XN000022-1977-03-30 — Page 7

WEDNESDAY, MARCH 30, 1977

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+THE FEDERATION OF HONG KONG INDUSTRIES HAS SET UP AN AD-HOC COMMITTEE TO STUDY THIS MATTER AND WE HOPE THAT THE GOVERNMENT WILL ALSO NOT OVERLOOK THE SERIOUSNESS OF THE PROBLEM AND SEEK TO PROVIDE IMMEDIATE REMEDIES, HE NOTED.

ON THE QUESTION OF WATER CHARGES, MR. WU SUGGESTED THAT BEFORE A DECISION WAS MADE TO RAISE CHARGES ON WATER FOR INDUSTRIAL USE, THE WHOLE MATTER SHOULD BE THOROUGHLY EXAMINED AS TO ITS EFFECTS AND POSSIBLE ALTERNATIVES.

HE TOLD THE COUNCIL THAT THE FEDERATION OF HONG KONG INDUSTRIES HAD EARLIER WARNED OF THE DANGERS OF INCREASING THE COST OF WATER FOR INDUSTRIAL USE.

THE FEDERATION, HE CONTINUED, HAD DEMONSTRATED THE SIGNIFICANCE OF WATER AS A PRODUCT COST-FACTOR IN MAJOR INDUSTRIAL SECTORS, SUCH AS IN THE DYEING, BLEACHING AND FINISHING, METAL FINISHING, KNITTING, WEAVING AND FOOD PROCESSING INDUSTRIES.

SOME 80 PER CENT OF INDUSTRIAL WATER WAS CONSUMED BY THE DYEING AND FINISHING INDUSTRY -- A VITAL LINK IN THE VERTICAL SET-UP OF HONG KONG'S TEXTILE AND GARMENT INDUSTRIES, HE SAID.

+ THE COMBINED EXPORTS OF THESE INDUSTRIES ACCOUNT FOR 50 PER CENT OF OUR EXPORT REVENUE AND THEREFORE PLAY AN ESSENTIAL ROLE IN THE ECONOMY OF HONG KONG AS A WHOLE.

+THE CHAIN FROM YARN TO GARMENT WOULD BE BROKEN IF THE DYEING AND FINISHING INDUSTRY WAS ADVERSELY AFFECTED BY A DECISION TO INCREASE WATER CHARGES, AS MANY FACTORIES MIGHT FIND IT NECESSARY TO MOVE ELSEWHERE,+ MR. WU SAID.

TURNING TO DIVIDENDS WITHHOLDING TAX AND UNDISTRIBUTED DIVIDENDS TAX, THE UNOFFICIAL MEMBER HOPED THE FINANCIAL SECRETARY WOULD BE CONVINCED BY THE THIRD INLAND REVENUE ORDINANCE REVIEW COMMITTEE'S RECOMMENDATION AGAINST THE INTRODUCTION OF THE TWO TAXES IN QUESTION, AND WOULD +PUT THE MATTER TO REST+.

MR. WU NOTED THAT THE MAIN OBJECTIONS WERE THAT THE TWO TAXES WOULD INTERFERE WITH JUDICIOUS AND SOUND FINANCIAL MANAGEMENT BY COMPANY DIRECTORS, AND DISCOURAGE RE-INVESTMENT FOR GROWTH AND PROVISION OF NEW JOBS.

ON THE SUBJECT OF RATES, MR. WU PROPOSED THAT AS A MEASURE OF RELIEF FROM HARDSHIPS AND DIFFICULTY, THE 33-1/3 PER CENT INCREASE IN RATES SHOULD BE REDUCED TO A MAXIMUM OF 25 PER CENT FOR THE FIRST YEAR.

/HE QUERIED

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