The "One Country, Two Systems" policy has been successfully implemented in Hong Kong, and has helped maintain Hong Kong-Taiwan relations, Hong Kong's Secretary for Constitutional Affairs Stephen Lam said Thursday.

He made the remark during a meeting with a Taiwan delegation of the Alliance for the Reunification of China, which is visiting Hong Kong.

The alliance was set up in 1998 with the aim of promoting peaceful reunification of China.

Lam told the delegation that the basic rights and freedoms guaranteed under the Basic Law for Hong Kong people have been fully protected since the territory's return in 1997, and the system of different aspects of Hong Kong is operating smoothly.

On Hong Kong's relations with Taiwan, Lam noted that Taiwan airlines could continue their flights between Hong Kong and the island after 1997, and Taiwan businessmen could set up factories on the mainland and get listed in Hong Kong.

This underlines clearly the effectiveness of the "One Country, Two Systems" policy, he said.

Lam noted that views were expressed last week in Taiwan that there were signs of Hong Kong receding in political and economic development since 1997, and that this was a result of the implementation of "One Country, Two Systems". "This is plainly not the case," Lam said.

On constitutional development, he cited the example that the proportion of directly elected seats in the Legislative Council had been increasing progressively in accordance with the Basic Law.

The number of directly elected seats had increased from 20 in the first term to 24 in the second term. It would be further increased to 30 in 2004, accounting for half of the number of LegCo seats.

Lam said the economic challenge faced by Hong Kong was a result of the Asian financial crisis, and not related to the implementation of the "One Country, Two Systems" policy.

Under the policy, Hong Kong has preserved a sound and open financial system.

The Closer Economic Partnership Arrangement would enable a variety of Hong Kong products to enter the mainland market duty-free and would make room for service industries and professionals to tap the mainland market.

It is the "One Country, Two Systems" policy that has provided the foundation which enables Hong Kong to enjoy this special status and to capitalize on this opportunity, Lam said.

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