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Following is the transcript of press conference by the Financial Secretary, Mr Henry Tang, at the Central Government Offices after delivering a speech on Hong Kong's economy and management of public finances at the Legislative Council today (October 22) (English portion):

Reporter: Will you consider further cutting civil servants' pay?

FS: The Government has an agreement with the Civil Service that we will reduce pay by 3% in 2004 and a further 3% in the year 2005. We will continue to implement those pay cuts.

Reporter: (On revenue sources, you mention bonds issuance, but is that enough?)

FS: Bonds is actually not a revenue for recurrent expenses. My philosophy is to draw a line between recurrent operating revenue and operating expenses and balancing that by the year 2008-2009 at $200 billion. On the capital account side, I also intend to balance that by the year 2008-2009 but capital expenditure should be covered by capital revenue, so therefore the consolidated account will balance by then. I presume you're going to follow up that question with revenue - how do I intend to reach $200 billion by the year 2008-2009? Actually, chart number 5 is an attractively simple straight line that goes from what we have today to $200 billion by the year 2008-2009. The attractiveness of that simple straight line is that every year we can review whether I am below or above that straight line. If I am below that straight line, that means I am not going to meet that theoretical target of $200 billion by 2008-2009 and I will have to consider whether additional revenue measures will have to be introduced. If I am above that guideline, there would be a very happy choice of whether I will accumulate a little more in reserves or whether there is room for a tax reduction.

Reporter: The sales tax and departure tax is not permanently eradicated, then. You still have to wait and see?

FS: As far as the border facilities tax is concerned, the rationale and the reason behind it is actually still valid. I am actually going to catch a plane to Beijing, I still have to pay the $120 departure tax even though I am going back to the Mainland. So in order to be fair, I think the rationale is still valid. It's just that I believe the public is not ready for it yet.

(Please also refer to Chinese portion.)

Ends/Wednesday, October 22, 2003

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