XN000022-1986-03-26 — Page 19

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WEDNESDAY, MARCH 26, 1986

UNFAIR TO SINGLE OUT FINANCIAL SECTOR

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THE FINANCIAL COMMUNITY QUESTIONS THE UNDERLYING RATIONALE OF PERIODIC INCREASES IN LICENCE FEES FOR BANKS AND DEPOSIT-TAKING COMPANIES, THE HON DAVID K.P. LI SAID DURING THE BUDGET DE BATE IN THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY).

COMMENTING ON THE BUDGET AS A WHOLE, MR LI SAID HE WAS PLEASED TO HEAR THAT A SMALL SURPLUS WOULD BE ACHIEVED THIS FISCAL YEAR AND THE NEXT AFTER THREE CONSECUTIVE YEARS OF DEFICITS.

HOWEVER, HE SAID HE COULD NOT HONESTLY SAY THE 20 PER CENT INCREASE IN BANK LICENCE FEES AND THE 13 PER CENT INCREASE IN DEPOSIT-TAKING COMPANIES' LICENCE FEES WERE UNIVERSALLY WELCOMED BY THE FINANCIAL COMMUNITY.

HE SAID THAT WITH 149 BANKS AND 310 DTCS COMPETING FIERCELY FOR BUSINESS IN HONG KONG, THE FINANCIAL BUSINESS WAS MUCH MORE OPEN TO OUTSIDE COMPÉTITION AND YET IT ALONE ENJOYED THE +DUBIOUS HONOUR OF REGULAR AND INCREASING PAYMENTS TO THE EXCHEQUER.+

+ IT SEEMS LESS THAN FAIR TO SINGLE OUT THE FINANCIAL SECTOR FOR SUCH ROYALTY-LOADED PAYMENT, HE SAID.

HOWEVER, MR LI SAID THE FINANCIAL SECTOR WARMLY WELCOMED THE ABOLITION OF STAMP DUTY ON HONG KONG BEARER INSTRUMENTS IN RESPECT OF LOAN CAPITAL, AND THE REPEAL OF PROFITS TAX ON INTEREST INCOME EARNED ON OFFSHORE DEPOSITS.

HE SAID BOTH HAD IMPORTANT IMPLICATIONS FOR HONG KONG'S FURTHER DEVELOPMENT AS AN INTERNATIONAL FINANCIAL CENTRE.

HE OBSERVED THAT HONG KONG'S CAPITAL MARKET HAD LONG EXHIBITED A LOPSIDED DEVELOPMENT, WITH THE BOND MARKET SEGMENT VIRTUALLY DORMANT COMPARED WITH ITS EQUITY COUNTERPART.

+HOPEFULLY THE ABOLITION OF THIS STAMP DUTY WILL ENCOURAGE THE ISSUE AND TRADING OF CORPORATE DEBT INSTRUMENTS IN HONG KONG AND RAISE THE DEVELOPMENT OF THE CAPITAL MARKET TO A LEVEL MORE IN KEEPING WITH OUR STATUS AS AN INTERNATIONAL FINANCIAL CENTRE,+ HE SAID.

MR LI ALSO NOTED THAT MANUFACTURING INDUSTRIES IN HONG KONG HAD MADE RELATIVELY LITTLE USE OF THE CAPITAL MARKET FOR RAISING LONG-TERM CAPITAL BUT HAD RELIED PRINCIPALLY ON BANK CREDIT INSTEAD.

HE COMMENTED THAT THE INABILITY OF THE CAPITAL MARKET TO FULFIL ITS CAPITAL-RAISING FUNCTION HAD UNFAVOURABLE IMPLICATIONS FOR THE LIQUIDITY AND SAFETY OF THE BANKING INDUSTRY, A SITUATION WHICH THE GOVERNMENT DID NOT SEEM TO SUFFICIENTLY APPRECIATE.

/HG SAID