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The following is the transcript of a press conference held by the Chief Executive, Mr Tung Chee Hwa, today (Monday):

Reporter: ... do they have a job, do they not have a job? What do you see as unemployment? What do you see as the unemployment numbers, the figures, for the next, say, quarter, two quarters, as you project ahead?

Mr Tung: Well, Francis, we care very much about the increasing unemployment rate. Unemployment is something we worry a lot about. I think the unemployment, unfortunately, will be going up somewhat. But let me tell you this, that it will be a difficult second-half 1998. But we have got to look beyond that and see how strong Hong Kong is, and with all the things we are trying to do Hong Kong should see a recovery path not too far away.

Reporter: So what figure do you see for the next quarter, two quarters, for unemployment.

Mr Tung: Francis, you know you are not going to get this out of me. Economists never tell you this, neither would be politicians. Thank you.

Reporter: Even though land prices have fallen considerably they are still back to only where we were a few years ago. By suspending sales now, are you telling foreign investors that there is no need for property prices to come down even further in Hong Kong?

Mr Tung: Let me put it this way. We are very conscious that we need to be competitive and the very substantial fall in property prices, both residential and in the office sector, commercial sector, has already given our competitiveness a great help already and we will continue to be very conscious of the need for being very competitive. The measures we have taken are to make sure that there is stability of property prices at this particular time. But we will continue to be very conscious of competitiveness.

But let me emphasise one more thing. While we are conscious of competitiveness from a cost point of view, competitiveness is also about the rule of law, it is also about a level playing field for everybody, it is also about the ability and the freedom to move about - in person, in capital, in information. In all these areas Hong Kong has been very good and we will continue to do better to enhance ourselves even more. So it is the whole comprehensive thing we will want the investors to look at when they come and invest and do business in Hong Kong. But let me once more emphasise we will be conscious of the cost aspect.

Reporter: Until now, we have been told that the way a currency board works is that external shocks are taken account for in the domestic economy by asset prices falling. Now the Government is attempting to put a floor underneath property prices - it doesn't want them to fall further - doesn't that make your job of assuring people that you can take whatever pain is necessary to support the linked exchange rate?

Mr Tsang: Well, we are not putting a floor to anything. What we want to achieve is a measure of stability in a very important market. We have secondary and tertiary economic effects throughout the community. Property transactions will continue. Government land sales only form a fraction of the total property transactions in Hong Kong, so of course the market will continue to move - upwards, downwards - whatever it is. But what we do not want to happen is the sale of government land aggravating the current sharp fall in prices. We have already experienced, as I have said, a fall of 40% over a period of six months which is very drastic indeed and is causing widespread community concern. And it is not a stoppage, it is merely a suspension which will enable us to accumulate land in our Land Bank for release later on.

Reporter: You have stressed the need to impress international investors --

Moderator: Sorry, sorry, wrong question. About the civil service pay.

Reporter: Yes, on the civil service pay, how many people will be affected and can you put a dollar value on that? And also, please, could you put a dollar value, please, on the entire package the Government has carefully thought about; how much will this give a push to the economy - either percentage of GDP or a dollar value please?

Mrs Chan: Perhaps I could answer the first part of the question and that is how many civil servants are affected. We have drawn the line at D3 and above and the numbers involved are roughly about 330 officers involved. We feel that there is a need at this senior level for us to demonstrate that we understand the hardship that the community is going through and that senior civil servants are willing to share this pain with the community at large. I will ask the Financial Secretary to answer the second part of your question.

Mr Tsang: Well, the total cost of the package, looking at the package alone in terms of financial cost it is roughly about $32 billion. That is why we are turning a surplus of about $11 billion to a deficit of $21 billion but it is looking at it narrowly at the financial cost. The economic benefits of this we have explained quite clearly. Of course it is not possible to quantify in terms of GDP growth which will be generated by a package of this kind but the fact that we are creating new liquidity through an amendment to the profits tax law, the fact that we are now preventing a major decline in property prices, and the fact that we are encouraging demands in a number of areas, and the fact that we are injecting more liquidity into people's pockets by a tax rebate, I am sure it will create greater economic activities for the remainder of this year. And it will certainly be beneficial in boosting economic growth in overall terms.

End/Monday, June 22, 1998

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