TNAG-0735-FCO40-939-Policy-objective-for-the-developing-of-Hong-Kong-in-the-1980-1978 — Page 80

(c) Adverse trade balance and tourism

19.

Here I would like to digress for a moment to say that,

whilst I agree with Mr. Newbigging's point that "there is a

case for trying to quantify and improve (our) understanding of

the economic contribution of our important service industries",

and surveys of these industries are now in hand, I think he

exaggerated the extent to which the tourist industry contributes to our net external earnings. Expenditure by tourists in Hong

Kong is of the order of $4 billion and it is true that this

figure represents about 7.5% of GDP in current price terms.

But this does not necessarily mean that "the tourist industry

contributes 7.5% of our GDP"; just as it would not be correct

to say that the manufacturing industry contributed 64% of our

GDP in 1977 simply because the value of domestic exports

represented 64% of GDP (11). The reason for this is that the

goods and services consumed by tourists have a high import

content so that domestic income generated, in terms of value

added in producing them, is less than is implied by the figure

of total expenditure.

20.

Furthermore, any direct comparison between the gross

earnings from tourism and the visible trade deficit is mis-

leading. As well as foreign tourists visiting Hong Kong, there are Hong Kong residents travelling abroad. So in order to evaluate the contribution of tourism to our balance of payments,

we must take the net surplus of tourist expenditure (or, to put

(11)

A rough estimate of the contribution of the manufacturing sector to GDP in 1977 (that is to say, the value added by the manufacturing sector) is 26%. See also B.S., 1978, f.n. (15). The hotel industry, which serves mainly tourists, employs 15,400 people out of a total labour force of about 2 million. This is less than 1%. In addition, a small proportion of people working in retail shops and restaurants serve tourists. Together their productivity and the profit margin of the tourist industry as a whole would have to be very high compared with other sectors of the economy for their contribution to the GDP to be as high as 7.5%.

11

/this