A new task force will oversee the development of the island's new political structure, Chief Executive Tung Chee-hwa said Wednesday during his annual policy speech.

Hong Kong Chief Executive Tung Chee-hwa listens to a question during a news conference after delivering his policy speech in Hong Kong January 7, 2004. Besieged by growing calls for more democracy and high unemployment, Tung pledged onn Wednesday to forge tighter economic links with China. [AP]

Tung promised to actively promote constitutional development in Hong Kong in line with the Basic Law, but said such a move should be pushed ahead with caution.

The method for selecting the chief executive and for forming the Legislative Council after 2007 are important components of Hong Kong's political structure, he told the Legislative Council in his annual Policy Address.

They would affect the implementation of the Basic Law, the relationship between the SAR and the central government and the long-term prosperity and stability of Hong Kong, he noted.

The development of Hong Kong's political structure must "proceed step and step, in accordance with the specific conditions in Hong Kong and in an orderly manner", Hu said, adding that the Basic Law must be adhered to when handling the issue.

"We must understand the full implications of these important issues, before making appropriate arrangements for the review of constitutional development," Tung said.

The chief executive has decided to establish a task force to examine these issues -- particularly those concerning the understanding of the relevant provisions of the Basic Law -- and to consult the central government.

The task force will be headed by Chief Secretary Donald Tsang, with members including Secretary for Justice Elsie Leung and Secretary for Constitutional Affairs Stephen Lam.

The SAR government has "always attached great importance to constitutional development," Tung said. It will encourage all sectors of the community in Hong Kong to continue considering and exploring the issue rationally.

Tung recalled that during his duty visit to Beijing last December, President Hu Jintao expressed the "serious concern and a principled stance" of the central government over the issue.

Economic recovery

In his second January policy address Tung vowed to seize opportunities to expedite economic recovery and meet the challenges of globalization.

He said the administration will try to stay close to the community and improve governance by better grasping public opinion, enhancing the accountability of principal officials as well as improving policy-making.

In his speech, Tung acknowledged that the people of Hong Kong have experienced many difficulties over the past year and the administration learned a painful lesson.

But the economy, badly hit by the SARS outbreak in the early half of 2003, has begun to recover.

"Many indicators point to a V-shaped economic rebound. Unemployment has declined. Hopefully, deflation, which has persisted for more than five years, will disappear in 12-18 months," he forecast.

"We expect to see sustained economic growth and a continued decline in unemployment this year. We are optimistic about our own economic prospects."

In particular, he mentioned the Individual-Travellers Scheme for mainland visitors and the Closer Economic Partnership Arrangement between the mainland and Hong Kong, which have contributed a lot to the territory's economic recovery.

He reaffirmed financial services, the service industry, logistics and tourism as the four pillars of Hong Kong's economy.

To improve the business environment, Financial Secretary Henry Tang will merge and reorganize the committees under his purview into a high-level body to simplify procedures and improve regulation.

"While meeting the challenges of globalization and dealing with economic restructuring, we have to pay at the same time serious attention to people's livelihood and social stability, so as to help Hong Kong people upgrade themselves and manage these changes."

With education accounting for 25 per cent of total expenditure, the government will continue to invest substantially in education and training to raise the competitiveness of the labour force.

To promote employment and training, Tung announced HK$1.2 billion funding to implement three employment initiatives.

Contracts for 11,000 temporary jobs will be extended, while the Youth Work Experience and Training Scheme for 10,000 young people aged 15-24 will be extended by two years.

The government will also introduce a one-year trial scheme to assist 1,000 young people become self-employed.

At a separate media session shortly after his speech, Tung admitted that the Policy Address this year does not contain many new ideas but "it was a solid and pragmatic one".

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