TNAG-1242-FCO40-1555-Future-of-Hong-Kong-1983 — Page 168

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and re-invest in buildings, plant and machinery (7) With the current recovery in the export sector (8), such reluctance could have serious consequences

for the size and efficiency of Hong Kong's

·

productive capacity, and for the external competitiveness of Hong Kong's manufacturing out- put. Reluctance to invest in Hong Kong is accompanied by investment elsewhere, i.e. an outflow of capital leading to further downward pressure on the Hong Kong dollar.

6.

(9).

The immediate effect of the situation

described in paragraph 1 would be an acceleration of these trends. Employment would decline, as some manufacturers contract their operations Overseas investment in Hong Kong, particularly in technology, would decline or dry up with all that entails for the process of moving up-market ----- virtually the only direction in which manufacturing could improve.

Infrastructural projects

7.

All major entrepreneurial decisions would be subject to close re-examination. Existing projects (e.g. container terminal facilities) would be halted or slowed. New projects are likely to be shelved. The same scenario would probably obtain in respect of some public sector

infrastructural projects(10); notwithstanding the

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Government's long term commitment towards providing essential infrastructure, the general slowing down in the level of economic activity would lead to a reduction in the Government's revenues both recurrent and capital, and therefore in its ability to finance major new projects. It would be difficult for the Government to borrow in such

circumstances.

SECRET

/Labour