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The following is the transcript (English portion) of a media stand-up session given by the Financial Secretary, Mr Henry Tang this morning (November 16) at West Wing lobby, Central Government Offices on the report by the International Monetary Fund (IMF) Staff Mission:

Reporter: ... urgency to introduce a GST?

Financial Secretary: The IMF report is actually a fairly thorough report and it is a very important report for us because they do this Article IV Consultation for many, many other economies. So they would look at us as one economy in a global economy and compare our strengths and our weaknesses. And one of the points they had emphasised very much is that we have a very narrow tax base and so, therefore, they believe that the introduction of a goods and services tax (GST) would provide a steady stream of income for us. I appreciate what they have said and I believe that they said it objectively. But we still have a timetable that towards the end of this year, the internal taskforce will submit a report to me. I would study the report first before I decide on the way forward.

Reporter: Do you think (GST's) implementation might be speeded up in the light of the report by IMF?

Financial Secretary: I cannot speed it up if the Legco members or the general public do not support it. Currently, they feel that the circumstances are not right for the introduction of a GST yet. But I have pledged that there is no question of introducing a GST without a thorough and detailed discussion in the public forum as well as with Legco. This is not the first time IMF said it (the need for GST), and a number of other organisations in Hong Kong have made these same points. So I think it is necessary for us to have a constructive, healthy dialogue and discussion on the way forward.

Reporter: Mr Tang, what do you think about the inflation outlook? Do you agree with them?

Financial Secretary: The IMF forecasts that next year we will see a 1% inflation. Our numbers are telling us that this year we will see a 0%, neither deflation nor inflation. We are now finalising the figures on the third quarter. But, as far as forecast for the next financial year is concerned, we normally do it during Budget.

Reporter: Do you think it will be more or less than 1%?

Financial Secretary: I do not wish to see a return of deflation. Whether we will see a mild inflation, we are still collating the numbers. I do not wish to speculate on it as yet.

Reporter: The report also mentions something about the external risks and challenges to the economy. Should we be worried about that?

Financial Secretary: Well, I've pointed out certain external risks and challenges such as whether oil prices are going to go up very fast and sustain at a very high level. Apparently, it's beginning to ease off a bit but I am not making predictions about oil prices. By the same token, China's macro-economic control policies to cool down the economy, what effect it would have on Hong Kong in the near term and in the medium term, again, still remains to be seen. So they're certain external challenges that we are aware of, and that we have to be conscious about. But, actually, IMF did raise one point which we knew about but we haven't quite come to grips with it yet, which is the changing demographics. Because of the changing demographics, the number of elderly people is going to grow to one out of four in the year 2030 and that would have much bigger demand on let's say, healthcare. And so these are some of the issues that we would have to start thinking about very soon.

Reporter: What about unemployment?

Financial Secretary: Unemployment remains a challenge.

Reporter: Is it going to fall below 6% as IMF predicts?

Financial Secretary: I hope they are right.

(Please also refer to the Chinese portion of the transcript.)

Ends/Tuesday, November 16, 2004

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