Hong Kong's Financial Secretary Henry Tang Wednesday outlined measures aimed at consolidating the current economic recovery and pursuing further development.

Delivering his third government budget at the Legislative Council, Tang said Hong Kong economy rose by 7.3 percent in 2005 compared to the previous year and unemployment rate dropped to a four-year low of 5.2 percent.

Capitalizing on the present opportunity and further developing economy is the mainstream social consensus in Hong Kong, he said.

With a record high of nominal GDP at 1,382.2 billion HK dollars (175.35 billion U.S. dollars) last year, Hong Kong has now fully emerged from the Asian financial crisis and has regained its strength and vitality, Tang said, adding that he was cautiously optimistic about this year's economic outlook.

He forecast real GDP growth of 4 to 5 percent in 2006, slightly higher than the trend growth rate over the past 10 years.

In the medium term from 2007 to 2010, he forecast a 4 percent trend GDP growth rate in real terms, and a 2 percent trend rate of increase in the GDP deflator. The forecast trend growth rate of nominal GDP over the period from 2007 to 2010 is therefore 6 percent.

He said the government will restore fiscal balance in the current fiscal year to end on March 31 in both the operating and consolidated accounts for the first time in eight years - three years ahead of schedule.

Strong economic performance in 2005 coupled with the government's spending cuts will result in a 5.8 billion (748 million U.S. dollars) operating surplus and a 4.1 billion HK dollars (529 million U.S. dollars) consolidated surplus for the 2005-06 financial year, he said.

Other fiscal targets would also be met ahead of schedule. Operating expenditure fell for the second year in a row in 2005-06, and stayed below 200 billion HK dollars (25.8 billion U.S. dollars) , while public spending fell and remained below 20 percent of GDP starting from 2004-05.

Tang said the government's fiscal targets are to keep its accounts in balance and the share of public expenditure in the gross domestic product (GDP) at 20 percent or below over the next few years. For 2006-07, public expenditure is forecast at around 18 percent of GDP, lower than most other developed economies.

To promote its strength as an international financial center, Hong Kong government will expand the scope of the Chinese currency Renminbi (RMB) business and upgrade the quality of its financial markets, Tang said.

As at the end of 2005, 38 banks in Hong Kong were providing RMB deposit-taking, exchange and remittance services. Total RMB deposits in Hong Kong had reached 22.6 billion yuan (2.8 billion U.S. dollars), and the cumulative value of spending and cash withdrawals using RMB debit and credit cards in Hong Kong amounted to 9.4 billion HK dollars (1.2 billion U.S. dollars).

"As to the next stage of development, we are in discussion with the Central Government regarding the other two strategic directions, namely the proposals to allow cross-boundary trade to settle in RMB and to establish an RMB debt issuance mechanism in Hong Kong," Tang said.

He also stressed the importance to promote Hong Kong's brand name in financial services and provide better service for Chinese mainland enterprises and funds to reach out to the international market.

On tourism development, Tang said the Individual Visit Scheme has extended to 38 Chinese mainland cities and attracted nearly 200 million visitors. Hong Kong is making a bid to extend the scheme to six other provincial cities in the Pan-Pearl River Delta region.

As its continued efforts to develop tourist facilities, Hong Kong is preparing for the opening of Ngong Ping 360 (comprising Ngong Ping Skyrail and Village) as well as the Hong Kong Wetland Park, Tang said.

In infrastructure area, the government will earmark 29 billion HK dollars (3.7 billion U.S. dollars) a year on average for infrastructure projects in the next five years, Tang said, adding that about 14,000 new construction jobs are expected to be created in the coming year.

Major projects, such as the North Lantau Highway Connection to the Hong Kong-Zhuhai-Macao Bridge and the Central Government Complex and LegCo Building at Tamar, will start as soon as possible. Other large-scale projects, including Kai Tak Development and the Central-Wan Chai Bypass are under discussion, Tang said.

To maintain its competitive edge as world trade and finance center, the government plans to recruit overseas and mainland talent excelling in their professions, introducing a migrant scheme giving a quota of 1,000 entrants a year to the city.

In order to stabilize government revenue, Hong Kong plans to introduce Goods and Services Tax (GST) as widespread experience overseas has demonstrated that a GST can achieve this purpose. But Tang said from making a decision to introduce GST to its actual implementation will take about three years.

On the environmental front, Tang said the government will introduce "green" taxes in accordance with the Polluter Pays principle and give tax reduction to encourage pro-environment behavior.

The government has also proposed to implement some modest tax concessions in the coming year to reduce the burden on taxpayers, particularly middle-class families in Hong Kong, Tang said.

Source: Xinhua