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The institution of a financial protection net based on contributions to cover retirement for the workforce was a pressing and urgent need which must be addressed as early as possible, said the Hon. Charles Lee Yeh-kwong, Chairman of the Mandatory Provident Fund Schemes Authority (MPFA) today (Wednesday).

The Mandatory Provident Fund system is an important long term project for Hong Kong and the launch date should not be delayed because of short term prevailing economic conditions, Mr. Lee said.

"The longer it is delayed, the greater will be the burden to be carried by the whole society," he said.

Speaking at a seminar organized by an international magazine on MPF, Mr. Lee said that MPF contributions would require a time span of 30 years or more to reach maturity.

"Due to the accelerated rate of our aging population, it is imperative that we start the scheme as early as possible."

Mr. Lee noted that Hong Kong had a rapidly aging population, and the number of people aged 65 or above would reach 2 million, or one in five, in 36 years.

"We must all do our share in curtailing short term needs to build a better future for our children and ourselves," he said.

The MPFA will soon be reviewing the overall timetable, which currently sets the launch date as 1 December 2000. "I will be advising the Government in late March or April whether we will be ready by the target date," said Mr. Lee.

However, Mr. Lee said he was confident that the MPFA could adhere to the initial timetable and added that he wanted to give the public at least six months' notice before the official launch.

On the question that MPF system would incur additional costs to employers, Mr. Lee pointed out that research findings had shown that on the average, the system would add only about 0.8 of a per cent to the cost of doing business.

"On the other hand, the MPF system will bring a positive and beneficial impact on Hong Kong's economic growth," he added.

In its first full year of operation, contributions to MPF schemes will amount to some $10 billion, rising to about $60 billion annually in 30 years time. By then, the accrued assets of MPF schemes will total almost $1,000 billion.

Mr. Lee pointed out that this huge pool of investment funds, created from the inception of the scheme and building up over the years, would have a significant and positive effect on the bond and securities markets. It would also lead to the creation of a pool of capital which would enable new companies to raise capital through equity listings, added opportunities for the financial services sector, new business and jobs.

"Apart from the obvious social benefits, the MPF system will have a significant impact on stimulating economic growth. And Hong Kong's status as a premier international financial centre will receive a great shot in the arm," Mr. Lee concluded.

– Ends –

16 February 2000