As an externally oriented financial and commercial center, Hong Kong is especially vulnerable to changes in the external economic environment. But, as we have seen in the past, Hong Kong has an uncanny ability to turn crisis into opportunity. The same will happen again in the aftermath of this current crisis.

After the Asian financial turmoil in 1997, many predicted the end of emerging markets. But the opposite happened - emerging markets revived and reached new heights. Hong Kong also harnessed that opportunity to strengthen our financial system. Now, a decade later, the foundations of our financial market remain strong in the face of a global crisis. So when this current situation stabilizes, Hong Kong must take some bold steps forward to embrace new opportunities. That is why last year I established the Task Force on Economic Challenges.

Apart from announcing a number of major measures to stabilize the financial system, support enterprises and preserve employment, the TFEC also solicited views and ideas from various sectors of the community to identify new opportunities for economic development. The TFEC's recommendations will be released today.>In 2007, I laid out my five-year blueprint for Hong Kong, which included the concept of "Progressive Development." Implementing this concept, in particular the provision of new, hard infrastructure, will lay a solid foundation for our long- term economic development and enhance our competitiveness. On the "software" front, we aim to provide a favorable environment for Hong Kong to further develop as a knowledge-based economy.

Every developed economy is racing toward a knowledge-based economy. While we all share this goal, the difficult part is how to achieve it. Over these past few months, the TFEC has studied six priority industries that are new engines for economic growth in a knowledge- based economy.

They are: educational services; medical services; testing and certification; innovation and technology; cultural and creative industries; and, environmental industries. These six industries will complement our four pillar industries of financial services, producer and professional services, trading and logistics, and tourism. Combined, they will form an even more solid foundation for future economic growth.

Talent is the key to success in a knowledge-based economy. Knowledge combined with innovation brings the huge economic benefits of high value- added and low energy consumption industries. So, we will strengthen our efforts to nurture local talent through education and research opportunities. At the same time, we will create an environment to attract talented people from around the globe.

Hong Kong is a vibrant world city with an eclectic mix of East and West. We embrace both traditional and modern values. Much work still needs to be done to improve air quality, enhance greening and foster a more diverse cultural life. By doing this, we will not only attract more world-class professionals to live and work here, our citizens will also benefit and take even greater pride in Hong Kong, our home.

Another vital element for building a knowledge-based economy is the market. Being a small economy, we adopt a strategy of leveraging our strengths in the mainland, particularly the Pearl River Delta region, and reaching out to Asia and the rest of the world.

The SAR government will play an important role in exploring new markets. From integrating with the PRD to negotiating better access to the mainland market under CEPA, the government needs to play a leading role. We will work hand in hand with industries to explore new markets and opportunities.

Of all the conditions needed to develop into a knowledge-based economy, the most significant is "soft power." Hong Kong has established a "brand" that is synonymous with integrity, professionalism, an independent and mature judicial system, a free and clean society, and an efficient and free flow of information. The six priority industries proposed by the TFEC are all built on the "soft power" of the Hong Kong brand and that is why their development should yield good results.

Developing a knowledge-based economy has become an irreversible trend. Our success in harnessing this trend depends on the policy environment we provide to nurture knowledge-based industries. The TFEC recommendations will provide an important catalyst for this to happen. I am sure that once the financial crisis recedes, Hong Kong will once again create a new niche for itself that will create even greater success.

Donald Tsang Yam-kuen is chief executive of Hong Kong