TNAG-1489-FCO40-2046-Hong-Kong-and-the-Asian-Development-Bank-1986 — Page 19

Page 3 of 4

work has started on a second cross harbor tunnel and other infrastructural plans are in the pipe-line. Where human resources are concerned, there are plans for the setting up of a third university and of other tertiary educational facilities.

Turning to the question of investment incentives, we do not offer cash or any other form of subsidy for investment in Hong Kong. But we maintain a low tax rate (profits of corporations are taxed at 18.5% and there is a maximum rate of 17% for salaries tax) which is applied even-handedly to residents and non-residents alike. Hong Kong is a free port and we do not impose tariffs or quotas on our imports. There is no foreign exchange control; profits and capital can move freely in and out of the territory. Our banking and financial services and communication facilities compare favorably with those of other major international financial centers. Overall we believe that these features provide a favorable environment for the successful enterpreneur whether he be born in Hong Kong or elsewhere.

I now turn to the operations of the Bank over the year. Being advocates of a free enterprise economy we have long recognized the importance of the private sector in the economic development process. We have noted with approval, therefore, the increasing attention the Bank has given in recent years to the role of the private sector. We expressed some concern last year about a fall in emphasis in the lending to development finance institutions. We are pleased to see indications, however, judging from the 1985 figures, that this area of business has received further attention. I hope this renewed momentum can be maintained and indeed that it is possible for its further enhancement.

I am also pleased to note that in 1985 the Bank undertook an extensive review of its assistance to the private sector in the developing member countries (DMCs). I see it as particularly pertinent in the present climate of slow world economic growth that the importance of contributions which can be made by private sectors is fully recognized. Many of the economies in this region are now becoming more market- oriented. With the establishment of a new Private Sector Division in the Bank in early 1986, it is my hope that the Bank will now be in a better position to offer as quickly as is practicable the various forms of assistance that have been recognized as feasible that is to say loans to the private sector without government guarantee and assistance to DMCs in privatizing public sector enterprises. I believe that this