XN000022-1979-02-14 — Page 3

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WEDNESDAY, FEBRUARY 14, 1979

RESUMED WATER CHARGES DEBATE

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THE IMPACT ON MANUFACTURING COSTS OF THE 37.5 PER CENT INCREASE IN WATER CHARGES FOR TRADE SUPPLIES DOES SEEM LARGE, THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE TOLD THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY).

BUT HE SAID IT WOULD BE MISLEADING TO CONCENTRATE ON THE INCREASE IN CHARGES WITHOUT CONSIDERING THE RELATIVE IMPORTANCE OF WATER CHARGES IN OVERALL COSTS.

SPEAKING AT THE RESUMED DEBATE ON WATER CHARGES, THE FINANCIAL SECRETARY SAID AS HE POINTED OUT THREE WEEKS AGO WATER CHARGES REPRESENTED ONLY +A VERY SMALL PART OF THE OVERALL MANUFACTURING COSTS.+

+THUS THE INCREASES IN CHARGES WILL BE, IN MOST CASES SMALL BOTH IN ABSOLUTE TERMS AND IN THEIR IMPACT ON TOTAL

COSTS.+

THERE ARE, HOWEVER, SOME TRADE CONSUMER WHO USE LARGE QUANTITIES OF WATER AND FOR WHOM WATER COSTS FORM A CONSIDERABLY MORE IMPORTANT PART OF A TOTAL COST THAN FOR MANUFACTURING

INDUSTRY AS A WHOLE, MR. HADDON-CAVE SAID.

+HOWEVER, EVEN AMONG THESE USERS, NEITHER WE NOR THE FEDERATION OF HONG KONG INDUSTRIES HAVE FOUND ANY TRADE CONSUMER FOR WHOM WATER CHARGES CONSTITUTE MORE THAN EIGHT PER CENT OF HIS TOTAL PRODUCTION COSTS.+

THE FINANCIAL SECRETARY SAID THAT IN LINE WITH HIS VIEW THAT THE IMPACT ON MANUFACTURING COSTS OF THE INCREASED CHARGES WILL BE SMALL, HE DOES NOT EXPECT THAT THEY WILL HAVE MUCH IMPACT ON EXPORT PRICES OR ON EXPORTERS' PROFIT.

+SUCH INDUSTRIES AS TEXTILE FINISHING AND DYEING AND ELECTRO-PLATING, ON WHOSE BEHALF IT IS ARGUED THAT THE IMPACT OF THE INCREASED CHARGES ON THE IR COSTS WILL BE CONSIDERABLE, ARE NOT MAJOR DIRECT EXPORTERS AND ARE ONLY PART OF A LONGER PRODUCTION CHAIN.

+TO THAT EXTENT, EVEN IF THEY HAND ON THE IR INCREASED WATER CHARGES IN FULL, THE INCREASE IN COST OF THE EXPORTED PRODUCT WHICH IS ATTRIBUTABLE TO HIGHER WATER CHARGES WILL BE SMALL, SMALLER THAN THE INCREASES IN OTHER COSTS THAT THE MANUFACTURERS OF THESE PRODUCTS HAVE ABSORBED IN RECENT YEARS.+

ON THE EFFECT THAT THE NEW STRUCTURE WILL HAVE ON DOMESTIC CONSUMERS, MR. HADDON-CAVE HAD THIS TO SAY +A COMMON THEME IN PRESS COMMENTS AND CRITICISMS IS THAT THE NEW PRICE STRUCTURE WILL IMPOSE A HEAVY BURDEN ON DOMESTIC CONSUMERS.

+ IF THIS THEME REFLECTS THE GENERAL CONCERN IN THE COMMUNITY ABOUT THE THREAT OF INFLATION, I CAN ONLY SAY THAT I SHARE THIS CONCERN AND INTEND TO SPEAK TO IT IN A FORTNIGHT'S TIME.

/+BUT IF.....