Small and medium enterprises - or SMEs - are indeed a powerful economic force in countries around the world. In Hong Kong, SMEs play an integral part in our economic prosperity, underpinning our economy's rapid and successful transformation from a light industrial hub into an international commercial and financial centre.

As at December 2005, there were about 268,000 SMEs in Hong Kong, accounting for over 98% of the total business entities. They provide job opportunities to about 1.18 million people, that is, over one-third of our total working population.

In the accountancy sector, we are also blessed with many versatile SME firms. Figures of Hong Kong Institute of CPAs as at June 2006 indicate that there are about 1,340 small-and medium-sized CPA firms and practices in Hong Kong, providing highly competitive auditing, accounting, secretarial, taxation and other related services to a large pool of clients, including their SME counterparts in other sectors.

You will agree that the essential ingredients for success of an SME include flexibility, good market foresight, and the ability to rapidly respond to evolving market trends and requirements.

In Hong Kong, we firmly believe that the Government should, on the one hand, do their best to stay out of the way of business people; but on the other hand, strive to create the best possible environment in which prosperity can be created and competition can flourish.

To this end, our Government has been implementing measures which would facilitate the business operation and development of SMEs. We review government regulations and streamline procedures impacting on business. We provide free business information and consultation services to SMEs including business start-ups.

Opportunities abound for SMEs following the implementation of the Closer Economic Partnership Arrangement, known as "CEPA", between the Mainland and Hong Kong. Under the arrangement, Hong Kong's industries and services suppliers are offered easier and wider market access in many different sectors, including accounting, securities, legal service, construction, distribution, among others.

For example, under CEPA, consultancy companies established by Hong Kong CPAs are allowed to provide bookkeeping services in the Mainland. Measures are also in place to promote mutual recognition of professional accounting qualifications and experiences in Hong Kong and the Mainland, as well as to facilitate Hong Kong CPA firms to apply for temporary business permits to practise on the Mainland.

Our Government is committed to providing a business-friendly environment. We are proud that our efforts are always widely recognised. This year, the US-based Heritage Foundation named Hong Kong the world's freest economy for the 12th consecutive year.

But we cannot afford to be complacent. We are fully aware that, at the same time, we must continue to staunchly uphold Hong Kong's fundamentals, including the rule of law, a level playing field, a healthy fiscal and monetary regime, a clean and highly efficient government, free flow of information, world-class infrastructure, global connectivity, state-of-the-art logistics and communication network, versatility and creativity of our labour force.

Nonetheless, the Government's work is only part of the whole story. Indeed, it is not just what the Government should or can do to support the development of SMEs. The Government and the private sector must work together to raise the profile of SMEs, promote their competitiveness and facilitate their pursuit of excellence.

In this regard, we always welcome and encourage greater participation from the private sector, particularly talented professional circles, in adding value to business operations. Accountants are recognised as the linchpin of the business world.

SMEs are not fighting a lonely battle, you are there to help and guide SMEs to safeguard their commercial interests, ensure compliance with regulatory standards, contain compliance burdens, enhance corporate governance, upgrade their personnel, and so on.

In this regard, I am very heartened to see the support and enthusiasm rendered to SMEs by the esteemed accountancy bodies that organised today's forum. The International Federation of Accountants and the Confederation of Asian & Pacific Accountants have demonstrated their commitment through their active participation in the process of International Accounting Standards Board in developing appropriate financial reporting standards for SMEs.

At the local level, the Hong Kong Institute of CPAs, as the statutory setter of financial reporting standards in Hong Kong, has been working very hard to develop the SMEs Financial Reporting Framework and Financial Reporting Standard, which has been in effect since January 2005.

These represent important steps forward in enhancing the resilience of the financial reporting regime for SMEs. I am confident that these bodies will continue their invaluable work, while strengthening international and regional alliance and cooperation on these fronts.

While there is broad consensus towards developing global reporting standards catering specifically for SMEs in order to lower compliance costs and meet the different needs of users of financial statements, public interest will still demand the same level of integrity, transparency, quality, reliability and corporate responsibility in the dissemination of financial reports of SMEs. Any initiatives or reforms must therefore be accompanied by equally effective regulatory means to uphold the corporate governance principle.

Hong Kong is uniquely positioned, more than any other economy to speak up for free trade and open markets for SMEs. Having built the best foundation for business, the Government of Hong Kong will leave entrepreneurs and investors free to get on with the business of generating wealth.