Last year was a difficult one for Hong Kong. Although it is a while ago now, we all remember the very difficult SARS episode, which put our economy and society under severe stress but we can all take pride in how our community rallied to defeat this threat and set our economy on a solid course of recovery. The year ended on a more upbeat note, helped by the signing of the long-awaited Closer Economic Partnership Arrangement, or CEPA.

As you know, your Chamber played an important role in initially proposing the concept of a Free trade Agreement between Hong Kong and the Mainland, encouraging our government on a regular basis to raise the issue with Beijing, and then working to ensure that the final result would be as practical as possible.

Indeed, we are gratified with the resulting agreement, and particularly with the broad and inclusive definition of Hong Kong service companies. However, CEPA is not a dormant document. Rather, it is the next logical step in the deeper integration of our two economies. This process has been on going for decades, and in the coming year we will work both to maximise the benefits under the present CEPA agreement and to extend CEPA to include more goods and services, to the benefit of both Hong Kong and the Mainland of China.

Last year was also politically charged, a characteristic which 2004 shows every sign of emulating. Last year, the subject was the attempt to pass legislation implementing Article 23. Following up our recommendation that a White Bill be issued to allow more thorough consultation and to put the community's mind more at ease on such a sensitive issue, the Chamber's Legal Committee put together a detailed analysis of the draft legislation. This was a very close analysis of the law itself, and how it compared to other, similar legislation in the U.K. and elsewhere. The HKSAR Government took on board many -- nearly all -- of the Chamber's concerns.

As we all know, continuing unease over this legislation and the process which had been pursued in pushing it forward, combined with various other factors resulted in this legislation being shelved for the time being after a large scale but peaceful demonstration on July 1st, a demonstration which I might add showed the respect that Hong Kong people have for rule of law and order.

Other activities

As you know, each year your Chamber reviews and recommends positions on a host of new policy initiatives, regulatory changes and plans for the future. Because we are able to draw on the talent and expertise you as members so willingly provide, the Chamber's views are listened to (not always agreed with but at least listened to), both within government and among the community at large. We take this responsibility seriously.

Last year -- exactly one year ago in fact, with considerable input from members, the Chamber submitted a number of suggested measures to then Financial Secretary Antony Leung on how to help our business through the dark days of SARS. We subsequently issued a paper entitled "Re-Invigorate, Re-Launch and Re-Build Hong Kong", which was a three-phase plan for short-, medium- and longer-term recovery. Many of our ideas were accepted.

In addition, submissions were presented on copyright legislation, waste management policy, a review of the role and functions of public advisory bodies, positioning on the development of Hong Kong's creative industries and, as usual, recommendations for the CE's Policy Address and FS's budget speech. As these are issues that help shape the future of our society, our prosperity and the business conditions in which we all operate, they are among your Chamber's main concerns.

Chamber activities

Although we had to postpone or cancel several events because of SARS, 2003 was nonetheless a busy year at the Chamber. In our efforts to keep members informed and broaden discussion of policy issues we held roundtables on such diverse subjects as double taxation, intellectual property rights, waste reduction, air pollution, terrorism, the war in Iraq, textiles, taxation, trade marks, work visas, human resource management and healthcare.

Our continuing strong support for deeper integration with the rest of the Pearl River Delta was explored in a number of different for a inside the Chamber and included discussions on outsourcing, employment opportunities for youth in the PRD, the Hong Kong-Zhuhai Bridge, and a series of sessions focusing on the details of CEPA.

The year also saw a host of distinguished guests speak at Chamber events. Among them were China's first astronaut Yang Liwei, Nobel Laureates Rolf Zinkernagel and Sir James Mirrlee, Belgium Prime Minister Guy Verhofstadt, Chairman of UPS Mike Eskew, US Ambassador to China Sandy Randt, and Liaoning Governor Bo Xilai, who has just been named China's Minister of Commerce.

Ministers from Home Affairs, Housing, Planning and Lands, the Civil Service, Education and Manpower and Constitutional Affairs offices also visited the Chamber to speak with members off-the-record in our "Town Hall" series, which proved popular and successful.

We also sent trade missions to Guangzhou, Beijing, Shanghai, and to Spain, Portugal, and France.

More information on the hundreds of events put on last year such as the Women Executives Club and study missions abroad are posted on our Web site, and, if you have not checked it out recently, I urge you to have a look to see what else your Chamber has been doing on behalf of the members and the whole Hong Kong business community.

In addition to public events, we also researched and publicised the results of a detailed survey comparing public and private sector pay. This project clearly showed that there was scope to reduce civil service costs and thus help rebalance Hong Kong's public finances. It was certainly a factor in the government's decision to deal with civil service pay, which occupies some 70 percent of our public expenditures.

The annual report

In the interest of brevity, I won't spend too much time reviewing finances and other information that is better read than said. But, please do read it at your leisure. One thing it does show is that your Chamber remains financially strong, which is crucial to our independence and future growth.

Our trade documentation, or CO Division, continued its efficient work in catering to the needs of the trading sector of the business community and has geared up to provide the information and documents needed to take advantage of CEPA.

At the end of the year, the Chamber again had a very good surplus, and considering the economic conditions of last year that is no mean feat. All in all, it was another successful financial year for the Chamber.

The economy and business

Globally, the world economy continued its strong recovery in 2003 and organisations such as the International Monetary Fund are now revising up-ward their forecasts for this year. The steady decline in the value of the US dollar, overly large fiscal deficits, rising concerns about protectionism and the collapse of the Cancun round of trade talks are also on our minds.

Mainland China remains the driving force in Hong Kong's economy, and increasingly, that of the rest of East Asia. The strong rise in trade last year provided critical business for Hong Kong companies amid the SARS-induced slump in domestic demand. Moreover, the rise of tourism flowing into Hong Kong from the rest of China proved to be one of the most important factors in over coming the economic consequences of SARS and spearheading the upward movement in the Hong Kong economy.

Our open economy cannot avoid external shocks and still remain the most international in the world. In addition to the sad human cost, SARS also hit our economy, prolonging our struggle with deflation and increasing unemployment. As we move forward, the reduction in the unemployment rate since the third quarter is promising. Property prices picked up strongly in the last months of the year and it appears that our long struggle with deflation is finally coming to an end.

At our December Business Summit, we predicted a swift easing of deflation this year and a mild rise in economic activity, resulting in 3.8 percent real growth in GDP. Now, both of those key factors appear to have been overly cautious, and we have thus revised our forecast to 5 percent real growth and 1 percent deflation. Looking further ahead, it is reasonable to assume that next year will see a mild rise in prices, and continued good economic growth.

We remain concerned about Hong Kong's fiscal balance and do not believe that this will be resolved solely by better economic growth. We continue to believe work is needed to both reduce recurrent spending and broaden the tax base. Prolonging the inevitable is not going to work. We believe the best time to take tough decisions is now, when business and consumer confidence is rising.

Conclusion

Your Chamber is working hard to ensure that Hong Kong is prepared for what faces us in the future, and that we are well equipped to weather the typhoons lurking just over the horizon. We will continue to speak out on behalf of our members, our society and our belief that Hong Kong is special.

To do so, we need to remain financially sound, enhance our service to members and expand our numbers. As we stride fully into CEPA and more deeply integrate with the rest of China, we will be guided by our overall mission of safeguarding, representing and promoting the interests of the Hong Kong business community, at home and abroad.

If and when the NPC approves Mr Tung's analysis that there is a need for electoral reform in Hong Kong, we will be on the road of constitutional development. You can be sure we will have the interests of our members at heart as we move forward on that road, keeping a firm eye on economic prosperity and development.

In closing, I would like to extend an open invitation to you all to raise at any time your own ideas and suggestions with the Chamber Secretariat, and I would like to wish you and your businesses every success in the year ahead.