XN000022-1975-02-05 — Page 14

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WEDNESDAY, FEBRUARY 5, 1975

NO POLICY OF ASSISTANCE FOR UNPROFITABLE COMPANIES

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THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE SAID TODAY HE DID NOT THINK THAT THE GOVERNMENT SHOULD HAVE A POLICY OF KEEPING UNPROFITABLE COMPANIES AFLOAT,

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HE WAS REPLYING TO THE HON. JAMES WU IN LEGISLATIVE COUNCIL WHO HAD ASKED WHAT MEASURES THE GOVERNMENT WAS TAKING TO ASSIST

INDUSTRY AND TO AVOID BANKRUPTCIES DUE TO CASH FLOW PROBLEMS.

MR. HADDON-CAVE SAID HE KNEW THE NUMBER OF BANKRUPTCIES HAD INCREASED, BUT HE WAS NOT SURE THAT THIS WAS BECAUSE OF CASH FLOW OR OTHER EQUALLY IMPORTANT PROBLEMS, SUCH AS PROFITABILITY AND THE LENGTH OF ORDER BOOKS, ADDING THAT THERE WAS NOTHING HE COULD DO TO PUT RIGHT THE MAIN EXPORT MARKETS WHICH WERE IN RECESSION.

+THE HELP WHICH THE GOVERNMENT GIVES TO INDUSTRY IS MAINLY THE PROVISION OF A PROPER WORKING ENVIRONMENT, WITH A LOW STANDARD RATE OF DIRECT TAXATION APPLICABLE SOLELY TO INCOME DERIVED WITHIN HONG KONG ITSELF, FREEDOM FROM CONTROLS AND INTER- FERENCE, AND FREEDOM FROM IMPORT OR EXPORT DUTIES.

+ASSISTANCE AND ENCOURAGEMENT IS ALSO PROVIDED IN CERTAIN SPECIFIC AREAS THROUGH THE COMMERCE AND INDUSTRY DEPARTMENT AND VARIOUS STATUTORY AGENCIES AND SUBVENTED BODIES,+ HE SAID.

HE POINTED OUT THAT CASH FLOW PROBLEMS ELSEWHERE HAD ARISEN LARGELY AS A RESULT OF INFLATION, AND OF TAX SYSTEMS WHICH BEAR HEAVILY ON PROFITS REFLECTING STOCK APPRECIATION AS WELL AS FROM PRIVATE CONTROLS.

+IN HONG KONG WE HAVE BEEN FREE FROM INTERNALLY GENERATED INFLATION AND ALTHOUGH WE HAVE TO LIVE WITH IMPORTED INFLATION, THE PRICES OF RAW MATERIALS FROM ABROAD, OTHER THAN OIL, HAVE FALLEN SHARPLY OVER THE LAST SIX MONTHS OR SO.

+AS REGARDS STOCK APPRECIATION, OUR LOW STANDARD RATE OF PROFITS TAX WILL HAVE MADE THE PROBLEM LESS ACUTE THAN ELSEWHERE, AND OUR MOVE TO A CURRENT YEAR BASIS FOR CALCULATING ASSESSABLE PROFITS WILL HELP MANUFACTURERS WHO ARE NOW RUNNING OFF STOCKS BOUGHT AT HIGH PRICES IN THAT RELIEF WILL BE AVAILABLE SOONER

THAN PREVIOUSLY IF THERE IS A DOWN TURN OF PROFITS IN EXCESS OF 10 PER CENT, HE SAID.

MR. HADDON-CAVE ADDED THAT HE BELIEVED ANY MEASURES OF A MORE GENERAL KIND TO ASSIST INDUSTRY COULD POSSIBLY BE DAMAGING TO OUR COMPETITIVE POSITION IN THE LONGER TERM.

+IN ANY CASE, ASSISTANCE INVOLVING ACTUAL EXPENDITURE WOULD I FEAR, HAVE BUDGETARY IMPLICATIONS WHICH COULD NOT BE ACCEPTED AT PRESENT.

+AND IF, AS WOULD INEVITABLY BE THE CASE, WE FOUND OURSELVES LOCKED IN TO A POLICY OF ASSISTANCE, THERE WOULD BE CONSEQUENTIAL IMPLICATIONS FOR FISCAL POLICY,+ HE WARNED.

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