Bulletin Number One 1983

corporate profits before tax for the first five years. This measure, if effectively implemented, would complement the provision of accelerated depreciation in inducing technological innovation. 2. The medium and small industrial enterprises remain important to Hong Kong's economic development. And in fact these industries are often potentially more innovative than the established large enterprises. However, I was given to understand that most of the medium and small enterprises could not share the same access to financial accommodation enjoyed by the large ones, and the rate of interest charged on loans to the former is appreciably higher in general. As most financial institutions tend to overestimate the risk of loans to the former, the interest charged on their loans is also correspondingly higher than the social cost of utilization of funds by these enterprises. This necessarily entails a hindrance to the normal growth of these industrial enterprises with attendant consequences. This problem, in fact, had long received attention from Hong Kong Government, and this explains the introduction of the Small Industry Loan Scheme in 1972. However, this scheme has proved to be quite ineffective, being too restrictive and complex in implementation. I now suggest that Hong Kong Government take initiative to set up a semi-official insurance agency whose function is to guarantee possible risks of loans to medium and small factories primarily on the principle of insurance. Once the loans they request are insured by this agency, they can be directly arranged with any bank; and the interest rate to be charged on these loans should in principle be exactly the same as chargeable to loans to large enterprises. It is my belief that this arrangement would encourage the medium and small industrial enterprises to take calculated risks and, therefore, should produce immediate favourable effect on the further development of the economy of Hong Kong. 3. Hong Kong Government has done some very useful work in promoting technical training for adults. But, to be honest, I would say this compares still quite unfavourably with what the Singaporean Government has achieved and there is a lot more to be done for Hong Kong to catch up with Singapore in this area. As regards advanced technology, the local industries will primarily continue to rely on transfer of know-how from overseas. But it takes a lot of innovation to transfer advanced technology. For this reason and for the effective operation of factories with transferred technology, there will also be a genuine need for a sufficient number of locally- trained specialists. Furthermore, comprehensive up-grading technology necessarily brings along socio-economic diversification, which in turn implies the need for more high-calibre personnel in various fields. In this connection, the far-sightedness of Hong Kong Governement in assigning high priority to the development of tertiary education and human investment is particularly praiseworthy. In view of the huge amounts of resources needed in satisfying numerous competing social needs relative to what is available to the Government, I leave open whether a third university should be set up at the present stage of development of tertiary education in Hong Kong. But I believe there is still ample room for the existing two universities to be expanded and strengthened, and I would also like to see the existing qualified senior secondary private colleges or their selected departments duly accredited and supported. In the development of education in science and technology, I am fully for setting up a second Polytechni but I think the science and engineering programmes of the two universities should be more fully developed on the existing foundations. I honestly feel that if the good science faculty of The Chinese University is not used as a base to set up a parallel engineering school, it simply means a waste of resources, just as in the case of the University's good social science faculty not being complemented by a parallel school of law. To conclude this speech, I wish to remind Hong Kong Government that France, West Germany, and Japan have respectively established a technological institute in Singapore under technical co-operation agreements. The circumstances may not be quite the same in Hong Kong as in Singapore in this respect. But I think it is worthwhile for Hong Kong Government to seriously explore the possibility of similar technical co-operation programmes. 8 NEWS