XN000022-1991-03-06 — Page 3

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WEDNESDAY, MARCH 6, 1991

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SIR PIERS SAID HE WOULD, AS USUAL, COMMENT ON HONG KONG'S ECONOMIC PERFORMANCE FOR THE PAST YEAR AND THE PROSPECTS FOR YEAR.

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"FORECASTING THE PERFORMANCE OF HONG KONG'S DYNAMIC ECONOMY NEVER EASY, AND IN THE CURRENT WORLD SITUATION IT IS NOW PARTICULARLY DIFFICULT, HE SAID.

FS OUTLINES CONTROL GUIDELINES FOR PUBLIC EXPENDITURE

THE FINANCIAL SECRETARY, THE HON SIR PIERS JACOBS, IN HIS BUDGET FOR 1991-92 PRESENTED TODAY (WEDNESDAY), SET OUT IN SOME DETAIL THE WAYS IN WHICH THE GOVERNMENT REACHED DECISIONS ABOUT THE LEVELS OF PUBLIC EXPENDITURE.

SIR PIERS ALSO DESCRIBED THE VARIOUS PROCEDURES DEVELOPED TO ENSURE THAT GOVERNMENT RESOURCES WERE PRUDENTLY AND EFFECTIVELY ALLOCATED AND THAT IT WAS GETTING VALUE FOR MONEY.

HE SAID FUNDAMENTAL TO THE BUDGETARY STRATEGY WAS THE PRINCIPLE THAT THE PUBLIC SECTOR MUST NOT BE ALLOWED TO ABSORB TOO GREAT A SHARE OF HONG KONG'S ECONOMIC RESOURCES, OTHERWISE THE PRIVATE SECTOR WOULD BE LESS ABLE TO GENERATE THE WEALTH ON WHICH THE TERRITORY'S WELL- BEING DEPENDED.

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IN APPLYING THIS PRINCIPLE, THE GOVERNMENT HAD ALWAYS USED GROSS DOMESTIC PRODUCT (GDP) AS A MEASURE OF THE SIZE OF HONG KONG'S ECONOMY, HE SAID.

"IF WE ARE TO KEEP THE PUBLIC SECTOR WITHIN BOUNDS, THEN PUBLIC EXPENDITURE SHOULD ONLY BE ALLOWED TO GROW BROADLY IN LINE WITH THE GROWTH IN GDP.

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"I SHOULD ADD THAT, IN THIS CONTEXT, PUBLIC EXPENDITURE COMPRISES THE TOTAL EXPENDITURE CAPITAL AS WELL AS RECURRENT - OF THE GOVERNMENT, THE HOUSING AUTHORITY AND THE URBAN AND REGIONAL COUNCILS,” HE SAID.

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SIR PIERS SAID IT WAS NOT PRACTICABLE TO KEEP THE GROWTH RATE PUBLIC EXPENDITURE PRECISELY IN LINE WITH THAT OF GDP, NOR WAS IT NECESSARY OR DESIRABLE TO DO SO.

"IT IS INEVITABLE THAT HEAVY CAPITAL EXPENDITURE WILL FOR A TIME TAKE US SOMEWHAT BEYOND OUR GUIDELINES.

"NEVERTHELESS, WE AIM TO CONTROL PUBLIC EXPENDITURE, PARTICULARLY RECURRENT EXPENDITURE, SO THAT, OVER A PERIOD OF YEARS, THE GROWTH RATE IN GDP AND THE GROWTH RATE IN PUBLIC EXPENDITURË REMAIN CLOSE TOGETHER.

"THIS DISCIPLINE