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CE's Q&A Session at Joint Business Community Luncheon


Following is the transcript of the Q&A Session given by the Chief Executive, Mr Tung Chee Hwa, at the Joint Business Community Luncheon at the Hong Kong Convention and Exhibition Centre today (January 12)(English only):

Question: My question is about the budget deficit. In your policy speech you mentioned that the way to eliminate the budget deficit is to increase tax, fees and cut expenditure and encourage economic growth. Just now you mentioned in your speech as well that one of the major attractions in Hong Kong is low tax. By increasing tax, can we have your assurance that what you meant is increasing the tax net rather than increasing the burden on the existing taxpayers?

Chief Executive: I know I am in a chamber lunch because sitting next to me at our table, the same questions were raised. I think we all agree we need to eliminate the budget deficit. Yes, there are three ways to do it. One is to raise taxes, the other is to cut expenditure and thirdly, if the economy is growing very well then the pressure on the other fronts will be a lot less. The first thing I will say is that the growth of the economy is going to give us the opportunity to really look at how we do balance the need for the budget deficit to be eliminated, on the one hand, and to clearly understand the need of the community, whether it is the business community or the ordinary folks, and then the issue of getting our economy to keep on moving up. So we will have the opportunity to really look at this and I'm sure the Financial Secretary will be looking at all these factors very, very carefully. But, let me tell you one thing. I believe very strongly in the low-tax regime because that's why Hong Kong has been successful and that's what we will continue to try to do in the years and years ahead. I think if we move away from a low-tax base, we would be in real trouble as a city, or as Asia's world city. Whether the tax base needs to be broadened, you know that there has been talks about this and the Government is looking at all these options, but the fundamental issue is that we need to keep the tax low. That is very clear.

Question: My question is about the proposed bridge between Lantau and Zhuhai. This bridge will help in accelerating development of the western side of the Pearl River Delta. Could you share your views and vision about the economic and employment opportunities this bridge and the development of the western side of Pearl River Delta will bring to the people of Hong Kong and create a positive environment?

Chief Executive: First of all, let me tell you where the state of play is. There is a general agreement among the Macau Government, Hong Kong Government and the Guangdong Provincial Government - with the support of the Central Government - that the bridge needs to be built. Secondly, we are now at the stage of a feasibility study commissioned by the three parties to ensure that feasibility is sound and we can then move ahead with the construction of the bridge. For us, the logic is simple. The western side of the Pearl River Delta over the next one, two or three decades offers tremendous additional potential for growth and therefore what we want to be sure of is that we have good linkage with the western side of the Pearl River Delta. As a world city, which puts logistics as one of the most important core business activities linking all parts of Pearl River Delta, including the western part of the Pearl River Delta with Hong Kong, does give Hong Kong that added economic advantage. History shows that economic activities on the eastern side of the Pearl River Delta have actually added great value to us in Hong Kong already. So we are looking forward to the eventual fruition of that bridge from Hong Kong to Macau and to Zhuhai and I'm very, very sure that it would bring enormous economic benefits.

Question: Chief Executive, could you give us some information on how Hong Kong is better prepared for SARS?

Chief Executive: I'm glad that I have this opportunity to talk to you about this subject. You can imagine this subject has been topmost on our minds over the last few months. There have been sporadic cases in Guangdong province. Obviously there is a heightened degree of awareness in Hong Kong. First of all let me say this, that I have confidence in the Guangdong municipal authority and the Central Government to deal with the recent cases that have been reported in Guangdong. Secondly, I also want to tell you that we in Hong Kong are very well prepared for this. Gaining from the experience of the last SARS outbreak, which has been so painful, we are now well prepared for this. There might well be sporadic cases that could happen in Hong Kong too and Dr Yeoh said the other day that the next three, four weeks could be the high-risk weeks for us here in Hong Kong. But I am quite sure that we are able to manage the situation.

First of all, I don't know whether you have crossed the border recently or not. There is such a heightened degree of work that is now being done by various government departments in checking the cross-border flow of people. Secondly, we are now good at early detection and early detection is very important. Thirdly, our contact tracing. In case we have found one person with SARS, our contact tracing is one of the best you can find anywhere in the world, and it's been recognised by WHO and others. Fourthly, our hospital authorities are well prepared for this and we have isolation wards and so on and so forth. So that those who have fever, or who we think have pneumonia only may, if necessary, be isolated. So we are on a heightened degree of alertness and we are ready for this. I have every confidence that we will be able to manage this situation. I can assure you that there will be total transparency as we have been doing every day. I know it is right for you to be concerned and I do want to remind you that whatever you do, ask you and your friends and your family to take care of your personal hygiene and environmental hygiene. It is important. I am quite sure that we are so well prepared that we should be able to master all these difficult environments.

I had another long telephone discussion with Dr Yeoh this morning to talk through some of these scenarios and he appeared to be very confident that we will be able to master whatever may come ahead of us.

Question: Can I comment with obviously my industry sector's interest in mind, that your Policy Address of 70 paragraphs only had two lines on aviation. Yet aviation is one of Hong Kong's greatest success stories. Undeniably, we have the best airport in the world and some of the best airlines. I also have to comment that the most successful visit last year was by astronaut Yang, another aerospace success story which your government did a superb job in arranging. My point in this feedback that you asked for is that surely the moral of the story is that Hong Kong takes too long analysing its problems and spends too little time selling its successes. Thank you, sir.

Chief Executive: I know what I am going to do - ask you to become our ambassador here in Hong Kong and overseas to push Hong Kong. Thank you very much.

Question: Chief Executive, in the past Policy Addresses you have made reference to civil service reform. But we didn't hear anything about it this year. It's one of the areas that's of great concern to the business community in reducing the total size of government. And I wonder if you can give us your thoughts on things such as the ongoing pay comparison surveys and other initiatives towards reforming the civil service.

Chief Executive: In one consultation exercise I had with the Chambers and the Federation of Employers, I thought we were going to talk about the Policy Address generally. We ended up with a whole hour talking about civil service reform. I was very surprised no question was raised until now, almost towards the very end. First of all, let me say this, that we should all be very proud. We have one of the best civil services anywhere you can find. My own experience during the SARS outbreak, when our civil service was asked to carry out duties at Amoy Gardens or to go on board a tanker from Malaysia, when others really didn't particularly want to do it in all sorts of hours late at night, one was on Sunday, no questions were ever asked. Duties were performed perfectly.

Secondly, the civil service size is too big. In 1998, it has 198,000 people. I want to tell you it's now down to 175,000 head counts. And by 2007, it will be down to 160,000. This is the way we are moving. Certainly, the civil service has taken a pay cut - ranging from six per cent plus which spreads over a couple of years. I know that in the business community, you feel this amount is not sufficient. But we felt that on balance, it was the right thing to do. So the civil service has contributed to the restructuring process. What next? Obviously, there is a survey going on about the pay review mechanism and also on the level of pay. But as a government, we had said that after the six per cent-plus pay cut, there would be no further pay cut during my term of office. There are also ongoing reviews on benefits, which are now being conducted. I know it's being conducted very actively within the Government and also with the unions.

Thirdly, I want to tell you one thing. If you look at public sector reforms, for instance in Britain, in Australia, in New Zealand, they all have been very successful. But do you know they have all taken a long time to complete. If we think, for whatever reason, we can complete such complicated reform within a very short period of time, I think we are deluding ourselves. For the UK, I think it went on and on probably for 15, 20 years. For Australia and New Zealand, it also went on, I hope I am right, also for a long time. I hope we would not take that long, and we will continue to strive forward. Thank you very much.

Question: Regarding your recent Policy Address paragraph 33, you said you have intended to further develop Hong Kong into an international financial services and asset management centre very much like Switzerland, based on the strength of Mainland China. What are the strategic policies or measures which you have in mind to gear up Hong Kong towards that position?

Chief Executive: This part of Asia generally has the highest savings rate compared with the Americas or Europe. Secondly, wealth is being created very fast here in Asia. Thirdly, the Asian economies over the next one to three decades will be growing very rapidly. And in Asia, in this time zone actually, we are the one that is most suited to become an asset management centre for Asia. Now, I did not say this because I thought it was the right thing to do. I say this because professionals like you have been giving me advice saying that this is the way forward for Hong Kong. Hong Kong is already doing a lot. A few more things need to be done. Once you have done that, or if you keep on improving on that, Hong Kong will have a great future. Now, I can talk to you about all the details of what has been discussed, but I think probably you know as well as I do what needs to be done. What we need to do now is that we need to push ahead with some of these changes, and also for the business sectors to really move ahead and get on with it. I think the prospect is very good indeed.

Ends/Monday, January 12, 2004


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