XN000022-1976-03-24 — Page 3

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WEDNESDAY, MARCH 24, 1976

UNTIL RECENT YEARS, ALL CAPITAL EXPENDITURES CAME FROM THE REVENUE, BE IT RECURRENT OR CAPITAL. APART FROM THE FACT THAT IT WAS USUALLY DIFFICULT TO FINANCE MAJOR CAPITAL PROJECTS FROM REVENUE WITHOUT THE SACRIFICE OF SOME DEVELOPMENT IN SOCIAL SERVICES, DR. CHUNG SAID HE ALWAYS FELT THAT THERE WAS ADDITIONAL SOCIAL INJUSTICE IN THAT APPROACH.

+ IT IS REALLY NOT EASY TO DEFEND THE PHILOSOPHY THAT THE PRESENT GENERATION SHOULD PAY FOR ALL THE COST OF A CAPITAL PROJECT WHICH IS TO BE ENJOYED ALSO BY THE NEXT GENERATION.+

HE SUBSCRIBED TO THE BUDGETARY STRATEGY THAT LOAN FINANCING WAS, TO CERTAIN EXTENT, DESIRABLE FOR THOSE CAPITAL PROJECTS WHICH WERE, GENERALLY SPEAKING, REVENUE GENERATING SUCH AS AIRPORT, WATER RESERVOIR AND RAILWAYS.

DR. CHUNG CONTINUED THAT THOSE WHO HAD THE GOOD OF HONG KONG AT HEART WOULD FULLY RECOGNISE THE URGENT NEED TO CONTINUE TO IMPROVE SOCIAL SERVICES AND RAISE THE LIVING STANDARDS OF THE LESS-PRIVILEGED RESIDENTS.

+I KNOW ALL THE UNOFFICIALS ARE IN SUPPORT OF THE INTERIM INCREASE OF CORPORATION PROFITS TAX TO 17 PER CENT, IN FACT, SOME OF MY UNOFFICIAL COLLEAGUES FEEL THAT THE FINANCIAL SECRETARY SHOULD HAVE TAKEN THE OPPORTUNITY TO RAISE THE STANDARD RATE OF TAX TO THE SAME LEVEL OF 17 PER CENT.+

DR. CHUNG WENT ON TO SAY THAT WHILE HE WAS GLAD TO SEE THE UPTURN OF HONG KONG'S ECONOMY, HE WISHED TO SOUND A NOTE OF CAUTION. HE FELT THAT THE FINANCIAL SECRETARY'S FORECAST ON THE ECONOMIC PROGRESS IN 1976 A NINE PER CENT GROWTH RATE OF THE GROSS DOMESTIC PRODUCT IN REAL TERMS - WAS SOMEWHAT OPTIMISTIC.

HE POINTED OUT THAT FROM 1965 TO 1975 INCLUSIVE, THERE WERE ONLY THREE YEARS IN WHICH HONG KONG WAS ABLE TO ACHIEVE ANNUAL GROWTH RATES OF GDP AT CONSTANT MARKET PRICES HIGHER THAN NINE PER CENT.

HE SAID IT WAS DOUBTFUL THAT THE MOMENTUM OF HONG KONG'S GROWTH COULD BE MAINTAINED TOWARDS THE SECOND HALF AND IN PARTICULAR THE FOURTH QUARTER OF 1976.

AS LONG AS THE TREND OF REAL ECONOMIC GROWTH WAS RISING, HE CONTINUED, ONE SHOULD BE PREPARED TO ACCEPT, AT LEAST FOR THE TIME BEING, THE FACT THAT THERE WOULD BE SURPLUS IN A PROSPEROUS YEAR AND DEFICIT IN A LEAN YEAR.

+ IT IS OF COURSE NECESSARY THAT OVER A PERIOD OF TIME THE SURPLUSES IN THE GOOD YEARS SHOULD BALANCE THE DEFICITS IN THE BAD ONES,+ DR. CHUNG SAID.

THE RATHER SMALL SURPLUS OR DEFICIT EACH YEAR WAS NOT REALLY IMPORTANT, HE SAID. THIS WAS PARTICULARLY SO WHEN A CASH ACCOUNTING SYSTEM WAS USED IN THE GOVERNMENT.

+THIS MEANS

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