The report covers the major areas of "one country, two systems”, the economy, the rule of law, the environment and Hong Kong's positioning as Asia's world city.

Topics highlighted include political development, China's entry to the World Trade Organization, enhancing competitiveness, tourism, the legal system and the right of abode issue.

In his opening message, Chief Executive of the HKSAR government Tung Chee Hwa said that the "one country, two systems" concept has been successfully implemented and that Hong Kong remains an open, free and vibrant society.

Tung said the greatest challenges over the past five years have been in the economic realm, rather than the political arena.

He said the government would "constantly, carefully and thoroughly" review the changing external environment as well as Hong Kong's competitive advantages, strengths and weaknesses, especially in regards to competing cities and regions.

He said, "Hong Kong remains very strong in our 'traditional' industries such as the manufacture of garments, watches and clocks, electronic consumer products and toys.

"These are successful businesses by international standards. The question now is how to help them move up the value chain to take a larger portion of the world market," he added.

Tung said the government would improve and promote a business-friendly environment by enhancing the efficiency of government, promoting the use of IT, maintaining a low and simple tax regime, and creating an environment that allow individuals and corporations to build wealth.

"We will continue to invest heavily in hard and soft infrastructure. By soft infrastructure, I mean education. We will invest a lot in education to make sure that for generations to come, we will be able to compete successfully in world terms as a value-added city," he said.

Tung emphasized the role that innovation, technology and science could play in helping Hong Kong to move up the value chain and with economic restructuring.

"The restructuring taking place will not be easy," he said, adding that "But it is worth remembering that Hong Kong has faced such challenges twice before - in the 1960s and 1980s - and both times Hong Kong people have proved to the world we have the drive, talent and entrepreneurial flair to succeed and further improve our lives."

"I have no doubt that we will once again be successful in overcoming the challenges and difficulties that lie ahead to lay the foundations for an even brighter future," he said.

(Xinhua News Agency June 29, 2002)