In the next two months, celebrations of the 10th anniversary of the Hong Kong special administrative region will be in full swing. We all should feel proud. Together, the people of Hong Kong have defied all the grim predictions of 1997. We have also overcome our own apprehensions. At various times during the transition, foreign observers dished out gloom-and-doom predictions. In their eyes, we were doomed to fail. We also had our own apprehensions. There were serious concerns about preserving the freedoms that Hong Kong was enjoying and maintaining the Hong Kong dollar's convertibility, about the acceptability of the new SAR passport, the possibility of mainland professionals swarming the city, and possible retribution against civil servants, particularly those in the disciplined services. To many people, June 30, 1997, was Hong Kong's expiry date. Nothing beyond that date was worth consideration. Nearly 10 years on, all these predictions and apprehensions have been consigned to history. Good fung shui has little to do with our success as the first community to implement the 'one country, two systems' concept. Both Hong Kong and the central government had spent at least 15 years analysing all aspects of life in Hong Kong. The results of this work are codified in the Basic Law. Were the first 10 years of the Hong Kong SAR all plain sailing? The answer is 'no'. While none of the 1997-related apprehensions came to pass, we were knocked sideways by challenges, which were unexpected and which we were ill-equipped to handle. The Asian financial crisis was devastating and exposed the structural weaknesses in our economy. Bird flu and severe acute respiratory syndrome were costly in human and financial terms, and there were wake-up calls about our crowded living environment. The lesson was clear. The worst challenges are often not the ones that we stare in the face, but the ones that we choose to ignore. Now that we have firmly established ourselves as an SAR and parts of our investment markets are chalking up record prices, what lies ahead? Are we ignoring hidden challenges for which Hong Kong will again be caught unprepared? There are tremendous opportunities. There is a lot going for Hong Kong. But, like most other communities, we face significant challenges and some are unique. The first is politics and the constitution. The present method of electing the chief executive could be considered transitional. The Basic Law states that ultimately the chief executive will be selected by universal suffrage. However, Hong Kong is unique in that it did not become independent at the end of British rule. It has a 'high degree of autonomy', not full autonomy and is definitely not a sovereign state. Hence, the chief executive is produced by a unique two-part process - voting by sectors of the Hong Kong electorate and then central government appointment. The power to appoint is not ceremonial. The Basic Law also requires the chief executive to be accountable to both the Hong Kong SAR and the central government. The timing of universal suffrage is one of many issues we need to address. Debates have not given serious consideration to the central government's power of appointment. Universal suffrage without regard to this reality will risk serious confrontation between the Hong Kong electorate and the central government. This may not appear likely in the present political situation. But our democratic institution must be designed so that this risk is reduced to a minimum. Second is our economy. Today, it remains strong and vibrant. But there is also a good deal of concern about our longer-term future. We have a unique economy in that it is small, extremely open, has a high level of overseas participation and a low level of government involvement. We are also best placed to benefit the most from a rising China. The year before the SAR was established, there were only 64 mainland companies listed on our stock exchange with a total market capitalisation of HK$295 billion. Today, the number has increased fivefold to 344 with a 13-fold jump in market capitalisation to HK$4.05 trillion. Last year, mainland enterprises accounted for more than 88 per cent of initial public stock offerings. While development on the mainland has brought immense opportunities to some sectors, others face intensified competition from many parts of the world due to globalisation. Mainland opportunities and global competition have social consequences. The 2006 by-census has shown that in the past five years, median personal income has remained stagnant at HK$10,000 a month. In other words, a significant part of the working population is not sharing in Hong Kong's economic growth. In the world economic order of today, our workforce cannot expect meaningful income increases unless Hong Kong climbs up the value chain. Before 1997, Hong Kong was described as 'a borrowed place living on borrowed time'. Now we have put the 1997-related uncertainties behind us. What should be done to encourage social cohesion? Our government should take the lead and make the first moves. While we ask the people of Hong Kong for their commitment, our government should also show its commitment to the people. As a credit card advertisement says, 'membership has its privileges', and it should have. 'Membership' of Hong Kong should not be confined to residents of Chinese origin. It should cover all permanent residents, regardless of nationality. The government ought to clearly show that wherever they are, Hong Kong 'members' can turn to their government for support. This could come in the form of government officials lobbying on behalf of Hong Kong companies to secure overseas commercial contracts, or setting up schools for Hong Kong expatriates on the mainland. Having overcome the many challenges in establishing the SAR, we should have renewed energy and feel all the more confident about making this city a better home for everyone. Leung Chun-ying is convenor of the Executive Council. This is an edited version of a speech delivered at a Rotary Club function yesterday
