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10.11.2006, 04:13 AM

HONG KONG (XFN-ASIA) - Chief Executive Donald Tsang delivered his annual policy address today during which he repeatedly harped on the need for Hong Kong to forge closer economic ties with the mainland in order to boost the territory's growth prospects.

The speech was short on concrete plans, but the few policy initiatives outlined were all directed at cementing the economic partnership with China while leveraging Hong Kong's strengths as a gateway for Chinese firms as they pursue international expansion.

Tsang spoke of Hong Kong's need to attract more investments, but the policy objective was mainly directed at attracting some of the offshore securities investment business of insurance companies in mainland China.

'The international insurance and reinsurance markets in Hong Kong can provide reinsurance services for the mainland's fast-growing insurance industry,' he said.

To meet the demands of the mainland market, Hong Kong can develop a whole range of risk management instruments, Tsang said.

'In this regard, we will conduct an in-depth study on the development of the commodity futures market,' he said.

Tsang said Hong Kong's tourism sector will receive a boost following China's approval of five more areas for the individual visit scheme to Hong Kong.

The scheme, which allow mainland tourists to travel to Hong Kong outside tour groups, now covers five more areas including Shijiazhuang in Hebei, Zhengzhou in Henan, Changchun in Jilin, Hefei in Anhui and Wuhan in Hubei, he said.

He also spoke of further expanding trade between Hong Kong and the mainland through the Closer Economic Partnership Arrangement (CEPA) with the mainland and through other avenues.

Tsang said the Hong Kong and mainland governments will jointly study development of 'cross-boundary' infrastructure projects.

The move is part of a program to enhance the efficiency of cargo flows and inspection between Hong Kong and the mainland, he said.

Today's address marks the last policy address by Tsang in his current term as Hong Kong's leader, but the former civil servant is widely expected to be chosen again as the top honcho next March by a Beijing-backed electoral committee. Tsang's current term expires at the end of June 2007.

Among the economic highlights in today's policy address was an announcement that the government plans to amend existing rules to facilitate more listings of overseas firms in the local stock market.

'We should quickly amend existing listing rules to enable well-established and qualified foreign enterprises from different parts of the world to list in Hong Kong,' Tsang said in his speech.

He did not specify the countries from which the government would like more foreign listings to come from.

Most of the large and well-established companies which have listed on the local bourse in recent years have come from the mainland.

Interestingly, Tsang did not say anything on the government's proposal to introduce a controversial goods and services tax (GST) as a way of broadening Hong Kong's narrow tax base.

The government is still conducting public consultation on the controversial tax measure, but private opinion polls have pointed to people's unhappiness with the proposed new tax.

Apparently taking a cautious approach on another controversial issue, Tsang said the government is not adopting legislation any time soon on proposals for the adoption of a minimum wage for workers. He noted that there are diverse views on the subject.

However, he said the government, together with the business and labor sectors, will soon launch a voluntary scheme, dubbed the Wage Protection Movement, aimed at protecting wages of workers in two sectors, namely cleaning and guard services sectors.

'We will actively encourage corporations and contractors to join this movement to ensure that employees in these two sectors will receive wages not lower than the average market rates of the relevant industries and occupations,' Tsang said.

'Taking into account the views of stakeholders, and having carefully considered our socio-economic situation, the government considers that the pragmatic approach at this stage is to provide wage protection through non-legislative means,' he said.

He said the government will monitor the effectiveness of the Wage Protection Movement through the LAB and conduct a comprehensive review in two years.

Tsang also spoke of expanding social welfare, education and a host of other benefits to local people.

On the issue of pollution, which has become a pressing issue in the territory due to worsening smog levels, Tsang outlined moves the government is pursuing in conjunction with authorities in southern China, as well as local measures aimed at alleviating and reducing pollution levels.

He said the government plans to spend 3.2 bln hkd to provide an incentive for the early replacement of 74,000 diesel-powered commercial vehicles.

Owners of these vehicles will have up to three years to take up the government's planned offer, Tsang said.

'Upon completion of this program, we envisage that emissions of nitrogen oxide and respirable suspended particulates in Hong Kong will be reduced by 10 pct and 18 pct respectively,' he said.

The Hong Kong Special Administrative Region (HKSAR) is prepared to introduce legislation in the 2006-07 legislative year to effect the establishment of a new communications authority, said HKSAR Chief Executive Donald Tsang Wednesday.

"We consulted the public early this year on the reform of the regulatory regime and proposed merging the functions of the Office of the Telecommunications Authority and the Broadcasting Authority to form a new communications authority," Tsang said in his second policy address at the Legislative Council.

"We aim to adopt a regulatory framework to promote innovation and competition to a level on par with advanced international standards," he said.

Tsang said the application of new wireless communication technologies has also spread rapidly and widely, adding that the SAR government will carry out public consultation by the end of 2006 on the policy of radio spectrum management.

"We aim to ensure, through market forces, more flexible and effective utilization of the radio spectrum as a public resource, facilitating technological advance and the evolution of new business models," he said.

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