Financial Secretary John Tsang yesterday said that tax concession would not be an effective measure to tackle rising inflation.

Speaking at the Legislative Council financial affairs panel meeting yesterday, Tsang said that the government would focus on enhancing productivity and developing the economy of remote areas to offset the impact caused by the inflation.

Wooing Vietnam: Secretary for Financial Services and the Treasury K C Chan at the signing ceremony of a MOU on cooperation and exchange of information between Hong Kong Exchanges and Clearing Ltd and Ho Chi Minh Stock Exchange in Ho Chi Minh City yesterday. Hong Kong bourse is looking for more listing candidates from Vietnam and other Southeast Asian countries. GIS

Prices had increased to a nine-year high of 3.2 percent year-on-year in October because of the surge in food and oil prices, according to government figures.

Tsang told legislators that rising inflation had been a global trend, and it was difficult for the government to keep the rate frozen.

It was in July 1998, when Hong Kong last experienced a 3.2 percent inflation. The SAR entered the period of deflation afterwards because of the Asian financial crisis until July 2004.

"Inflation is a global issue. It is very difficult to maintain the rate at the existing level. We will alleviate its impact through enhancing our productivity and efficiency," said the finance chief.

Liberal Party legislator Andrew Leung Kwan-yuen suggested that more tax concession be given to lessen public burden caused by inflation.

Government statistics showed that public housing rental waiver and rates relief had curbed inflation by one percent.

Tsang, however, said having more tax concessions might not necessarily bring inflation down.

"There are pros and cons of having more concessions. Public spending will be increased if people have more money, and this will make inflation more serious. We need to strike a balance," he said.

Tsang said he was concerned with the unemployment in remote areas, and pledged that the government would step up efforts on building infrastructure projects to relieve their burden.

Speaking about the price hike in foodstuff, government Economist Kwok Kwok-chuen said at the same meeting that the prices of food from mainland, Japan, Thailand and Australia had gone up.

But the level of price increase for imported food were less than the world's average, and the increase could be controlled if fair competition was maintained in the city food market, he added.

Meanwhile, Tsang said the impact caused to the economy by the US sub-prime mortgage crisis would continue, and it would take time for the full impact to be seen.

Hong Kong export trade would be affected if consumer spending in the US dropped, he added.

"The economies of Europe and other countries are developing well. But these may not offset the negative impact caused by the US sub-prime mortgage crisis. We have to strengthen the development of our economy to increase employment," he added.

(HK Edition 12/04/2007 page6)