THE CONSULATE GENERAL OF SWITZERLAND IN HONG KONG

Introduction
Despite a remarkable economic recovery (a framework within which the budget for 2004/05 was welcomed) the fight over democracy continues to make headlines in the Hong Kong press. It is deepening for several reasons: Beijing has clearly taken the lead and adopted a tough line on who is patriot, democracy activists have testified in the US Senate and Washington has warned that relations with Beijing might suffer over HK. International media say that, if China pushes it any harder, it could damage business confidence in HK. On the contrary pro-Beijing politicians stress that the political reform debate could drive away investors.

Domestic Politics
Political reform debate: In March the support of HK citizens for universal suffrage has fallen from 74% to around 65%.
The members of a HK delegation headed by democratic leader Martin Lee who testified in a US Senate hearing have been violently criticised by pro-Beijing forces, accused of being traitors, liars and clowns. On their return supporters and opponents of the democrats clashed at the airport.
On the occasion of the annual session of the NPC in Beijing, Tung said that the central government will continue to provide support for HK's economy but that no timetable has been set for the city's constitutional development. He is widely seen as spineless leader who has failed to explain to Beijing the views of the majority of HK citizens. Premier Wen has called for unity in HK skipping the burning issue of patriotism and stressing the need to focus on the economy. For several HK editors economics is no answer to a question of politics and for some observers the Chief Executive's request for economic assistance from Beijing makes HK people feel shameful.
The war of words goes on between the two camps: Beijing warns HK it could declare a state of emergency in the city to combat civil upheaval, a comment seen by the pro-democrats as a threat, a bizarre and dangerous portrayal of HK and a tactic to hide Tung's failure. It is also said that HK's government has breached the trust of Beijing by failing to pass the national security bill last year. Li Ka Shing, the richest man in HK, favours slow step by step reform stressing that the city cannot withstand any major shock and cannot handle big volatilities.
After the announcement that the Standing Committee of the NPC will in the first days of April examine and give his interpretation of the sections of the Basic Law dealing with the election of the Chief Executive and LEGCO, the democrats declare that the formula "One Country, Two Systems" is finished and that this interpretation will also weaken the city's rule of law and would tarnish the image of HK. If this continues, the Basic Law will become a tool for people in power to control the development of society. HK's autonomy is under attack and not much is left of the principle "HK people ruling HK". By acting so China forces people into the streets.
After two months of public consultation involving 82 groups the government political task force has reported its conclusions to the central government: changes are possible to the selection method for the next chief executive and the formation of the Legislative Council as of 2007 adding that any proposal should be based on a consensus between HK and Beijing.
International reactions to constitutional reform debate: Europe is troubled by erosion of the "Two Systems" part of the "One Country, Two Systems" formula and Washington clearly sides with the democrats camp.
Taiwan elections: According to pro Beijing politicians too much democracy too soon could drive away investors and lead to the kind of turmoil seen in Taiwan during and after the presidential election.
Harbour reclamation: Harbour reclamation broke no rule. Judge says the government acted within the law in ordering that work proceeds on the central project to create land for bypass.

International Affairs
HKSAR and Japan forge closer ties on ICT co-operation: On March 23, the Hong Kong SAR Government signed the first Arrangement on Co-operation with Japan to forge closer ties in the development and co-operation of information and communications technology (ICT).

Human Rights and Legal Affairs
Tienanmen testimonies premiered in HK: Tienanmen Mothers Campaign launched a series of events to mark the 15th anniversary of the crackdown including testimonies from victims and witnesses.
Ombudsman gets second term: Alice Tai Yuen-ying has become the first ombudsman to serve a second term since the office began in 1989 after the Chief Executive re-appointed her for a further five years. Her first appointment in 1999 raised doubts among legislators who questioned her impartiality.
Final Report of the Working Party on Civil Justice: The Final Report of the Working Party on Civil Justice Reform (appointed in February 2000) was published on March 3. Having studied in detail the comments received on its Interim Report and Consultative Paper published in November 2001, the Working Party has made a total of 150 recommendations. The Final Report recommends a large number of amendments to the existing procedural rules and practices.

Transborder affairs
Abuse of land use in Shenzhen: Shenzhen illegal golf courses largely catering to Hongkongers are facing a crackdown to halt abuse of valuable land.
Economic ties between Fujian and HK: Xiamen aims to step up economic ties with HK under CEPA and Fujian residents are keen on solo travel to the city.
Increase in prostitutes and beggars numbers from Mainland: Amid growing concerns about imported prostitution and theft, Guangdong authorities have eliminated the 90 days two way permit to HK limiting stays to 7 days.
Diplomatic training for HK civil servants: The Foreign Affairs College of Beijing has offered to coach HK on foreign policy.

Economy
Budget 2004/05; no surprises: The Financial Secretary presented his maiden budget for the Financial Year 2004/05 on March 10. Highlights: Prudent management of public finances: The fiscal deficit for 03/04 is forecast to be HK$49 billion (4% of GDP), for 04/05 HK$ 42.6 billion. Fiscal balance is expected by 2008/09 (government operating expenditure should then be reduced to HK$200 billion from 218 billion in 2003/04). Economic initiatives include - beside further implementation of CEPA and enhancing the quality of the financial market - promoting the tourism industry (with additional funding of HK$ 95 million) and fostering of creative industries (creation of a HK$ 250 million fund to launch a DesignSmart initiative with the setting up of a Design Centre to attract talents). Promoting Employment: $1.2 billion are allocated to extend about 11 000 temporary jobs, to provide young people with opportunities for gaining work experience. Taxation and Fees: No additional tax increases proposed; fees and charges will be revised in line with the "User Pays" principle. «Fun»: Car owners will be able to make their personal statements with the Personalised Vehicle Registration Marks Scheme (expected to fetch HK$ 70 million a year). Welfare: HK$ 200 Million will be set aside to help the disadvantaged. Government Bonds will be issued to finance infrastructure; the value will not exceed HK$ 20 billion for 2004/2005. Broadening the tax base: An internal Committee will submit a report at the end of the year on the eventual introduction of a goods and service tax. Any implementation would take at least three years to prepare. The IMF welcomed the presentation of the budget and endorsed the medium-term fiscal consolidation framework in particular the objective of attaining budget balance by FY2008/09.
The Hong Kong International Jewellery Show 2004 opened on March 2; a total of 1,380 exhibitors from 34 countries and regions were to take part in the exhibition, 16 per cent up on last year. Over a dozen countries and regions had their own pavilions.
Film production: The Film Development Fund has allocated $1.2 million to provide training equipment for the first comprehensive training programme on film production in Hong Kong. This three-year programme will provide 240 training places each year. Since the launch of the Film Development Fund in April 1999, it had allocated more than $48 million to 69 projects. The Film Guarantee Fund, another Government initiative to support local film production, had approved loan guarantees totalling over $11.2 million for five local film productions to help them to secure loan facilities from lending institutions. The committee also endorsed the following work targets of the Film Services Office in the coming year. There are, among others, to promote Hong Kong as a major film production centre; to further promote the Film Guarantee Fund and conduct a review of the fund before the end of 2004.
Retail banks see profits rise despite a turbulent year: they record a 5.3 per cent increase in pre-tax operating profits last year. With interest income in free fall, largely because of the continual narrowing of net interest margins, banks turned to fee income and treasury gains to bolster earnings. According to a Hong Kong Monetary Authority report on banking-sector development, non-interest income last year accounted for 34 per cent of lenders' operating income, up from 30 per cent in 2002. Another encouraging development reported was an improvement in loan quality, as banks benefited from a drop in bad-debt charges.
Closer Economic Partnership Arrangement (CEPA)
- more Time to Add New Products for Second Phase of Zero Tariff: The Trade and Industry Department (TID) announced on March 19, that the deadline for the business sector to propose additional products for the next phase of tariff elimination under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) will be extended by one month to 30 April 2004. Under CEPA, 374 Hong Kong origin goods can be exported to the Mainland tariff-free starting from 1 January 2004. According to a TIS spokesman, 90 applications were received and the product types include, among others, food and beverage, textiles and clothing, metal, plastic, machinery and electronic products, optical products.
- Expatriates and foreign visitors in Hong Kong will soon be given visa-free access to Shenzhen as part of new measures under the Closer Economic Partnership Arrangement. About 800,000 foreigners who visit the special economic zone via Hong Kong would benefit from the new measure.
Exporters' credit insurance claims decline by 18.2pc: The Hong Kong government's export credit insurer last year recorded its lowest payouts since the Asian financial crisis, as exporters increasingly turned to international debt collectors to recover payments rather than seek compensation. The Export Credit Insurance Corp (ECIC) received 145 claims applications seeking total compensation of $42.5 million last year, which was a decline of 18.2 per cent from 2002. The Sars outbreak was one reason for the low level of claims.
Wages: The average wage rate for all the major sectors surveyed taken together, as measured by the wage index, fell by 1.5% in nominal terms in December 2003 over a year earlier. This was smaller than the decrease of 2.1% in September 2003. Companies should not give their staff pay rises this year, an employers' group said - after the labour minister asked businesses to do just that.
Macao: Premier Wen Jiabao praised Macau Chief Executive Edmund Ho Hau-wah for having done a good job. Before a private meeting Beijing, Mr Ho told the premier that the city had an impressive economic growth rate of 14 per cent last year, while unemployment was down to 5.4 per cent. Mr Ho boasted a budget surplus of $2.6 billion, thanks to a windfall in revenue and reduced spending.

Hong Kong in figures
GNP/GDP: After netting out the effect of price changes, Hong Kong's GNP increased by 6.8% in real terms in the fourth quarter of 2003 over a year earlier. This exceeded the 5.0% year-on-year increase in real terms in GDP in the fourth quarter of 2003. For 2003 as a whole the GDP grew by 3.3% up from 2,3% growth in 2002. Forecast according to Mr Tangs budget's speech: 2004, 6%.
External merchandise trade figures for February 2004: In February 2004, the value of total exports of goods (comprising re-exports and domestic exports) soared by 28.2% over a year earlier to $134.8 billion, after a year-on-year increase of only 0.2% in January.
Unemployment: the seasonally adjusted unemployment rate declined from 7.3% in November 2003 - January 2004 to 7.2% (provisional) in December 2003 - February 2004.
Consumer Price Indices for February 2004: according to the Composite CPI, overall consumer prices fell by 2.0% in February 2004 from a year earlier, enlarged from the 1.5% decrease in January.(the composite CPI has now been falling for 64 consecutive months but government officials and most economists expect Hong Kong's long-running deflation to finally come to a halt in the second half of the year).
Statistics on vessels, port cargo and containers: In the 4th quarter of 2003, total port cargo throughput increased by 10% over a year earlier to 55.3 million tonnes. For 2003 as a whole, total port cargo throughput increased by 8% to 207.6 million tonnes.
Hong Kong International Airport: According to an official speech, Hong Kong International Airport now handles close to 200,000 aircraft movements annually and processes over 34 million passengers and 2.6 million tonnes of cargo each year.

Health
Bird Flu: On 11 March, the Health, Welfare and Food Bureau welcomed the decision of the United States' Centres for Disease Control and Prevention (CDC) to remove Hong Kong from the jurisdictions included in an importation ban on birds and bird products. As of March 20, frozen chickens from the Mainland are back on sale in Hong Kong. The ban on live chickens will end on May 12, three months after the last case of bird flu was reported in Guangdong province. New measures will be introduced by then to improve hygiene at wet markets and minimise human contact with live chickens.

Varia
Attacks on hikers: Police increases its presence in country parks to foil robberies after at least six recent cases.
Crackdown against triads: More than 400 persons have been arrested in raids against triads' vice ring.
Quality of life: Hong Kong's quality of life rating held steady last year while the rankings of regional rival Singapore and major mainland cities improved, according to a survey by Mercer Human Resources Consulting. HK came 70th in the annual study of 215 cities or territories by Mercer Human Resource Consulting. The city's ranking was unchanged from the year before.

Press articles about Switzerland
Hong Kong Daily News, March 2, 2004: Both Zurich and Geneva rank No. 1, among 215 cities in the world, in a survey about quality of living by an European consultant company. Bern, Frankfurt, Sydney, Auckland and Copenhagen rank the 5th. The criteria include medical services, logistics, housing, entertainment and public services.
Press release issued for the Celebration of the Francophonie: Hong Kong - On March 20, young and talented Swiss performer and accordionist Celina Ramsauer will grace the stage of the Fringe Club Theatre for the annual Francophone Festival organised by the Consulates of Canada, France, Switzerland and the Alliance Francaise. She will add a Swiss note to the Francophone celebrations. Her distinct husky voice combined with her partner, "Old Leon" will be a new experience for music and art lovers in Hong Kong.
South China Morning Post, 26.03.04: Shunned firms back in force for Basel fair Victims of a Sars 'ban', HK watch and jewellery makers are wooed to return. Watch and jewellery makers in Hong Kong are set to return in force to the world's biggest industry trade show next month in Switzerland, although they still feel hurt after being effectively banned last year because of the Sars outbreak. At least 333 exhibitors from Hong Kong have signed up to attend this year's Baselworld watch and luxury goods show, making it one of the largest contingents… Financial Secretary Henry Tang Ying-yen, who fought for the rights of Hong Kong exhibitors last year, has been invited to the show's opening on April 15 by the Trade Development Council (TDC), which is organising the Hong Kong delegation… The country's Consul General, François Barras, said Hong Kong companies would be welcomed not only as exhibitors but as partners.
The Standard, 29.03.04: Swiss banking ways criticised by Baer doyen. In his autobiography Hans Baer, a member of one of Switzerland's oldest and most respected private banking dynasties, wrote that banking secrecy is a defensive instrument that protects Switzerland from overall competition and, to borrow some words from Winston Churchill, makes fat but impotent. The book calls for Switzerland's unique secrecy rules to be relaxed because they prompt questionable behaviour and distrust abroad.
Seen and heard in the Swiss media…. But not yet in Hong Kong (at time of printing)
Telecom fair to leave Geneva: The Swiss city of Geneva is set to lose a major telecommunications event. The International Telecommunications Union said it was planning to move its next Telecom World event in 2006 to Hong Kong. The United Nations organisation said the reasons for the move included costs, organisational problems and the growing importance of the Asian markets. Geneva has hosted the Telecom World fair since it was first held in 1971.

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