ENG-2001 — Page 106

THE ECONOMY

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such as the rule of law, a low and simple tax regime, a level playing field, and a business-friendly environment; secondly, providing that infrastructure in which the private sector will not invest; thirdly, providing an appropriate environment and the resources required to raise the quality of human capital, which includes investing in education and attracting outside talent to Hong Kong; fourthly, securing more favourable market access for the local enterprises through multilateral and bilateral economic and trade negotiations and participation in relevant economic and trade organisations; and, in conjunction with the appropriate organisations, also assisting local enterprises to promote their products outside Hong Kong; and fifthly, considering the need to take appropriate measures to secure projects beneficial to the economy as a whole when the private sector is not ready to invest in them.

Amidst the increasing trend of globalisation generally and integration with the Mainland economy in particular, the Hong Kong economy is undergoing restructuring towards activities of even higher sophistication and value. Constrained by its relatively high costs, Hong Kong can hardly compete on price. It has to capitalise on its own strengths and develop higher value-added activities. This calls for market-driven, customer-oriented services and products delivered or made with quality, speed and creativity. Such attributes are essential for both high- and lower- technology sectors, since high added value does not come solely from high technology. High value-added activities exist in every economic sector. Of the many sectors in Hong Kong, four are of particular importance, namely, financial services, logistics, tourism, and producer and professional services, as they can foster the development of other sectors, give impetus to economic growth, and create employment. The Government will take action to facilitate their further development. Also, the Government will facilitate the development of the local community economy so as to help promote domestic consumption and also create employment. A key challenge confronting Hong Kong is the need to further upgrade the quality of manpower so as to fit in with the changing demand in the economy as it restructures and develops. This is to be done by improving the quality of basic education, enhancing higher education, reinforcing training and retraining, and promoting lifelong learning in the community. In addition, the admission policy should be reviewed and refined where necessary so as to bring in more talented professionals. These are individuals with the right knowledge and skills or with strong entrepreneurial spirit, adding to the pool of manpower resources which is Hong Kong's major asset.

Hong Kong also needs to enhance its economic ties with the neighbouring region in order to maintain its status as a regional financial and commercial centre. In particular, cross-boundary flows with the Mainland in respect of people, goods, capital, information and services should all be enhanced further, to the mutual benefits of both places.

Public Finance

Structure of Government Accounts

The Government adheres to prudent fiscal practice, while maintaining a simple tax structure with low tax rates that will sustain workers' incentive to work and entrepreneurs' incentive to invest. The current corporate profits tax rate and standard tax rate, at 16 per cent and 15 per cent respectively, are low by international