Reunification in 1997 was the biggest economic, political and legal challenge our city had ever faced. Thankfully, Hong Kong people have a reputation for being able to rise to the challenge. Today we are a city with a renewed confidence and sense of belonging within our nation. We also have a deeper understanding of the special role that Hong Kong plays as an integral part of China.

At the same time we have been able to build on our reputation as Asia's world city. Throughout our transitional period we lost none of the characteristics that set us apart from other cities in China. We are a predominantly Chinese community, but we grew up in a different way from the rest of China.

We continue to follow the common law legal system, and our judiciary is as independent as ever. Our Independent Commission Against Corruption is a world leader in its field.

We work hard to maintain a level playing field for business, and we welcome business people from all corners of the globe. I encourage you all to come and visit us to see for yourself what Hong Kong has to offer.

You will find that Hong Kong people are running Hong Kong with the promised high degree of autonomy. Our unique way of life is protected by our constitutional document, the Basic Law. Under the Basic Law, we remain a separate member of international organisations such as the World Trade Organisation, and we continue to negotiate our own air-services agreements, and maintain our own shipping register. We have our own passport and our own tax system, and we have our own freely convertible currency.

For the past 14 years our economy has been ranked as the freest in the world by the US-based think-tank, the Heritage Foundation.

These attributes, and others, have helped to augment our business-friendly reputation over the years. About 3,900 international companies maintain regional headquarters or offices in Hong Kong. That's 55% more than we had in 1997. There is still plenty of room and we would like to see more Saudi Arabian companies establishing a base in our city.

To become a more attractive business hub, Hong Kong - like Riyadh - continues to invest heavily in infrastructure. In the past decade, new roads and rail links to the Mainland of China and new shipping terminals have all come on line. Our new airport is consistently ranked among the best in the world.

Remember that Hong Kong has a population of about 7 million people on a land mass of roughly 1,100 square kilometres, which is considerably smaller than Riyadh Province's 1,554 square kilometres. Good infrastructure planning is vital to our future success. In the next five to 10 years we will have even more projects coming on line, most of which will boost our cross-boundary connectivity.

They include new bridges and highways serving our port; a 30-kilometre bridge linking Hong Kong to Macau and the Mainland of China; a new high-speed railway line that will link in with the national rail network; a new cruise liner terminal to boost tourism; and enhanced links between Hong Kong International Airport and Shenzhen Airport. Hong Kong is not a place that stands still.

This rapid infrastructure development has also expanded the horizons of engineering in areas such as reclamation, construction and transport. Our engineers now have experience and skills that are highly sought after by other cities, including here in Saudi Arabia.

We have also devised new and imaginative ways to enhance the management of properties, hotels and hospitals as well as improving logistics and port systems and technology. All these are resources that can be tapped by our friends here in this corner of our global village. 

New infrastructure is just one of a wide range of initiatives we are pursuing to significantly deepen our economic engagement with our neighbouring province of Guangdong and beyond.

Our country's 11th Five Year Plan, covering the period from 2006-2010, gives clear support to Hong Kong's core sectors such as shipping and logistics, tourism, as well business and information services.

It also affirms Hong Kong's irreplaceable position as China's global financial centre. Here we have a dual role to play, as both a platform for foreign investment into China and a facilitator of outward investment.

We are seizing this opportunity with both hands. Hong Kong already has a world-class financial services sector with a trusted and transparent regulatory regime, a liquid market, a high concentration of international banks, and broad, deep pool of local and international expertise.

Our stock market is the world's seventh largest in terms of market capitalisation, and the third largest in Asia with market cap of US$2.7 trillion. Hong Kong ranked fourth in the world for IPO funds raised last year. The 80 IPO listings last year raised total funds of more than US$37 billion.

We all know that this year has got off to a bad start for global financial markets. Hong Kong, like most places, has not been spared from the market turmoil. However, this has not undermined the sound fundamentals of our economy. Indeed, it has highlighted the efficiency, liquidity and reliability of our banking and securities market infrastructure.

One of the advantages of being a small city with big ideas is that we can move swiftly when new opportunities present themselves. In 2004, we launched renminbi banking, using the national currency for certain services. These days most of our 37 retail banks offer renminbi banking services. Total deposits exceeded 30 billion yuan last year. Also last year we became the only place outside the Mainland to have a renminbi bond market.

Another new market for us is Islamic finance. We believe Hong Kong is well placed to become a major centre for Islamic finance in East Asia.

Our legal system is flexible and well adapted to supporting Islamic financial transactions. It permits freedom of contract subject only to certain public law restrictions, none of which should inhibit Islamic financial instruments for legitimate purposes.

A unique advantage for Hong Kong is our unrivalled role in bridging China, the world's fastest growing large economy, to the international market. The potential requirement for capital in the Chinese Mainland is huge. And one of the biggest areas is for infrastructure development projects, which lend themselves well to Shariah-compliant financial instruments. Hong Kong can play a significant role in structuring and financing Islamic investment products to meet the needs of Mainland Chinese borrowers.

Islamic financial products appeal to both Muslim and non-Muslim investors and issuers. There is evidence that a large part of the demand for Islamic bonds comes from non-Muslim investors who have found the yield and structure of these products attractive. Hong Kong is a good platform to service these investors.

A significant number of leading international banks in Hong Kong have already devoted considerable resources to the creation and servicing of Islamic financial products.

Recently, the first Islamic retail fund in Hong Kong was launched. By December last year, the fund had already attracted some US$45 million worth of orders.

I invite Saudi banks and financial services companies to consider diversifying their global reach through Hong Kong. For all the financial products that you may need in a mature and liquid market within the Asian time-zone, halfway between Wall Street and London, you will hardly find an equal to Hong Kong. Our geographical location means we bridge the gap in daily trading hours. This is a very important factor in financial risk management of any substantial portfolio.

Meanwhile, we can learn a great deal from Saudi Arabia's expertise in the provision of Shariah-compliant services. I intend to learn as much as I can about such services during this visit to the Middle East.

Sovereign wealth funds are also becoming more prominent in global financial markets. These require a stable and transparent investment environment. Our sound financial services infrastructure, and our transparent legal system, make Hong Kong an attractive location for such investments.

In addition to financial linkages, I see great opportunities for expanding trade and tourism between our two places. There is considerable room to improve our bilateral trade, especially given Saudi Arabia's dynamic expansion and our central position within Asia.

Although, in absolute terms, our bilateral trade is relatively small - it was worth US$850 million in 2006 - there has been impressive growth. Between 2002 and 2006, average annual bilateral trade grew by almost 15%. I am confident we can find areas for further growth. 

One of our biggest advantages is, again, our special relationship with the Mainland of China. Hong Kong has long been regarded as the gateway to China. Well, that gate swung a little wider open in 2004 when our free trade pact with the Mainland came into play.

This free trade arrangement is called the Closer Economic Partnership Arrangement, or CEPA for short. All manufactured items meeting the 'Made in Hong Kong' origin requirements under CEPA enjoy tariff-free access to the Mainland.

CEPA also covers 38 services areas in key areas such as banking, advertising, accounting, legal services, logistics and freight forwarding, and management services. Hong Kong-incorporated service providers enjoy preferential access to the Mainland market.

And because CEPA rules are nationality-neutral, foreign-owned firms, including Saudi Arabian companies, incorporated in Hong Kong can enjoy the full benefits of the arrangement.

CEPA applies nationally, across the whole of China, covering 1.3 billion potential customers, in particular the Pearl River Delta region that has a relatively prosperous population of around 50 million -a ready-made testing ground for those wishing to offer products and services in China. 

Leveraging CEPA, there is another initiative called the Pan-Pearl River Delta economic co-operation. We often simply refer to this as the 9+2 initiative. That's because it brings about closer co-operation in the nine southern provinces of China, plus Hong Kong and Macau, which are both special administrative regions of China.

Our goal here is to establish a common market in our country and show that breaking down trade barriers is better than keeping them in place.

The Pan-PRD economic caucus covers an area of about 2 million square kilometres - almost the same size as Saudi Arabia. It has a population of about 470 million, which is close to that of the European Union, and bigger than that covered by the North American Free Trade Agreement. It is also more than 10 times bigger than the population of the Gulf Cooperation Council common market.

Some businesses, especially small firms testing the waters in China for the first time, may find the scale of this a little daunting. That is why we are determined to help firms based in Hong Kong get a good start.

We have with us on this trip representatives from our Trade Development Council which has enormous resources and expertise in match-making between foreign firms and the most suitable local business partners.

We also have InvestHK, a government department that specialises in problem solving and practical advice for companies wishing to set up in Hong Kong. Don't hesitate to get in touch with them if you have any questions at all.

Unlike here in the Middle East, Hong Kong has precious few natural resources. Apart from a spectacular deepwater harbour, our hardworking, well-educated and enterprising people are our greatest resource. To stay ahead of the competition in our region, we are constantly upgrading our human capital through better education and re-training programmes.

We also want to encourage more of the best and brightest individuals from overseas to come to Hong Kong to help keep our economy on a growth track, as well as to contribute to our society. Earlier this month, we relaxed the criteria for our Quality Migrant Scheme. This scheme allows people from overseas to come to Hong Kong to live and work. By easing the age restriction as well as work experience and other requirements we hope to encourage more talented individuals to apply under the scheme.

We also have a Capital Investment Entry Scheme for people wishing to contribute to our society by investing in the city. The minimum investment threshold is HK$6.5 million or about US$833,000. So consider this an invitation to become part of the Hong Kong story.

You will find Hong Kong a safe, friendly and vibrant place to live. We have a multi-cultural society that welcomes people from all corners of the globe. Our Muslim community numbers about 80,000 with a history dating back to the mid-19th century when our first mosque was built.

Indeed, there is no better time to come and pay us a visit. From Monday, you will be able to take advantage of new regulations, which entitle Saudi nationals to 30 days visa-free stay in Hong Kong, up from the current two weeks.  

As many of you will know, this year will be an historic one for China with Beijing hosting the 2008 Olympic Games. We in Hong Kong will also play a role in this once-in-a-lifetime opportunity by staging the Olympic and Paralympic equestrian events. Saudi riders will be part of the action and excitement and I wish them all the best for the Olympics. I am sure they will have some pretty strong support behind them.

We know that the grace and precision of equestrian sport is well appreciated in the Middle East, which has a long tradition of excellent horsemanship. We look forward to welcoming competitors, officials, spectators and visitors from the Middle East later this year. So, please, come and support your team and share with us the Olympic spirit in 2008. If you can't make it then, come when you can. I am sure you will not be disappointed.

Chief Executive Donald Tsang gave this address at a Hong Kong-Riyadh business luncheon in Saudi Arabia.