1
5
as a whole has tended to be the same as the rate of
growth of exports of textiles which still represent
about 50% by value of total domestic exports.
9.
(c) Fiscal Policy
But manufacturing industry has flourished in
Hong Kong not simply because of the discipline which
direct exposure to world competition has provided; the
Government's fiscal policy has played a critical role.
The lack of tariffs and other restrictions on imports
and exports has been paralleled by an absence of controls
on the movement of capital and has been complemented by
low rates of direct taxation. The fact that capital has
been able to move freely into and out of Hong Kong
has in itself made investment in Hong Kong very attractive.
Low rates of direct taxation, and the limitation of the
charge to profits and earnings arising from activities
within Hong Kong itself, have acted as a major stimulant
to investment in Hong Kong, both to investment which is
of an internationally mobile nature and to purely domestic
investment; and they have also been a powerful influence
through their incentive effect on the supply of effort.
However, although the contribution of the
10.
manufacturing sector to overall economic activity in
Hong Kong has increased substantially in the last twenty
years, and although the entrepot trade (which provided the
original rationale for Hong Kong's free port status)
is now relatively less important, there is still little scope
/in Hong Kong....