XN000022-1983-03-27 — Page 2

SUNDAY, MARCH 27, 1983

FOREIGN INVESTMENT DEFYING RECESSION

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FOREIGN AND JOINT-VENTURE INVESTMENTS IN HONG KONG'S MANUFACTURING INDUSTRY EXPANDED TO AN ALL-TIME RECORD LAST YEAR DESPITE WHAT MANY ECONOMISTS CONSIDER THE WORST GLOBAL RECESSION IN HALF A CENTURY.

STATISTICS GATHERED BY THE INDUSTRY DEPARTMENT SHOW THAT BY THE END OF LAST YEAR THE ACCUMULATED TOTAL OF THESE INVESTMENTS HAD REACHED $9.5 BILLION, UP BY 10 PER CENT OVER 1981 AND MORE THAN DOUBLE THE AMOUNT OF THREE YEARS AGO.

THE TOTAL CONSISTS OF $7.5 BILLION INVESTED BY FOREIGN INTERESTS AND $2 BILLION BY LOCAL PARTNERS IN ABOUT 488 ESTABLISHMENTS, MANY OF WHICH EMPLOY HIGHLY SOPHISTICATED TECHNOLOGIES.

THIS EXPANSION IS IN MARKED CONTRAST TO THE LOW GROWTH EXPERIENCED BY THE REST OF THE INDUSTRIALISED WORLD LAST YEAR.

MR C.G. BERNARD, A PRINCIPAL CONSULTANT OF THE INDUSTRY DEPARTMENT, ATTRIBUTED THIS TO THE DIFFERENCE IN SOCIO-ECONOMIC FACTORS BETWEEN HONG KONG AND MANY INDUSTRIALISED COUNTRIES.

OVER THE YEARS, HIGH LABOUR AND OTHER COSTS IN INDUSTRIALISED COUNTRIES HAVE MADE IT VITAL FOR MORE INDUSTRIALISTS THERE TO SHIFT SOME OF THEIR OPERATIONS OVERSEAS.

AND FOR A NUMBER OF REASONS, HONG KONG IS CONTINUING TO BENEFIT FROM THIS SITUATION. THESE INCLUDE CONSISTENT ECONOMIC AND FINANCIAL POLICIES, RELIANCE ON FREE TRADE AND FREE ENTERPRISE, A GROWING POOL OF EXPERIENCED LOCAL ENTREPRENEURS AND A COST EFFECTIVE, HIGHLY SKILLED LABOUR FORCE.

OTHER IMPORTANT FACTORS ARE THE GROWING DEPTH OF HONG KONG'S COMMERCIAL AND FINANCIAL FACILITIES, THE INCREASING SOPHISTICATION OF ITS INFRASTRUCTURE AND COMMUNICATIONS. THE LOW PERSONAL AND CORPORATE TAX RATES OF 15 AND 16.5 PER CENT RESPECTIVELY, TOGETHER WITH GENEROUS DEPRECIATION ALLOWANCES, AND THE ABILITY TO CARRY LOSSES FORWARD INDEFINITELY.

THIS IS NOT THE FIRST TIME THAT FOREIGN INVESTMENT IN HONG KONG HAS CONTINUED TO EXPAND IN THE FACE OF A RECESSION, MR BERNARD POINTED OUT. DURING THE PREVIOUS RECESSION IN 1974 AND 1975, 19 NEW FOREIGN AND 40 JOINT-VENTURE ESTABLISHMENTS WERE SET UP INVOLVING_INVESTMENTS OF $119 MILLION AND $1 031 MILLION, THE LATTER BEING THE HIGHEST FIGURE FOR THE DECADE.

UNIT COSTS OF PRODUCTION IN REAL TERMS ARE EVEN MORE FAVOURABLE TODAY BECAUSE OF STABLE WAGES AND A MARKED DECLINE IN INDUSTRIAL LAND PRICES WHICH ARE NOW COMPETITIVE WITH OTHER AREAS IN EAST ASIA.

ALSO, ABOUT ONE MILLION SQUARE METRES OF INDUSTRIAL FLOOR SPACE WERE AVAILABLE AT THE END OF 1982, A FIGURE WHICH COULD DOUBLE BY THE END OF 1983.

/+AS HONG KONG'S