17. Seven and a half years ago, we reunited with our Motherland. A colonial administration gave way to a Special Administrative Region Government, which embodies the principle of "Hong Kong people ruling Hong Kong" and enjoys a high degree of autonomy. We, finally, became our own master. Accompanying the fundamental transformation in the nature of government were significant changes in social and political behaviour, the media environment, as well as demands on, and expectations of, the Government on the part of the public at large. As our economic performance worsened, public demands understandably grew. In addition, government policies and measures to deal with the bursting of the real estate bubble and the serious fiscal deficit no doubt caused the public pain and unease. In retrospect, our mindset was inadequately prepared for the dual impacts of political change and economic downturn, nor did we have the necessary experience to respond appropriately.

18. First, this was reflected in our failure to establish the vision of "people-based" governance. In formulating policies, we fell short of "thinking what people think" and "addressing people's pressing needs". Second, we were not sufficiently mindful of the impact of some policies on the community's capacity to bear and the potentially controversial nature of these policies. We introduced too many reform measures too hastily, putting heavy burdens on our people. We also lacked a sense of crisis, political sensitivity as well as the necessary experience and capability to cope with political and economic changes. We were indecisive when dealing with emergencies. These shortcomings and inadequacies have undermined the credibility of our policy-making capability and our ability to govern.