ENG-2006 — Page 71

The Economy | 43

The Gross National Product (GNP), comprising GDP and net external factor income flows, stood at $1,479 billion in 2006. This was slightly higher than the corresponding GDP by 0.3 per cent. The difference represented a net inflow of external factor income. In gross terms, inflows and outflows of external factor income remained substantial in 2006, at $643 billion and $638 billion respectively, equivalent to 44 per cent and 43 per cent of GDP respectively. This was related to the huge volume of both inward and outward investment in Hong Kong.

Contributions of the Various Economic Sectors

Primary production, including agriculture, fisheries, mining and quarrying, is insignificant in Hong Kong, in terms of both its value-added contribution to GDP and share in total employment. This reflects the predominantly urban economy.

Secondary production, comprising manufacturing, construction, and supply of electricity, gas and water, which made a significant contribution to GDP up to the early 1980s, has since decreased in importance. Within this broad sector, the value- added contribution from manufacturing shrank from 21 per cent in 1985 to 8 per cent in 1995 and to only 3 per cent in 2005 as a result of the relocation of the more labour-intensive production processes to the Mainland. The construction sector's contribution to GDP stayed at around 5 per cent between 1985 and 2000, before edging down to 3 per cent in 2005. The supply of electricity, gas and water remained relatively stable, with a share of around 2-3 per cent of GDP over the past two decades.

Hong Kong's economy has become increasingly service-oriented since the 1980s. The Mainland's open-door policy and economic reform have not only provided an enormous production hinterland and market outlet for Hong Kong's manufacturers, they have also created abundant business opportunities for a wide range of services. Hong Kong has continued to move towards service activities, prompted by the changing regional and global economic environment and also by closer integration with the Mainland. In particular, while the thriving Mainland economy has provided ample business opportunities for Hong Kong's service sectors, the availability of cheaper land and labour on the Mainland and its rising productivity have also prompted Hong Kong to move swiftly up the value chain.

As a result, the share of the tertiary services sector, comprising the wholesale, retail and import/export trades; restaurants and hotels; transport, storage and communications; finance, insurance, real estate and business services; community, social and personal services and ownership of premises, in GDP went up noticeably, from 71 per cent in 1985 to 85 per cent in 1995 and 91 per cent in 2005 (Chart 2). There was a similar development on the employment front (Chart 3).