XN000022-1993-05-17 — Page 5

MONDAY, MAY 17, 1993

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YOU

MANUEL MORALES (PUERTO RICO): I WOULD LIKE TO ASK YOU, SIR ADDRESSED THE ISSUE OF ENVIRONMENT AND SPECIFICALLY THE WASTE DISPOSAL TECHNOLOGY THAT YOU WILL BE IMPLEMENTING AND WORKING WITH IN HONG KONG - COULD YOU EXPAND SOME COMMENTS ON THAT PARTICULAR SUBJECT PLEASE?

GOVERNOR: YES. FOR YEARS, WE HAVE POURED INDUSTRIAL, AND HUMAN WASTE INTO OUR WATER SYSTEM AND INTO THE WATERS AROUND OUR SHORES WITH WHOLLY PREDICTABLE RESULTS AND NOW WE HAVE GOT TO PAY FOR THAT, WE'VE GOT TO CLEAN UP OUR WATER AND WE'VE GOT TO MAKE SURE IT REMAINS CLEAN. WE'VE LAUNCHED A PROGRAMME WHICH IS ESSENTIALLY IN TWO PARTS, ONE OF WHICH A DISCRETE PART CAN BE COMPLETED BEFORE 1997 AND THE OTHER OF WHICH I HOPE THE SUCCESSOR GOVERNMENT AFTER 1997 WILL CARRY THROUGH. OUR PART INVOLVES INVESTMENT OF ABOUT 7 BILLION IN A NETWORK OF NEW SEWERS AND SEWAGE TREATMENT STATIONS. IT IS A HUGE INVESTMENT BUT A VERY IMPORTANT ONE.

IT RAISES AN INTERESTING QUESTION OF COURSE, NAMELY, THE EXTENT TO WHICH IT IS SUFFICIENT FOR US IN HONG KONG TO TAKE ON ENVIRONMENTAL PROBLEMS ON OUR OWN. THE ANSWER OF COURSE IS, IT IS NOT SUFFICIENT FOR US TO DO THESE THINGS ON OUR OWN, WE HAVE TO THINK REGIONALLY. AND INCREASINGLY, AS [ SAID TO A CONFERENCE WITH SOME OF THE AUTHORITIES FROM GUANGDONG NOT VERY LONG AGO, WE WILL HAVE TO PLAN THESE THINGS AND INVEST WITH REGIONAL OBJECTIVES IN MIND.

IF WE CLEAN UP THE WATERS AROUND HONG KONG BUT FIND THAT THEY ARE BEING POLLUTED IN THE YEARS AHEAD BY INDUSTRIAL EFFLUENT PLOWING DOWN FROM THE PEARL RIVER DELTA, IT WON'T HAVE BEEN THE MOST SENSIBLE WAY OF INVESTING OUR MONEY, SO WE HAVE TO WORK CLOSELY WITH OTHERS IN THE REGION TO MAKE SURE THAT WE TACKLE A REGIONAL PROBLEM SUCCESSFULLY, BUT THE FIRST BIG INVESTMENT HAS TO START HERE IN HONG KONG.

MARCO LANDI (TEXAS INSTRUMENTS); THE THEME OF THIS CONFERENCE IS HIGH TECHNOLOGY AND PROFITABILITY, I WOULD LIKE TO ASK THIS QUESTION: HONG KONG INFLATION KEEPS AT A LEVEL OF 10%. THAT IS REALLY HIGHER THAN MANY OTHER PLACES AROUND HONG KONG. DO YOU SEE ANY SPECIFIC ACTION THAT SHOULD BE TAKEN IN ORDER FOR HONG KONG ΤΟ BE STILL COMPETITIVE TO ATTACK THIS ISSUR? THANK YOU.

GOVERNOR: I, AS A FORMER POLITICIAN, CAME FROM EUROPE WHERE A NUMBER OF GOVERNMENTS OVER THE LAST YEAR HAVE BEEN WRECKED OR COME CLOSE TO BEING WRECKED BY THEIR COMMITMENT TO DRIVING DOWN INFLATION AND WE ALL KNOW THE POLITICAL COSTS THAT CAN BE PAID IN THAT VERY NECESSARY PROCESS. THE TROUBLE IS, IN MANAGING THE PROBLEM IN EUROPE, EUROPEAN POLITICIANS HAVE HAD TO COPE WITH HIGH EXPECTATIONS FROM THEIR FELLOW CITIZENS AND LOW ECONOMIC GROWTH RATES. HERE, WE DO HAVE A DIFFICULT INFLATION PROBLEM, AN INFLATION PROBLEM WHICH NONE OF US CAN BE COMPLACENT ABOUT BUT AN INFLATION PROBLEM WHICH HAS STRUCTURAL CAUSES, IN MY JUDGMENT, AND IS LARGELY A CONSEQUENCE OF SUPPLY-SIDE ISSUES.

ONE OF THE INSTRUMENTS THAT WOULD BE AVAILABLE, THOUGH WE MIGHT NOT WISH TO USE IT, WERE WE DEBATING THESE THINGS IN THE EUROPEAN CONTEXT, IS MONETARY POLICY, BUT IN HONG KONG, TO A DEGREP, WE HAVE

OUR HANDS TIED ON MONETARY POLICY BECAUSE OF THE NECESSARY LINK BETWEEN OUR DOLLAR AND THE US DOLLAR. THAT IS A LINK WHICH IS GOING ΤΟ REMAIN AND MUST REMAIN, BECAUSE ! WOULDN'T WANT TO SEE THE OCCASIONAL POLITICAL DISTURBANCES. THAT WE HAVE OR POLITICAL DISAGREEMENTS THAT WE HAVE, TAKING THEIR TOLL ON OUR FXCHANGE RATE. THE LINK WITH THE US DOLLAR IS IMPORTANT TO US BUT IT DOES RESTRICT THE

WHICH WE CAN USE MONETARY POLICY

A WRAPON IN

AMOUNT

CONTROLLING

ס'וי

INFLATION.

'1''

/THE MAIN