One thing that I always mention when I'm overseas is the breadth and depth of our intellectual capital in Hong Kong.

It's one of our features that sets us apart in the region as Asia's world city. 

There is an old Chinese saying: 'those having the right people thrive'. 

That is certainly the case in Hong Kong, where we have a per capita GDP of nearly US$25,000 and where more than 85% of our GDP comes from the services sector.

A well-educated, hard-working, flexible and enterprising workforce has always been one of our greatest strengths - and at the end of the day, it always will be.

HK faces tough overseas competition

But we can only hope to remain ahead of the game, and boost the living standards of our people, if we can nurture our home-grown talent as well as attract the best and the brightest from around the globe.

In that regard we're up against some tough competition. London, New York, Tokyo, Toronto, Sydney, Singapore, Shanghai and Shenzhen - all are striving to retain their own human capital, as well as attract talented professionals, business people and entrepreneurs to add further value to their economies.

Today, I would like to remind you of Hong Kong's population policy, which was released in February this year.

In his inauguration speech on July 1 last year, the Chief Executive highlighted the urgent need for such a policy to 'fit our long-term social and economic development, complement family requirements, and address the interests of different sectors in our community'. 

I chaired the Task Force set up to look at this issue.

Quality boost needed to meet HK's vision

Our overriding policy objective is to strive to improve the quality of our population to meet our vision of Hong Kong as a knowledge-based and world-class city.

In this context, we should aim to redress population aging, foster the concept of active and healthy aging, promote social integration of new arrivals and, most of all, equip our people, young and old, in sustaining economic growth. 

If we can do all of this we should see a steady improvement in the standard of living of our people.

We also believe that any population policy for Hong Kong should move away from the simple idea of aiming at an optimum population both in terms of size and composition. 

Sufficient flexibility key to quick response

It is more useful to ensure that sufficient flexibility is built into the system to respond quickly to changing demographic conditions and market situations.

I would like to first talk about the characteristics and trends of our population, and then I will move onto some of our policy recommendations.

First, population growth has been declining steadily since the 1950s and is now at a low level of 0.9%. It is predicted to remain low in the years to come.

Fertility rates have dropped rapidly over the decades, and Hong Kong now has one of the lowest fertility rates in the world. 

Perhaps we're all too busy working to think about having families. 

Fertility rate falls to alarming levels

In 2002, the fertility rate reached an extremely low level of 959 children per 1,000 women, well below the 'natural' replacement level of 2,100 children per 1000 women.

On the other hand, thanks to our high public healthcare standards, we are all living longer. 

Life expectancy at birth has risen over the past 30 years from 68 for men and 75 for women, to 79 for men and 85 for women.

What this tells us is, like other advanced economies, Hong Kong's population is aging rapidly. 

One-fourth of population to be 65+ in 2031

If these trends continue we expect that a quarter of our population will be aged 65 or above by 2031.

Second, population inflows are more complicated in Hong Kong than most places. 

We have new arrivals from the Mainland for family re-union, skilled migrants and imported transient workers who are mostly foreign domestic helpers.

For some categories - such as new arrivals from the Mainland under the 'One Way Permit Scheme' - there is a limit.  But for others, such as skilled migrants and foreign domestic helpers, there are no limits.

New Mainland arrivals accounted for most growth

From 1997 until 2001, new arrivals from the Mainland under the OWP Scheme accounted for 93% of Hong Kong's population growth. 

From 1983 to 2001, more than 720,000 new arrivals from the Mainland were admitted under the scheme. 

Data provided by Mainland authorities tell us that by August 2002 there were about 168,000 OWP Scheme applicants waiting to come to Hong Kong. 

We will continue to rely on new arrivals from the Mainland for most of our population growth. 

Need to plan to meet Mainland arrivals' needs

So, we have to plan for these arrivals, particularly in key areas such as education and training, health care and housing.

For skilled migrants, there are various schemes to admit people from overseas and the Mainland. For foreign professionals, there are no quotas or job-sector restrictions, and successful applicants are allowed to enter Hong Kong to live with their families. 

And up until recently, the admission schemes for Mainland professionals have been rather restrictive.

Hong Kong has a significant transient population of imported workers employed mainly as domestic helpers. 

Foreign domestic helpers' numbers multiply

The proportion of foreign domestic helpers in the total labour supply leaped from 1% in 1982 to 7% in 2001.

There is no clear indication that the admission of FDHs has been affected by the economic downturn of the past few years.

Outflows of people slow

The number of people emigrating from Hong Kong has declined sharply from 66,000 in 1992 to about 10,000 now. A considerable proportion of these emigrants was highly educated and skilled. 

The accuracy of these figures, though, has to be treated with caution because an unknown but certainly significant number has since returned.  But, these Hong Kong residents can readily re-emigrate and leave our workforce again.

Another outflow is the growing number of Hong Kong residents living, working or retiring in the Mainland, particularly the Pearl River Delta. 

There is yet no evidence that retiring across the boundary has become a significant trend, although this may change in the future.

HK faces challenges in keeping talent

After analysing these characteristics and trends, we found we faced some serious challenges and concerns.

One is an increase in our dependent elderly.  They are expected to rise gradually from 158 per thousand in 2002 to 198 in 2016, then quickly to 380 in 2031. 

This will impact adversely on our future workforce, put extra burden on our medical and social welfare services.

We need creative ways to look after our elderly and encourage them to continue to lead productive and healthy lives.

Immigration accounts for most growth

The growth of our population relies much on immigration, the bulk of which is admitted through the OWP Scheme. 

As a scheme mainly to facilitate family reunion, it is neither appropriate nor feasible to impose screening criteria based on educational attainment or skill. 

The task of training and upgrading the skills of adult new arrivals, and our existing population, does pose a serious challenge for our ongoing development as a knowledge-based economy.

And that is why we have been devoting more resources to education and training. 

To help ensure an adequate supply of well-educated manpower, we have laid down a target that 60% of our secondary-school leavers will receive post-secondary education by 2010-11. 

As a cosmopolitan city, we devote extra efforts to upgrade the teaching of English in schools. 

Schemes help train, re-train workers

To meet the needs of a knowledge-based economy, we have introduced various schemes to help retrain workers who have lost their jobs and are looking to develop new skills. 

We have also set aside funds to encourage our population to undertake lifelong learning, as well as provided businesses with funds to help their staff upgrade skills and enhance competitiveness.

Although Hong Kong adopts an open-door policy towards talent and professionals from overseas, our previous policy on the entry of Mainland talent and professionals had been rather restrictive. 

I am glad to say that a new, more flexible admission scheme introduced in July this year should change this.

The importance of this scheme has grown with China's accession to the WTO and the conclusion of Closer Economic Partnership Arrangement. 

Mainland professionals to help HK tap markets

The admission of Mainland professionals and talent who possess the connections as well as understanding of the Mainland market and consumer preference would help Hong Kong tap the vast Mainland market. 

Greater flexibility in admission of such personnel is essential for Hong Kong to maintain competitiveness as a regional hub for professional and business-related services. 

And the scheme has proven to be successful. By the end of August, we had already received 464 applications and approved 181 of them.  CEPA will certainly benefit the Hong Kong service suppliers. 

Overseas suppliers here to benefit from CEPA, too

Foreign service suppliers incorporated in Hong Kong will enjoy CEPA benefits in the same way as Hong Kong companies. 

We encourage those foreign service suppliers who wish to take advantage of CEPA to establish themselves in Hong Kong as soon as possible.

We are very keen to attract talented people from the Mainland and elsewhere in the world. 

Liberal immigration regime welcomes overseas talent

We have a much more liberal immigration regime relative to other advanced economies.  We have made it relatively easy for companies to bring in staff from overseas as long as they possess skills and talents not readily available in Hong Kong. 

In addition, we will also encourage investor immigrants to settle in Hong Kong and take advantage of our position as a regional business and financial hub and of our low taxes.

In the past, we only allowed the entry of investors to join or set up a business.  We have relaxed our policy to attract investment immigrants who have the financial means to make a substantial investment in Hong Kong but do not wish to run a business. 

More flexible rules for investment immigrants

Investment immigrants can inject funds for investments like stock market, mutual funds and real estate. Persons with net assets for investment of not less than HK$6.5 million will be eligible for admission to Hong Kong as capital-investment entrants.

My colleagues in the Security Bureau will announce details of this investment scheme very shortly. 

We believe that these new measures will help generate more economic activities and more employment opportunities in Hong Kong.

From a wider perspective, the growing proportion of immigrants born outside Hong Kong will inevitably have a major impact on our social and economic structure. 

The Government will need to put in greater efforts, but every quarter of the community will need to promote closer integration of new immigrants into society.

Relationship with Mainland key to our competitive edge

Hong Kong's economic development and success in global trade over the past three decades have been leveraged on the enormous human and material assets of the Mainland. 

Hong Kong's relationship with the Mainland is a key element of our competitive positioning as a world city. 

The Closer Economic Partnership Arrangement, the introduction of individual visit permits for Mainland residents in a number of cities to visit Hong Kong for sight-seeing, the endorsement of Central Government for the construction of a bridge to link Hong Kong with Macau and Zhuhai, will strengthen that relationship and our unique assets in taking on the new challenges in global trade. 

Our economic recovery is in sight.

That brings me to the final point that we must continually review our population policy.

Population policy needs regular review

The publication of the Population Policy Task Force report in February this year was the beginning. We have many serious, long-term issues to address - and hopefully overcome - if we are to ensure sustainable economic development in Hong Kong.

The Chief Secretary for Administration Donald Tsang gave this address on Hong Kong's Population Policy at a conference "Getting Serious About People: Capitalising on Talent in Greater China" at the Hong Kong Convention & Exhibition Centre.