Hong Kong's Financial Secretary Henry Tang Wednesday outlined measures aimed at consolidating the current economic recovery by promoting social stability and economic development.

Delivering his second government budget at the Legislative Council, Tang said Hong Kong economy grew by 8.1 percent in real terms in 2004, the highest growth in four years and well above the 20-year average of 4.8 percent. Seeking development, stability and harmony is the mainstream social consensus in Hong Kong.

He forecast real GDP growth of 4.5 percent to 5.5 percent in 2005, with 1.5 percent inflation.

In his annual budget address, Tang also said the government was well on the way to balancing its books.

A fiscal surplus of 12 billion Hong Kong dollars (1.54 billion US dollars) would be achieved in 2004-05, he said. But after discounting the proceeds from bond issuance, there would still be a deficit of 13.4 billion Hong Kong dollars, said Tang.

The surplus was due to lower spending and higher revenue, with land premiums in particular contributing 31.3 billion Hong Kong dollars to government coffers, more than two and a half times the original estimate.

Tang also noted the operating expenditure for 2004-05 would be lower than the previous year's, down to 201.2 billion Hong Kong dollars. Barring two special accounting arrangements with the former municipal councils, this is the first time operating expenditure has fallen in more than 50 years.

"We have succeeded in checking the trend of our operating expenditure," he said. "This clearly demonstrates that we have the determination and capability to contain our spending."

Expenditure for 2005-06 will be 247.8 billion Hong Kong dollars, with more than 60 percent spent on education, social welfare, health and security.

Tang forecast a fiscal deficit of 10.5 billion Hong Kong dollars for 2005-06. The Consolidated Account was expected to show a surplus in 2007-08, one year ahead of target, while the Operating Account would be restored to balance in 2008-09 as scheduled.

He said the government would uphold the principle of "market leads, government facilitates" and promote economic growth by facilitating the market's development and providing a favorable platform for the business community.

The government will continue to allocate resources for capital works projects, promote tourism, logistics, environmental and some other creative industries, in a bid to help create more job opportunities, said Tang.

He said the government has decided to extend about 11,600 temporary jobs in the public sector, involving a sum of more than 880 million Hong Kong dollars.

He stressed measures to boost business, such as encouraging fair competition, fostering economic co-operation with Chinese mainland, helping Hong Kong enterprises access the mainland market, enhancing the competitiveness of the financial, logistics and tourism industries, improving training, and attracting more talents.

Tang said Hong Kong will continue to enhance economic ties with the Chinese mainland, and the economic benefits of Closer Economic Partnership Arrangement (CEPA), a trade-facilitating pact between them, are gradually being realized.

By the end of February this year, products with a total value of 1.4 billion Hong Kong dollars were exported tariff-free under CEPA from Hong Kong to the mainland.

"According to the initial findings of the government's economic benefit analysis, we expect to see the creation of more than 28,000 new jobs in the first two years of implementing CEPA," Tang said.

To strengthen the financial services industry, Tang said he would look for ways to improve the financial regulatory system, enhance corporate governance, promote the bond market and explore ways to develop renminbi business in Hong Kong.

He proposed abolishing estate duty to help develop Hong Kong's asset management services and enhance its competitiveness as an international financial center. The move would also help small and medium-sized enterprises who might encounter cash-flow problems and operating difficulties in settling estate duty.

Over the next two years, 500 million Hong Kong dollars would be allocated to boost the tourism industry's development, Tang said.

The Hong Kong Tourism Board will launch strategic global publicity programs to leverage major milestones such as the opening of Hong Kong Disneyland, the second phase of 'A Symphony of Lights', the Tung Chung Cable Car and Hong Kong Wetland Park.

Tang said 2006 would be designated 'Discover Hong Kong Year', when visitor arrivals were expected to exceed 27 million. This compares to the record 21.81 million visitors in 2004.

To improve the safety and appearance of old buildings, 830 million Hong Kong dollars will be allocated to the Buildings Department over five years from 2006-07 to remove more than 180,000 unauthorized structures. This would also help create job opportunities.

There are no new taxes nor tax increases in the latest budget, and some taxpayers may see their burden eased somewhat if the Legislative Council approves the proposal. The Financial Secretary unveiled two new allowances for taxpayers taking care of dependent parents or grandparents aged between 55 and 59.

"They will be granted a basic allowance of 15,000 Hong Kong dollars a year, with an additional allowance of the same amount if their parents or grandparents are residing with them," he said.

To help families meet the costs of educating their children, Tang proposed to increase the child allowance from 30,000 Hong Kong dollars to 40,000 Hong Kong dollars per child.

The above new and increased allowances for grandparents, parents and children together would cost 10.7 billion Hong Kong dollars a year.

On the environmental front, Tang said the Environment, Transport and Works Bureau was studying the introduction of a product responsibility scheme to boost the recovery and recycling of waste tires.

The bureau was also considering the feasibility of introducing a tax to minimize the use of plastic bags in Hong Kong, where more than 1,000 tons of plastic waste, or 33 million plastic bags, are dumped each day.

On the Goods and Services Tax, Tang said a public consultation would be launched later this year and that the public would have sufficient time to hold in-depth, thorough and constructive discussions on the subject.