Hong Kong has threatened to impose unspecified economic sanctions on the Philippines if substantial progress is not made within a month in talks demanding the country's apology and compensation for a hostage tragedy three years ago.
Hong Kong is demanding a formal apology for the incident, which saw eight of its citizens killed and seven others wounded after negotiations broke down between Philippine authorities and a former police officer who hijacked a tour bus.
Speaking before a debate by legislators calling for sanctions against the Philippines on Tuesday, Leung Chun-ying, Hong Kong leader, urged the Philippine government for a "concrete and timely response".
"Unless, within a month, there are concrete steps taken to resolve this issue, the government will take necessary actions to apply sanctions," Leung said without going into specifics.
Hong Kong and the Philippines have close economic ties, from tourism to more than 100,000 Filipino domestic helpers working in Hong Kong, but tensions continue over the incident.
The tragedy happened in 2010 when a busload of Hong Kong tourists in Manila were taken hostage by disgruntled former policeman, Rolando Mendoza, who had just been dismissed.
Following a prolonged stand-off and negotiations, watched on live television by thousands in Hong Kong, the man opened fire after what the victims' families maintain was a bungled rescue effort.
Unless, within a month, there are concrete steps taken to resolve this issue, the government will take necessary actions to apply sanctions.
"I urge the Philippines government and/or the Manila municipal government to quickly come up with a proposal to respond to the families of the deceased and the requests of the injured," Leung said.
Leung, who took office last July and has since seen his ratings plummet over contentious policies and scandals engulfing his ruling team, was criticised last month for not taking a stronger stance with Manila.
The apparent incompetence of the police outraged the residents of Hong Kong, a city accustomed to low crime rates, and saw relations with the Southeast Asian country nosedive.
Hong Kong has maintained a travel warning to the country since the episode, while the city's legislators have mooted a cancellation of its visa-free arrangement for visitors from the Philippines as well as possible trade sanctions.
Another further sanction could be a freeze on domestic helpers, similar to a move by Taiwan this year following the fatal shooting of a Taiwan fisherman by the Philippine coast guard.
The Taiwan sanctions were dropped in August after Manila gave a formal apology for the fisherman's death.
However, Raul Hernandez, Philippine foreign ministry spokesman, said the government hoped the hostage row would not be linked to visa-free arrangements for Filipinos travelling to Hong Kong.
"We look forward to the continued healthy exchange of travelers from both sides," he said.
More than 160,000 Philippine nationals reside in Hong Kong, with most working as domestic helpers.
Bilateral trade between the two countries totalled about $8.2bn in 2012.
In October, Joseph Estrada, Manila mayor, offered to issue an apology for the hostage-taking incident. But Philippine President Benigno Aquino has refused to make an apology on behalf of the country, insisting that the Philippines could not apologise for the crimes of one person, he reportedly said at the time.
It has offered compensation of $75,000 to each family of the deceased and up to $150,000 to those injured, media reports said.
But the families involved in the hostage crisis have not accepted the money, saying the amount was too low.