SCMP, October 15, 2002 By Ambrose Leung and Ng Kang-chung Financial Secretary Antony Leung Kam-chung has warned that the government may delay or drop infrastructure projects which are not very cost-effective to tackle the budget deficit, which could hit $60 billion. Mr Leung said the deficit could be much higher than previously forecast because a plan to raise $15 billion through the issuance of MTRC shares might have to be put on hold. Mr Leung said that with revenue expected to decline, the government would consider halting some infrastructure projects deemed less cost-effective. He did not specify which ones. 'This will not affect jobs or people's livelihood,' he said, adding that the annual $27 billion expenditure on infrastructure would be maintained. He also said projects such as new border checkpoints and the Shenzhen Western Corridor would not be affected. 'But whether we have to launch some longer-term projects would depend on the need. If there is no need, we will delay the projects,' he said. Mr Leung also said revenue from land sales was less than expected but he believed the economy would improve after government measures to stabilise property prices were in place. 'Land is Hong Kong's important asset. If property prices become more stable, it could help improve deflation and internal consumption,' said Mr Leung. The government has an nounced a budget deficit of $56 billion for the first five months of the financial year. In March, Mr Leung estimated this year's deficit at $45.2 billion, and anticipated the budget would be balanced by 2006-07. The government planned to raise $15 billion by selling a second tranche of MTRC shares this financial year. But this may be put on hold pending consideration of proposals to merge the MTRC and KCRC under recommendations by a transport policy review. Mr Leung also said the government had been cutting costs by reducing the size of the civil service, and he hoped the establishment would be cut to a 'meaningful' level by 2007. Legislator Lee Cheuk-yan, of the Confederation of Trade Unions, warned that a halt in infrastructure construction would hurt job creation. 'Concentrating on facilities such as cross-border bridges is favouring businesses at the expense of the people,' he said. But Ip Kwok-him, vice-chairman of the Democratic Alliance for Betterment of Hong Kong, said he agreed with the principle of scaling down projects which might generate less returns. Thomas Chan Man-hung, the head of the Polytechnic University's China Business Centre, said less cost-effective projects must be scrapped. 'The money could be spent elsewhere to create jobs,' he said. (More discussion, Page 8) Glossary infrastructure (n) basic facilities such as buildings, roads and power supplies needed for the operation of a society or enterprise budget deficit (n) an excess of expenditures over incomes halt (v) to bring to an abrupt stop checkpoint (n) a place where traffic is stopped and checked scale down (phrasal v) to reduce something in size, number or extent Example: Following the handover, pro-Taiwan groups significantly scaled down their October 10 events. (SCMP, September 23, 2002) scrap (v) to abolish or cancel Example: Tsing Ma Management said it promised to exercise leniency towards workers involved in the protest but made no pledge over a rethink on the scrapping of the fixed extra month's pay. Discussion points - What do you think are the least cost-effective infrastructure projects? A bridge that crosses Hong Kong, Macau and the mainland? Or a railroad linking the west of the New Territories and Hong Kong? Or a public garden near your home? - Can you draw up some criteria to help Mr Leung identifiy the cost-effective projects?