RULING HONG KONG, HONG KONG STYLE
The first Policy Address of the Hong Kong Special Administrative Region was delivered by the Chief Executive amidst high hopes and great expectations. It succeeds in mapping out a blueprint fitted for Hong Kong in this new era.
The Policy Address underlines the Chief Executive's deep love for our country and his conviction that Hong Kong's prosperity and stability are closely linked with those of the Mainland. It also shows that the HKSAR Government will face the future with determination, commitment and high morale, and will follow the familiar HK style of ruling Hong Kong through extensive public consultation. All this demonstrates that the Government is ready and able to take charge of Hong Kong's own affairs.
The Policy Address sets out the priorities of the Government quite clearly. The first task is the strengthening of Hong Kong's economic vitality. This will be followed by the building of more homes for the people, greater emphasis on information technology in education, and improved care for the elderly and the needy. The directions are thus clear and the programme is comprehensive. But while the Policy Address points at new opportunities, it also instils unavoidable risks. While it shows great vision in many areas, it also evades one or two critical issues.
A CLIMATIC CHANGE RATHER THAN A COLD SPELL
(N.B: Speech delivered before the currency and stock market upheavals)
The recent financial upheavals and currency devaluations in several Southeast Asian countries immediately hit the economy of Hong Kong. Tourism and the consumer industry were the first to suffer, and the stockmarket has already begun a notable trend of overall downward adjustment. This clearly demonstrates that Hong Kong's economy can no longer stand alone and remain unaffected.
At the PLC Financial Affairs Panel meeting held on 11 October -- the third day after the Policy Address was presented -- I questioned the validity of the Government's view that the administration's medium-term GDP forecast for Hong Kong could remain unchanged and that the sweeping currency devaluation in neighboring countries was an economic cold spell rather than a long-term 'climatic change'.
Over the past fortnight, a considerable number of financial leaders attending the World Economic Forum in Hong Kong expressed the view that the recent financial turmoil has brought about a structural adjustment. During the last couple of days, local newspapers also reported general agreement amongst financial analysts of the banking sector that the strong Hong Kong dollar would gradually erode Hong Kong's competitiveness, and that this problem would begin to surface next year; what they really cannot be sure of is the exact extent of the adverse effect this might have on our GDP growth rate.
Tempered by the sudden surge in the strength of the Hong Kong dollar and the RMB, Hong Kong would be hard-pressed to maintain its economic performance, let alone further strengthen its economic vitality and improve the environment for business. In the Policy Address, there is no lack of favorable measures to enhance medium-term and long-term business prospects, but the present situation has significantly weakened those measures. I hope the Government realizes that we are now facing some critical issues of a fundamental nature and that we must listen and react to the bad news as well as to the good.
In the present situation , what the financial, business and industrial sectors need most urgently are not just titbits of benefits and inducements?They need timely economic data and accurate analysis of the international markets so that they can work in tandem with the Government and come up with creative and effective responses. I hope that the Commission on Strategic Development headed by the Chief Executive will react quickly to find ways out of the present impasse and to set new courses for Hong Kong's beleaguered economy.
DANGERS LURK WHERE POLICIES ARE IN THE HANDS OF LAYMEN
The Chief Executive should indeed be concerned with the housing issue, and Hong Kong people will certainly appreciate his efforts. But as we try to fulfill the aspirations of those who want to become homeowners, we must also remember that the property sector now contributes more than 40% of our GDP. When the market is strong, the introduction of a few administrative measures designed to help the public may be quite desirable. But when the timing is not right, and a target for the property market is set totally arbitrarily by laymen bureaucrats, we are left with an artificial plan which may well backfire. The result could be like adding fuel to flames. The property market could become rife with confusing signals, supply and price could fluctuate greatly, and potential home buyers and developers might be left at a complete loss.
In a system of free market economy, the Government should refrain from unnecessary interventions and limit itself to the pursuit of clearly defined public policies. Our land is a great public resource and the Government should speed up development to ensure a regular supply of this land for the property market. The housing construction programme should also be complemented by greater infrastructure development, so that as soon as construction work is completed, flats can be sold on the market.
The policy of providing public housing for those who cannot afford to buy their own homes is indeed welcomed. But before the Government intervenes any further in the free market arena, I suggest it needs to carry out more detailed planning and obtain a better overview of the situation. This is especially so because most government officials are technocrats who are not entirely familiar with the actual operations of the market. They should therefore avoid overreaching themselves and refrain from commenting mindlessly on market prices and other sensitive factors that might seriously impact on price trends.
The fact of the matter is that a free market economy is full of dynamism and variables. To survive, businessmen must always respond with great agility to changing market conditions. Unless the Government wants to take that dynamism away from them, and turn the whole property market into a planned sector of the economy, it had better go easy on sporadic and short-sighted interventions. Such interventions could in the long run, hurt potential home buyers by putting them on the receiving end of arbitrary policies.
Three main housing targets are set in the Policy Address, two of which are: to build at least 85,000 flats a year; and to achieve a home ownership rate of 70% in ten years. The first target is reasonable. The second, however, looks suspiciously like a target set in a planned economy. Such an arbitrary target also puts great pressure on officials who, like the Secretary for Housing, are in charge. Some of his recent off-the-cuff remarks concerning the 'correct' level of property prices were widely considered inappropriate.
I would like to illustrate further my arguments that the Government should refrain from undue interference in the market, that such interventionist measures will be ineffective and that they will ultimately make life more difficult for home buyers . I shall focus on a few key variables of a free market, starting from the supply of land to the buying of homes by the end-users. I hope, moreover, that my analysis will illustrate another point: if the Government really wants to achieve certain administrative targets, even at the expense of bending market rules and deflecting the natural equilibrium set by the forces of demand and supply in the market itself, it should choose a much more effective approach of introducing financial incentives and administrative measures that will profit market operators rather than penalise them.
Let us first assume that co-ordination within the Government is smooth, that there is regular supply of land, and that the developers are willing to buy all the land regardless of any risks involved. Even then, the Government faces many obstacles. The first is the pace of building the flats. Anyone in the construction industry knows that the problem of manpower shortage will get increasingly acute. It is already time for the Government to work out a specific labour importation timetable, provide guidelines on the types and number of workers required, and establish proper application procedures.
But the Government is still evading the issue, even though it is of pressing importance. Does the Government really believe that the mere announcement of a deadline for the sale of flats will automatically result in the appearance of more construction workers? Can such an announcement really solve the labour shortage problem?
Let us next assume that the massive schedule for the construction of flats can be kept notwithstanding the obvious labour shortage. The developers will still need to study the latest market positions and price trends, before determining whether to sell or lease the flats. The Government can, of course, set another deadline for the sale of flats. But even then there is no guarantee that the flats will be bought by end users as they may not be able to afford the best market price. Unless of course the Government were to also intervene in the pricing of flats and force the developers to lower the prices and sell the flats to designated end users. Otherwise, the developers will sell the flats to investors who can offer better prices. In any case, developers will definitely not want to sell their properties below cost. In the next few years, there will be an abundant supply of flats, but if prices remain unaffordable for the genuine end users, there will still be vacant flats held by developers or investors. This will be a true waste of precious resources in our community.
Let us go further and assume that the second problem is also solved, and that the developers are willing to sell the flats regardless of price. In that case will banks have enough funds to provide mortgage loans, at a reasonable interest rate, to the large army of home buyers ? In July, the Hong Kong Monetary Authority asked local banks to observe the upper limit of 40% for funds designated as mortgage loans. Nearly all local banks have now reached this ceiling, and the mortgage interest rates have started to climb up. If the Government wants to turn an additional 20% of our entire population into home owners in ten years, the amount of mortgage loans needed will reach an astronomical figure. Can the natural growth of bank deposits and other loan securitisation measures cope with such a drastic increase in mortgage loans artificially created by the Government? Will the Government then ignore the glaring risks, allow a steep increase in interest rates for mortgages, or relax the 40% upper limit for banks?
Signs of an economic slowdown are already apparent. If the Government rigidly relies on bureaucratic means and stern administrative measures to meet these housing targets, history will repeat itself. We will again witness, in the property market, yet another instance of government intervention which is too much and too late. What the public wants is a "soft landing" for the property market. I strongly urge our government officials to refrain from making intimidating gestures at this time. Such an attitude could ruin the property market and thus further weaken our share market and our whole economy.
To meet the housing target, the Government should build and sell more
public housing units and home ownership flats. The private property market
can , of course, also be expected to contribute. But it should not become
the scapegoat in a situation created by another deliberate government
policy -- the policy of releasing land at a premium. Everyone knows that
it will take at least two to three years before there will be an ample
supply of flats; during this time, the Government and the people of Hong
Kong must remain patient and sensible.
HELPING OUR YOUNG PEOPLE TO APPRECIATE THEIR RIGHTS AND OBLIGATIONS
"It takes ten years to grow trees, but a hundred to rear people". The ten-year housing plan is a massive construction project, and many grand and tall buildings will be built in a relatively short period of time. But it takes great patience and suitable guidance to nurture and educate our younger generation.
We should respect and recognize the rights of young people. At the same time, we should help them understand their duties and responsibilities towards the society. Experienced social workers know that we cannot educate the youth by only giving them didactic instructions; without proper example and guidance, young people can easily loose aim in this world of confusing values and take on their own solitary courses.
After a comprehensive consultation carried out four years ago, the Commission on Youth established a set of long-term developmental goals for the youth. These goals are shared by members of different sectors of the community as well as by the youth themselves. The Commission also forwarded to the relevant government departments a number of recommendations on ways of encouraging our young people to take part in community affairs. The recommendations include support for the development of self help youth groups, and for the active promotion of youth participation in voluntary services.
The Commission is also currently discussing with the Government ways of ensuring better coordination in the promotion of civic education. The Commission hopes that the PLC and the Finance Bureau will provide it with the necessary manpower and research funds to strengthen its links with youth workers as well as with the young people themselves. This would enable the Commission to bridge the gap between the youth community and government departments, and encourage young people to take a more active role in the SAR affairs.
SUPPORT OUR REFORM IN EDUCATION
Education is an important investment in young people. The Policy Address shows that the Government has accepted the advice of educators and the business sectors, and that it now fully recognizes the importance of information technology and language proficiency to the future of Hong Kong. This is most encouraging . However, if we wish the end-result to be more than an ever-expanding curriculum spoon-feed to pupils , we must ask more of the Government. To ensure that its education policy does not become an empty promise, the Government must put forward an effective curriculum restructuring programme, provide relevant support for the schools, and conduct regular target reviews.
If the education reform, which takes up 6 pages of the Policy Address, is fully carried out, it will bring about major structural changes to our education system, and produce an impact like that of a revolution. The allocation of $5 billion to encourage reform in primary and secondary schools, the introduction of whole-day primary schooling to about half our schools within the next five years, the implementation of mother-tongue teaching in about 40% of all secondary schools, as well as the development of information technology in education, are all based on good intentions, but these targets will also exert great pressure on the education sector. As a friend from the education profession puts it: "There are so many things I have to do, so many goals have been set, and I have really no idea how many I can actually reach ".
Once again, the Policy Address talks in glowing terms about achievement targets, but it says very little about specific means of support to those providers operating outside the government structure. This is a great pity, for the plan is otherwise quite flawless. I hope the Government will provide supplementary information on this point in its reply. This will dispel outside doubts about the practicability of the policy.
COLOUR OFF THE BLUEPRINT
Without a parallel political development, this blueprint for our economy and livelihood is like a picture with only dull colours. A strong Executive-led Government is acceptable to Hong Kong people, but it must be supported by a Legislature that is equally strong and has a wide mandate from the people. Otherwise, when the technocrats in the Government adopt strict and vigorous measures to pursue their policies, those deeply affected by these policies might feel that they have been deprived of a the proper avenue to express their grievances and that the constitutional channels have not provided them with the proper protection of their interests. The Administration should therefore, as soon as possible, put forward a proposal on how the reform of the Legislature will be carried out in accordance with the timetable set in the Basic Law.
It takes a long time for a review of political development to produce a solid response from the community -- whether in the form of mainstream views or proposals. It also takes a long time to implement the relevant measures. When the Chief Executive consulted Provisional Legislators on the Policy Address, I suggested that the Government should map out a preliminary blueprint for political development in Hong Kong and work out as quickly as possible the necessary procedures and a timetable, this is really a matter of urgency, especially since the Chief Executive has made a number of pledges to international leaders indicating that a comprehensive review of the political system of Hong Kong will be finalized by year 2007 (i.e. in less than ten years).
Let us not forget that while it took more than ten years to draft and implement the Basic Law, people still thought that the pace had been too hurried. The issue of political reform is of great concern to the locals as well as the international community. The Government must tackle this issue -- with courage and with vision.
May the SAR government rise to the challenges of a new era of political development with the same high morale, and with the determination and commitment so evidently shown in this Policy Address.