XN000022-1982-03-25 — Page 8

THURSDAY, MARCH 25, 1982

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THE INDUSTRIAL OUTPUT OF THIS AREA, HE SAID, WILL ONE DAY BE SO VAST THAT IT WILL DEMAND MORE EFFICIENT WAYS OF GAINING ACCESS TO HONG KONG FOR WE ARE SO FAR THE ONLY PRACTICABLE DEEP WATER PORT OF ANY SIZE IN THE REGION.+

THE GOVERNMENT SHOULD THEREFORE EXAMINE NOT ONLY IMPROVEMENTS IN RESPECT OF THE PASSENGER LINKS WITH CHINA BUT ALSO THE IMPLICATIONS THAT THE INDUSTRIAL OUTPUT OF THE AREA WILL HAVE FOR OUR OWN TRANSPORT SYSTEM, HE SAID.

MR CHEONG SPOKE AT LENGTH ON HONG KONG'S ECONOMIC PROSPECTS.

HAVING READ THE +1982 ECONOMIC PROSPECTS+ SEVERAL TIMES, HE SAID HE WAS STILL NOT CONVINCED THAT THE ACTUAL GROWTH RATE IN 1982 WAS LIKELY TO BE CLOSE TO THE FORECAST RATE OF EIGHT PER CENT.

FIRST, UNDERLYING THE FORECAST GROWTH RATE OF 16 PER CENT FOR GROSS DOMESTIC FIXED CAPITAL FORMATION IS AN ASSUMPTION THAT THE GROWTH RATE OF INVESTMENT IN PLANT, MACHINERY AND EQUIPMENT WILL BE 14 PER CENT IN 1982.

HOWEVER, HE DISAGREED WITH THIS ASSUMPTION BECAUSE HE FELT THE ADDITIONAL BENEFIT ACCRUING TO THE MANUFACTURER IN THE PROPOSED INCREASE IN THE DEPRECIATION ALLOWANCE IS NOT SIGNIFICANTLY BIG IN ABSOLUTE TERMS.

QUOTING AN EXAMPLE, HE SAID A MANUFACTURER WHO INVESTS $1 MILLION IN NEW PLANT AND EQUIPMENT WILL, UNDER THE PROPOSED INCREASE IN DEPRECIATION ALLOWANCE, ENJOY AN ACCUMULATED TAX EXEMPTION BENEFIT IN FOUR YEARS OF $147 173 - ABOUT $8 000 MORE THAN UNDER THE EXISTING ALLOWANCE, OR ONLY 0.8 PER CENT MORE ON THE CAPITAL INVESTED.

SECONDLY, MR CHEONG EXPRESSED RESERVATIONS ABOUT THE PROSPECTS OF AN ECONOMIC RECOVERY IN THE UNITED STATES WHICH ACCOUNTED FOR 36 PER CENT OUR DOMESTIC EXPORTS BY VALUE IN 1981.

HE SAID THE FORECAST OF SEVEN PER CENT GROWTH RATE OF OUR DOMESTIC EXPORTS WOULD BECOME MORE REALISTIC IF THE GOVERNMENT WOULD ANNOUNCE THAT RECENT FIGURES ON RETAINED IMPORTS OF RAW MATERIALS ARE FAVOURABLE TO SUPPORT THE VIEW THAT THE DECLINING TREND IN THE FOURTH QUARTER OF 1981 HAS BEEN ARRESTED.

IT WOULD ALSO BE HELPFUL TO KNOW WHETHER THE FORECAST GROWTH RATE IN RESPECT OF DOMESTIC EXPORTS HAS TAKEN INTO ACCOUNT THE EFFECT OF A POSSIBLE ATTACK ON OUR TEXTILE ACCESS RIGHTS IN RESPECT OF THE USA AND THE EEC.

+HOWEVER, SHOULD THE DEMAND FOR OUR EXPORTS IN OUR LARGEST OVERSEAS MARKET FAIL TO PICK UP UNTIL TOWARDS THE END OF 1982, IT WOULD BE DIFFICULT FOR DOMESTIC EXPORTS TO ACHIEVE THE FORECAST GROWTH RATE OF SEVEN PER CENT.

+GIVEN THE NATURE OF OUR ECONOMY IT MIGHT BE DIFFICULT FOR THE GROSS DOMESTIC PRODUCT TO ACHIEVE A GROWTH RATE OF EIGHT PER CENT.+

/HAVING REGARD