, whatever the cause of this difficult situation, whether or not it arose from events outside the control of the authorities, it is considered, and rightly so, the responsibility of a caring government to do what it can to relieve these grievances. refusal or reluctance to do so, even for very sound reasons in the larger long - term public interest, is not looked upon kindly. even in cases where the authorities managed to be innovative, perhaps to an extent not normally expected of bureaucrats, and did the right thing, there is always the easy, popular but legitimate question of why action was not taken earlier. the political process of monetary management 6. in hong kong, the grievances of the community are enthusiastically and effectively aired by politicians. whether directly or indirectly elected, the politicians have the mandate of the people and the people of hong kong are well served by them. but one of the peculiarities of the system of hong kong is that the politicians, although having the mandate of the people, do not actually have the authority to direct government policies. a consequence of this is that the administration is always kept on its toes, much more so than in many other jurisdictions. there are lively debates on almost all issues of significance, not to mention those that are controversial. this obviously has the benefit of ensuring that the administration performs to its best ability. but the inevitable disadvantage is simply that there can be too much of everything, to the extent of eroding rather than enhancing the efficiency and effectiveness of government. but this is the reality of hong kong today and we all have to live with it. 7. the management of any public issue of significance involves first getting the technicalities right, then explaining them patiently and clearly to all those concerned, and then handling skillfully the politics surrounding it. more often than not, handling the politics is the most difficult part. you can be 100 per cent right technically and you can spend all day explaining all the fine details, relating them to the policy objective and the public interest. but if you are not skillful enough in the handling of the politics of the issue, particularly an issue in whose success the confidence of the people plays a crucial part, all your efforts might be wasted. a totally different perception than that intended could well result, undermining the chance of success of what you are trying to achieve. 8. let me focus specifically on the management of the political process concerning monetary issues. i must say that this task is, for the hk

best interest of hong kong. whatever reputation the hkma has been able to achieve, domestically and internationally, such support could never be sustained for long. we do run a system that, at times, inflicts considerable pain on the community. many of the decisions taken by the hkma are unpopular. the pain and the unpopular decisions may become too severe to bear just on the foundation of faith, particularly in the peculiar political setup of hong kong. 11. an essential part in the management of the political process concerning monetary issues, therefore, is to promote a better general understanding on those issues. this is not easy. not only are those issues technical, but they are also changing all the time with the rapid changes in the global financial scene. financial liberalization and the globalization of financial markets, encouraged by the advance of telecommunications and information technology, have drastically changed the behaviour of money. on top of all this, we have the complication that hong kong ’ s monetary system has really only started to take shape in the past ten years or so, as monetary reform measures were introduced to modernize it so it could cope with the demands and expectations of modern finance. but these difficulties are not excuses for not trying. and we have tried ; although i must confess, on the basis of the reaction from some of the politicians to the actions we have taken recently, that the returns on our efforts to promote a better general understanding of monetary issues in hong kong have not been impressive. 12. so we must try harder, and we will. there are then the questions on how and the areas in which we need to concentrate our efforts. on the former i shall seek advice from my colleagues. on the latter, the recent episode surrounding our operations in the stock and futures markets, culminating in the defeated motion debate in the legislative council on 30 september 1998 to review the hkma, provides excellent guidance. if one filters away the noise from political posturing, including the rather unpleasant and unnecessary personal attacks, there are three areas that require attention. basic monetary concepts 13. the first area that requires attention concerns various concepts in modern monetary management that need to be more effectively put across. this is essential if discussions on the technical issues are to be more meaningful. i am aware that this is not intended to be a lecture on monetary economics, so let me just bring out one or two of them here for illustration. 14. under our linked exchange rate system, stability in the exchange rate is ensured through the control on what