath.

The government has listened to the people, and in a commendable display of humility and respect for its own citizens the government realigned its course. National security legislation has been withdrawn pending more extensive consultation with the Hong Kong people. The government organized a new team and a new agenda to advance fundamental objectives, including a return to that previously ubiquitous discussion, namely Hong Kong's future role in the world, in Asia, and with and in mainland China. So it is back to the future for Hong Kong once again.

U.S. Supports Hong Kong's Success

Let me state this as plainly as possible. The United States would like to see Hong Kong succeed. We want to see a stable, prosperous, and successful Hong Kong, and it seems self-evident that continuing progress on constitutional development is an important contribution toward that outcome. Why do we as Americans care, you might ask? Isn't this the purview only of Hong Kong and its sovereign government in Beijing?

There are two reasons: U.S. national interests and our history of friendship with the Hong Kong people. There are 45,000 or more American citizens in Hong Kong, and 1,000 or more American firms. We have extensive economic and commercial ties. U.S. direct investment in Hong Kong totaled almost $29.4 billion by year-end 2001, making the United States one of Hong Kong's largest investors. We're the second largest market for Hong Kong exports and Hong Kong is the 14th largest market for American exports and our 16th largest overall trading partner. In food and agricultural products, Hong Kong is our eighth largest trading partner. Port calls by U.S. ships allow our soldiers, sailors, airmen, and Marines to enjoy rest and recreation. At the same time, over eight thousand Hong Kong students study at U.S. universities. All of this says a lot about a city of seven million people, and underpins our avowed national interest in Hong Kong's maintenance of a high degree of autonomy under the "one country, two systems" formula as well as Hong Kong's continued prosperity. We have global, regional, and bilateral reasons for hoping for Hong Kong's continued success.

Convergent Global Interests

Hong Kong's pioneering participation in the U.S. Container Security Initiative points to our shared conviction that the global trading system is vulnerable to terrorist threat and therefore we all need to work together to counter and ultimately eliminate that threat. And Hong Kong has unique value to add to the effort to prevent terrorists from financing their operations, either through money laundering within legitimate financial networks or by other means. The United States and Hong Kong share a desire to manage other threatening aspects of globalization, including the potential for epidemics to spread with frightening speed. We've all focused on SARS, for good reason, but our health professionals in the United States are perhaps equally concerned about the potential for the next influenza epidemic to spread from this region to the rest of the world more quickly than SARS did. That is why our Department of Health and Human Services is working with Hong Kong to advance public health cooperation, including with regard to the development of a new institution in Hong Kong focused on controlling the spread of infectious diseases.

Of course, our collaboration in areas of global interest is not solely retrospective. Looking to the future, one of the world's top priorities has to be trade liberalization. China alone seeks to lift 600 million people out of poverty. There are hundreds of millions more in Asia and beyond, and their best hope is the expansion of economic growth that will attend further liberalization of global trade. Hong Kong has been a world leader, not only at the recent ministerial in Cancun but throughout the Doha Round of global talks. We look forward to continued close collaboration with Hong Kong to advance the Doha Round to the benefit of scores of millions of people the world over. It is emblematic of Hong Kong's commitment to a global and regional leadership role that it has committed to host the next WTO ministerial.

Regional Cooperation

We work together in Asia on every issue of priority to our societies, including security, health and medical care, education, tourism, and the like. Our common efforts are making the region more prosperous, more stable, and more responsive to the daily needs of Asians. Hong Kong and the U.S. work together within APEC on numerous important issues. Over the past few years, one of our top priorities has been to enhance counter-terrorism cooperation within the APEC region. To that end, in August 2003, Hong Kong organized and hosted a major symposium on 100% baggage screening with the goal of improving the ability of every APEC economy to provide secure and safe maritime and air navigation. Hong Kong and other APEC Leaders, meeting in Bangkok in October, agreed on a Health Security Initiative to protect the public against disease outbreaks and critical threats such as bio-terrorism.

Both Hong Kong and the United States are active members of the Asian Development Bank. In addition to its regular shareholder contributions, Hong Kong has also contributed $36.5 million to the ADB's Asian Development Fund. Hong Kong has also been an important partner in the fight against money laundering and the financing of terrorism. Hong Kong has developed a strong anti-laundering regime. Last year, Hong Kong passed the United Nations Anti-Terrorism Measures Ordinance that criminalizes the supply of funds to terrorists. Hong Kong continues actively to search for terrorist assets using United Nations lists. As Financial Action Task Force (FATF) President in 2002, Hong Kong worked energetically to build international support for effective measures to impede terrorist financing. This is an important area where Hong Kong continues to show leadership.

Bilateral Engagement

Our citizens benefit from cooperation between us on a host of law enforcement, security, commercial, and social issues. Hong Kong has a lot to offer both the mainland and the region as a model of "best practices." The SAR's relatively free economy, low taxes, respect for the rule of law, and respect for fundamental freedoms sets a model for others in Asia. Hong Kong can and should share its experience in areas such as protection of intellectual property rights, combating money laundering, promoting the rule of law, and establishing safe as well as efficient procedures for handling sea and air cargo. There is more that Hong Kong can do to boost its attractiveness as a desirable place to invest and operate commercially. We would like to help Hong Kong advance its reputation as a world class environment for doing business.

Not a Footnote but the Fundamental Thing: A History of Friendship

I noted a moment ago that we pursue this rich and active program with Hong Kong based on U.S. national interests, and that drives our support for Hong Kong's success. But shared interests don't just spontaneously arise without respect to history and background. Another reason we are hopeful that Hong Kong will succeed is because we share values and outlooks, culture and history, ambition and aspiration. The entrepreneurial, self-reliant spirit that has been Hong Kong's hallmark is one that resonates with the American people. Hong Kong, like the United States, is a land of immigrants, bolstering the SAR's ability to meet new challenges with fresh perspectives.

An Agenda for the Future

Despite the extensive common ground between us, there are, too, natural and inevitable differences. Hong Kong has its own priorities and objectives, and these will at times diverge from those of the United States. Our interaction in the bilateral relationship comprises a fair amount of give-and-take over precisely these converging and diverging policy lines.

Politics Not a Dirty Word

This give and take usually goes under the heading "politics" and can be a contentious arena. One of our U.S. presidents, Calvin Coolidge, said:

"Politics is not an end, but a means. It is not a product, but a process. It is the art of government. Like other values it has its counterfeits. So much emphasis has been placed upon the false that the significance of the true has been obscured and politics has come to convey the meaning of crafty and cunning selfishness, instead of candid and sincere service."

Candid and sincere service is still with us, thankfully, and that is what all governments the world over should aspire to provide. As the recent District Council elections made clear, the Hong Kong people have embraced the political process in Hong Kong, to the benefit of the SAR as a whole. The government's dialogue with the people continues, and seems likely to succeed in identifying steps to refine the political system. Several parties represented in Legco have called for the change to election of the Chief Executive in 2007 by universal suffrage, for example, as previewed in the Basic Law. It seems entirely natural that there should be such a debate. "One country, two systems" is a broad outline, after all, not a precise roadmap. Hong Kong, since it has taken on a unique, highly autonomous status, will continually face the problem of defining and redefining its economic and its political structure. It is the United States' belief that history has more than demonstrated that the best way to respond to the will of the people is through universal suffrage. As the HKG looks at ways to better respond to the Hong Kong people, we believe the best next step is to begin full and public consultations on democratization as soon as possible.

If the distinctions in the "one country, two systems" formula were all black and white, perhaps it could be simpler. Perhaps refinement or improvement of the political structure would be unnecessary. But I would venture that there is and will continue to be considerable gray area associated with Hong Kong's autonomous status and this will necessitate ongoing discussion between the people and their government of means to refine and improve the economic and political structure here. In the end, I suspect Hong Kong will emerge much stronger as a result of its ongoing examination of constitutional reform, the role it should play in the Pearl River Delta, its competition with Shanghai or Singapore, and the like. As is by now well known, the American perspective in Hong Kong is consistent with a principle that we adhere to the world over, i.e. the government and society can only be strengthened by creating more opportunities for citizens to participate fully in and contribute meaningfully to their own governance.

Economics: Hope and Faith Not Enough

Hong Kong has recorded financial and commercial successes in the past, but these days one can never rest on past accomplishments. Competitors are moving faster than Hong Kong is in some areas, and the gap between Hong Kong and others in the region is therefore contracting. Just as the Hong Kong people are seeking the most responsive and effective political system to manage change in the 21st century, the government is also pursuing lean and efficient economic and commercial structures. One way to ensure that outcome is through competition. Hong Kong is one of the few developed economies that has not enacted general anti-trust legislation. The government has introduced significant, successful competition in the telecommunications sector to the tremendous benefit of Hong Kong consumers. Granted, this is a topic that must be approached with skill, deliberation, patience, and wisdom. No one wants to see Hong Kong's reputation as a free and open economy damaged by cynical manipulation of an anti-trust law to actually decrease competition by excluding foreigners or other entire classes of competitors. But if competition is good for the telecommunications sector in Hong Kong, if competition benefits Hong Kong consumers and strengthens Hong Kong's hand in the global contest for investment and trade, what is wrong with pro-competitive policies generally? Won't more international companies be drawn to Hong Kong in a more competitive environment?

There are other ways Hong Kong can build on its core competence to make an excellent place to do business even better. Hong Kong has done a remarkable job of turning around its record of protecting intellectual property rights in recent years, passing tough laws, committing resources to robust enforcement, and raising awareness of the economic benefits of a strong IPR regime. There are still areas where rights-holders are vulnerable in Hong Kong, however. For example, the Hong Kong Health Department still issues marketing approval to generic pharmaceutical products even if they infringe on valid patents. And end-use piracy of copyrighted works continues to be a problem, especially for business software, cable and satellite TV signals, and printed works such as textbooks and academic journals. If Hong Kong wants to maintain its reputation as a regional leader in the protection of IPR and foster a vibrant creative sector, it must continuously monitor and improve its IPR protection regime. Establishing a patent link to protect original pharmaceutical manufacturers and cracking down on end-user pirates would demonstrate Hong Kong's leadership in this critical area. In addition, Hong Kong would do well to welcome international businessmen and women and their families, ranging from free-lance journalists to investment bankers and architects, with minimal bureaucratic delay. And it would benefit if it could develop a local talent pool of fluent English speakers with world-class professional training for multinationals to draw upon.

A final area of ongoing importance to Hong Kong's attractiveness as an international business center is the environment. Health and quality of life are directly affected by the quality of Hong Kong's air and waters. Sadly, Hong Kong's crown jewel, Victoria Harbor, is now so contaminated that no one -- with the possible exception of the Yuen Lung crocodile -- swims there. And what a shame that China's first man in space was barely able to make out Central's stunning skyscrapers from the Harbor during his visit in October. Hong Kong is not the source of all the pollution that fouls its air and water, but it must take the initiative in cleaning up if it wants to maintain its competitive edge and attract investors to "Asia's world city."

The Fundamental Thing: a Future of Friendship

One of the American men of letters I admire is Henry David Thoreau. He wrote that, "Friendship is never established as an understood relation.... It is a miracle which requires constant proofs. It is an exercise of the purest imagination and the rarest faith."

It has been an exercise of imagination and faith to sustain the deep and abiding friendship between us over the last century and a half or so in the sense that it has taken hard work by those who have gone before us to sustain an enduring friendship. That sense of commitment is no less in demand in today's turbulent and rapidly evolving environment. We are fortunate that our predecessors in both the public and private sectors had the foresight to invest in the future relationship with Hong Kong, a decision that has benefited countless numbers of American and Hong Kong citizens.

Over the past year we have faced difficulties in our two societies and economies. Through it all we have put forward the "constant proofs" of our friendship in ways that will earn the praise of future generations. This is a mutual necessity; if our friendship is to endure, it will be on the basis of constant effort on both sides, continuing investment in the relationship, and genuine respect for each other's people and their aspirations.

Put differently, we have received a gift from history, which is our friendship built on the basis of shared values and common sacrifices. We should expand on that foundation. Looking to the future, an American corporate leader recently told his Hong Kong colleagues across the table that Hong Kong could hardly elicit confidence from those overseas if it did not exhibit confidence at home. Since July 1, there has been a remarkable resurgence in self-confidence here. We believe that is a good thing, and sorely needed. We have the faith and imagination to see this new sense of self-confidence as the beginning of a new phase in Hong Kong's brief history as a Special Administrative Region. I would amend my American corporate friend's words in a modest respect. If Hong Kong wants the rest of the world to invest in its future, it must be prepared to do so as well. Americans stand ready to join Hong Kong in this endeavor, and are looking forward to further positive, dynamic, and forward-looking steps in the SAR in the year ahead.

(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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