A chance to emerge stronger from crisis

PUBLISHED : Tuesday, 23 June, 2009, 12:00am
UPDATED : Tuesday, 23 June, 2009, 12:00am

Amid hopes that the worst of the global financial crisis is behind us, Chief Executive Donald Tsang Yam-kuen has unveiled a strategy for sustaining Hong Kong's economic development. The government is to play a key role in promoting six knowledge-based industries identified as new engines of economic growth. For example, Mr Tsang says the government will keep an open mind where land costs might prevent these industries setting up. It has taken the advice of its Taskforce on Economic Challenges, at the risk of being seen to pick winners instead of leaving it to the free market - the basis of our city's success.

The taskforce also advised on major stimulatory measures late last year to stabilise the financial system, prop up cash-strapped businesses and save jobs. The longer-term measures are no less important. The city still faces many uncertainties. There is a danger of a false sense of security. Our financial system has withstood the financial meltdown in the United States and Europe. We seem to be emerging from a severe recession. And the government's top economist does not rule out a return to growth as soon as this quarter after a year of contraction and the collapse of exports. All this appears to leave our city well placed to turn adversity into opportunity, as it did after the Asian financial crisis in the late 1990s. This time, however, it is the world that is recovering from financial shock. Global recovery could take longer than investor optimism in global markets anticipates. The road ahead could be bumpy.

As Mr Tsang conceded, our city has done little more for a decade than talk about a future as a knowledge-based economy. The financial crisis has spurred some action. The six sectors in which Hong Kong is seen as having an edge are medical and educational services; testing and certification; innovation and technology; cultural and creative industries and environmental industries.

Mr Tsang has committed the government to finding four hospital sites for the development of private medical services, with expressions of interest to be sought by the end of the year, and two urban sites for sponsored, self-financed higher education institutions. Promises such as setting up a council on testing and certification within three months, to explore financial and tax incentives for private-sector investment in research and development, and to consider refitting old industrial buildings for cultural use, are all welcome.

He rightly identified the city's attraction as a place for foreign talent to live and work as just as important as grooming local talent. To achieve this, though, tougher action will be needed to make Hong Kong a more pleasant place in which to live, especially where curbing pollution, protecting our heritage and ensuring cultural diversity are concerned.

The Taskforce on Economic Challenges has played a key role in the government's handling of the financial crisis. Now it has been disbanded and its proposals left to government policy bureaus to follow up. Meanwhile, the World Bank, the Organisation for Economic Co-operation and Development and other forecasters have issued warnings that for many countries the recession may be far from over. Rallies in equity and property markets continue to run ahead of economic data. A sharp downward global market correction cannot be ruled out. As an externally oriented economy, Hong Kong would be vulnerable. It is to be hoped the decision that the taskforce is no longer needed does not turn out to be premature.