CONFIDENTIAL
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6.
Hong Kong's fiscal conservatism has recently led to a rather
blemished record in Budgeting in that underspending is occuring too often.
It might be worth considering budgeting for more expenditure and to rely
on the factors normally advanced and experienced for underspending, to
bring this down.
EMPLOYMENT
7.
(ie full)
There are some worrying aspects about employment. Hong Kong has no
effective trade unions and wage rates are flexible downwards as well as
upwards. Consequently unemployment (and public assistance) should, by
definition, normally be very low. Full employment is regarded as coinciding with a level of 41% unemployment. Even accepting measurement differences,
it is still difficult to accept this view, as in most manufacturing countries
an unemployment level of around 2% to allow for unemployables, those
switching jobs etc,is reckoned to be about par It is also pointed out
that the manufacturing sector will decline as a proportion of GDP whilst the
financial sector will grow. It is somewhat unfortunate that the former is
labour intensive and the latter not. It suggests Hong Kong's changing role.
from a manufacturing base to a financial haven; the unemployment and social
implications are obvious. More may need to be done to arrest this and
industrial incentives devised; a query could therefore arise on the New
Towns policy.
PUBLIC EXPENDITURE
8.
The Financial Secretary does not seem to have fully appreciated the
importance both past and present Secretaries of State attach to a rising
level of public expenditure. Neither world recessions or troubles on the
MFA front should be allowed to intervene to cause a repeat of the 1975 cutbacks,
or reductions in the relative size of the public sector. Whilst the Governor's
social programme has of course been accepted and costed with some room for "
"essential" new policies, from the discussions held in London in December 1976
there would still appear to lurk the (mistaken) philosophy that expenditure
in certain fields, eg higher education, is best left to the private sector -
an idea contrary to that of most other manufacturing countries.
GUIDELINES
9.
The repetitious references to local self-imposed guidelines serve
little useful purpose in defining Hong Kong's economic policies. It is
difficult to see their value. Such a line assumes a constant relationship
/ between variables
CONFIDENTIAL