The Financial Secretary emphasised that the government is not abandoning market economics, but is preparing a better foundation for market economics. I personally believe that the proposed budget is acceptable and took into consideration today's difficult economic climate. Although the proposal is able to relieve burdens for the population, it poses no immediate drawbacks on the business environment.

Taxation Policy
What concerns businessmen in the budget are the government's tax and development policies. In this adverse economic environment, government support for businesses is vital. The budget proposed to exempt rates for nearly eighty-five percent of property owners and waive water and sewage charges, industrial sewage surcharges, and business registration fees. Not only is this good news to SMEs, it also indirectly encourages entrepreneurship. A Boundary Facilities Improvement Tax of HKD18 was put forward, but it would not be a significant burden to the general public. This Boundary Facilities Improvement Tax will not only go towards developing border facilities and logistics resources, but will also improve trade and economic relationship between Hong Kong and the Mainland. On the other hand, imposing a Goods and Service Tax, as some have previously suggested, will have a significant effect on Hong Kong's economy and her image as a tax-free shopping paradise, directly affecting local tourism. As Hong Kong's exchange rate remains strong, the world economy continues to experience a recession and other cities like Shanghai, Singapore and those in Thailand and Japan are actively attracting tourists, the government should seriously consider the various implications if a Goods and Service Tax is introduced. Hong Kong should maintain its simple and low tax system in order to continue to attract foreign investment. When the economy recovers, businesses may be more able to withstand a slight increase in profits tax to solve the budget deficit.

Direction of Development
Even though Hong Kong has successfully undergone various challenges, stock market disasters and financial troubles, the present structural changes in the economy and the mainland's lightning economic development is not something that most SMEs can face by themselves. Government support towards the population and the business sector is needed urgently. Investment risks in technological research and development, and human resources are usually too high for businesses to bear alone, government support for these items are vital. The government has traditionally followed a "laissez-faire" policy, but in reality Hong Kong's economy cannot further develop without government support, and co-operation and input from the business and the population. As a trade association, a businessman and a citizen of Hong Kong, I would encourage all to participate more in the government's policies and express our views to the government, so that the government would better plan how to better develop Hong Kong's future.

Mainland/Hong Kong Closer Economic Partnership Arrangement
Since the government is no longer completely letting the market dictate economic course, it could choose to take on the role of leader and promoter for trade. For example, the government could actively promote closer trade ties with the mainland. This would allow exporters to better compete and take advantage of China's entry into the WTO. We hope that the government can start to negotiate and attain agreements with the central government to allow Hong Kong's businesses enjoy the same economic benefits as other foreign enterprises (such as tax exemptions, simplified customs clearance, expedited working procedures, relaxation of domestic sales restrictions, opening up insurance, advertising, travel and other professional industries). Hong Kong's experience as a traditional trading port and financial hub would not only benefit China in its economic development, but would also stabilise Hong Kong's economy, making it a win-win situation for both. Government spending in infrastructure, education and trade development in order to improve Hong Kong's population language and technology skills would compliment Hong Kong and the Mainland's efforts to develop closer trade ties.

Simply start from the Pearl River Delta Region
According to 2000 and 2001 statistics by Business Stat-Online, exports growth for the last two quarters declined by 15%, re-exports dropped 5%, imports decreased by 5% and the trade deficit was at 2%. However, exports from the Mainland, especially from the Pearl River Delta Region, were able to increase under the adverse global economic environment. For 2001, the Pearl River Delta Region accounted for 78.8% of Guangdong Province's economy and China's GDP reached RMB1,055.6 thousand million. In preparation for the expected decreases in import tariffs and the gradual cancellation of import permits and quotas following China's entry into the WTO, the Pearl River Delta Region is developing its consumer markets, transportation and logistic facilities. This would enable Guangzhou to act as a springboard for Hong Kong in being the main distribution centre for the province and Southern China. Hong Kong and Shenzhen, being close neighbours and having different benefits, will also be able to co-operate further and compliment each other on technology, telecommunications, finance, travel, trade, transport and border management. The relationship between Hong Kong and the Pearl River Region has spanned over 20-30 years, co-operating hand in hand with Guangdong would be the quickest starting point for Hong Kong to better compete in China and the international arena.

My only concern is the acceptance and response of civil servants to possible salary decreases. I agree with the government on the importance of simplifying bureaucracy and reallocation of resources. Within these few past years, government spending has increased from 75 thousand million to 240 thousand million, of which spending on payroll for civil servants and other supporting organisations comprises of 70%. It is apparent that suggestions to control the expenses ratio needs to be implemented immediately. The remuneration system also has to be reviewed, to allow for more flexibility and tied to performance. Regular reviews of respective departments and support structures should be performed to avoid structural and functional duplication, which waste expenditure. Thus, recent reviews of the functions of the Vocational Training Council and Employees Retraining Council are welcome. There are also concerns that the private sector will follow the civil servants' pay reduction. At the end of last year and the beginning of this year, a number of large and small businesses had announced or performed salary and payroll reductions, I personally believe that most companies are already operating at a very lean level. An economic recovery is much hoped for so that the unemployed can return to work. Employers and employees will also be able to set goals and try to achieve them.

Conclusion
On March 7th, the Chairman of The Federal Reserve Board, Mr. Alan Greenspan, announced that the economy forecast was more optimistic than before. In fact, the 4th quarter last year showed an unexpected growth of 0.2% instead of -1%. The worries about the 911 tragedy seemed not to be as bad as forecasted. Also, a trend for long-term recovery appeared in the first quarter this year. The recent weak Japanese Yen was beneficial to its exports, causing concerns that increased Sino-Japanese trade would make Japan a big competitor for Hong Kong. If Hong Kong is able to strengthen its technology development, with her geographic advantage and good timing, closer trade ties with China should not be a problem. Under the global economy led by US economic recovery and closer trade relationship with the Mainland, Hong Kong's economy will stabilize. I am very confident that the prospects for economic development will brighten up for this year, referring to The Financial Secretary: "Side by side we overcome ills as the Hong Kong story we write".