ENG-1986 — Page 90

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Industry and Trade

MANUFACTURING industries generally performed well in 1986. The value of domestic exports during the year amounted to $153,983 million, 19 per cent more than in 1985.

Overall, the major factors that have contributed to Hong Kong's success as a leading manufacturing and commercial centre continued to work well. Among these are the government's consistent commitment to free enterprise and free trade and a simple tax structure, a flexible and industrious workforce, a modern and efficient seaport with the world's third busiest container port, a centrally located airport with a computerised cargo terminal, and excellent world-wide communications.

In its approach to economic policy the government takes the view that, because of the external orientation of the economy and the need to enable it to adjust efficiently, it is normally futile and even damaging to the performance of the economy for the government to attempt to plan the allocation of resources or to frustrate the operation of market forces. The government rarely intervenes and then only where it is clearly in the long-term interests of the economy. In practice, this has meant that, apart from providing the necessary framework within which private enterprise can operate successfully, the government's main concern is to avoid frustrating individual enterprise and to seek to maintain incentives. To this end, the tax regime has been kept low, the size of the public sector has been effectively constrained, and subsidies to business have been avoided.

Manufacturing industries are an important component of the Hong Kong economy, accounting for some 22 per cent of the gross domestic product and 36 per cent of total employment. It is estimated that up to 90 per cent of Hong Kong's manufacturing output is eventually exported. The shortage of usable land has generally prevented diversification into capital and land intensive industries. Accordingly, light manufacturing industries, producing mainly consumer goods and operating in multi-storey factory buildings, predominate. About 65 per cent of the total industrial workforce is employed in the textiles, clothing, electronics, plastic products, and watches and clocks industries. These industries together accounted for 79 per cent of Hong Kong's domestic exports in 1986, a pattern which is likely to continue.

Notwithstanding the concentration in light manufacturing, there has been a continuous process of up-grading in terms of quality and product range. Many new and sophisticated product lines have been introduced and many simpler ones abandoned, partly because of external competition and partly in response to demand in Hong Kong's established main markets.

Trade

This year, 1986, was an eventful year for trade. In a year when the Multi-Fibre Arrangement (MFA) and most of Hong Kong's bilateral textiles agreements fell due for

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