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Following is a speech by the Secretary for the Treasury, Miss Denise Yue, at the Association of International Accountants 25th Anniversary of the Hong Kong Branch this (Friday) evening:
Mr Chairman,
Thank you for your kind introduction.
I am very pleased to be here this evening and to have the opportunity to congratulate you, your members and your students on the 25th anniversary of the establishment of the Hong Kong Branch of your Association.
I must say that in Hong Kong we are doubly fortunate.
Fortunate, that so many of our young people are anxious to upgrade their qualifications to meet the changing needs of our economy.
And fortunate also that professional bodies such as your own are available to provide quality training, leading to an internationally recognised qualification.
The need for such training and professional skills is greater today than it has ever been.
I have no doubt, Mr Chairman, that the financial skills possessed by your members are at a premium in today's challenging times. I am sure your members must be at the forefront of the steps being taken throughout the private sector to maintain competitiveness and profitability as companies come to terms with today's market conditions.
We are going through a period of severe economic adjustment. Faced with declining demand, it is significant how quickly and decisively the private sector has responded to our present circumstances.
We in the public sector in general and in the government in particular are well aware that we need to do the same.
But in our case the nature of the problem is somewhat different than that faced by the private sector.
Let me try to explain why.
Whilst the private sector often experiences a downturn in business in times such as these, the reverse is true of the government. More people need our help and as a result we face greater, not less, demands on the provision of public services.
To quote just a few examples - we need to provide more retraining opportunities, we need to provide more intensive job placement services and regrettably we see more people having to fall back on the safety net provided by our Comprehensive Social Security Scheme.
Yet, on the other hand, our revenues are declining. As turnover in the stock and property markets fall, so do our collections from stamp duties.
As consumers cut back on discretionary spending, our collections from excise duties and from motor vehicle registration tax fall.
As hotels trim prices to remain competitive, our revenue from hotel accommodation tax falls.
And as profit margins contract so do our collections from profits tax.
Even our collections from betting duty are down.
In short, we are suffering an across the board drop in our revenues.
Faced with this dilemma of reduced revenues and increased demands for our services, how should be we respond?
Clearly, what we must not do is to take any action which would further set back the economy.
That rules out major tax changes and swingeing reductions in overall government expenditure.
Yet there is one bright spot amidst the gloom. The fiscal prudence with which we have managed our finances over the years gives us the ability to ride out the storm that we are now experiencing. Unlike many other governments in Asia, we have no debt. On the contrary, at the beginning of the current financial year we had accumulated reserves of over $450 billion. These reserves give us the financial strength to tide us over our present difficulties.
But there is one discipline which we have followed for many years and which we must maintain even in these difficult times. We must continue to control government expenditure so that it grows no faster, over time, than the economy as a whole. The reason for this is quite simple. We must not let government spending grow so disproportionately that it starves the private sector of the resources which will be needed to fuel our economic recovery. As the economy slows, so must the growth in government spending.
To retain control over government spending on its own would of course not be very difficult. We could simply say no to the introduction of any new or improved services, say no to new infrastructural projects. But that would be very misguided. In addition to meeting the immediate increased demand for our services, it is, particularly, at times like this that we must invest in the future. We must make sure that our young people and our workforce have the knowledge and skills to maintain and develop Hong Kong's role as a major economic player on the world stage. And we must provide the modern infrastructure to support that role.
If we are to find the resources to continue to invest in our future in this way, then we need to redouble our efforts to ensure that government services are being provided as efficiently and effectively as possible. We must strive to ensure that within the money we are able to spend, we provide the optimal level and mix of services to the public.
It is for those reasons, as the Chief Executive announced in his policy address two weeks ago, that we are embarking on an Enhanced Productivity Programme within the Government.
If I can, I would like to clear up a number of misconceptions about this programme -
* It is not about a deterioration in the quality of
services which we provide to the public.
* It is not about cutting back government spending.
* Government expenditure will continue to grow in line
with our forecast of the trend growth rate of the
economy, albeit at a slower rate than in recent years.
What our programme does involve is a determined and structured effort to provide more and better services from within the level of expenditure which we as a community can afford -
* We must provide the community with improved value for
money from our available resources.
* We must direct those resources to achieving the best
possible results.
* We must satisfy ourselves that we still need to do all
the things we are now doing.
* And we must examine critically the way in which public
services are delivered.
In short, we must be willing to question what we are now doing, and the way in which we are doing it. And where justified, we must be prepared to make decisive changes.
Mr Chairman, I have no illusions. This is no easy task. It will require a major and concerted effort throughout the civil service.
Your members here tonight will appreciate more than most just how important and challenging a target we have set ourselves.
But it is a target we are determined to achieve.
Mr Chairman, can I conclude by once again congratulating your Branch on its 25th anniversary and by wishing the Branch and its members continuing success in the coming years. Let us all look to the future and to the next 25 years with confidence. Confidence that is based on the increasing numbers of our workforce with the qualifications and training provided by associations like your own.
Once again, thank you for your invitation and Happy Birthday to the Hong Kong Branch of the Association of International Accountants.
End/Friday, October 23, 1998
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