New Initiatives on a Solid Foundation

Like the rest of Asia, Hong Kong has been hit by the financial turmoil. In typical Hong Kong style, our community has faced up to the severe test with determination and resilience. The challenges brought about by the adversity have also yielded new opportunities. The Government has decided to take full advantage of them to strengthen Hong Kong's fundamentals and to embark on new initiatives. Our objective is for Hong Kong to reach greater economic heights in the new millennium.

Donald Tsang
Financial Secretary
3 March 1999

Major Initiatives
      • Undertake major securities and futures market reforms
      • Further develop the local debt market
      • Develop a Cyberport
      • Plan the construction of a Disney theme park
      • Partially privatise the Mass Transit Railway Corporation (MTRC)
      • Reform the civil service and review the mode of delivering public services

A Low, Simple and Predictable Tax Regime

Hong Kong has one of the world's most business-friendly and competitive tax regimes, with a low corporate tax rate of 16%. The generous tax concessions introduced in the 1998 Budget have provided timely relief to businesses, and the 1999 Budget will go a step further -

  • Halve the ad valorem re-export declaration charge from 0.05% to 0.025%.
  • Issue a new three-year business registration certificate at a fee of $5,200, as an option to the annual registration certificate at $2,000.
  • Extend the special relief rate of diesel duty, now at $2 per litre, until 31 March 2000.
  • Significantly reduce maximum merchant shipping registration fees and annual tonnage charges to $15,000 and $100,000 respectively.
  • Exempt same-day transit passengers from Air Passenger Departure Tax.
  • Abolish the 12-month restriction on stamp duty exemption for stock borrowing transactions.
  • Extend the 50% tax concession on income from qualifying debt instruments to those with face value as low as $50,000 (or equivalent in foreign currency).
  • Exempt life insurance proceeds from estate duty regardless of where they are paid.

Financial Services

  • Actively pursue the demutualisation, merger and listing of the exchanges and clearing houses, and implement other major reforms in the securities and futures markets.
  • Strengthen banking supervision, and pursue recommendations to enhance competition by relaxing the entry requirements for foreign banks, simplifying the regulatory structure of deposit-taking financial institutions and abolishing the remaining Interest Rate Rules.
  • Further develop the local debt market by listing Exchange Fund Notes in the second half of 1999 and allowing the use of Exchange Fund paper as margin collateral for trading in stock options and futures. Promote the integration of the clearing and settlement systems and improve credit rating capabilities. These measures will provide more stable and flexible financing for local businesses.
  • Adopt a new Exchange Fund investment strategy which allows a 5% weighting of the Fund to be invested in local equity. Exchange Fund local equity holding to be reduced to the desired level without causing market disruption.

Information Technology

In partnership with the private sector, we will develop a world-class Cyberport at a cost of $13 billion for commissioning in phases starting in 2002. This will provide the essential infrastructure, and a working and living environment of the highest standard, for the formation of a strategic cluster of top international information services companies in Hong Kong. It will provide 12,000 vacancies in full operation, and 4,000 construction jobs when it is being built.


We will redouble our efforts to consolidate Hong Kong's position as Asia's most popular tourist destination.

  • In co-operation with the Walt Disney Company, plan the construction of a major theme park on reclaimed land at North Lantau.
  • Grant a $500 million loan to the Ocean Park for redevelopment to provide the Adventure Bay theme area, featuring a new dolphinarium, a new water ride and quality food and retail services.

Public Sector Efficiency and Cost Effectiveness

  • Achieve $818 million productivity gains in the public sector through the Enhanced Productivity Programme in 1999-2000, three quarters of which will be devoted to new or improved services. Deliver productivity gains amounting to a total 5% of operating expenditure by 2002-03.
  • Launch major civil service reforms, strengthen its result-oriented and service-based culture, freeze salaries in 1999 and institute a general freeze on hiring to the permanent establishment.
  • Privatise a substantial minority share of the MTRC through an initial public offering. The Government will remain the major shareholder.
  • Critically review the mode of delivering public services, and maximise the room for private sector participation.

Fiscal Prudence

  • Total fiscal reserves forecast to stand at $389 billion on 31 March 2000. There is no government debt.
  • Short term fiscal deficit set in the context of a return to balanced budgets in the medium term.
  • The Basic Law imposes constitutional requirements to "follow the principle of keeping expenditure within the limits of revenues in drawing up its budget, and strive to achieve a fiscal balance, avoid deficits and keep the budget commensurate with the growth rate of its gross domestic product" (Article 107) and to maintain a low tax policy (Article 108).
  • Government committed to keeping the growth of its expenditure in line with economic growth over time and maintaining a low tax regime.

  "Hong Kong has built an unrivalled reputation for fiscal prudence, reflected in the maintenance of steady fiscal surpluses and the accumulation of substantial fiscal reserves. ... Hong Kong's high fiscal reserves have played an important role in sustaining confidence in financial markets; and they have also significantly increased the authority's room for manoeuvre in the present economic situation."
  ~ International Monetary Fund
October 1998

Back to 1999-2000 Budget Back to FB Home Page