We know little about these assets, even as professional accountants. The government has much to do to enhance transparency so that the people of Hong Kong are better informed about the management of public finances and to ensure that the government's decisions on fiscal policy do not become the bargaining chips of a handful of political groups.

In these last days before the transition, the Chinese and British Governments should work closely in preparing the 1997/98 Budget. Before the first SAR Government is set up, the Administration should provide the Chinese Government with plans relating to all post-97 long-term investments, infrastructure projects, and major policy changes in our public institutions.

The transfer of government assets should be treated as an important part of Hong Kong's change in sovereignty. This could take the form of an internationally recognised agreement, under which the transfer procedures and the financial obligations of each government are clearly stated. For example, the British side could endorse the list of public assets prepared by the government and assist in recalling external loans, while the Chinese side could take responsibility for acknowledging the future SAR's liabilities. Both governments must seek international recognition of the agreement and present regular progress reports to the public.

Following the change of sovereignty, the Chinese Government should put into practice the principle of 'Hong Kong people ruling Hong Kong' and not interfere in Hong Kong's internal affairs. Among the many pressing matters the people of Hong Kong will face, there are a number relating to the management of public finances.

Large amounts of capital will be released, including the Land Fund and the minimum fiscal reserve of HK$25 billion as agreed by the Chinese and British Government. Long-term plans are needed to fully utilise such an enormous sum. The government's investments should not just serve the interests of individual government departments or corporations in the public sector. Rather, they should serve the long-term overall economic interest of Hong Kong, ie improving the local investment environment. Large-scale infrastructure or investment projects should proceed steadily to avoid overheating the economy and causing short-term inflation.

A Venture Capital Fund and a Mandatory Provident Fund (MPF) should be established. The cost of running a business today are so high that it is virtually impossible for young people and salary earners to start their own businesses. The long-term purpose of establishing a Venture Capital Fund is to preserve the dynamic entrepreneurial spirit and the economic vigour that characterises Hong Kong.

The MPF aims to bring about a stable society and provide security for our aging population. Managing such an enormous amount of retirement funds will be a great challenge for the future SAR Government. The people of Hong Kong must make an effort to understand how this money is managed and the associated risks involved.

The Exchange Fund is another colossal asset that belongs to the people of Hong Kong. A healthy foreign exchange reserve will ensure that the strength of the Hong Kong dollar remains stable. Yet, at present, the people of Hong Kong only have a superficial knowledge of the Exchange Fund and its operation. A positive step forward would be to disclose more information about the Exchange Fund's investment accounts and provide the public with more opportunities to participate in its monitoring.

Effective ways to strengthen the monitoring of public bodies and trading funds must be found. At present, public bodies are still not fully aware of the need for internal monitoring. It is a matter of urgency, therefore, that sound corporate governance be introduced to ensure that these bodies become fully accountable to the public. Measures which should be introduced include: audit committees; the appointment of independent directors; the stipulation of qualifications of chief financial officers; and a clear definition of the residual powers of the Director of Audit. Public consultations should be held to help the public better understand the operation of public bodies.

In addition, the management of these bodies should promote transparency and display a high degree of integrity in their corporate dealings. More thought should be given to ways to disclose information to the public. Consideration should be given to defining parameters for the type of information disclosed and to following the example of listed companies by announcing major plans, transactions, tenders for contracts, consultation studies and projects.

Trading Funds are subject to several operational constraints: the stance of trade unions; civil servants' conditions of service; and the limited marketability of the services provided. In an open market, these services may be at a disadvantage when competing with those provided by the private sector. Until the cost-effectiveness of these services is improved, the setting up of any new funds should be postponed while those already approved should proceed with caution.

The management of public finances is monitored via three main channels: LegCo and its committees; pressure groups; and the media.

From the legislature to the polulace, from the independent watchdogs set up by the government to individuals and community organisations, all must work together to ensure that the management of public finances is carefully monitored so that the resources of our society are properly deployed.

The effects of an executive-led government is much more evident in the shaping of fiscal policy than of any other public policy. The management of public finances is now almost exclusively in the hands of the government. Let us use the opportunity provided by the transfer of sovereignty to set up an effective monitoring system and learn more about public finance.

Eric Li
Accountancy Functional Constituency
Representative
LegCo