Hong Kong should seize the opportunity for economic diversification, so that it can improve people’s livelihood and prepare for future challenges in public finances. To promote diversification, the city must not only strengthen its traditional pillar industries but strongly support the emerging ones.
The Chief Executive has delivered the 2015 Policy Address, the third one during his term of office. Compared to the previous two, this policy address allocated considerable resources to the two areas of housing and assistance to the poor, elderly and underprivileged. As a key livelihood measure, the Long-Term Housing Strategy was proposed to gradually resolve the housing supply and demand imbalance by introducing the Low-income Working Family Allowance which is eligible for over 710,000 low-income family members, in response to the greatest public concern for the grassroots. All these initiatives should be given credit.
This year, the Chief Executive has made bold moves on several controversial deep-rooted social issues, showing the Government’s determination and commitment to the long-term development. On retirement protection, for example, the Financial Secretary will earmark HK$50 billion with a public consultation in the second half of the year. On the sustainability of medical services, the Chief Executive has committed to putting the results of the Voluntary Health Insurance Scheme consultation into implementation through legislation.
Economy is Backing for People’s Livelihood
What is disappointing in this year’s Policy Address is the lack of specific policy focus and a clear blueprint on long-term economic development. Looking at the chapters relating to the economy, the Policy Address merely repeated the existing measures and advantages without giving any concrete and feasible policy initiatives. It is just old wine in old bottles, offering little insight to address Hong Kong’s urgent need for economic restructuring.
Without the backing of a robust economy and adequate money in the coffer, the livelihood measures - be they for the short, medium or long term - set out in this year’s Policy Address might just be castles in the air. While Hong Kong is sitting on huge reserves of about HK$780 billion, the Authorities have warned of a structural fiscal deficit in the future. Competitors are gradually catching up on the fronts of many traditional industries, but new economic engines have yet been built. If we do not act proactively to break away from the excessively uniform economic structure, we are destroying Hong Kong’s long-term prosperity and stability.
Seizing Opportunity for Diversification
Judging from the current trends, the competitive edge of the traditional pillar industries in which Hong Kong takes pride, such as finance and logistics, will be taken away within the next decade, as the neighbouring regions are gearing up aggressively to develop a diversified economy. Now that the external economies are still weak, this is a prime opportunity for the Government to put great efforts to forge diversification and boost emerging industries that have better strength and greater potentials into new economic drivers. Otherwise, Hong Kong will just be marking time and its status in the international and national contexts will gradually fade.
Developing Economy amid Looming Fiscal Challenges
The Government will be facing big challenges in public finance over the long run and find it difficult to meet the needs for social development and public welfare, let alone to sustain improvement in people’s livelihood. I have repeatedly stressed that it is very important to maintain Hong Kong’s long-term and sustainable economic development. It is necessary to pursue people’s livelihood and the economy in tandem for the sake of the long-term social development.
Greater efforts must be made to develop the economy and promote a diversified economy. To this end, we must not only further develop our traditional pillar industries, but give greater support for emerging industries and accelerate Hong Kong’s transformation into a high value-added, knowledge-based economy. Doing these is in the interest of society as a whole and can stimulate upward mobility, so that businesses can thrive and create more middle or high-level positions for young people’s career development.
Single-direction Development of Financial Sector
Finance is the most important pillar industry of Hong Kong, an international financial centre. But the advantages of the local financial sector are mainly built upon the Mainland’s not-yet-perfect system and not-yet-liberalised capital account. Hong Kong is fixated at the stock market, leaving the development of other markets such as bonds, fixed income and commodities lagging far behind. It is questionable how the Government can effectively develop the bond market by issuing such a small quantity of i-bonds. Local corporate financing and IPO, which mostly focus on the Mainland market only, have limited its contribution to our economic growth. With the growing wealth in Asia Pacific, there is rising demand for high-end and diversified financial products. The Government should therefore grasp the opportunity to help the financial sector to expand in more new markets.
The Financial Services Human Resources Report issued earlier by the Financial Services Development Council pointed out that employees in the local financial services industry need to improve their language proficiency and communication and presentation skills, while the private banking and insurance industries are facing an acute manpower shortage. It recommended the Authorities to have full planning to strengthen professional training and encourage academia-industry collaboration in resolving the structural problems in the financial sector, so as to minimize manpower mismatch.
Capital Investment Entrant Beneficial to Hong Kong
In this year’s Policy Address, the financial sector is most surprised by the abrupt suspension of the Capital Investment Entrant Scheme, which has been in place for nearly a dozen of years. Given that the whole world is scrambling for foreign investment, the sudden suspension of the scheme would definitely do more harm than good to Hong Kong’s economy. To date, the scheme has attracted a total investment of more than HK$210 billion, which not only carries great significance for the development of the financial, real estate and insurance industries, but brings considerable incidental economic benefits. If the suspension was intended to attract foreign talent, then what the Government should have done would be refining the scheme and announcing the details of the refinement, instead of taking such an abrupt action that makes the public doubtful about whether it runs counter to the Government’s commitment to turn Hong Kong into an asset management centre.
Assisting Enterprises in Relocating Production Bases
Comprising 24,500 Chinese characters, the Policy Address has made no mention of the traditional industries. Manufacturing, despite no longer being a pillar industry in Hong Kong, stills employs about 3% of the local labour force. The Authorities therefore should not overlook the traditional industries. In recent years, with the Mainland’s economic reform and rising wages, as well as the implementation of new labour law and regulations, it is increasingly difficult for Hong Kong enterprises to operate in the Mainland. Many have moved to lower-cost places such as Myanmar and Cambodia, but they face with problems arising from different cultures, different languages and different policies. It is time for the Government to assist them in striving for policy and tax incentives and support them in tapping these new production bases and markets.
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