XN000022-1976-09-16 — Page 2

THURSDAY, SEPTEMBER 16, 1976

REVISED QUOTA SYSTEM ANNOUNCED

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DETAILS OF THE REVISED TEXTILE QUOTA SYSTEM ARE ANNOUNCED BY THE COMMERCE AND INDUSTRY DEPARTMENT. THE REVIEW WAS UNDERTAKEN AT THE SUGGESTION OF THE TEXTILES ADVISORY BOARD AND TOOK SEVERAL MONTHS TO COMPLETE.

THE MODIFICATIONS COVER QUOTA ALLOCATIONS, QUOTA TRANSFERS THE AVAILABILITY AND DISTRIBUTION OF UNALLOCATED QUOTAS, AND DISSEMINATION OF INFORMATION ON QUOTA HOLDINGS, QUOTA UTILISATION AND TRANSFERS.

THESE AND SEVERAL OTHER ASPECTS HAD BEEN THE MAIN TARGETS FOR CRITICISM OF THE PREVIOUS SYSTEM, CRITICISM WHICH BECAME PARTICULARLY VOCAL TOWARDS THE END OF LAST YEAR AS THE RESULT OF A SHARP INCREASE IN THE DEMAND FOR HONG KONG TEXTILE PRODUCTS IN THE UNITED STATES AND WESTERN EUROPE.

TRANSFER OF QUOTA

THIS IS PROBABLY THE ASPECT OF THE SYSTEM THAT HAS ATTRACTED MOST CRITICISM.

ALTHOUGH IT IS GENERALLY ACCEPTED THAT THE PREVIOUS SYSTEM MAKES POSSIBLE THE MAXIMUM FLEXIBILITY IN THE USE OF QUOTA IN ORDER TO ENSURE THAT HONG KONG AS A WHOLE BENEFITS FROM MAXIMUM UTILISATION OF TOTAL AVAILABLE QUOTA, THERE ARE UNDOUBTEDLY GROUNDS FOR THE CRITICISM THAT THE SYSTEM ALSO MAKES IT POSSIBLE FOR PEOPLE TO PROF IT FROM SELLING QUOTAS AS DISTINCT FROM SELLING TEXTILES.

CERTAIN DIS INCENTIVES AGAINST PERSISTENT TRANSFERORS (1.E. SELLERS OF QUOTA) ARE BEING INTRODUCED.

THERE HAS BEEN SOME CRITICISM OF THE PRACTICE UNDER THE PREVIOUS SYSTEM WHEREBY A QUOTA HOLDER WHO UTILIZES 95 PER CENT OR MORE OF HIS ALLOCATION IN ANY ONE YEAR RECEIVED FOR THE FOLLOWING YEAR, NOT ONLY A FURTHER ALLOCATION EQUIVALENT TO 100 PER CENT OF THE PREVIOUS YEAR'S ALLOCATION PLUS ANY PERCENTAGE OF +GROWTH+ PERMITTED UNDER THE RELEVANT AGREEMENT, BUT ALSO A BONUS WHICH REPRESENTS THE DISTRIBUTION OF QUOTA FORFEITED BY THOSE QUOTA HOLDERS WHOSE UTILIZATION IN THE PREVIOUS YEAR QUALIFIES THEM FOR A LESS THAN 100 PER CENT ALLOCATION. THIS PRACTICE IS DISCONTINUED UNDER THE REVISED SYSTEM AND THE AMOUNT WHICH WOULD OTHERWISE BE ALLOCATED AS BONUS WILL IN FUTURE GO INTO THE POOL OF FREE QUOTA.

/FREE QUOTA