After winning rounds of applause from over 800 supporters, Tung Chee-hwa announced his decision to seek a second term as Chief Executive. The challenge ahead for Mr. Tung is to address the deficiencies and shortcomings, which occurred in his first term, as he himself honestly admitted.

But it was not all his fault. While many might not agree with some of his policies in the past four and a half years, few would argue that their implementation has fallen short of expectations. As the Chief Executive, he lacked a civil service that was supportive as well as a structure conducive to changes in step with the times. He inherited a body of subordinates accustomed to being their own boss, and not willing to share power with the new chief so what we have seen was the tail wagging the dog, creating confusion for everyone and giving the impression of poor leadership from Mr. Tung.

The Chief Executive was further handicapped by a defective political structure that featured an executive-led administration but did not promise Legislative support. When policy decisions were made by the Executive Council, Mr. Tung had to lobby his way through a Legislature over which he had little or no control, causing misunderstanding and mistrust in what should be a close working relationship. To secure support, he needs to treat those Legislators who share his vision as the de facto ruling party, thereby providing the missing link in the whole picture of an Executive-Council-and-Legislative-Council partnership.

To a certain degree, the support Mr. Tung enjoys among his constituents is a reflection of some of his achievements. First and foremost, he has successfully implemented "One Country Two Systems" since July 1997 ensuring a smooth transition in the best interests of the people of Hong Kong. On policy initiatives, his commitment to education, for example, earned him respect across most sectors. And to be fair, his efforts in promoting better economic integration with the mainland were commendable.

Mr. Tung is also a man with a mission who has the trust and support of the Central Government. In his recent meeting with President Jiang Zemin and Premier Zhu Rong-ji, he managed to secure the Central Government's support in principle towards the idea of a free trade zone between Hong Kong and the mainland, an opportunity that will give Hong Kong enterprises fair access to the mainland market. Although further study is needed we can expect it to come to fruition under the continued guidance of Mr. Tung who has all the blessings he needs from the Chinese leaders.

In steering Hong Kong out of the economic recession we reckon closer economic ties with the mainland are essential. Mr. Tung has made good progress in this area already, and he could do more in his second term. According to a university survey, Hong Kong people made an average of 16 trips to Shenzhen annually injecting a total of HK$19 Billion into their economy. While we would not impose any barrier on cross-border spending, we have good grounds for requesting the Central Government to reciprocate by abolishing exchange controls for compatriots visiting and investing in Hong Kong, as a means to stimulate our economy. Given Mr. Tung's good relations with the mainland, it is not unlikely that he can convince Beijing and strike a fair deal for Hong Kong.

Tackling the structural deficit should be given top priority on his agenda for the second term. Against the background of a struggling economy, it makes more sense to cut government expenditure than to increase revenue. Since the pay of civil servants and those working in subvented organizations accounts for about 70% of government's recurrent expenditure, and many in this sector are grossly overpaid, a review of their salaries in line with current economic conditions will be most effective. This logic is easy enough to understand but Mr. Tung has to have the courage of his own convictions when confronted by the civil service.

Mr. Tung's performance might not be entirely satisfactory but we see promise in him for a second term: he has five years of experience, enjoys huge support from the Central Government, understands business, and assures policy continuity as well as political stability ---- attributes that we believe will give him the edge over alternative candidates, if any.

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