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SCMP Reporter

The Government is drafting an action plan to boost Hong Kong's competitiveness as a regional financial hub in the face of a mounting challenge from Singapore, Secretary for Trade and Industry Brian Chau Tak-hay says.

 He said the Government was exploring initiatives which Financial Secretary Donald Tsang Yam-kuen could unveil in his next Budget.

 Mr Chau sharply dismissed any notion of the Government following Singapore's lead in directing a wage cut.

 'We are not a command economy,' Mr Chau said, speaking on the sidelines of the Asia-Pacific Economic Co-operation summit.

 'We believe wages should be set in the market. But in the next Budget we will explore ways for our competitiveness to be advanced and improve our finance sector.'  In recent months, Singapore has taken a host of measures to lift its competitiveness.

 These include a package of proposed aggressive cost-cutting measures, including wage reductions, unveiled last week; designed to reduce companies' operating costs by an average 15 per cent, or S$10 billion (about HK$46.82 billion) a year.

 This is in addition to earlier tax and reform initiatives to directly promote Singapore's finance sector.

 Mr Chau said salaries were being trimmed in Hong Kong, particularly bonuses, but this was market-led.

 'In Hong Kong, we would never dream of instructing that people's wages should be cut 10 to 15 per cent,' he said.

 Mr Chau also argued that Singapore had greater need to act than Hong Kong.

 'One possible reason is entirely understandable. It would appear that Singapore's economy is not in a good shape and that their [medium-term] economic prospects are worse than Hong Kong's,' Mr Chau said.

 Hong Kong was expecting a 4.8 per cent contraction in its economy this year but Singapore was expecting very modest growth for this year as a whole.

 However, Mr Chau said Hong Kong's advantage was that it had the mainland as its hinterland as opposed to Indonesia and Malaysia, which were both in recession.

 He said: 'Now mainland China has achieved a soft landing from its high inflation rates of a few years ago and will enjoy a high level of economic growth.

 '[The mainland's expected] 8 per cent growth this year is possibly the highest in the world at the moment.'  Mr Chau said Hong Kong also had the advantage of a healthy, vibrant banking sector, stable political and social environment and probably the freest media in Asia.

 He said: 'Hong Kong is still one of the freest economies in the world and we expect to remain one of the freest in the world in the future.' 



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