Fruit of Concerted Efforts

Government's cost containment efforts are starting to bear fruit. Operating expenditure for 2004-05 will be $2 billion lower than for 2003-04 - a drop for the first time in more than 50 years	Hong Kong is the first place outside the Mainland to conduct personal RMB business, including deposit-taking, currency exchange, remittances and credit cards. Nearly all retail banks in Hong Kong are providing most of these services. The development of this business has been encouraging
Forging ahead with CEPA Phase II: domestic exports of 1 108 products to the Mainland are enjoying zero-tariff treatment; liberalisation of trade in services has been extended to 26 sectors	Successful issuance of $26 billion in bonds. The offerings have set a number of records in the region and were oversubscribed by local and international investors alike. These help promote development of our bond market
Visitor arrivals in 2004 reached an all-time high of 21.81 million, with 4.26 million attributable to Mainlanders under the Individual Visit Scheme. The latter generated an additional $6.5 billion in tourist spending and led to the creation of 16 500 new jobs	$200 million Partnership Fund for the Disadvantaged formally set up to foster the development of a tripartite relationship between the Government, the business community and the non-government organisations to help socially disadvantaged groups

Resuming Growth Trend

• Real economic growth was 8.1% in 2004. Forecast GDP growth is 4.5%-5.5% in 2005. Trend GDP real growth rate is forecast at 4% a year
• The 68-month-long deflation ended in July 2004. CPI Inflation in 2005 is expected to be 1.5%

Prudently Managing Public Finances

• The Consolidated Account is estimated to have a surplus of $12 billion in 2004-05 - the first surplus since 1999-2000. After discounting proceeds from bond issuances, a deficit of $13.4 billion remains
• A consolidated deficit of $10.5 billion is estimated for 2005-06, and this will gradually decline. Fiscal balance will be achieved in 2007-08, a year earlier than the original target. Balance in the Operating Account will be restored in 2008-09 as scheduled

Building on Our Strengths and Fostering Growth

• Earmark $500 million to:
  - support the Hong Kong Tourism Board in launching global publicity and promotion programmes and introducing brand new tourism products
  - extend the Quality Tourism Services Scheme, improve customer services and enhance consumer protection
  
• Abolish estate duty to promote development of our asset management business

• Transfer $200 million and provide an additional $300 million to the SME Export Marketing Fund and the SME Development Fund to help SMEs enhance their competitiveness

An Equitable and Sustainable Society

• Appoint an independent committee to review existing competition policy and mechanisms
• Relieving people's tax burden:
  - Introduce basic and additional allowances at $15,000 each for taxpayers caring for dependent parents or grandparents aged between 55 and 59. About 100 000 taxpayers will benefit from these measures which will cost the Government $450 million a year
  - Increase the child allowance from $30,000 to $40,000 per child. About 300 000 taxpayers will benefit and cost to Government will be $620 million a year

• Earmark $830 million for Buildings Department to continue to remove unauthorised structures, improving the safety and appearance of old buildings and creating job opportunities

• Study the introduction of "green" taxes:
  - Product responsibility scheme for waste tyres
  - Plastic bags

Studies on Other Taxes

• No change to existing alcohol duties
• Launch public consultation on broadening the tax base through a goods and services tax