Cut and run
In the wake of the global financial crisis, politicians have been falling over themselves to present proposals to stimulate the local economy and help the needy. But many of their ideas would incur huge public expenditure and are not well thought out. The Liberal Party is singing from its old script, advocating free shopping coupons to help the retail sector.
First floated during the severe acute respiratory syndrome crisis, the idea received a cold reception then. But with Taiwan adopting a similar measure, the Liberals are championing it again.
The Federation of Trade Unions has joined the chorus, advocating a HK$20-billion free-coupon scheme. The unionists' ally, the Democratic Alliance for the Betterment and Progress of Hong Kong, proposed a huge lucky draw, set up with HK$300 million from the government and HK$200 million from business, also to encourage private consumption.
Many such proposals cannot stand the test of economic analysis. Some are, in essence, political stunts.
Economists have long discredited the effectiveness of shopping coupons. The retail market might receive a shot in the arm, but the impact on the economy would be short-lived. In the end, only businessmen benefit.
If every citizen - rich or poor - receives the same value in coupons, the idea also falls foul of equity principles. Those on a low income would probably use all the coupons for daily necessities, and only the supermarket chains that effectively monopolise the market would gain, not the small vendors. Better-off consumers wouldn't care about the extra HK$1,000 or so. They may use the money to tip their servants or pay for fuel for their expensive vehicles. There would be no spending spree.
Some say the potential wastage could be avoided if only the underprivileged got coupons, but implementation would be costly.
To help small businesses, the most direct way is to return taxes or give cash. But why should the government dish out free lunches to businesses? If the sector and its political proxies are favoured in the economic rejuvenation package, shouldn't the government also ensure that they support a minimum wage and promise not to lay off staff?
The Liberals have been championing a 'Tsunami Pledge by Caring Businesses', hoping to enlist responsible enterprises to commit to keeping on their staff. Not surprisingly, the response has been poor. Many hugely profitable companies have already started to downsize, even before profits are hit. HSBC is one example.
But the biggest irony is that, of the 10 businessmen appointed by the chief executive to the Task Force on Economic Challenges, five have already taken the lead by firing employees.
One member of the taskforce, Centaline Property chairman Shih Wing-ching, has asked the government to assist the sector if property prices fall by more than 30 per cent. His solution is for the government to simply purchase all the mortgages. This is a shameless request from a man who showed no mercy when he slashed his own staff levels.
The Liberal Party should make sure its constituents live up to their corporate responsibilities before they campaign for a free lunch. The party's former chairman, James Tien Pei-chun, also opposed distributing shopping coupons indiscriminately to all people. Mr Tien has proposed a separate idea but, again, it is no more than a well-crafted scheme to benefit business.
To stimulate private consumption, the best and easiest way is to slash prices. This proved to be highly successful in the United States during the Thanksgiving holiday, when stores offered 70 per cent discounts.
In Hong Kong, a department store in Sha Tin, a trendy boutique in Central and one property developer all attracted good business when they offered big discounts.
The catering trade has introduced a HK$1 campaign to stimulate sales, but this is only a gimmick. The sustainable way forward is to cut prices consistently.
Albert Cheng King-hon is a political commentator