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Meeting with Australian Customs in Melbourne, Australia

14 April 2000

Ladies and Gentlemen,

Good morning.

I am delighted to be here this morning. I last visited Australia only in September last year for one of our regular bilateral meetings with your Customs Service. I am back again on this occasion to attend in Canberra the World Customs Organization's Asia Pacific Regional Conference of Heads of Customs Administrations which is kindly hosted by your Government. We have had fruitful discussions this week on a wide range of issues, setting the direction and focus of our work in the region for the next two years.

This breakfast meeting is a real bonus for me, and I am grateful to my colleagues in the Hong Kong Economic and Trade Office in Sydney for organizing this august gathering. I would like to take this opportunity to share with you some of the recent developments in Hong Kong. In particular, I think you would be interested to hear about our economy, in general, how we are doing in the control of strategic commodities and intellectual property piracy, as well as what we have done to clamp down on smuggling of illegal immigrants.

Recent developments in Hong Kong's economy

First, the economy.

The contagion impact of the Asian financial turmoil which brought about Hong Kong's worst economic downturn ever is now history. We have suffered the pains of this economic malady, and our economy has gone through a difficult period of adjustment.
The economy of Hong Kong staged an export led recovery in 1999. This was driven by a resurgence of demand in the crisis-strickened Asian economies as well as sustained import absorption in the US and Europe. Positive growth returned in the second quarter of 1999 with a modest increase of 1.1 per cent in GDP growth, and we haven't looked back since. We achieved a 2.9 per cent growth for the year as compared to a 5.1 per cent contraction in 1998, and we are now forecasting a 5 per cent growth in GDP in the year 2000.

We are seeing a rebound of economic opportunities to our part of the world, and we in Hong Kong should stand to benefit from it. My confidence is based on the preparedness and the flexibility of our workers and entrepreneurs as well as the solid fundamentals of our economy. We have totally free trade in a textbook market setting, level playing field for all, a low and simple tax regime, and unfettered flow of information. We also have an accountable, clean and business-friendly civil service, buttressed by the rule of law and an independent judiciary.

On top of that, we have the benefit of geography. We are located in the centre of the Asia Pacific Region, and next to the world's largest and fastest growing market. With the impending accession of China to the World Trade Organization, the likely expansion of its trade links and investment relations with the rest of the world should bring substantial gains to Hong Kong.
Control of strategic goods

The relationship between Hong Kong and China is, indeed, deeply entwined. The defining principle of this special relationship, the "One Country, Two Systems" concept, has enabled Hong Kong to take the fullest advantage of its uniqueness and strength.
Hong Kong remains a separate Customs territory. We maintain a distinct physical boundary with the Mainland, policed by our own enforcement agencies, employing a set of transparent and well-established laws. Our system is best described as "legally colour blind and politically tone deaf". We would not have it any other way.

The Central People's Government of China is totally supportive of Hong Kong's special status, and has stated clearly that state organs in Hong Kong, including the People's Liberation Army Garrison, must abide by the Basic Law and all Hong Kong laws. So far, all of them have conducted their activities meticulously and in an exemplary manner.

As an active and responsible player in the global economy, my Government is fully committed to operating a law-based, transparent, stringent and internationally accepted system of controls on the trade of strategic commodities. Hong Kong has also maintained an excellent track record in enforcing our laws vigorously and objectively. There have been numerous examples of our success, and our control system has been commended by all the key players of strategic export control regimes, including your own administration.

The excellent system of control in Hong Kong is well recognized. In fact, in the Seventh Report of the Task Force on the Hong Kong Transition presented by US Congressman Doug Bereuter in February this year, it is stated that "Hong Kong has one of the finest systems of export controls in the world and the reversion to Chinese sovereignty appears to have no major impact on the exercise of export controls." It went on to state that "Hong Kong's record of enforcement of its export control regime is good." As to the groundless allegation contained in the highly politically charged Cox Report concerning the transshipment of technology by the PLA, Bereuter reported that "A recent visit to Hong Kong by staff members of the House International Relations Committee found that there is no evidence to suggest that the PLA is smuggling controlled items into China."

We are pleased to receive this clean bill of health, but for our part, we intend to upkeep the effectiveness of our control system, conform to the highest international standards and maintain the sharp transparency that is the key feature of the system.

The fight against IPR infringement

As to our enforcement against intellectual property piracy, I am happy to tell you that the situation in Hong Kong is now fully under control. The extent of piracy in Hong Kong has reduced significantly in the last twelve months. About 90 per cent of the retail outlets selling pirated products in Hong Kong have closed. We will continue to spare no effort in combating piracy in Hong Kong.

We have brought about this level of success with a two pronged enforcement strategy, clamping down on both the supply side and the retail end simultaneously. Our record speaks for itself. In 1999, we seized a total of some 16.5 million pirated CDs and 14 production lines, and arrested some 2,700 persons in our anti-piracy operations. In fact, Doug Bereuter said in his Report that there has been a marked improvement in IPR enforcement in Hong Kong, and he noted that we are now off the Special 301 Watch List. We actually never gave much attention to this unilateral American measure. Our effort to make improvements in our IPR enforcement is to build for ourselves a solid platform for innovation and creativity. 
Now that we have broken the back of the illicit business in the piracy of intellectual property in Hong Kong, we have even greater confidence in promoting technological innovation in our economy. My Government has embarked upon a series of new strategic initiatives aimed at deepening and broadening our economic architecture. We are seeking to develop a more sophisticated technological base. We are working to be a leading centre for information technology in the form of the now well-known Cyberport. This facility, which already has the support of leading international IT firms, will house a strategic cluster of major service companies specializing in the development and application of IT in electronic commerce and information services. This facility will provide a huge boost to the businesses in the region. With the new technological infrastructure, Hong Kong is now well placed to face the challenges of the new millennium.

Smuggling of illegal immigrants

As we enter into the new millennium, we face also a new problem of smuggling of illegal immigrants, a problem which, I think, you know well. We have always taken vigorous actions to prevent Hong Kong from being used by human smugglers as a staging point for transit to other countries. Unfortunately, in early January, enforcement authorities in the US and Canada found over a hundred illegal immigrants hidden in cargo containers on board vessels which had transited through Hong Kong. This caught the attention of the media, and we were given all kinds of labels.

Given the geographic location and heavy marine traffic in the Hong Kong waters, vigilant enforcement action to combat the smuggling of illegal immigrants has always been a priority for us. We have adopted an inter-departmental approach to deal with the problem.

The Hong Kong Customs exercises a sound mechanism in checking cargoes to prevent smuggling. We use a "risk assessment" approach in selecting cargoes for examination, and the system has proved to be effective. Together with the Marine Police, we patrol Hong Kong waters to intercept vessels suspected to be involved in smuggling operations. The Hong Kong Police Force also has a special team under the Organized Crime and Triad Bureau to collect intelligence and investigate suspect organizers of human smuggling. In addition, our Immigration Department maintains a Ship Search Unit to conduct searches on ships inside the Hong Kong harbour.

Apart from these enforcement actions, the Hong Kong law enforcement departments enjoy excellent cooperation with our overseas counterparts. We regularly exchange intelligence on these activities through designated local liaison officers and established channels. In fact, the detection of the illegal immigrants in Seattle and Vancouver in early January this year was the result of tip-offs from the Hong Kong Customs.

In response to recent discovery of illegal immigrants travelling by containers and to curb the smugglers from using Hong Kong as a transit base for human smuggling, we sought enhanced cooperation from our trade including major shipping companies and agents, container terminal operators and the major associations.

They recognized immediately the gravity of the issue, and we were able to reach very quickly a consensus to adopt a battery of measures, including shipping companies to report to Customs intended shipments of "soft-top" containers prior to export; shipping companies and container terminal operators to strengthen their security measures and to explore the employment of modern technology to detect illegal immigrants hiding in their containers; shipping companies and container terminal operators to report to Customs through a special hotline any suspicious outbound shipments; shipping companies to check new clients' business particulars before accepting business; and more.

On our part, we have enhanced our examination of outgoing "soft-top" and refrigerated containers and we are using CO2 detectors to assist in our container examination. So far, the results are encouraging. We will keep up our efforts by maintaining close cooperation with relevant local and overseas law enforcement authorities as well as the trade to ensure that Hong Kong will not be used as a transit base for human smuggling.


Ladies and Gentlemen, I hope I have given you an informative snap shot of some of the relevant issues that we are facing. I hope you will agree that Hong Kong is a vibrant modern city that is on the leading edge of business, that is confronting difficult problems heads on and that is building a platform of innovation to launch into the new millennium. And I hope you will come join us on this platform of opportunity in scaling new heights in Hong Kong.

Thank you.

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