Last month, Hong Kong's economy started to show signs of recovery. We are now, hopefully, on the long road to full recovery, but to arrive at our destination, the government will need to provide further initiatives to boost the weak economy, while at the same time work on eliminating Hong Kong's budget deficit.

The Central Government has been providing strong support with construction of the Hong Kong/Zhuhai/Macau Bridge, the Closer Economic Partnership Arrangement and the "Free Travellers Scheme" for Mainland residents all being given the stamp of approval. These measures, complemented by Hong Kong's existing advantages, will make it easier for the economy to get back on track.

However, shortly after the new Financial Secretary, Henry Tang, was appointed, some people suggested that the government abandon its focus of reaching fiscal equilibrium by 2006-07, set by the then Financial Secretary, Anthony Leung, and instead concentrate on revitalising the local economy. I have reservations about this suggestion.

No one opposes the importance of boosting the economy, but does this need to be at the expense of abandoning our goal of eliminating the budget deficit? Can they not be inter-related in some way?

I believe that the government should stick to its plan to ax the deficit, not just because of the points mentioned above, but also because efforts to do so will also stimulate the economy. For example, the government would be able to save HK$10 billion every year if it reduced the number of civil servants by 10 percent. The money that it would save could then be used to initiate additional resources to revive the economy.

Without a clearly defined goal to eliminate the deficit, government will probably get further into the red and postpone plans to trim public expenditure. As a result, the same old problems of staff redundancy, and unnecessary expenses will continue to waste more public money. Taxpayers, especially businesses, will need to continue shouldering this huge burden.

The government finalised a "0-3-3" pay cut deal with civil service unions to cut civil servants' salaries by 6 percent over three years. Many people have expressed disappointment with the arrangement, yet it is seemingly impossible to terminate the agreement.

However, salaries aside, the government should find other ways to trim its expenditure, including reducing its headcount and staff allowances. The government will be able to save HK$7 billion a year once the full 6 percent pay cut has been implemented, but it also pays out HK$6 billion annually in staff allowances. Even top executives in Hong Kong can't get some of the perks offered to civil servants. These antiquated allowances -- including financial assistance for civil servants at directorate rank to pay for air-conditioning and to send their kids to study overseas -- were originally provided for expatriate officials as incentives to work here in the then British colony. Despite this, they are still available for civil servants and the number of civil servants claiming these allowances continues to soar. The government must carefully study how it can phase out these perks as soon as possible.

The government has twice tried to reduce its headcount through the Voluntary Retirement Scheme, but has failed to meet targets. As such, it must now lay off surplus staff to reach its goal. Furthermore, it aims to reduce its headcount by 10 percent by 2006. One problem I see with this plan, however, is that without an interim target, some departments won't cut staff until the deadline is upon them. This will stop the government from reducing its expenditure before then. As such, I think departments should work out a timetable to dismiss 2 to 3 percent of their staff each year, and include all ranks, including those at the directorate grade, to avoid dismissing only low-paid staff.

The government seems to flinch at the mention of the pay cut issue, but I hope it will doggedly combat the budget deficit, and at the same time reallocate more resources to help the economy get back on a sound footing.