Tuesday, 18 November 2008

EPA notes- F.3 unit 3,4

The role of government in Hong Kong’s economy 1) Previous capitalist system and way of life for 50 years; protect private property rights and previous economic policies including free trade policy, freedom of capital movement, low tax policy and free port policy. 1) Clear vision of direction of economic development. 1) Minimize the intervention of government to the market. 2) Business-friendly environment-principle of equality before law, respects the independent of the judiciary, salary tax and corporate profits tax lowest among the world→labour works and attracts foreign investment. 3) Provide infrastructure for market to run more efficiency Transport - good transportation, e.g., Highway and road Industrial sector for developing hi-tech industry, e.g. Cyberport and Science Park. Commercial sector-platform to sell, e.g. Hong Kong Convention and Exhibition Centre (HKCEC) Tourism - attracts more tourism, e.g., Hong Kong Disneyland 4) The government also encourage private enterprise to provide some infrastructure (to lower the expenditure of gov. in order to hold low tax) , e.g., electricity, gas, LPG (energy sector), construction and separation of container termination (transport), telecommunication services. 5) Education and training forms knowledge-based economy-pro-knowledge, tech. and skills needed to rise productivity. 12 years free and universal education for child for school-going age; expand higher education for pro-workers; vocational training for skilled workers; retraining courses to upgrade workers’ skill; assist and encourage containing education with educating fund; Import foreign talents to rise Hong Kong’s competitive power 6) Supporting Authority - Hong Kong Monetary Authority keeps HKD stable (by linking with USD through foreign exchange fund) and supervise operation of banking industry. 7) The Securities and Futures Commission of Hong Kong(SFC) monitor operation of stock exchange market/financial investment and commodity exchange market. 8) Office of Telecommunications Authority monitor telecommunications services, encourage competition and protect consumer interests. The problems of Hong Kong industries(manufacturing) : It’s belonging to secondary production and it is declining after the Civil war. There’s 3 internal reason and 3 external reason. Internal: I) The high production cost. It including all the cost that during the production, mainly is rent and wages. The high land prices and salary rises the production cost and rises the selling prices. That causes the lower competition power comparing to countries which have lower production cost. II) Low technology sector would also lower the competitive power. This may lower the quality and some technology industry. Although the government is developing technology sector, this is only a long term training. Hong Kong is lack of talents, resources and experience. III) Lack of land is also a problem. Basing on the lacking of land, we can’t develop heavy industries(occupies large land and capital). We even can’t do reclamations because of the environmental protection. External: I) There are lots of foreign competitors. Taiwan, Singapore and S. Korea has higher technology and mainland, Malaysia maintains lower production cost. II) In other countries, by protecting their local industries, tariffs (import tax) and import quota is set by other countries. Hong Kong even can’t take revenge because Hong Kong is lack of different kind of resources. Taking those measures may only suffer ourselves. III) Countries which have partner relationship to Hong Kong is not too much. So that Hong Kong’s industries is easily affected by outside’s economic situation. Solution I) Move production process to mainland→reduce production cost. II) Diversify products and markets →reduce reliance on European and US market, explore new market such as Russia. III) Improve investing environment-provide cheap land and low-interest loans to manufacturers→reduce effect from trade restriction. IV) Develop and support high-tech industries as Ch.3. V) Establish institutions for industrial development- Trade and Industry Department: 1)Handle trade policies, agreements and international trade relation. 2)provide services for manufacturing industries and S/M enterprises. HK science and Tech. Parks Corporation-1)cultivate new tech. companies by giving training program 2)provide land/facilities for manu. and high-tech. industries. Hong Kong Productivity Council-helping with value- added product by providing pro. services. Hong Kong Export Credit Insurance Corporation: export insurance for local exporters against non-payment risk due to commercial and political event. Hong Kong Trade and development Council-Conduct trading connection through the world and hold exhibition and publications to promote local products.

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