POSTGRADUATE places will be increased by about 45 per cent by 1998 to produce the highly-educated people Hong Kong will need to cope with its economic development, it was revealed yesterday. A University and Polytechnic Grants Committee (UPGC) proposal for the 1995-98 triennium plans places for 8,705 postgraduates, compared with the existing 5,959. ''In view of the restructuring and development of Hong Kong's economy, there is a need for more people with education levels higher than undergraduates,'' UPGC chairman AntonyLeung Kam-chung said. The number of taught and research postgraduates would increase annually by eight and five per cent respectively from 1995 to 1998, he said. For undergraduates, there would be 14,500 first-year, first degree places provided every year in the next triennium, he said. This was to maintain the target laid down by former governor Lord Wilson to provide degree places for 18 per cent of the relevant age group, and the target could be reached by next year, Mr Leung said. ''But the actual percentage for the next triennium may reach as high as 20 per cent in view of the gradual decline in the [potential tertiary] student population.'' The total number of graduates and postgraduates in 1998 would be 53,151, compared with 41,704 this year. This increase was a result of the continuous expansion of the tertiary sector in the past few years. Mr Leung said although the undergraduates provision level was still lower than South Korea, Singapore and Japan, graduates returning from overseas had supplemented the manpower supply in Hong Kong. While the UPGC had not yet worked out the funding for tertiary education for 1995-98, Mr Chan said the amount would be proportional to the increase in the number of students. The UPGC is designing a new funding model which will take academic performance of institutions into account in addition to the number of students and courses they offer. Mr Leung said it was up to the Hong Kong Government to decide whether Beijing would need to be consulted on funding for the next triennium, which straddles 1997. But he said he hoped the UPGC would remain an independent advisory body on tertiary education after 1997. ''It's a fairly good system to help in the development of tertiary education in Hong Kong and I believe it should be maintained,'' he said. Mr Leung said the UPGC was also compiling a report on the direction of tertiary education beyond this century. He said the demand for graduates to work in China was increasing and the committee would take this into consideration. ''These trends mean we would need more graduates as the market they serve is enlarged.''