Anson Chan Fang On-sang yesterday endorsed controversial arrangements for next year's legislative elections, denying they were designed to freeze out Democratic Party candidates. In her first speech since the handover, the Chief Secretary for Administration made a pointed defence of plans that will disenfranchise two million voters. Addressing businessmen at a lunch organised by the American Chamber of Commerce, Mrs Chan said: 'Democracy has not been throttled. I am confident the elections will be free, fair, open and governed by rules that are transparent. 'But I see them first and foremost as a stepping stone that will set Hong Kong firmly on the road to the universal suffrage envisaged in the Basic Law.' Mrs Chan, who last year said the pre-handover legislative council was elected fairly and should serve beyond the resumption of mainland rule, yesterday claimed there was no 'universal truth about the perfect election'. 'Each society should be allowed to develop its own process, based on its own particular social, historical, political and cultural conditions,' she explained. 'I think we all agree that Hong Kong's social, cultural, political and historical conditions are different from most, if not all. 'A degree of care and attention is required, particularly in relation to the unique situation embodied in 'one country, two systems' and the specific content and spirit of . . . the requirements of the Basic Law.' Mrs Chan rejected charges that the electoral plan would 'set back the course of democracy', and that it was deliberately designed to favour some candidates and hurt others, particularly the Democrats. 'There is no conspiracy to design a system that is hostile to democratic political forces and heavily weighted in favour of China's capitalist communists,' she said. 'That kind of comment only underestimates the role of the Democrats in Hong Kong's body politic, and impugns the integrity of those who take a different view of how best to enhance Hong Kong's prosperity and stability and preserve our way of life.' Mrs Chan was confident the election would produce a 'balanced legislature, representative of the multi-coloured spectrum of opinion and aspirations of the community'. Democratic Party chairman Martin Lee Chu-ming described Mrs Chan's remarks as 'highly unfortunate'. 'There is no way to fudge the fact that two million fewer people will have a vote in 1998 than did in 1995. If we are really moving forward, then why is it we have to go backwards first?' he asked. 'The bottom line is that any electoral system that does not faithfully reflect the public will, as expressed through the ballot box, is by definition a bad system. 'And we already know that in this electoral system the political group which always wins the highest percentage of the popular vote will end up with the smallest number of seats. 'This is, by no stretch of the imagination, democratic progress,' he added. Mrs Chan also used her speech to applaud Hong Kong's progress since the handover. Citing the headline 'Death of Hong Kong' used by Fortune magazine last year, she said: 'I think the headline today would read 'Hong Kong goes back to China: Business as Usual'.' She dismissed as 'misinformed and groundless' claims that the SAR Government was 'conniving to subvert the rule of law' and replace it with 'rule by law'. Civil liberties had not been curbed or stifled, she said, pointing out that there had been 150 demonstrations in Hong Kong since the handover, but not one arrest.