HONG KONG STANDARD
HK can keep 7pc growth rate in
next decade
SINGAPORE, Wed. Hongkong Financial Secretary Philip Haddon-Cave today predicted that Hongkong could maintain an average seven per cent growth rate in gross domestic product over the next decade despite an expected 20 per cent rise in population during that period.
"This is a formidable rate of growth, but it is one which I believe is possible," Mr Haddon-Cave told a Conference on Business Opportunities in the Pacific Basin.
He said such a rate would produce an annual increase in per capita income of five per cent over the next 10 years.
According to provisional figures available in Hongkong, the Colony's growth in GDP was 7.1 per cent last year over 1971 and the rise in the per capita income in real terms during the same period was 6.2 per cent.
'The growing population will meet the increased demand for labour generated by this growth rate and the wage structure over the next decade will create a much higher proportion of workers in relation to total population than in the last few years, Mr Haddon-Cave said.
He contended it was conceivable that a higher rate of savings proportion to incomes would filter through Hongkong's established capital market and should cause an increase in investment expenditure.
TRIBUTE
The financial secretary underlined however that Hongkong's growth will at the end of the day depend on export performance.
He paid tribute to the entrepreneurial skill of Hongkong's exporters in finding outlets in Europe and the US and said the Colony should benefit from the increased rate of growth in these countries.
The new initiatives in the decade ahead leading to increased trade liberalisation and specialisation in production will also aid growth, Mr Haddon-Cave said.
The Hongkong government official reiterated his intention to persevere with a policy of a narrow tax base and low rates to encourage investment and expansion.
In fact, he said, high tax rates could have serious Implications for the economy. If public expenditure was allowed to grow significantly faster than gross domestic product the result could be a competitive demand for available resources leading to higher internal costs and prices and balance of payments disequilibrium,
The financial secretary warned that it does not jeopardise longer term growth prospects by diverting resources away from the private sector on an excessive scale.
Mr Haddon-Cave said that he estimated that public revenue In the future will he sufficient to finance quite a spectacular increase in public expenditure. He did not rule out however the possibility of external borrowing.
GROWTH
The financial secretary explained that so long as the growth of public expenditure is kept in step with the growth of overall demand the economy of Hongkong will automatically adjust so as to maintain internal and external equilibrium. Any attempt to control aggregate demand would have a damaging effect on internal costs and prices and balance of payments because Hongkong is so dependent on international trade.
Mr Haddon-Cave rejected arguments that in the future the current reliance on the automatic corrective mechanism which controls demand in Hongkong would become distorted by changes in the community.
Some people claimed rising living standards would lead to militancy in the labour market in Hongkong, Mr Haddon-Cave. said, but he noted that the increased wage costs in Hongkong had been matched by increased productivity and Hongkong has no history of employer/employee confrontation.
He also pointed out that as Hongkong had never had a balance of payments problem, and had avoided dramatic changes in public spending and taxation policy, be did not expect labour militancy of cost push inflation to be a problem in the future, he suki. Reuter
4.10.73
MR HADDON-CAVE 'Formidable rate of growth"
Dow