CONFIDENTIAL
REPORT BY THE OVERSEAS LABOUR ADVISER ON A VISIT TO HONG KONG
16 FEBRUARY - MARCH 1978
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INTRODUCTION
1. To anyone paying his first visit, Hong Kong is a place of never-ending and all-pervading activity. Work proceeds at a great pace on new office blocks and the Mass Transit Railway. Capital expenditure, up nearly 49% in the 1977/78 budget reflecting the continuing recovery after the recession years of 1974 and 1975, is also building schools, hospital, clinics, technical schools and improving the congested road system. Massive sums are being spent on improving water supplies and the Hong Kong Government is also pushing ahead with the comprehensive development of the New Territories, including building three new towns which will all house more than one million people. It was little surprise, therefore to learn that employment in the construction industry as a whole was 32% higher in 1977 than in 1976 and that wages in that period had risen by about 20%.
2. What was surprising was to learn that the characteristic bustling activity obscures trends which cause considerable local concern. 1976 was a year of great performance by the Hong Kong economy which saw an increase of over 16% in real terms in Hong Kong's GDP and a 30% increase in exports. By contrast, in 1977 GDP rose by 12% and exports only by 5%. The 12% growth in GDP was made possible by a growth in tertiary industries and the financial services sector (including financing, insurance, real estate and business services) now accounts for well over one-fifth of the GDP, compared with 27% for manufacturing which employs perhaps 14 to 15 times as many people.
3.
Local industrialists drew my attention to the disturbing drop in 1977 in the numbers working in the clothing and textiles sector Hong Kong's largest industry and source of employment. Workers in September 1977 numbered 353,237 (a decline of 4.4% from the Septem-- ber 1976 figure of 369,524) pointing, they claimed, to a drop in demand from Hong Kong's biggest markets and a loss of competitiveness with South Korea and Taiwan. Making the point that the textile industry has traditionally accounted for about 50% of Hong Kong's total exports, they then went on to express concern that the position would deteriorate still further in 1978 as a result of the EEC imposing quotas which represented cut-backs from past performances in the most profitable categories. They feared the EEC example could be followed by other Governments in North America, Japan and
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CONFIDENTIAL
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