The Hang Seng Index gained over 750 points on the day Financial Secretary Paul Chan Mo-po delivered his budget speech, a clear signal of market approval of the budget! As a matter of fact, sentiment in Hong Kong has already improved over the past year, backed by a spate of policies to attract talent and enterprises to the city. As noted by Chan, last year saw vibrant IPO activity and renewed vigor in Hong Kong’s stock market, with the average daily turnover exceeding HK$200 billion ($25.7 billion), up more than 50 percent year-on-year.
The Hong Kong Special Administrative Region government is aware of public concern over the multiyear fiscal deficits and is acting positively to address them. It is raising fees that have been frozen for a long time, such as the air passenger departure tax, and is considering revising the tolls for tunnels and key highways that have cost much public money to build. It is leveraging technology, streamlining processes and cutting the ranks of the civil service to enhance efficiency. The Digital Policy Office is making life easier for individuals and businesses through the one-stop “iAM Smart” portal. The government is stepping up the Productivity Enhancement Programme, proposing to reduce the civil service establishment by 2 percent in each of the fiscal years 2026-27 and 2027-28. I hope, however, that the government will examine the needs of different departments and units before implementing any cuts, instead of an across-the-board cut. The government should also first weigh the benefit of any funding cut to nongovernmental organizations against the cost of the cut to people in need, before pushing through with the cuts.
Hong Kong is very strong in its infrastructure, and very strong in its institutions. Its strategic location and its special relationship with the Chinese mainland through the “one country, two systems” arrangement is unique and must be a hugely favorable factor to drive the Hong Kong economy. The SAR government continues to make a laudable effort to attract talent and enterprises to come to Hong Kong. Sadly, however, for years we have underperformed relative to our potential. In my view, this is due to a lapse in our “can do” and “self-reliance” culture. We must revive our can-do culture and our self-reliance culture, which had driven the Hong Kong economy for decades until quite recently. We must bring back the “Lion Rock Spirit”.
I would also like to suggest an adjustment to the proposed changes to the “HK$2 Scheme” that allows the elderly to travel on most public transportation routes by paying HK$2. ... I strongly advise the government not to impose any cap. This cap will not bring in much revenue at all but it will cost the well-being of many elderly people, who will be under pressure to count the number of trips taken. It will also tarnish the image of the government.
Because of the rise of populism, our politicians had been pressing the government to hand out “goodies” to the public, ignoring the wider social and economic implications. For example, I cannot understand why tenants in public rental housing with over three times the eligibility income limit but less than five times can still stay in our public rental housing. In contrast to Hong Kong, Singapore has kept its self-reliance spirit consistently. Consider this: The Housing and Development Board of Singapore website states: “Rental housing is heavily subsidized by the government and caters to households who cannot afford to buy HDB flats and do not have other housing options. As the number of rental flats under this scheme is limited, you have to meet the eligibility criteria in order to renew your tenancy term.” I think it may be fine to allow reasonable room to tolerate the continuation of tenancy. But the present arrangement is much too generous for those who breach the eligibility criteria. Today, the very well-off households noted above are merely required to pay double rent and can still buy a Home Ownership Scheme flat at a great discount, and even profit from it! In Singapore, HDB housing and public rental housing are also never located in prime sites, thus giving strong incentives for HDB owners and tenants to improve their housing conditions through their own effort. If we do the same, our government will be able to sell more land and generate more revenue. Owned homes will also become a better store of value.
We must also learn from the Chinese mainland. I have been telling my students that the mainland economy is able to overcome difficulties and has maintained solid growth year after year since 1976 (with the exception of 2020, when our growth rate was 2.2 percent because of the COVID-19 pandemic) because it keeps learning from its mistakes with an open mind. Our housing policy since the 1997 handover has been seriously flawed. For example, we had kept the special stamp duty for well over a decade without examining its costs on the economy and whether it had helped or hurt the cause of buying a starter home.
I would also like to suggest an adjustment to the proposed changes to the “HK$2 Scheme” that allows the elderly to travel on most public transportation routes by paying HK$2. The government says it will retain the HK$2 charge on trips costing less than HK$10 but elderly travelers will have to pay 20 percent of the full fare for trips costing more than HK$10. The government will cap the number of concessionary trips to 240 per month. I strongly advise the government not to impose any cap. This cap will not bring in much revenue at all but it will cost the well-being of many elderly people, who will be under pressure to count the number of trips taken. It will also tarnish the image of the government.
The author is an adjunct research professor at Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute and the Economics Department, Lingnan University.
The views do not necessarily reflect those of China Daily.
