China's budget bargain

PUBLISHED : Friday, 31 March, 1995, 12:00am
UPDATED : Friday, 31 March, 1995, 12:00am

SIR Hamish Macleod hailed it as a pleasing result - the passing of his last budget by an impressive 48 votes to one.

While he is bowing out with the success of nurturing a co-operative and constructive spirit with legislators, his successor, Donald Tsang Yam-kuen, must build trust and consensus with China.

The budget consultation is an arduous task - the last-minute fracas in defining the scope of the budget talks almost aborted the first scheduled meeting held yesterday.

Britain wanted to refer the expert team to the 1997-98 budget only while China insisted on the general terms of Hong Kong budgets, suggesting the inclusion of the last two pre-1997 blueprints.

Fortunately, the two sides managed to reach a compromise late on Wednesday afternoon in the wording of the title of the expert team, adopting the terms of 'transition budget', to avoid references to the scope of the expert meetings.

Publicly, Sir Hamish said the two sides had resolved 'whatever problems they had about defining the scope of the talks' but privately, he and his aides are aware that outstanding differences remain unsettled.

China's position is clear - that it wants to participate in the preparation of both the 1996-97 and 1997-98 budgets and it wants the four Preliminary Working Committee (PWC) members appointed as advisers to sit in on some of the expert meetings.

While the British side is adamant it is prepared to involve the Chinese in formulating the 1997-98 budget, it insists discussions on the 1996-97 budget should be confined to briefings on procedures such as how the blueprint is planned and prepared.

The logic follows that while the 1997-98 budget extends beyond July 1, 1997, justifying China's participation, the 1996-97 budget falls into the pre-1997 period and the British Hong Kong administration should enjoy the autonomy of deciding its shape.

The British side also maintains that the Beijing-appointed advisers' role should be limited to procedural matters.

Governor Chris Patten made it clear it was the Chinese side's prerogative to pick its own advisers and judging from what Mr Tsang said before yesterday's meeting, the British are yet to know the status and terms of reference of the four appointees.

Apparently, the British side considers that the more important task now is to convince China to respect Hong Kong's financial autonomy and keep its hands off the 1996-97 budget.

The status and role of the Beijing appointees is a secondary matter to be dealt with later.

Hong Kong officials could take the scope of the talks and the involvement of the advisers as two separate subjects but, realistically, they are inextricably intertwined if the British cannot stop China from getting to the 1996-97 budget.

According to the Chinese side, the advisers can attend expert meetings when necessary.

Chinese expert team leader, Chen Zuo'er, said yesterday that the advisers, Nellie Fong Wong Kut-man, Shao You-bao, Sir Sze-yuen Chung and Philip Wong Yu-hong, have vowed not to leak the confidential details of their meetings.

Apparently, China is aware of a potential problem of conflict of interests for the four non-government people. However, hard as Mr Chen might try to play down the concern, his statement of assurance has yet to allay concerns.

Mrs Fong is now deputy managing partner of the US accounting firm Arthur Anderson & Co in Hong Kong, Mr Shao is deputy general manager of the Bank of Tokyo, Sir Sze-yuen sat on the boards of some leading local firms and Mr Wong owns a number of companies.

Until now, except for saying the appointment of advisers is for the sake of continuity, Beijing has yet to come up with any clear justification foor why businessmen should be involved in the budget process or the rationale behind selection criteria.

Nor has Beijing offered any statement about the advisers' terms of reference and their period of service.

A mechanism on how to ensure that the advisers do respect the confidentiality rule - and that they will not use the data for personal use - is still missing.

It is no good for China to simply say, trust the advisers because we trust them. All these queries have to be addressed.

Conflict of interest aside, getting outsiders involved may also politicise the budget exercise.

Hong Kong officials may be content that in the next 12 months the advisers only have access to information relating to procedural matters.

But have the officials considered what impact this will have on Hong Kong legislators? Even assuming the advisers will only be told about procedural matters, it remains to be clarified whether the information the Beijing appointees will have access to, will be more, or less, what Hong Kong's law-makers are offered.

Once the process is open to outsiders, will legislators come forward with similar demands? How can the Government exclude them from budgetary information while allowing the Beijing advisers the privilege of being well-briefed? Weighing the potential demands by legislators and China and calculating the extent and scope of information to be passed on to mainland officials and their Hong Kong advisers may prove a difficult balancing act.

The preservation of the integrity and credibility of Hong Kong's budget, so essential to the territory's capability to steer clear of any potential financial crisis in the run-up to 1997, is not something that either the British or Chinese side can take lightly.

Time and again, mainland officials have urged Hong Kong civil servants to stay on to serve the future Special Administrative Region (SAR) government because their service is needed for the continuity of the administration.

Hong Kong civil servants obviously hope this is not an empty slogan and they will be trusted to do a responsible job.

The Hong Kong officials sitting on the budget team will certainly be more eager to persuade China that they have every intention of protecting the territory's financial interests.

In the months ahead, it is for Mr Tsang and his aides to prove that to China.

But it is also for China to act reasonably and sensibly if mainland officials truly have Hong Kong's interests in mind.

If Beijing indeed wants double assurances, the best option is to nominate the Chief Executive-designate as soon as possible.

The territory's future chief, who is supposed to know the Hong Kong system well, will be involved and can play a leading role in formulating the budget.