Peter D. A. Sutch
Deputy Chairman, Managing Director, Cathay Pacific Airways and Chairman-Designate, John Swire & Sons Ltd.
HONG KONG: MYTHS AND REALITIES
Introduction: John F. Bankes
President, The Empire Club of Canada
The Canadian and Empire Clubs are privileged to have Peter Sutch, Chairman-Designate of John Swire & Sons, address our members and guests today. He will be speaking to us on the subject of Hong Kong: Myths and Realities.
This century has lived through two great political distortions: fascism and communism. When the red flag came down over the Kremlin last December, the twentieth century had beaten them both. And mankind's hope for a freer and richer future had become that much brighter.
The political developments in Eastern Europe have, in a way, left China as an ideologically isolated island. However, as July 1997 approaches, the almost six million residents of Hong Kong are increasingly aware that the future of their colony is tied to the policies of China and, ultimately, the implementation of the Sino-British Agreement signed in December 1984 under which Hong Kong becomes a Special Administrative Region of China. As T.L. Tsim stated in a recent article in The New York Times: "The destiny of Hong Kong is now the same as the destiny of China. There is no escaping."
Confidence in the 1984 agreement has, from time-to-time, been severely shaken. Consider the horror of events in Beijing and other parts of China in June 1989. The frenzy of fear that followed the massacre at Tiananmen Square resulted in visa applications at the Canadian Commission office in Hong Kong reaching 9,000 a day.
Hong Kong, known as "a borrowed place, living on borrowed time," is a rocky mountaintop bereft of natural resources. Although the British Territory has been described as a "barren rock" or "sterile pile of granite," Hong Kong residents believe in the fundamental principle that the correct alignment of the forces of nature govern all aspects of life.
Most people believe that the long-term future of Hong Kong lies in its continuing economic success as an international centre of trade, finance and business. Confidence may fluctuate. But the underlying strength and attraction will always be the business opportunities that Hong Kong's geographical location, its business infrastructure, and its hard-working and enterprising population help to create. So long as these attributes exist, one can be optimistic about the future.
It's hard to think of a North American city that has closer links with Hong Kong than Toronto. The population of the Chinese community in this city is approaching 400,000--a number which surpasses New York, for many years the largest Chinese community in North America.
York University and the University of Toronto are the North American post-secondary institutions of choice for thousands of Hong Kong residents. In fact, the Hong Kong chapter of the University of Toronto Alumni Association has a larger active membership than the Toronto chapter!
And, the social and cultural links between Hong Kong and Toronto are matched by commercial and financial connections. The annual dollar volumes of trade and investment capital are impressive.
If it's true, as Rudyard Kipling said, that in Hong Kong East meets West, then in Toronto they renew acquaintances!
On September 30 of this year, the Hong Kong Government is launching in Toronto a multi-faceted business, cultural and educational festival under the theme, Hong Kong and Canada--Bridge Across the Pacific. The festival is the largest promotion ever undertaken by the Hong Kong Government. From Toronto, it will travel to Montreal, Calgary, Ottawa and Vancouver.
But even with our close ties, how well do Torontonians really know Hong Kong? Peter Sutch is to address this combined meeting of the Canadian and Empire Clubs today on the subject of Hong Kong and will dispel some of the myths surrounding the British Territory.
Peter joined the Swire Group in September 1966. The interests of the Swire Group, of which Cathay Pacific Airways is part, include transport, shipping, trade, manufacturing, warehousing, engineering, property investment and development, and insurance on a worldwide basis. Peter became Managing Director of Cathay Pacific on January 1, 1984, and Deputy Chairman and Managing Director on June 1, 1988. We have recently been advised that Peter will be the new Chairman of John Swire & Sons effective June 1 of this year.
It is perhaps unfair to single out one facet of the Swire Group's global business interests. However, the success of Cathay Pacific Airways, in an era when airlines are hemorrhaging, is quite remarkable and stands in sharp contrast with the experiences of most North American air carriers.
Cathay Pacific prospers as Hong Kong's airline by continually exhibiting the same attributes that have made the Territory itself successful--efficiency, enterprise, sophistication and a commitment to quality. Peter, your airline has come a long way since 1946 when Betsy and Nikki, two reconditioned war surplus DC3s, started operating passenger and cargo charter fights around Southeast Asia.
As many of you know, last week heralded the beginning of the Chinese Year of the Monkey. According to the soothsayer, the lunar New Year will see success in bold ventures and new inventions. And, of particular interest to our business audience today, the agile Monkey will put an end to recession and its shrewdness will generate a business boom!
Our guest, Peter Sutch, has a unique window on Hong Kong and Asia. It is an honour to have him share the view with us. Ladies and gentlemen, please welcome Peter Sutch.
Ladies and gentlemen, it is indeed a pleasure to be able to address both The Empire Club of Canada and the Canadian Club at a single gathering. Having seen the list of distinguished speakers to which your associations have played host, I am all too aware of the high standards to which guests
are expected to rise. I hope, on this occasion, that my theme will be sufficient to hold your interest. I intend to talk partly about Cathay Pacific Airways, of which I have the honour to be Chief Executive, but primarily about Hong Kong at this critical, and extraordinarily interesting, point in its history.
Hong Kong and its people are growing accustomed to being watched by the eyes of the world. Interest and understanding, however, are not always the same, and I would like, this afternoon, to try to dispel some common misconceptions. I will also attempt to give you some idea of the economic and political realities which I believe are already shaping Hong Kong's future.
I know that Canada takes a close interest in the affairs of Hong Kong, not least because of the considerable number of expatriates from the Territory who have chosen to study or settle here--in some cases both. You will have heard a good deal about Hong Kong's "brain drain," and that is one subject I intend to consider this afternoon. Let me begin, however, with a general overview of the Territory's present position as I see it.
Hong Kong is now undergoing a period of dramatic transition. Its economic success--it is in its own right the world's 11th largest trading economy--has been nurtured by a British colonial government. The administration has been consistently pro business while remaining strictly non interventionist in its dealings with the private sector. Government has systematically developed the infrastructure to keep pace with changing needs, while entrepreneurs have built up the economy.
In 1997 that administration will change. Hong Kong will cease to be a British colony and will be re-designated as a special administrative region of The People's Republic of China.
Forgive me if this information is old hat to you. But it is, I think, important to be clear about exactly what 1997 means. Hong Kong is not, like most of Britain's former colonies at the same stage, being granted independence. It is preparing to undergo a change of sovereign power. This transfer takes place under terms negotiated between Britain and China which are outlined in the 1984 Sino-British Joint Declaration on the question of Hong Kong.
The blueprint for the special administrative region's future development is laid down in the basic law, which embodies the Chinese Government's undertaking to preserve Hong Kong's way of life and doing business more or less as it is for at least 50 years after the handover date. The oft-quoted formula for this is "one country, two systems."
Let me say immediately that I, Cathay Pacific and the Swire Group, firmly believe in Hong Kong's future up to and beyond 1997. But I also believe that that future is dependent on the Territory establishing a workable modus vivendi with China which recognizes both political and economic realities.
The political reality is that in five years China will become Hong Kong's sovereign power. The Territory's interests will therefore be far better served by working with the authorities than by provoking constant confrontation with them over issues which we cannot realistically expect to influence.
Part of the deal in the implementation of the "one country, two systems" formula is an acceptance that the Territory does not have a mandate to attempt to influence policies in China as though it were a separate sovereign power. Too many individuals in Hong Kong--many of them in positions of considerable influence--choose to ignore this.
The economic reality is that Hong Kong and China are already indissolubly linked and irreversibly interdependent. Over the past 10 years Hong Kong has become the main engine driving the economic development of Southern China--it has, in effect, made the Chinese hinterland an extension of its own economy. Approximately three million workers, employed by about 25,000 enterprises in Guangdong province, are now undertaking work for Hong Kong companies. Most are involved in the processing of goods which are then re-exported through Hong Kong. China depends on the Territory for about one-third of its foreign exchange earnings and fully two-thirds of direct foreign investment.
China, furthermore, is an increasingly important investor in concerns in Hong Kong, including Cathay Pacific Airways, in which Citic, the corporate body responsible for many of the Chinese Government's international investments, has a 12.5-per-cent stake. China is the third largest investor in Hong Kong's industrial sector with substantial interests in the banking, property, transportation, construction and tourism sectors. Total investment is more than US$10 billion.
I hope you will not consider me too cynical or materialistic if I point out that, so far as most Hong Kong people are concerned, the importance of this overwhelmingly strong economic relationship far outweighs any political factor.
They are accustomed to attending to their own affairs and leaving politics to governments. Business, historically, is Hong Kong's life blood, and primarily business involving China at that. The Territory thrives on pragmatism, and the business community is rightly suspicious of political idealists.
Nevertheless the politics of idealism is now a daily fact of life in Hong Kong, and to many of us this is a cause for some concern. Hong Kong has always been run on a basis of consensus politics--a traditional Chinese approach which has worked well. In a context of British administration, confrontation, however, is now very often the order of the day.
The election to the Legislative Council of 16 members or supporters of the United Democrats, led by Martin Lee, has, if not upset the applecart, certainly dislodged quite a few of the apples. The Hong Kong Government is now having to learn to deal with noisy opposition in areas in which it has been accustomed to quiet acquiescence. In certain respects this may be no bad thing.
There is concern in some quarters, however, that unless the government and its democratically elected critics can find a way to get along, there may be a deterioration in the business environment. Hong Kong's legendary efficiency stems directly from an efficient administration able to make rapid decisions. It is now being hampered in this process, and having its task of government further complicated by the seemingly implacable desire of certain recently elected members to provoke confrontation with China.
Idealism is a characteristic of fledgling democracies. But, as I have pointed out, Hong Kong is not going to be a democracy in the normal sense of the term. Even though a greater measure of directly elected representation is being introduced into the system. My belief is that the Territory will eventually come to terms with this new way of doing things without unduly disrupting business.
I also believe that those newly elected members who continue to seek confrontation with China, which cannot be in Hong Kong's best interests, risk having their mandate revoked before 1997 by the very people who voted them in. Pragmatism will prevail, but we must hope that no permanent damage is done to Hong Kong's well-deserved reputation as an attractive place to invest--or to our relations with China.
The apparent political volatility of the relationship between Hong Kong and China belies the stability of the underlying economic fundamentals. Hong Kong and China are irrevocably committed to each other. Misunderstandings, however, are prone to occur, and perhaps the most serious of these to date has been over the issue of Hong Kong's new airport.
The controversy over Chek Lap Kok has generated a great deal of interest internationally. And there is, I believe, a certain confusion about the issue which it may be timely to clarify. The facts, briefly, are that a decision was taken early in October 1989 by the Hong Kong Government that, in view of the Territory's increasing importance as a centre of international aviation and of the strain this was imposing on Kai Tak, a replacement airport should be built at Chek Lap Kok, off Lantau Island, some 25 kilometres west of Hong Kong.
This decision was, perhaps, unfortunately announced, without appropriate prior discussion with the Government of China, which immediately registered a strong objection.
A strong affirmation of confidence and commitment to the future was vital for Hong Kong at the time. For China, however, the moment was politically highly sensitive. Throughout the demonstrations in Tiananmen Square earlier that year, which drew to their tragic conclusion on June 4, there had been sympathetic rallies in the streets of Hong Kong.
In some cases these turned abruptly to angry--though entirely peaceful--protest marches, leaving the Chinese Government deeply concerned at the possibility of Hong Kong being used as a base from which to foment unrest in China.
The Hong Kong Government's unilateral decision, at this sensitive time, to proceed with a project with major implications for post 1997 Hong Kong was well intentioned, but, with hindsight, diplomatically somewhat unfortunate.
So far as the Chinese Government was concerned the decision was not merely an affront--it also signalled a failure on the part of the Hong Kong Government to act in what they perceived to be the spirit of the Sino-British Joint Declaration. They set out to use the issue as a means to establish--some would even suggest to change--the ground rules for that Declaration's implementation, and also to remind the people of Hong Kong of their authority.
The dispute dragged on until September of last year when John Major went to Beijing to sign a memorandum of understanding in which the British and Chinese Governments undertook to support the project, subject to certain conditions. The most important of these related to controlling the cost of the airport in view of China's very real, although ill-founded, fear that cost over-runs might bankrupt the Territory.
The argument was about many complex issues involved in the sometimes troubled triangular relationship between London, Hong Kong and Beijing. What it was not about, curiously, was the urgency of the need for a new airport, as the memorandum implicitly acknowledges. That requirement was self-evident to all parties.
As shorter flights to Europe and the United States become possible, and as the economies of the Asia Pacific region grow in prosperity and importance, Hong Kong becomes progressively more and more attractive as a centre for international aviation. The Territory is traditionally the Gateway to China, and has long been established as its de facto major southern port. It will now become its major southern airport also.
China and Hong Kong have, I believe, emerged from the Chek Lap Kok debate with an improved understanding of each other, and a clear recognition of a mutual interest which the memorandum of understanding well expresses. One heartening aspect of the resolution of the issue is that it underlines China's commitment to maintaining Hong Kong's status as an international city.
As 1997 draws closer we must, l believe, not only come to terms with but actively welcome increased participation in Hong Kong's economy by mainland China. There is a school of thought which maintains that while China pays lip service to the "one country, two systems" principle, in fact it is endeavouring to gain a controlling interest in Hong Kong's economy by stepping up its investment in the Territory.
That, I think, is a myth. Certainly China is anxious to increase its participation in Hong Kong's economy. It sees the opportunities to date taken up by local and international companies such as mine, but nothing in my experience suggests that it seeks to dominate it. Citic is content with minority shareholdings in Cathay Pacific and Hong Kong Telecom because the Chinese shareholders prefer it to be clear that the companies which have made these operations successful continue to control them.
They recognize, I believe, that a larger shareholding might make the companies less attractive to banks or other investors. In short, they protect their investment by keeping it within limits.
Certainly China is a keen participant in many sectors of Hong Kong life. About 3,000 Chinese-controlled companies are active in the Territory. They are used not merely as profit centres but also as a training ground, and as a window on the world--one more reason for China to nurture Hong Kong's internationalism.
The greatest risk for Hong Kong has never been that China would deliberately seek to harm it--history shows that it has always recognized its own invested interest in Hong Kong's success. Without China's tacit consent, the Territory could not function let alone flourish. A far greater risk has always been that China would fail to understand its workings and implement policies which might damage it.
Through direct participation in Hong Kong's economy, the Chinese are beginning to understand just what makes it tick. This can only benefit the Territory in the future, and is already benefitting Hong Kong's neighbouring Chinese special economic zones.
The inter-relationship between the economies of Hong Kong and China, as I have said, is already close and is becoming closer--so much so that an attack on China's economic interests must, of necessity, strike a blow to the heart of Hong Kong. As you will doubtless be aware, there is now a strong lobby in the United States pressing for economic sanctions against China. As discussions progress on the tripartite Free Trade Agreement between the United States, Canada and Mexico, we are naturally concerned that similar sentiments should not prevail in Canada, which is historically such a good friend to Hong Kong.
Sino-American relations have been troubled lately by disputes over a variety of subjects, including human rights, intellectual property copyright, and import restrictions. Because of these issues pressure groups are now lobbying for the withdrawal of China's most favoured nation status when it next comes up for review in June of this year.
Notwithstanding China's undoubted violations of U.S. law section 301, with regard to import restrictions, and past failures to conform to special 301 stipulations on protection of intellectual copyright, I do not believe U.S. withdrawal of MFN status from China would serve any useful purpose.
There are two reasons for this. The first is that any such action taken in the name of human rights will only reinforce China's already rigid determination not to tolerate foreign interference in its internal affairs. The second is the disastrous implications of such a course of action for "the greater China"--a de facto economic unit comprising China, Taiwan, and Hong Kong, which, notwithstanding their political incompatibilities, are increasingly economically interdependent.
To isolate China over human rights will not improve its practices in that department--any liberation that does take place is much more likely to spring from interaction between the Chinese and the people of more politically liberal countries. Dripping water may wear away that stone, but a sledgehammer will not crack it. China requires patience. Believe me, after 25 years in Hong Kong, I think I know!
In the second place withdrawal of MFN status from China would unquestionably have a seriously detrimental effect on Hong Kong with its heavy dependence on cross-border manufacturing. It would further damage those U.S. concerns which have invested in China through Hong Kong, and which have established their regional headquarters in the Territory.
Canadian enterprises would also suffer. Canada is the 15th largest foreign investor in Hong Kong's manufacturing sector, and its accumulated industrial investments alone add up to US$24.8 million. Canadian companies are also well represented in Hong Kong's banking, trading and service sectors.
Another strong bond between Canada and Hong Kong is, of course, the large population of Hong Kong expatriates who now hold Canadian citizenship. I mentioned the brain drain a little earlier, and it seems to be an appropriate subject to raise in Toronto, the preferred destination of so many emigrants from the Territory.
Hong Kong's brain drain is both a myth and a reality--a myth in that its proportions tend to be wildly exaggerated, and in that its existence is attributed to a largely imaginary state of panic supposedly to be found in Hong Kong.
The great majority of the Territory's people choose to remain and work industriously in the place they rightly regard as home. It is a reality, however, that considerable numbers of capable qualified people continue to leave Hong Kong, as they have done since the '50s, for at least long enough to obtain residency rights overseas.
Emigration, however, is falling. The government estimates that only about 60,000 people emigrated from Hong Kong in 1991 compared with 62,000 in 1990. Many of these migrants, furthermore, choose to return to Hong Kong on acquisition of their second passports, and in some cases considerably earlier.
The grass is not always greener on the other side of the fence, and jobs can be relatively hard to come by overseas. Hong Kong, which for a period of global recession is still more or less a boom town, understandably has its attractions.
Paradoxically, in my view, the brain drain has also brought Hong Kong certain benefits. A creative economy does not automatically result from allowing men to grow old in their jobs, and the decision of a number of middle managers to move on opened up opportunities for younger and in some cases, better-educated talent. These executives are anxious to put fresh ideas in to practice. This benefit has, at the very least, helped to offset some of the losses in terms of personnel.
The brain drain is not the consequence of some sort of collective despair. Far from it. The mood in Hong Kong, generally speaking, is buoyant and becoming more so daily. As you are doubtless aware, the commonly accepted barometer of Hong Kong people's confidence in the Territory is the performance of the stockmarket. The Hang Seng Index, which measures this, sailed through the 4000-point barrier in mid-1991, and, after a plateau period in the quiet summer months, has been rising steadily since November. Analysts expect bullish sentiments to prevail.
We should also remember that residency rights do not necessarily imply even a desire to live elsewhere in the long term. There are now several passport schemes in place with different countries which give Hong Kong people the "insurance certificate" they need without having to actually leave the Territory to qualify for overseas residency. These are understandably popular.
Far more pressing a problem than a loss of emigrants is the ceaseless tide of would-be immigrants which continues to flow to our shores from Vietnam. The sad and problematic issue of the Vietnamese boat people refuses to go away.
Hong Kong is now alone in Southeast Asia in allowing Vietnamese boat people to land. Some countries actually push their boats back out to sea. The result is that the Territory is the intended destination of over 80 per cent of those who leave. Hong Kong has its own housing problems, and the community cannot assimilate a wave of mass immigration of this kind--particularly since illegal immigrants from China, who may well have relations in Hong Kong, are mandatorily repatriated.
We cannot return genuine refugees, but neither can we continue to support in Hong Kong Vietnamese people who have no real reason to fear political persecution if they return to Vietnam. Hong Kong, therefore, has a screening process to distinguish between genuine refugees and economic migrants. The former can remain in Hong Kong while awaiting resettlement in a third country. The latter will eventually have to go back to Vietnam.
Hong Kong has now begun to implement programs of voluntary repatriation for those who wish to return from the camps to their native land, and compulsory repatriation for those who have already chosen to return to Vietnam only to set out once again for Hong Kong.
I am aware that international opinion is not whole-heartedly behind this policy. There is, however, no practicable alternative. To imprison the migrants, some of them infants born in the camps, indefinitely would clearly be inhumane. The riot and fire earlier this month at the Sek Kong camp, in which 22 people were killed, is a tragic reminder of the potentially awful consequences of this prolonged incarceration.
No country, however, has expressed a willingness to accept more than a handful of even the genuine refugees. We have received little help from the U.S.A., which still reserves the right to object to our repatriation policy. Neither has Britain effectively come to our aid.
Between 1979 and 1991 the United Kingdom accepted only 14,140 Vietnamese refugees for resettlement. Canada, over the same period, took 24,627. That is certainly a better response than we have had from Britain, but in a country of this size with a long established friendship with Hong Kong, we had hoped, and to continue to hope, for a little more help.
Hong Kong has not the resources to offer the boat people a permanent home, and would be utterly swamped with new arrivals if it did. The only viable solution is to assist in rebuilding the Vietnamese economy, thereby reducing the incentive these unfortunate people have to leave.
Without question the greatest obstacle to Vietnamese initiatives towards both political and economic liberalization has been the trade and investment embargo imposed by the United States. The announcement that relations will, in time, be normalized has provided something of a fillip, but the U.S. Government clearly intends to proceed with caution in this matter.
Hong Kong would welcome Canadian support in expediting full normalization of relations between North America and Vietnam--a reconciliation that troubled country, and those of its citizens so desperate to leave it, urgently need.
I, personally,--along with many others in Hong Kong--find the gradual liberalization of the Vietnamese economy greatly encouraging. I have recently been to both Ho Chi Minh City and Hanoi and met with very senior government officials. I was greatly impressed by their pragmatic political attitude.
Cathay Pacific now flies directly to Ho Chi Minh City and Hanoi, on a joint venture basis with Vietnam Airlines. We are enjoying record load levels for new routes, and are already considering increasing the frequency of our services. There are strong traditional business links between Hong Kong and Vietnam, and trade and investment are both increasing steadily.
Hong Kong investment in the country is now in the region of US$400 million and some 14 companies have opened representative offices. With the resumption of diplomatic relations with China in November last year, cross-border trade also looks set for growth.
Vietnam, in my view, offers outstanding opportunities to investors, and Hong Kong looks to its friends for support in the role we are currently playing in the reconstruction of that country's economy. It is a key--perhaps the only key--to ending the tragic plight of the boat people.
I cannot conclude without saying something about the future. With regard to Cathay Pacific, the largest of Hong Kong's three airlines--let nobody say we have an over-regulated protected market--allow me to dispel one myth immediately. Contrary to any rumours you may have heard, Cathay Pacific has not the remotest intention of moving its base of operations away from Hong Kong before, or after, 1997.
We are satisfied with the provisions in the aviation annexe of the Sino-British Joint Declaration for the maintenance of Hong Kong's status as an international air transport centre.
The annexe stipulates, and I quote: "The Hong Kong Special Administration Region shall maintain the status of Hong Kong as a centre of international and regional aviation. Airlines incorporated and having their principal place of business in Hong Kong and civil aviation related businesses may continue to operate."
Since the signing of the Joint Declaration the Hong Kong Government has renegotiated the existing air service agreements between Hong Kong and a substantial proportion of the countries to which Cathay flies. The previous agreements required Hong Kong carriers to be British airlines, effectively owned and controlled by British nationals in a British colony.
There are some complications involved in the negotiations with the United States, but the new definition of a Hong Kong airline as one incorporated and having its principal place of business in the Territory is fully acceptable to the governments of Canada, Australia, France, Germany, Holland, India, Italy, New Zealand, Switzerland and many others, including, of course, China.
Canada was one of the first countries to sign a new, independent air services agreement with Hong Kong and we are grateful for the confidence this showed. It undoubtedly encouraged others to follow suit. Hong Kong's recognition in these agreements as an international city with its own international aviation arrangements, I believe, reflects international confidence in its future.
Cathay, furthermore continues to put its money where its mouth is. Our plans call for nearly US$8 billion to be spent on aircraft alone in the period between now and 2000, with firm orders for nine Boeing 747-400s and 10 A330s. In addition, we expect to soon have in place orders and options for a further 29 widebodies.
As I have already said, we are firmly committed to Hong Kong, not only in our own right but also as part of the Swire Group. The importance of our parent company's role in Hong Kong could hardly be overstated. Swire companies, including Cathay and the Swire operations responsible for aircraft catering and maintenance as well as air cargo handling, contributed almost one per cent of Hong Kong's total GDP last year. Swire's investment strategy calls for 90 per cent or so of the Group's assets to remain within the Greater China triangle of Hong Kong, Taiwan and China.
As an important property developer, Swire Properties continues to invest in projects on which the company cannot expect to see a return until long after 1997.
These strategic decisions do not arise from sentimentality about Hong Kong, which has, after all, been our home since we lost our base in China in the late '40s. The Territory provides, and will continue to provide, unrivalled access to opportunities, and first-class conditions in which to do business. Hong Kong is one of the world's great centres of banking, finance and tourism with more than six million visitors passing through last year--a figure roughly equal to the total population.
Economically, the Territory's performance remains, in the view of many observers, near miraculous in the context of a global recession. Per-capita income is the highest in Asia, outside Japan, and GDP is forecast to grow by five per cent in 1992. Inflation, which last year reached 11 per cent, and a shortage of labour remain problems, but steps are being taken to solve them.
Without question the Territory's greatest asset is its people. Hong Kong's work force is industrious and adaptable and its entrepreneurs imaginative and determined. It is a major manufacturing and services centre in its own right, as well as being the key to the Chinese hinterland. Hong Kong capital, technology, management and marketing skills, combined with China's abundance of land and labour, offer a competitive advantage available nowhere else in the region.
Certainly overseas investor confidence continues to run high. Although precise figures are impossible to obtain, direct foreign investment probably exceeded US$30 billion at the end of 1989.
I have referred to some of our difficulties, and I do not wish to minimize them, but none, I think, is insurmountable. I remain confident. The very existence of Hong Kong as the sophisticated modem city it is today is compelling evidence of indomitability in the face of adversity.
Certainly Cathay Pacific's commitment to it is unshakeable. Hong Kong is, after all, the logical hub of a region which, according to World Bank estimates, will account for fully 40 per cent of the world's economic activity by the year 2000. Bearing all that in mind, where else could we possibly want to be? Hong Kong is a great city and Cathay Pacific has every intention of remaining its airline well into the next century. Thank you.
The appreciation of the meeting was expressed by Roland Lutes, President, The Canadian Club of Toronto.