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Sat, Jul 19, 2003 - Page 12 News List

Hong Kong's new financial secretary faces bad economy

BLOOMBERG

The chairman of one of Asia's largest trading companies and two former Hong Kong senior civil servants may be frontrunners to replace Antony Leung as financial secretary, an office where success can lead to the city's top job.

Chief executive Tung Chee-Hwa's list of candidates include Victor Fung, chairman of Li & Fung Ltd and the Airport Authority; Anthony Neoh, the city's former top securities regulator; and Rafael Hui, the former secretary for financial services, the Hong Kong Economic Times said, without citing its source.

Leung, who may face prosecution for buying a luxury car shortly before increasing taxes on them, resigned on Wednesday.

His successor will face both a record budget deficit and an economy in need of stimulus.

"A successful career as financial secretary will pave the way for the chief executive position," said Joseph Cheng, professor of political science at City University of Hong Kong. "Someone who can bring the Hong Kong economy around will certainly carry a lot of credentials."

The risk of failure looms large. This year's budget deficit is forecast at HK$90 billion (US$11.5 billion), and economists have said they expect the jobless rate in the city of 6.8 million to increase from the current record high of 8.6 percent.

The government halved this year's economic growth forecast in May to 1.5 percent because of the SARS epidemic, which killed almost 300 people in Hong Kong and caused tourists to disappear. Consumer spending, hurt when SARS kept shoppers at home, is forecast to drop 3 percent this year.

Retailers are still burdened by 55 straight months of deflation, forcing them to lower prices and accept smaller margins.

Leung's replacement may find himself confronting those problems from a position of weakness. Tung, who heads the government, is under fire for his handling of SARS, the economy and controversial anti-subversive legislation. Only about one in three residents was satisfied with is performance in Hong Kong University's latest popularity poll.

The next financial secretary must set policies for use of the city's HK$311 billion in fiscal reserves and for cutting the deficit, Cheng said. The public needs to feel that government money is being used fairly, he said.

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