Seize the Moment and Renew Our Strengths

• Our economy staged a V-shaped rebound after SARS
• The real economic growth rate for 2003 was 3.3%
• The real economic growth rate for 2004 is forecast to be 6% while the trend growth rate of nominal GDP is forecast at 4.5%

Manage Public Finances Prudently

• The fiscal deficit for 2003-04 is forecast to be $49 billion, equivalent to 4% of GDP
• The fiscal deficit for 2004-05 is forecast to be $42.6 billion, equivalent to 3.4% of GDP, and will gradually decline. Fiscal balance is expected by 2008-09

Revitalise the Economy and Promote Employment

• Market leads and Government facilitates
• Implement the measures announced by the Chief Executive in his Policy Address:
  – Economic and Employment Council established to promote economic activities, encourage investment, facilitate business and create more employment opportunities
  – $1.2 billion allocated to extend about 11 000 temporary jobs, to provide young people with opportunities for gaining work experience, skills enhancement and assistance towards self-employment
  – $50 million earmarked to establish a Youth Sustainable Development and Engagement Fund
• Implement the preferential arrangements regarding zero-tariff for product and market access for service sectors under CEPA, and continue to discuss with the Mainland on mutual recognition of professional qualifications and entry thresholds
• Nurture local talent and attract elite from places outside Hong Kong
• Improve regulatory framework in pace with development of the financial market to enhance its quality
• Facilitate RMB banking business in Hong Kong
• Develop bond market
  
• Develop Hong Kong as a world-class asset management centre
• Ensure successful implementation of the Individual Visit Scheme to boost Hong Kong's image as Asia's premier tourism destination:
  – Provide an additional $95 million for promotional and training activities in tourism

• Foster creative and innovative industries:
  – Create a $250 million fund to launch a DesignSmart initiative to nurture start-up design ventures, train manpower in design and branding
  – Set up a Design and Innovation Centre to attract design talent from different places
  – Extend the profits tax research and development deduction to cover expenses on design-related activities

• Co-ordinate economic and infrastructural projects and promote logistics development:
  – Develop a value-added Logistic Park on Lantau as soon as practicable
  

Control Expenditure First

• Reduce public expenditure progressively, with a view to achieving the following targets by 2008-09:
  – Contain government operating expenditure at $200 billion
  – Restore fiscal balance in Operating and Consolidated Accounts
  – Contain public expenditure at 20% of GDP or below

Raise Revenue

• Introduce Personalised Vehicle Registration Marks Scheme
• Revise fees and charges of government services in line with the "User Pays" principle, dealing first with items that do not directly affect people's livelihood or general business activities

Leave Wealth with the People Promote a Caring Community

• To give the community a respite, no additional tax increases are proposed despite tight fiscal position
• Extend the entitlement period of Home Loan Interest Deduction by two years
• Further extend the duty concession for ultra low sulphur diesel to end 2004
• Set aside an additional $200 million to promote joint efforts among the Government, the business community and the welfare sector in helping the disadvantaged

Next Steps

• Study the implementation of a Goods and Services Tax
• Issue government bonds not exceeding $20 billion to provide funds for investment in infrastructural projects. Issuance of bonds can provide greater flexibility in management of Government's liquidity, help promote development of our bond market and provide an option to investors