HONG KONG ECONOMY
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Redefining Hong Kong

Hong Kong’s budget too conservative to address social problems, SCMP forum told

PUBLISHED : Friday, 17 March, 2017, 7:43pm
UPDATED : Tuesday, 21 March, 2017, 11:11am

Hong Kong’s budget is too conservative to solve deep-rooted social problems, including land shortages and the widening wealth gap, politicians and analysts told a forum held by the South China Morning Post on Friday.

The comments were made during the 2017 Redefining Hong Kong Debate Series which looked at whether the city’s latest budget could rejuvenate an economy that has seen flat growth since 2012 and faces uncertainty amid rising interest rates and a global trend towards increasing trade protectionism.

James To Kun-sun, a pan-democratic lawmaker, said the Hong Kong government lacks the legitimacy to adopt controversial policies, such as increasing land supply and allowing imported labour, to tackle problems that are dragging down economic growth.

“They tend to be more conservative because they want to downplay the anticipation,” To said. “If the government continues with that kind of mindset, that kind of political manoeuvre, it will not solve our problems.

“We must have a politically-legitimate government, which must push ahead with universal suffrage, so the government has the legitimacy to make hard decisions.”

Echoing To, failed chief executive hopeful Regina Ip Lau Suk-yee, said the city’s budget plan was not forward looking and failed to address the problem of the widening wealth gap.

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“A big part of youth anger in Hong Kong is the widening gap between the haves and have-nots, in terms of income gap, wealth gap and opportunity gap. These objectives are not in the budget,” Ip said.

A longstanding chairwoman of the pro establishment New People’s Party, Ip quit the chief executive race earlier this month after she failed to get the 150 nominations required to qualify.

Hong Kong recorded a much higher than expected provisional budget surplus of HK$92.8 billion in 2016, compared to the HK$11 billion for the previous financial year.

The huge surplus was achieved largely on the back of higher-than-expected revenue from land sales and stamp duties, according to the new Hong Kong Financial Secretary Paul Chan Mo-po.

Richard Wong, a professor in political economy from the University of Hong Kong, said the surplus should be spent on expanding office space and housing supply, which he says will lay the foundation for future economic growth.

In the budget speech delivered in February, Chan said HK$61 billion will be allocated to the high technology sector, elderly services and sports and youth development, while additional social welfare hand-outs would be made for the elderly and disabled.

“I’m actually disappointed,” Wong said. “I would rather see the HK$60 billion extra from land revenues going into housing and land supply.”

Panelists Agnes Chan, managing partner at consultancy EY, and Daniel Cheng, chairman of the Federation of Hong Kong Industries, argued that the government is on the right track in supporting innovative industries, but more needs to be done.

“I was hoping to see a 200 per cent super tax deduction for R&D,” Chan said.

“So all and all, the budget is ordinary and no surprise, but still a little bit positive in its direction forward.”

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