Hong Kong Chief Executive Tung Chee-hwa warned yesterday that the territory's economic difficulties will not disappear in the short term.
"The economic situation we are facing is severe and unprecedented in decades," said Tung in his first policy address since being re-elected for a second term last year.
He said despite recent signs of economic recovery, there was no indication of an end to more than four years of deflation.
PHOTO: REUTERS
Tung said a substantial reduction in government revenue and rising public expenditure had resulted in higher fiscal deficits in the past few years.
"As a result, our fiscal reserves have been sharply reduced. This is beginning to affect our credit ratings. If not dealt with properly, the stability of our financial system could be jeopardized," Tung said.
Hong Kong's budget deficit stood at some HK$71 billion (US$9.11 billion) at the end of November.
Tung said Hong Kong's future would be backed by China's expanding economy.
"We will strive to foster further economic growth by applying new knowledge, new technologies and through providing high value-added services," he said.
Tung said greater emphasis would be given to investment in human resources as well as reinvigorating the services sector to form the main thrusts of Hong Kong's economic revival.
Tung said one of the urgent tasks was to further improve Hong Kong's business environment.
"To overcome our economic difficulties, we must strive to attract foreign investment, retain domestic investment and boost local economic activities, with a view to broadening our production capacity, creating employment and expanding our tax base.
"We have to reduce business costs by cutting red tape, embarking on de-regulation, streamlining procedures and enhancing administrative efficiency. We believe we can do better," he said.
The Hong Kong government estimates the economy grew 2 percent last year, up from 0.1 percent in the previous year.
In his blueprint, Tung said he would reinforce and enhance financial services, logistics and tourism -- some of the main pillars of Hong Kong's economy.
The chief executive also pledged to stabilize Hong Kong's once blooming property market as one of the important elements in revitalizing the economy.
"At this stage, to restore interest in investment and consumption requires the restoration of confidence in property ownership," said Tung.
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