83. Overseas experience shows that during economic restructuring, cultural and creative industries can propel the economy to a new level. In the United Kingdom, for example, this economic sector achieved average annual growth of 8% from 1997 to 2001, far exceeding the overall economic growth rate, after its government adopted a policy to promote creative industries. In the same period, the number of people employed by creative industries grew by an average annual rate of 3%, compared with the overall figure of 1% . While developing creative industries will require creative talent, it will also create employment opportunities for people with various technical skills, particularly as avenues for creative young people to prove their worth.

84. In the Asia-Pacific region, with over 2 billion people, Hong Kong is well positioned to develop cultural and creative industries: we have a highly open and free society, where information, capital, talent and goods can move freely. We have the rule of law, providing effective protection for intellectual property. We are a pluralistic and inclusive society, a confluence of Eastern and Western cultures, and a cultural cradle for overseas Chinese. We have a rich variety of cultural activities and life-styles conducive to inspiring creativity. We stand to benefit from the many opportunities now arising in the Mainland following its own promotion of cultural industries in recent years. We have people who have always been good at learning, skilful at adaptation and strong on creating things. Yet, there are apparent limiting factors in some key areas, such as cultivating creative talent, fostering creativity, commercialising creative ideas and financing the establishment of creative industries, which have held back the full development of cultural and creative industries in Hong Kong. At present, cultural and creative industries account for only about 4% of our GDP, compared with 8% in the United Kingdom. Obviously, there is still scope for growth.

85. In my two previous Policy Addresses, I mentioned the need to promote the development of creative industries – that is, industries in which creativity is the principal means for adding value. Creative industries in Hong Kong encompass 11 categories: design, architecture, advertising, publishing, music, film, computer software, digital entertainment, performing arts, broadcasting, and antiques and art dealing. Some fall under our core industries, such as tourism. Creative industries can be extended to cover areas such as community building and the creation of an urban image. In this new competitive era of globalisation, adding value to products and services through design, packaging, image building and advertising serves to consolidate and realise the intangible values of culture. For this reason, I consider that the term "cultural and creative industries" should replace "creative industries". This new term is a clearer expression of our direction.

86. To promote new development in this area, we have adopted some policy measures and gained some experience over the past two years. For example, we have set up a Digital Media Centre and the Cyberport iResource Centre and we will establish an incubator to facilitate creation of television games. We have not only set up a Design Centre, but also launched a $250 million DesignSmart Initiative to develop a service centre that will provide a focal point for high value-added design activities. We have secured access to the Mainland market for our film industry under CEPA and will strengthen the function and application of existing funds supporting the film industry. We have also helped organise a number of activities to promote local films. In March this year, we will premiere a world-class event, Entertainment Expo Hong Kong. This new mega-event will combine the Hong Kong International Film Festival, the Hong Kong International Film and TV Market, the Hong Kong Film Awards Presentation Ceremony and the Digital Entertainment Leadership Forum.

87. Our aim is to consolidate our core industries, foster a favourable social environment to nurture and attract versatile people with multi-skills, promote the development of cultural and creative industries, facilitate the transition to a knowledge-based economy, sustain prosperity and enhance our quality of life.

88. Enhancing appreciation of culture is not only a target to be pursued by Hong Kong people, it is also a pre-condition for developing our cultural and creative industries. We endorse the Culture and Heritage Commission's earlier recommendation on the cultural positioning of Hong Kong and the principles and strategies for cultural development. These include people-oriented development, respect for freedom of expression, protection of intellectual property, a community-driven approach supported by government, and holistic development. We can make good use of our advantage as a confluence of Eastern and Western cultures and leverage on our connections with the Mainland to create an environment conducive to the vibrant development of culture and arts. Various measures recommended by the Commission are being implemented. We will explore new ways of putting facilities such as libraries and museums to even greater effect.

89. One of our important tasks is to step up the promotion of cultural and creative industries. We will establish, as soon as possible, a consultative framework for cultural and creative industries, so that relevant representatives from these industries including outstanding personalities from outside Hong Kong can participate. We will work together to study the vision for development, direction, and organisational structure to see how we may deploy our advantages, consolidate resources and pursue key areas. An example is our film industry. It possesses advantages and enjoys huge market potential. But it now faces some problems. We need to devise appropriate measures to promote its further development.