HK chief plans to fix economy

Asia's "World City" is hurting from a global economic downturn

HONG KONG, China -- In a bid to fix an ailing economy, Hong Kong's leader has announced a slew of measures to put more money into the pockets of people living in the territory.

Key among them are plans to boost funding to small businesses, cutting property rates and building a new exhibition center to revive tourism.

The measures came as Chief Executive Tung Chee-hwa found little to cheer in his annual policy address to the legislature, saying the territory's fragile economy will need to prepare for drawn-out pain in the aftermath of the terror attacks in the United States.

"Hong Kong faces an accelerated economic downturn, a rise in unemployment, an increase in the fiscal deficit and a delayed recovery," Tung said.

Hong Kong, home to 6.8 million people, is teetering on the brink of its second recession in three years as the former colony struggles to shape a new identity amid a flagging global economy.

Even before the September 11 attacks, the territory was struggling to lift itself out of the gloom.

Hong Kong's jobless rate had hit its highest level in a year and the benchmark Hang Seng stock index was well on its way to being the worst performer in Asia. It has lost more than 30 percent of its value this year.

Real estate prices too are less than half of what they were at the height of the property bubble in 1997.

"We have to prepare for drawn-out economic hardship," Tung said in the last policy address of his five-year term, which ends in mid 2002. He is widely expected to win a second term.

Tung was picked by Beijing to run Hong Kong after the British returned the territory in 1997.

Tourist spot

Key among the programs to help Hong Kong stay afloat during troubled times is a bid to boost tourism, one of the few bright spots for the economy this year. Bookings have fallen sharply in the wake of the attacks.

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The government will invest a maximum of US$256 million to build a new exhibition center near a planned Walt Disney theme park, Tung said, to maintain the competitiveness of the territory's prosperous exhibition industry.

And as it seeks to attract more tourists from mainland China, Hong Kong and Chinese authorities have agreed to scrap a quota system.

Visitors from mainland China already account for some 30 percent of travelers coming to Hong Kong, Reuters news agency has reported.

Money in pockets

In a modest pitch to put more money into people's pockets, Tung said the government would cut property rates for all ratepayers in 2002. The maximum amount to be waived was HK$2,000.

This covered public housing, private residential property, shops, and small and medium-sized enterprises.

He estimated 840,000 rate payers would pay no rates in 2002 and the rest would benefit from the full reduction. This would cost the government about HK$5 billion in lost revenue.

The government also said it will boost its funds for small and medium scaled enterprises to US$243 million from the US$166 million proposed in June.

But many analysts said they doubted any of these measures would help the territory rear its head out of the doldrums if the global economy keeps on waning.

Reuters contributed to this report.