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Hong Kong to Keep Status of Tax Free Shopping Destination - 2003-02-03

Hong Kong is to keep its status as a tax free shopping destination and the Philippines posts better than expected economic growth for 2002.

Hong Kong's Financial Secretary Antony Leung assured residents that the territory's status as a tax-free shopping center will remain intact for at least another year. He made this comment after the territory's leader hinted recently that taxes needed to be raised to help solve Hong Kong's growing budget deficit. "The retail sector is still struggling and income of some of our wage earners is still declining," he said. "The introduction of such a regressive tax at this stage would do more harm than good. So I can tell you for this budget, no sales tax."

Mr. Leung said a sales tax would only further encourage weak consumer demand - which is already in evidence as Hong Kong enters its fifth year of deflation. He also acknowledged that Hong Kong's record unemployment presents a challenge with many of the territory's unskilled jobs being lost to mainland China.

But Mr. Leung stressed there is plenty of hope for new growth this year, capitalizing on a two percent growth rate in 2002.

He said raw data, like a 21 percent increase in tourist arrivals and double-digit growth in exports, suggest a positive first half of the fiscal year. But he said much of this forecast could be impacted by a war with Iraq.

In the Philippines President Gloria Macapagal Arroyo announced that her country's economy grew by four-point-six percent last year - its strongest performance since the 1997 Asian financial crisis.

The figure surpassed forecasters expectations and exceeded last year's economic expansion of three- point-six percent.

Despite the positive figures, there is evidence that some areas of manufacturing in the Philippines are slowing. The National Statistics Office reported that manufacturing output fell by point seven percent in November. Fifteen sectors saw production deteriorate - most noticeably in leather products, which witnessed a 59 percent drop in the value of production and petroleum, which registered an 12 percent drop.

Elsewhere, Anglo-Australian mining giant Rio Tinto announced its full year net profit sank by about 40 percent for 2002 - at $651 million. Excluding one-time expenditures and write downs, profits were only down eight percent - or about $1.5 billion.

The company called this a credible performance given week global demand. Rio Tinto's chairman says China and the U.S. market would be critical in 2003.