THE CONSULATE GENERAL OF SWITZERLAND IN HONG KONG

Introduction
After a traumatic year marked by the SARS crisis and the large protests against the government's plan to introduce a state security legislation, 2004 has started quite well for HK: economically the city, with the active support of Beijing, is recovering from a prolonged period of stagnation and politically the democratic forces fighting for direct elections of the chief executive in 2007 and the legislature in 2008 are gaining in strength. On January 1st around 100'000 people marched in favour of democracy asking the authorities to set up a calendar for constitutional reform. If Hongkongers are showing a renewed confidence, a majority of them still does not trust the Chief Executive.
The main political event of 2004 will no doubt be the legislative elections in September.

Domestic Politics
Political reform debate: Over the last weeks public debate over the scope and the pace of HK's constitutional reforms has intensified and dominated the headlines. Beijing authorities have clearly stated that they want to be consulted on the issue and have set camp in Shenzhen where they are meeting a range of HK representatives. In his annual policy address on January 7th 2004 the Chief Executive has not given any calendar for democratic reform as requested by the democratic forces but has announced the creation of a special task force whose mandate will be to study the provisions of the Basic Law concerning constitutional reform, to start discussions with the central government and to hear the point of views of Hongkongers. In view of the first visit to Beijing by the special task force in February various view points have been made public setting the parameters of the debate:

• NGO's have published a green paper stating all the possible options concerning the election mode of the Chief Executive and LEGCO from no change to universal suffrage.
• A well-known Chinese legal expert has stated that universal suffrage in 2007 would go against the Basic Law and that it would take more than 30 years to achieve it. His statement has not been endorsed by Beijing but is interpreted as a trial balloon for the upcoming talks.
• The pro-democracy camp has reiterated its request to have a timetable for universal suffrage by 2007 and that there is no provision in the Basic Law preventing such a development.
• After the public support in favour of democratisation by the American Consul General in HK, Beijing has asked Washington to stop interfering in Chinese domestic affairs.
• The HK General Chamber of Commerce has made public that 77% of its members believed the existing political system was not workable and constitutional reform was needed.
• Various polls have concluded that around 70% of the HK population supports direct elections for the Chief Executive and the legislature and that until now the Beijing authorities are much more popular than the local government.

The whole debate embedded in legal interpretations of the Basic Law provisions about constitutional reform is in fact highly political.
Follow-up of district elections: After the democratic camp victory in November 2003 district elections, the Chief Executive selected all the legally appointed district council members (102 on 529), a move seen as an effort to dilute de election victory of the democratic camp and as a political faux pas.
Harbour reclamation: Conservationists won a legal fight to protect Hong Kong's Victoria Harbour when the city highest court rejected a government appeal to allow a land-reclamation plan to proceed. According to the court the harbour is a special public asset and heritage.

International affairs
Cultural agreement signed between HK and Egypt.

Human rights
Visit of Tienanmen leader Wu'er Kaixi: highly publicised visit to HK of exiled Tienanmen student leader who has made repeated appeals in favour of human rights and democracy in Mainland China.
Visit of US panel on religious freedom: visit aimed at preparing future trip to Mainland China called inappropriate by central government. Contacts with pro-democracy HK Catholic Bishop Zen.

Transborder affairs
Tourism: Guangdong Province officials are planning to give all residents, and not only those from a few selected cities, the right to apply to travel as individuals to HK.
Immigration: From January 2004 onwards new migrants to Hong Kong, mostly from the Mainland, will not be eligible for assistance from the city's social security system. Other issues to be addressed: greying of HK's population and easing of restrictions on bringing in highly skilled people from Mainland China.
Crime: Soaring crime rate in Shenzhen, one of the most crime ridden cities in Mainland China. Danger to HK which is still considered one of the safest cities in the world.
Environment: Thick smog cutting visibility to 900 meters largely stemming from Guangdong Province industrial pollution
Transportation: HK airport fights for its status as gateway to Mainland, an uphill struggle as Beijing has just postponed talks to discuss further opening the Mainland market to HK's airlines.

Economy
Policy address: The Chief Executive Mr Tung Chee-hwa said he was optimistic about HK's economic prospects. He highlighted the factors underpinning economic recovery, including an improving world economy, a growing Mainland economy, closer links to the Mainland and the Central Government's strong support. HK should consolidate its core industries: producer services, logistics, tourism, financial services. He further mentioned that HK's economy is still in a transition to a knowledge-based economy. Mr Tung recalled that the target date for restoring fiscal balance had been postponed to 2008 - 2009.
2003 Hong Kong Swiss Business Council (SBC) survey: In summary, 2004 seems to be shaping into a good year for HK. Swiss companies operating in the SAR are more optimistic about business prospects than they have been for a number of years now, with sales and profits both expected to be higher.
Property:
Land sales: First public land auction after 13 months moratorium to shore up falling property prices
- Public housing: Call for changing the system of highly subsidised public housing benefiting half of Hong Kong's population
Hong Kong in figures:
- Gross domestic product (GDP): After shrinking in the second quarter because of Sars, the economy has dramatically rebounded on rising consumer confidence and an influx of high spending mainland visitors. Researchers said they expected HK's gross domestic product to record 4.2 per cent growth in the fourth quarter of last year and a 3.1 per cent expansion in the whole of last year. That is in line with the government outlook showing third quarter GDP grew 4 per cent. According to an economic forecast commissioned by The Better Hong Kong Foundation the real GDP is estimated to grow by 3,3% in 2003 with a prospective 6,7% in 2004.
- Unemployment: The seasonally adjusted unemployment rate continued to decline, from 7.5% in Sept. - Nov. 2003 to 7.3% (provisional) in Oct. - Dec. 2003.
- Consumer price index (CPI): According to the policy address, deflation is easing off. It might disappear in 12-18 months. According to the Composite CPI, overall consumer prices fell by 1.9% in Dec. 2003 from a year earlier, narrowed further from the 2.4% decrease in Nov. 2003.
- External trade: Comparing the first eleven months of 2003 with the same period in 2002, the volume of HK's re-exports of goods rose by 15.7%, while that of domestic exports fell by 8.5%. Taken together, the volume of total exports of goods grew by 13.6%. Concurrently, imports of goods increased by 12.2% in volume.
Monkey's year outlook: Public confidence in HK's economic prospects has hit a three-year high, according to a survey conducted by the University of HK. The Year of the Monkey will be a good one for HK companies, said another survey: optimism over corporate profits and the economy in the coming six months is at its highest level ever. According to a business survey conducted by the think-tank Civic Exchange in November more than 80% of the business sector is dissatisfied with the Government's performance. A commentator warned that change in HK's political system was needed if stability were to be maintained. On Government's side we heard that HK people might not want to achieve political reform at the expense of prosperity. And to take a social perspective, we add those lines taken out an editorial: "The economic shock caused by Sars is seemingly over… Public discontent against the administration and pressure for democratic change could be eased considerably with further economic improvement. But even if the economy returns to a healthy state, there are still many people who will lose out. The gap between rich and poor has widened with the drop in average wage levels of low-income earners".

Health
SARS: In January 2004 a total of three SARS cases have been confirmed in neighbouring Guangdong Province. A few more suspected cases have turned out to be false alarms. The three individuals who had no contact with each other have already been released from hospital care. It seems the virus has mutated to a milder form. The civet cats and rats are once again suspected to be the carrier and spreader of the virus. The civet cat - a local delicacy in Guangdong - is now banned from markets in China. HK has so far not seen any new SARS cases since the outbreak last spring.
Bird flu: The recent spread of H5N1 avian influenza in Asia has been more worrying in HK than SARS and has brought back bad memories. The same string of virus has killed six people in HK in 1997. HK has therefore stepped up measures to prevent another outbreak. The territory already has extremely severe measures in handling of poultry in place. In addition to the monthly rest and cleaning day, all life chicken receive vaccination. Also the bio-security measures at chicken farms and surveillance of wild birds have been stepped up after a dead peregrine falcon tested positive for H5N1. In the meantime the government is discussing if the selling of live birds - very popular in HK - should be completely banned. The city remains bird flu free.

Culture
Tendering process under way for the controversial West Kowloon cultural zone, a privately built project on freely allotted public land combining museums, theatres, residential and commercial properties aimed at making Hong Kong a world class cultural hub.

Press articles about Switzerland
South China Morning Post, 13.1.04: «In his policy address, Mr Tung describes Hong Kong as being very well placed to further develop as an international services and asset management centre like Switzerland. This is a very interesting and constructive proposal as Hong Kong is already a banking and financial centre. Looking at the high value-added services provided by Switzerland in corporate investment, personal banking, insurance and financial services is definitely a step in the right direction. During a trip to Geneva few years ago, I noticed that prices appeared much higher than in neighbouring France. Yet, despite the relatively high cost of living, Switzerland remains famous not only for private banking and financial services, but also for high quality manufacturing, hotel management and tourism services. It can achieve this because it produces high quality products and services that the world is prepared to buy- even at a higher price.»

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