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Transcript of CE's press conference

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Following is the transcript of the press conference given by the Chief Executive, Mr Tung Chee Hwa, at the Central Government Offices New Annex Conference Hall after delivering his Policy Address this (January 8) afternoon:

Mr Tung: Good afternoon, ladies and gentlemen. I have just delivered my first Policy Address of my second term. The focus of my Policy Address is on the subject of economy, how do we move forward to get the economy going again, and how do we reduce the mounting budget deficit that we face. I also took the opportunity to briefly talk about Article 23 of the Basic Law. I would be very happy to answer any questions you might have. Thank you very much.

Reporter: In your speech you have mentioned that you are confident that you can go forward and take Hong Kong out of its economic difficulties. And as to the deficit, you have said we have reached a critical stage. Could you just explain how you intend to deal with this deficit problem? And could you give some specific details, perhaps, on the new taxes you propose and whether or not this might damage an already fragile economy?

Mr Tung: With regard to your second question first, about the budget deficit. First of all, I have to say that a budget deficit of $70 billion, which is in excess of 5 per cent of GDP, is a very, very serious matter and we need to deal with it resolutely. Secondly, it will be dealt with consistent with a set of principles and philosophies that we are following.

Firstly, yes, we have to increase taxes. But we will do it in such a way that it will be consistent with our simple tax structure and low tax base. Whatever we do, we will not affect that basic principle, which we hold dearly.

Secondly, we need to reduce expenditure, and I have said that the goal is that we will progressively reduce expenditure. By the year 2006-2007 we will reduce our overall expenditure of $219 billion by about $20 billion. How are we going to do this? Well, we really have to do it in many, many different areas. But we are going to make it, to cut expenditure by $20 billion. But we will be careful. When we do this, we will also be careful that we would not create too much of a problem from a deflation point of view. So, these are some of the things we will be very careful about.

But you know, at the end of the day, you cannot solve the deficit problem just by increasing taxes or cutting expenditure because at the end of the day, it is the economy, it is the growth of the economy. We have got to get the economy growing again. And I am happy to say, actually, that (in) the third quarter of last year we had 3.3% growth, and in the fourth quarter of last year the initial figure looks pretty good. So we are doing all right for the time being. But we need to keep on doing it to move ahead. We need, also, to tackle the deflation issue because deflation really hits us very, very seriously.

On this reduction of budget deficit, on this question about cutting government expenditure, the principal officials have been looking at this together with their senior colleagues in the government for a couple of months already - (for) more than a couple of months, maybe three months already - as to how this can be done, and we are confident we can deliver this.

And insofar as getting the economy growing again, let me tell you this, that to get the economy growing again we have to be clear where we are going. And after some really careful studies and soul-searching and listening to the views of the community, the way we are going about it is to give further support to the development in the areas of our competitive advantage, such as a financial centre, a centre for tourism, logistics, and a centre for trade and so on. And on the other hand, to move ahead very aggressively, working together with the Pearl River Delta to bring extra economic vitality into our economy. And we are quite sure this is the way forward, and given some fair wind, we will get there.

(Please also refer to the transcript in Chinese)

End/Wednesday, January 8, 2003

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