HK's Tsang vows economic, anti-pollution focus

HONG KONG, Oct 11 (Reuters) Hong Kong leader Donald Tsang endured heckling today as he pledged to improve people's livelihoods and tackle pollution while strengthening the city's role as a financial centre for Chinese yuan-backed business.

''Expanding renminbi business represents a natural progression and a development priority for Hong Kong,'' Tsang said, adding the city was fully prepared -- pending Beijing's approval -- to launch yuan-denominated bonds and import settlement in the Chinese currency.

But Tsang shunned bold initiatives such as calls for a minimum wage in his second annual policy speech, as he laid the groundwork for a likely re-election bid next year.

Before Tsang began his speech, activist legislator Leung Kwok-hung -- known locally as ''Long Hair'' -- and independent Albert Chan staged a walk-out protest.

Shouting at Tsang, they accused him of failing to push for universal suffrage and failing to heed calls by trade unionists to propose minimum wage laws.

A group of protesters in the gallery later interrupted Tsang's speech with shouted slogans, but Tsang said wage protection should be provided through ''non-legislative means'', namely a voluntary charter on a minimum wage for the cleaning and security service sectors.

Only if this initiative failed after two years would the government look to legislate a minimum wage -- and then only for those two sectors, he added.

The move appeared to be a compromise to appease employers and businessmen who fear a minimum wage would cause firms to relocate to lower-cost China.

A MISUNDERSTANDING On economic policy, Tsang said the government was committed to ''big market, small government'' and keeping public expenditure below 20 per cent of gross domestic product.

He also said the government was considering ways to amend exchange listing regulations to make it easier for corporations around the globe to float shares on Asia's second-largest bourse.

Tsang drew criticism last week from Nobel prize-winning economist Milton Friedman for saying the government no longer adhered to the economic principle of ''positive non-interventionism'' -- a laissez-faire approach seen by some as central to Hong Kong's economic success -- and needed to be proactive.

''Some mistook our stopping to use the term ''positive non-interventionism'' as a shift, or a U-turn, in our policy. This is not the case,'' Tsang said.

While Tsang side-stepped sensitive issues such as calls for greater constitutional reform, he put emphasis on the environment. Hong Kong's air quality has deteriorated in recent years, with experts saying pollution causes poor visibility around 45 per cent of the time.

''There are no magic bullets, no quick fixes,'' Tsang said.

Tsang said the government would progressively tighten emissions caps on the two power companies, which are often blamed as the city's worst polluters.

Tsang also said the government would spend HK dollar 3.2 billion to subsidise a switch to more environmentally friendly diesel vehicles that comply with stringent Euro 4 emissions standards.

With less than a year left to his term, analysts had expected the Beijing-backed Tsang to take a cautious tack, to not pre-empt a re-election platform, and to avoid being attacked by opponents.

Tsang, who stepped into the shoes of unpopular former Chief Executive Tung Chee-hwa, who suddenly resigned last year, has enjoyed robust popularity ratings.

But critics say Tsang has suffered a number of notable setbacks, including the voting down of a political reform blueprint from sceptical democratic legislators, who want direct elections instead.

REUTERS SAM DS1220