Hong Kong Chief Executive Admits Serious Economic Problems

by Mary Swire, Tax-News.com, Hong Kong

22 January 2002

Speaking the day after Financial Secretary Antony Leung admitted that Hong Kong was facing a structural deficit, and just seven weeks before Mr Leung's first budget, SAR Chief Executive Tung Wha-Chung ruled out on Friday the introduction of a sales tax or other new taxes this year despite the huge deficit faced by the SAR, but vowed to balance the books in the course of three to five years.

Tung described the situation as very serious. "It may take three, four or five years for a return to a balance. We have to do it. We can do it. The Government must enhance efficiency and streamline its structure. At a time when the economy is still weak, the introduction of broad-based taxes, such as a sales tax, is a non-starter. We can't do so."

Speaking at a media briefing in his election office, the Chief Executive said officials would be instructed to create more jobs. Referring to the latest jobless rate of 6.1%, Mr Tung said: "The Government is very concerned. I had a very long meeting with colleagues this morning. In the near term, we must implement the creation of 33,000 jobs as soon as possible. At the same time, we will study any other ways to create more jobs, even 1,000, 1,500 or 2,000."

Mr Tung also promised to make a comprehensive study of population policy in an effort to improve population quality, including the possibility of bringing in more specialists. A recent survey by Hong Kong University showed that by 2005 there would be a shortage of 180,000 graduates, but a surplus of 150,000 people in the low-education group. The government will study whether Hong Kong needs to bring in more talent. "More talent will help boost the economy and create more job opportunities," Tung said.

The study will also look into ways of keeping talented people by way of improving the SAR's business and living environment, including education, infrastructure, environment protection and urban renewal policies. ''A better environment helps people stay, otherwise, we will lose our edge to neighbouring countries,'' he said.

Answering criticisms about the growing size of the Government and its costs, Mr Tung said: "We are already trimming. From a peak of more than 190,000 civil servants, we are down to just a little over 180,000."

Mr Leung had confirmed on Thursday that a government study had found budget deficits to be "structural", implying that spending would still exceed revenue even when the economy had improved, and a government-appointed committee chaired by Moses Cheng Mo-chi had proposed a three per cent tax on goods and services and a land departure tax as possible options to broaden the sources of revenue.

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