Today nearly a quarter of the Government's expenditure is committed to education. Our investment, plus the generous donations from numerous philanthropists, a robust programme of education reform in recent years, and the hard work of our teachers are beginning to bear fruit.

The 2007 Programme for International Student Assessment Rankings placed our 15-year-olds second in science and third in math and reading among their peers from 57 countries. And our 10-year-olds are the second most literate in the world, according to the US-based Progress in International Reading Literacy Study in 2006.

Four of our universities placed in the top 150 of the Times World University Rankings last year, actually three of them in the top 60. Also in 2007, the Kellogg-HK University of Science and Technology Executive MBA programme was ranked world number one by the Financial Times of London.

The prospect of consistently turning out high quality graduates should be enough to keep a smile on the faces of our human resources professionals for some time to come. We must not be complacent, but strive to improve and build on our success.

Understanding that the standard of education is an important factor for overseas professionals considering moving to Hong Kong with their children, we are working hard to promote our international school sector.

We have more than 50 international schools in Hong Kong that provide a wide variety of curricula including British, US, Australian, Japanese, German/Swiss, Singaporean, Canadian and Korean. Many schools offer International Baccalaureate programmes. And to meet the strong demand for places we aim to increase the capacity of our international schools by expanding existing facilities and making more land available for new schools.

With our world-class universities, Hong Kong is well placed to become a regional higher education centre. Attracting more non-local students will further internationalise our higher education sector and give local students more international exposure.

We are increasing in phases the quota for non-local students studying in our publicly-funded programmes from 10% to 20%. We are also setting up a $1 billion Government Scholarship Fund for local and non-local students.

We also want to encourage more non-local students to take up jobs in Hong Kong after they complete their studies. From the coming academic year overseas students will be able to take up part-time jobs during their studies. And after they graduate they can enjoy a one year unrestricted stay in Hong Kong to give them plenty of time to find the right job and launch their careers here.

While on the subject of human capital we cannot underestimate the importance of career training. Boosting the performance of our existing workforce is a strong focus area for the government. We are expanding the training and retraining programmes to help more people maximise their potential in the work place.

Last December we relaxed the criteria for people applying for courses run by the Employees Retraining Board. Now school leavers as young as 15 can apply for courses, together with people who are changing careers or upgrading their skills.

From April this year there will also be a 50% increase in the number of training places offered by the Retraining Board, taking the total number of places to 150,000. Programmes are being better tailored to suit the needs of the market. Our aim here is to enhance the sustainability of jobs and the value of a person's career so they can contribute more effectively to our long-term prosperity.

Organic growth sounds good, but not good enough in face of cut-throat competition. So we also have an appetite for acquisition.

I am often reminded that Hong Kong is an easy place to 'sell', or promote to people overseas. We have a low and simple tax system, so we get to keep much of what we earn. We have a high standard of living with all the trimmings that you would expect from a world-class city including quality healthcare, education and the latest information technology.

Taken together with our cultural diversity, vibrancy and efficiency, we have a recipe that is hard to beat. And the biggest pull factor of all is our proximity to the largest and most exciting Chinese market that promises abundant opportunities for people with creativity, initiative and ambition.

We have a liberal immigration regime, which is under regular review so we can best meet the needs of an ever-changing marketplace. Our General Employment Policy is friendly to new migrants with skills who can contribute to the development of our city. In recent years we have introduced a number of new schemes to attract high calibre individuals. These include the Quality Migrant Scheme, the Capital Investment Entrant Scheme and the Admission Scheme for Mainland Talents and Professionals.

Since the establishment of the Hong Kong Special Administrative Region in 1997, we have attracted over 200,000 high calibre individuals and professionals to come live and work in Hong Kong under various arrangements.

Today, almost 4,000 foreign firms have regional headquarters or regional offices in Hong Kong and some 60,000 Hong Kong enterprises run operations on the Mainland. For many of these companies, and others drawn to Hong Kong by the China factor, attracting the best and brightest talent from the Mainland is an important part of their business strategy.

I am pleased to note that the Admission Scheme for Mainland Talents and Professionals has proved particularly successful since its launch in July 2003. So far more than 20,000 applications have been approved under the scheme. Last year alone, over 6,000 applications were approved.

Mainland professionals bring special qualities to the local workforce. They have unique firsthand experience of what makes the Mainland markets tick and how to make the most of the opportunities across the boundary.

Often, these professionals also bring extensive networking skills that can be a valuable asset for any company wishing to expand in China. These qualities are not only important for individual firms, but also for building Hong Kong's reputation as a gateway to the Mainland.

In today's global race for talent, we are ideally placed to tap the potential of this vast labour market on our doorstep.

But this is not the time to relax. Increasing competition from other cities in the region for high quality professionals means we have to work harder than ever to remain the location of choice for business people in Asia.

Just last month we relaxed requirements for people wishing to apply under the Quality Migrant Scheme. Under the new arrangements, people over 50 can apply, and younger degree holders with little or even no work experience can meet the required entry level. Extra points are awarded to applicants with a foreign language, in addition to Chinese or English. We have also made it easier for entrants to extend their stay in Hong Kong.

 By opening the door a little wider, we can attract more of the brightest and most talented people to explore the opportunities in Hong Kong, and in turn help to sharpen our city's competitive edge.

In today's world, the flow of human capital is a two-way traffic. While I have talked much about nurturing local talent and attracting talent from outside Hong Kong, I do see our unique role as the capital of human resources to serve the Greater China region.

Later this year China will be celebrating the 30th anniversary of her reform and open-door policy that has brought sweeping changes to every quarter of this great country and created an unprecedented economic miracle in history. Hong Kong is proud to be part of this process.

Much has been talked about the financial capital injected by Hong Kong investors into the Mainland. But an equally important if not more important input is our human capital, the professional expertise, the international experience, the management know-how that help Chinese companies raise their bar and become the world's factory.

According to a report published by our Census & Statistics Department in 2007, it is estimated that roughly 9% of Hong Kong's total working population, which is close to 300,000 Hong Kong residents, are residing or substantially staying in the Mainland.

This has not yet taken into account the numerous short trips between Hong Kong and Mainland cities made by our professionals and businesspeople to tender professional advice and bring in new ideas.

Perhaps the most important underlying value of all these people movements is the resultant vast network of Hong Kong people who understand the nuances of the Mainlanders and the outside world, speak both languages, and will always be able to fill the void and forge a deal. This is our biggest capital.  

The only natural resource of Hong Kong is our people, and we must continue to strive for excellence in order to survive in a globalised economy.

Chief Secretary Henry Tang gave this address at a conference on "Human Capital in Greater China".