The overall benefits of competition to the economy are widely accepted. Competition helps maximise efficiency in the allocation of resources, provide a clear indicator of market preferences and maintain costs at viable levels whilst providing a range of choices. In the longer term, it can also promote innovation and creativity.

Competition has served Hong Kong well. With few restraints to trade in goods and services and foreign direct investment, and no significant entry barriers to most industries, entrepreneurs can enter and trade freely in our markets. Companies can compete in terms of price, including the use of discount and loyalty schemes, and in terms of differentiated goods and services.

However, while the overall benefits of competition are clear, it is not always easy to quantify the specific benefits of competition in individual markets. One way we can do this is to compare the range and the cost of products available in a market before and after the process of  "opening up" of the market to competition. In this regard, Hong Kong's telecommunications and banking sectors provide useful examples.

Since the telecoms sector was opened up to competition, there has been a significant fall in telephone-call charges. At the same time, we have seen a substantial increase in telephone-call volume and fixed-asset investment. There have also been considerable gains in technological innovation and marked improvements in management efficiency.

In the banking sector, the phasing out of rules on bank interest rates created competition that has led to greater choices for business and consumers. At the same time, it has prompted innovation within the sector itself, both in terms of products and services offered to customers, and in the application of technology and management practices.

To ensure that government policies are not anti-competitive and to review other competition policy matters, the Competition Policy Advisory Group, or COMPAG, was set up in 1997 under the chairmanship of the Financial Secretary.

Hong Kong's competition policy has thereafter been enshrined in a statement issued by COMPAG, which sets out the objective of this policy as being: "To enhance economic efficiency and the free flow of trade, thereby also benefiting consumer welfare".

Since its establishment, COMPAG has overseen the introduction of a number of measures aimed at ensuring that government policies and practices are "competition-friendly". We have also reviewed over 100 complaints of anti-competitive behaviour, both in the public and private sectors.

In recent years, however, we have come to realise that without the authority to undertake thorough investigations into complaints of anti-competitive behaviour, it is difficult to establish whether such behaviour has indeed taken place. Further, without the power to sanction such conduct, there is no effective enforcement mechanism to back up our competition policy.

With these concerns in mind, and with a view to ensuring that our policy is in step with the times and continues to serve the public interest and to facilitate a business-friendly environment, in June last year, we appointed the Competition Policy Review Committee, or CPRC. The task of the review committee was to review the effectiveness of the current policy and to make recommendations on how it might be enhanced. The committee delivered its recommendations in June this year.

In its report, the CPRC recognised that the implementation of new measures to ensure the effectiveness of our competition policy could be a complex task, and that views on this subject might be diverse. On the advice of the review committee, we have launched a three-month public consultation exercise on the way forward for Hong Kong's competition policy.

To provide a focus for this exercise, we have issued a public discussion document, which outlines the background to Hong Kong's competition policy, and asks some key questions that we need to consider. In particular, this document clearly suggests that a new competition law is likely to bring overall benefits to our small and medium enterprises.

The experience of overseas jurisdictions shows that SMEs should have little to fear from a carefully crafted competition law and that SMEs are seldom targeted by competition regulators. As SMEs lack market power almost by definition, their conduct can rarely have the effect of appreciably preventing, restricting or distorting competition.

On the contrary, SMEs stand to gain as the potential of the bigger players to adopt abusive or other anti-competitive practice is checked by competition law. SMEs will thus be able to trade more freely in various markets as it would be difficult for the bigger players to impose artificial entry barriers.

I encourage you to read the public discussion document and to give us your views on how we might best safeguard competition in Hong Kong for the benefit of us all.