Hong Kong Financial Secretary Mr. Henry Tang has unveiled a package of budget measures designed to “share the fruits of economic prosperity with the community” and support Hong Kong’s ongoing economic development and job creation.

The centerpiece of the Budget is a US$2.56 billion (HK$20 billion) package of tax concessions and other one-off relief measures.

Major initiatives to promote the economy and employment include:
 US$397.43 million (HK$3.1 billion) to upgrade air traffic control facilities and build a new Civil Aviation Department headquarters at the airport;
 Reducing by half the duty rates on wine, beer and other drinks containing not more than 30% of alcohol, costing the revenue US$44.87 million (HK$350 million) a year;
 US$38.46 million (HK$300 million) to help finance film production and overcome the shortage of film talent;
 US$26.92 million (HK$210 million) to install WiFi networks enabling free Internet access by the public in government facilities such as libraries, parks and community halls.

Mr. Tang said that the Government’s fiscal position had markedly improved as a result of the strong economic recovery.

He forecast a consolidated surplus of US$7.06 billion (HK$55.1 billion) for 2006-07, much higher than the original forecast.

“Due to our economy’s better-than-expected performance over the past 12 months,” he said, “investment income and revenue from land premiums, stamp duty, profits tax and salaries tax alone are about US$3.97 billion (HK$31 billion) higher than the original estimates.”

Mr. Tang revealed that GDP grew by 6.8% in 2006, significantly higher than the 4% to 5% forecast.

GDP growth for 2007 is forecast at 4.5% to 5.5%, with a trend growth rate of 4.5% a year from 2008 to 2011.

Total government expenditure for 2007-08 will be US$31.84 billion (HK$248.4 billion), up US$358.97 million (HK$2.8 billion), or 1.1%, from the 2006-07 original estimates. Education, social welfare, health and security will account for over 60% of the total expenditure.

Mr. Tang said that the government would continue to earmark US$3.71 billion (HK$29 billion) a year, on average, for infrastructure projects over the next few years.

Major projects coming on-line in the next financial year, such as the Tamar development, improvement works for the 2009 East Asian Games sports facilities, and water mains replacement and drainage works in various districts, would create about 23,000 jobs for the construction industry.

An operating surplus of US$923.07 million (HK$7.2 billion) and a consolidated surplus of US$3.25 billion (HK$25.4 billion) are forecast for 2007-08.

The Financial Secretary added that Hong Kong’s economy had staged a strong recovery since mid-2003, when the city was in the doldrums following the Severe Acute Respiratory Syndrome (SARS) outbreak.

He pointed out that employment was now at a record 3.5 million or 310,000 more than in 2003. Unemployment had fallen from a peak of 8.5% in mid-2003 to a six-year low of 4.4%.

Total retail sales were up by 23% since 2003; overall investment grew by 8% in 2006 – the biggest rise since 2000; stock market capitalization as at mid-February was 300% higher than in 2003; visitor arrivals topped 25 million in 2006 – up 60% over 2003; and negative equity cases had dropped from more than 100,000 to 8,400 by end-2006.

Mr. Tang said that when he took over as Financial Secretary in August 2003, he needed to address the Government’s serious deficit problem and restore the health of public finances.

Due to the combined efforts of the Government and the entire community, the fiscal targets had been achieved in 2005-06, three years ahead of schedule.

As a result, operating expenditure had been reduced to below US$25.64 billion (HK$200 billion), fiscal balance had been restored in both the Operating and Consolidated Accounts, and public expenditure had been reduced to below 20% of GDP.

He pledged to maintain strict fiscal discipline and manage public finances prudently.

Mr. Tang explained that Hong Kong’s ability to undergo continuous economic restructuring was a key element underpinning the territory’s competitiveness and its economic integration with the Mainland was pivotal to Hong Kong’s future development.

“Hong Kong’s restructuring should complement the economic development of the Mainland and create a ‘win-win’ situation.”

To sustain future economic development and creation of jobs by the market, the Financial Secretary undertook to continue to promote the development of the financial services sector, to enhance the competitiveness of the trade and logistics industry and to continue to promote the development of tourism infrastructure.

Mr. Tang highlighted that the Government will continue to improve Hong Kong’s business environment through removing barriers, promoting fair competition, nurturing and attracting talent, supporting scientific and technological research, and encouraging innovation and creativity.