Fair Means to Achieve Fair Pay

'When Squire All-worthy opened his door to find a baby lying on his doorstep, he could not avoid a decision.  To have 'taken no action' or to have left it there, would have been tantamount to deciding to let it die of starvation and exposure'.

The Legislative Council has been 'left holding the baby' on the issue of the 'Public Officers Pay'. By taking the unusual step of introducing legislation, the Government has unwittingly thrust the decision to cut civil servants pay to LegCo amidst the fierce and unanimous opposition from the entire army of unions in Hong Kong. They oppose fiercely, primarily not because of the small amount of money involved, but the injustice that this unnatural law, if passed, would have in suppressing their chances to obtain fair judgement by means of mediation or litigation. To put it in another way, lawmakers are now being asked to move the 'goal post' in the wage bargaining process in favour of the Government while the game is still ongoing. The 'Public Officers Pay Amendment Bill' has left lawmakers to choose between letting the civil servants get away with a salary level which is unfairly high or to serve as accomplice to the Administration in handing down its deal unilaterally to the civil servants in a somewhat unfair manner.   How should we decide, to decide against fair game or to decide against pay cut?  It is indeed a Hobson's choice.

I believe that as a lawmaker, I must ask why should we be left in such a 'no-win' situation.

Firstly, why is that the Government has left itself in such an absurd position of only allowing pay rises but not pay cuts?  Why is this problem not fixed years ago or at least sometime 'before' entering into this round of wage bargaining for the year 2002-3?

Secondly, even if we accept that the existing legal rules are stacked against the Administration.  Why should we insist to legislate and add new rules before the game is played out and the whistle blown by the referee?

Thirdly, if the Legislative Council is the equivalent to a 'games committee' making rules for wage bargaining then the referee should clearly be left to another institution e.g. the courts.  Then why is that the government now asks the Legislative Council who is the rules-maker to suddenly double up as judges for this year's pay cut？

In my view, any bargaining of wages should be strictly a matter between the employer and the employees.  In the event of legal dispute, they should seek mediation or a court judgement.  The Legislative Council is neither an arbitrator nor a court.  We should seriously question the rationale of placing LegCo in this role and then ask us to determine against the civil servants at the same time.  

If there are obvious defects in the present legal and contractual arrangements between the administration and its employees, then such should be reviewed and fixed after due process of consultation and then, and only after then, be enshrined in law.  That is the proper use of the political process and where the Legislative Council plays it's proper role.  To meddle with this system could result in serious consequences.  The community could then rightly ask if we could do this to the Civil Servants today, could we then not do it to others tomorrow?  Even if a reduction in Civil Servants pay is a desirable objective, which I fully agree, should a lawmaker use any means to serve this end or should we not also consider whether or not the means are fair?

I urge the Government and lawmakers to keep an open mind and to explore any other preferred options to try to resolve this apparent stalemate between the Administration, the Unions and LegCo.

The first possible method is to allow a parallel procedure of arbitration and legislation. If the unions would abide to the results of arbitration and that the Chief Executive would exceptionally order it, then the passage of legislation should follow to enshrine its conclusions. I personally believe that the year of 2002-3 is a 'one-off' year where arbitration is needed. In any case, the legal rights for the Government to implement pay cuts should be put in place before the next round of pay review begins.

The second possible method is to allow time for parallel legislation.  The Administration or lawmakers might introduce another piece of legislation immediately to enshrine the existing principles and mechanism of the wage bargaining process in order to deal with the long-term issues and to also plug any loopholes in the present system.  Then and only after then, shall the present 'Public Officers Pay Adjustment Bill' together with any consequential amendments be given legal effect to commence.

Any one of these two methods would ensure fair means to achieve fair pay.  In a society that endears civil liberty and fair play, the government should not be seen to enjoy special privileges and some added convenience of being able to change existing legislation at will to suit its executive decisions. 

There is, however, a price to pay for fairness. Because of the technical issues involved, it takes time to mediate or to enact new laws of such complexity. If it means taking a year to perfect the system, that the price tag to the government coffer will be about $1.5 Billion.

Nonetheless, I believe that if the Administration and the unions set their minds on settling the matter quickly. It will only take a few months from now, or, not much longer than 1st October 2002, the original day set for the pay cuts, to resolve the present disputes through arbitration.  The cost is then minimal.  If it means parallel legislation, then the clock will be running and the dollars draining whilst the Administration and the unions negotiate a fair deal with the whole world watching.  Unreasonable delays on either side will mean the loss of public support immediately. I do not believe then that they will stall their feet.

Hong Kong is going through hard and changing times.  I can envisage even more difficult problems to come on the horizon.  For example, the new political accountability system starting from next week and the even tougher negotiation to come in the review of the structure, methodology of review, level and the terms and condition of public officers pay.  These difficult changes can best be managed with the co-operation and trust of the Civil Servants rather than trying to break their spirits.  To be paid perhaps a bit too excessively is not a public crime and our loyal civil servants deserve a fair hearing from the public and the Legislative Council.  Why should they be now 'punished' just because the Government has been far too generous with them in the past?

To me, this whole issue is as much a matter of moral judgement as a matter of public finance. However, it should never have been a political decision if the Administration has not left the legal position unresolved for so long and then unceremoniously thrust the 'unwanted baby' at the doorstep of the Legislative Council.  We are now left with a tough call to decide whether or not to back the Government in doing the 'right thing' but by taking a 'dubious route' or to say no to the Government but then let the community suffer the rather undesirable financial consequences that follows.

Credit: Eric Li is the LegCo Accountancy Functional Constituency Representative. For more information, refer to his website at http://www.ericli.org.

An Exchange of Views

As the Legislative Council Representative of the Accountancy Functional Constituency, I recently met with the heads of thirteen active Hong Kong accounting bodies to exchange views on matters of common interest. In recognition of the many valuable and creative suggestions raised during these meetings, I would like to take this opportunity to bring some of the more worthy points to the attention of the Hong Kong government. I hope that their personal appearance and oral articulation in the joint meeting with your good self on 3 April 2002 will further help to supplement and clarify these useful ideas.

The broad objectives of my submission on 3 April 2002 to Mr Stephen Ip, Secretary for Financial Services, is summarised below:

(1)               To identify the competitive edge and growing opportunities for Hong Kong as an international financial centre in the wake of China's accession to the WTO;

(2)               To explore ways in which accountants can contribute given our high level of professional expertise and extensive international networks;

(3)               To recommend policy initiatives that will complement our business drive and help Hong Kong gain a head-start in the race towards global competitiveness.

I have organised the submission below into three main parts: measures to improve Hong Kong's overall standing as an international financial centre; suggestions to help attract greater investment into Hong Kong; and, initiatives to support the export of our financial services to China.

Hong Kong's Status as an International Financial Centre

Mobility: We believe freedom of movement, whether it is of people, capital or services, is crucial to Hong Kong's survival. In fact, it is inconceivable that an international city, e.g. London and New York, would impose restrictions on movement into and out of the main catch areas it was trying to serve.

Therefore, we propose that existing artificial barriers be identified and removed as soon as practicable. In particular, Hong Kong should consider granting multiple entry visas and/or residence rights to individuals from the Mainland and Taiwan who have substantial business ties to Hong Kong.

Networking: More often than not, accountants have substantial links with the international business community. Therefore, we are in a prime position to use our existing networks to promote and disseminate information about Hong Kong and China to the rest of the world. In this respect, government encouragement and support in terms of exploring ways of tapping into this resource would certainly be of immense value.

Mutual recognition and value-added services: We should speed up the accreditation process of the various academic and professional qualifications in China and urge our Chines counterparts to do the same. Otherwise, we will have little evidence which can be used to prove our expertise as it relates to both the international and Chinese markets. If investors find no difference between staying in Hong Kong and going directly into China our competitive edge will disappear and with it will go valuable job opportunities.

Another way we can increase our competitiveness is by promoting a much broader range of financial services, e.g. information technology, consultancy services, insolvency services, etc, in which Hong Kong has an advantage over Mainland professionals.

Attracting Investment into Hong Kong

Our goal should be to attract China's top 100 enterprises to set up international offices in Hong Kong in which to provide one-stop services to conclude negotiations with international investors. We can emphasis our superior legal system, extensive and skilled financial services as well as our neutral position, i.e. free from China's internal regional competitions and the resulting unreliable sales pitches.

Moreover, we should review our tax regime to ensure that its competitiveness is maintained. Hong Kong also needs to more aggressively promote its simple and low tax policy as a more tangible package through responsible government agency such as Invest Hong Kong. We should also publicise our tax policy to specific groups such as fund managers. With regards to high net worth individuals, it is essential we abolish our antiquated estate duty tax. Estate duty has now become a voluntary tax for the rich locally and a burdensome tax for the SME and middle classes. While the revenue base is small, i.e. about $150 million, it can be a nasty stumbling block when it comes to attracting major investments from high net worth individuals outside the territory. Its abolition could potentially be a very important marketing tool for Hong Kong, particularly at a time when the competitiveness of our tax policy is already widely perceived to be losing ground in the region.

Exporting Financial Services to China

In this area, the government is in a position to act as an authoritative source of information. This is particularly important since China's policies and practices change quite frequently and are often rather confusing. One reason for this confusion is the dissemination of conflicting information coming from a variety of sources such as different ministries and local governments. However, the penalty for breaking rules and regulations can be extremely severe. This risk would be greatly reduced if the government provided an authoritative avenue to clarify matters relating to the Central Government.

It would be helpful if the government set up a small number of one-stop service centres in China's major cities. The benefit would be a better flow of information and services to Mainland enterprises as well as lower overheads for SME professional firms who are unable to afford permanent offices in various parts of China.

In the long term, the successful promotion of Hong Kong as a springboard for investments in China will require greater effort in training and the kind of financial assistance scheme recently announced is definitely a step in the right direction.

It would benefit the profession if accountants were promoted not only as financial experts with auditing skills but also as guardians and skilled managers of financial resources. This is particularly important to our non-practicing accountants who are skilled in financial management. Their presence can help enhance the efficiency and effectiveness of international and Mainland corporations that operate in Hong Kong as well as in China.

Accountants in Hong Kong have always been self-reliant and our rapid expansion into such a wide range of services over the last few decades was mainly market driven and achieved with little governmental support. However, the business environment is changing rapidly due to increased globalisation and a partially-opened China market which has its own unique set of challenges. We will, no doubt, continue to play our part with utmost diligence. But as can be seen from this submission, we will need the government on our side as a supportive partner.

(Submission to Mr Stephen Ip, Secretary for Financial Services, on 3 April 2002.)

Credit: Eric Li is the LegCo Accountancy Functional Constituency Representative. For more information, refer to his website at http://www.ericli.org.