Stomaching a decline in the purchasing power of Government revenue will not be
be easy, especially with the new spending initiatives the Administration is proposing. Something must give way. Recurrent expenditure growth must be limited to the growth rate of our Gross Domestic Product. Department heads, Members of this Council and the people of Hong Kong must be ready to accept that spending on some services or programmes will have to be curtailed.
To keep the Government's finances under control, Hong Kong must adopt fixed-cost budgeting for capital projects and zero- based budgeting for recurrent expenditure.
Another valuable option would be for the Government to cash in capital gains on previous infrastructure projects. By privatising operations such as the KCRC, MTRC, water distribution and the Post Office, the Government could realise illiquid assets and generate funds which could be used for new infrastructure development.
In building a longer-term policy framework for fighting inflation, the Administration must also consider changing the current Linked Rate System from one based solely on the US dollar.
Such a move should not be taken in isolation, but must be examined within the context of a general programme to strengthen the Territory's monetary and financial systems. Hong Kong needs an independent Monetary Authority. The groundwork for such an Authority has been laid with the creation of the Exchange Fund Office. It is time to move forward.
Vital among the Monetary Authority's responsibilities must be the establishment and operation of a fully functioning Discount Window. This would greatly enhance the overall stability of the financial system. Such a Discount Window could also help prevent a repeat of the unfortunate events of this past summer. It could preclude the need for and thus avoid the expense and inherent risk of establishing an official Deposit Insurance Scheme.
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In facing the political, economic and social challenges of the future, we need to have a clear vision of where we want to go, a clear vision of where we need to be. We need a vision beyond bricks and mortar, beyond "warm bodies" and mortar boards.
Advancing the Territory's constitutional development, fostering a closer and more co-operative relationship with China, improving the local quality of life these goals are linked by one key, overriding theme: "Competitiveness".
Policy Debate 1991 -
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