• Fri
  • Dec 19, 2014
  • Updated: 5:49am
PUBLISHED : Sunday, 03 November, 2013, 4:51am
UPDATED : Sunday, 03 November, 2013, 4:51am

Hong Kong's timid leaders lack vision

Philip Bowring says Hong Kong's do-nothing leaders could learn something from Beijing about bold ideas to solve the city's pressing problems, starting with the ageing population

BIO

Philip Bowring has been based in Asia for 39 years writing on regional financial and political issues. He has been a columnist for the South China Morning Post since the mid-1990s and for the International Herald Tribune from 1992 to 2011. He also contributes regularly to the Wall Street Journal, www.asiasentinel.com, a website of which he is a founder, and elsewhere. Prior to 1992 he was with the weekly Far Eastern Economic Review, latterly as editor.
 

When will Hong Kong's government and civil service leaders grow up? It seems they are incapable even of thinking beyond the baby steps they propose to meet Hong Kong's most obvious problems. They have a lot to learn from Beijing on the eve of the Communist Party plenum, where high-level advisory bodies and think tanks have been proposing bold ways for China to move ahead.

They include such items as freeing up interest rates, a road map to full currency convertibility, abolition of the hukou system, ending of preferences for state enterprises, and creating a market in land-use rights.

Of course we know that a lot of this will not happen. Interest groups within the closed political system will likely frustrate reform. But at least China has people near the top with vision. Where are their equivalents in Hong Kong? For sure, Hong Kong's political system can be an obstacle to change, but ultimately its more open system should be better capable of bringing about change for the common good than a one-party state. But timid men in well-paid, secure jobs are failing the community.

Take the issue of the ageing population. There is a suggestion of setting aside HK$60 billion for a fund to support the ageing poor. This is a derisory sum; it compares with the HK$24 billion which sits in the Civil Service Pension Reserve Fund for that spoiled class in the unlikely event that the government itself could not pay their pensions out of recurrent revenue.

What current and future pensioners - those reaching 65 to 70 over the next 15 to 20 years - deserve is a share of the vast surpluses built up by their toil over the previous four decades. These are currently HK$1.3 trillion - some HK$674 billion in fiscal reserves plus the HK$637 billion accumulated surplus of the Hong Kong Monetary Authority.

It is often forgotten that much of the surplus has arisen as a direct result of devaluation of the Hong Kong dollar, whether in the period immediately before the peg or as a result of subsequent US dollar weakness, against some currencies in which assets are held. The Exchange Fund has benefited at the expense of savings eroded by inflation.

Lower income groups mostly save through bank accounts. But decades of mostly negative real interest rates have eroded their savings to the advantage of the banks, the developers and those already sufficiently well-off to be able to borrow and enjoy many years when assets prices have outstripped rises in earnings. While the small savers earned nothing, the HKMA was able to reap the higher returns available in bond markets. It is of course entirely coincidental that the non-official members of the fund's advisory board are bankers and property developers.

It is time for the government to give back to the people - the older ones in particular - the HKMA's gains which accrued at the cost of the people, not as a result of clever management. These reserves are not required for currency stabilisation, for which the HKMA has more than enough other assets and tools.

Hence the sum the government should be thinking about is not HK$60 billion but HK$600 billion. It can still be managed by the HKMA as part of the Exchange Fund but its income and some of its capital must be earmarked for a pension system which does not leave frugal hard-working people in abject post- retirement poverty.

On the question of advancing the retirement age, the civil service (and quasi-government bodies like the universities) set the worst possible example. Retirement at 60, or even earlier, mainly benefits the upper echelons who then get cushy jobs in the private sector peddling their connections to the bureaucracy. Lower ranks can find difficulty in finding new jobs.

Health is the only reason for retiring before 65. Those in services requiring a higher level of physical fitness should have the option of redeployment in other parts of the civil service. Ultimately the general retirement age probably needs moving to 70.

A previous column addressed the meaningless baby steps being touted to raise the fertility rate. One of those baby steps - tax breaks - is being proposed for health insurance. Yet again this is a device aimed not at dealing with an issue at its root but adding to the income and wealth divide by favouring one class of citizen - mostly the high-income one - over the rest.

The iniquities of the high-land- price policy, and the lock of the Heung Yee Kuk, are well enough known. But fellow Post columnists have recently drawn attention to the abuse of public housing as a result of government unwillingness to enforce rules meant to keep it for those who need it. Likewise, feeble administration allows tens of thousands of flats to remain vacant.

There is no need to repeat here details of the deliberate failure to address pollution issues, have a rational pricing system for tunnel and highway use, or even begin to think about modernising the tax structure. Bold policies on all these issues are within easy reach and maybe some Beijing think tanks could spell them out for our do-nothing leaders.

Only then will we know if the legislature is the obstacle to change that officials suggest, rather than timid men taking refuge in "seeking consensus".

Philip Bowring is a Hong Kong-based journalist and commentator

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This article is now closed to comments

johnyuan
The civil ‘servants’ in Hong Kong is divided into two groups that comprise with many levels of different responsibility, compensation and etc. The seniors, in the colonial days were mostly British. The rest were Chinese. Since the hangover, the localization requirement rushed the Chinese juniors into senior positions. It is batch of civil servants who are formally as a group seeking extension of retirement age. I am all for anyone to remain in servicing the public if they are physically fit and have a good performance record. The chances of the latter clearly are absent. For those in the very senior positions, despite dismal performance, the government has been treating these retirees on a musical chair of employment. They just retired to stay on other positions paid by tax. The colonial senior members before the hangover just mostly packed and retired somewhere (not in Hong Kong). Sure there are now those having a good time in the private sectors nowadays making themselves for their new employers by keeping in touch with their former subordinates in the government.
.
A blood change of the senior civil servants is not an unreasonable move in attracting the more civic minded people who would hold their job to serve the public instead would hold an iron bowl as a job. And not the least, stop the music and remove those chairs for those retirees.
whoaman
So many good points are raised in this article, yet I keep having that sinking feeling that nothing will change. The government and monetary authority will never let go of it's money for pensions, as they are completely blind to the needs of the HK lower economic classes (remember Mr. Timid 2012? John Tsang, the 'man of the middle class...' who once mentioned that there are plenty of flats under $2 -3 million available - if you want to live in a closet).
HK remains a greedy capitalist city (there are countries that are capitalist, but have extensive social welfare setups) that won't change as long as the timid government bows to the property barons and the Heung Yee **** crook.
johnyuan
Hong Kong is a town ruined by its property culture. Every irrationality finds rationality that is shielded by property. Boldly we justified and set our mind in keeping the property even as the center of our social system.
.
The property culture can’t exist and sustain without the push by the vest interest individuals who ride on and perpetuate the culture. Unfortunately, property as a main driving force of our existence can’t prevail without the acquiescence from government the ruler of the city. Even more unfortunate, those vest interest individuals act as a group wills so much power that in reality becomes the ruler of Hong Kong. When the objective is singularly in money making, why Hong Kong would need able government officials to look after the rest of us?
.
But we know, Hong Kong can’t subsist on property even by desperately importing mainlanders – rich or poor. Any sensible person knows that. So as CY Leung who opts for reform. But he will succeed only if he has good helps. We all doubt that he does.
.
It’s time for a blood change in the government. Perhaps pay half of the current salary to exclude the iron bowl and fortune seekers. We will get civic minded able bodies that will produce more than twice the work that we need.
caractacus
There is little imagination in our Executive Council and even less talent and Legco is not far behind. This has spilled over into what was once an honest and efficient civil service now paralysed by indecision and the incompetence of leaders who have been promoted above their abilities because of the same crony culture. What do you expect when a Chief Executive only appoints "yes men" who have to have been vetted as politically correct by the CCP?
If Hong Kong were a business it would have gone into liquidation 10 years ago and the Directors would be in gaol.
kctony
A "patriot" came over to my boss during the changeover evening and claimed HK's prosperity will exceed that of the colonial days. He said the British had always left many colonies ruined when they left, but not HK with China backing it up.
My boss gave him a polite smile, "The Brits left us 4 words.....The Hong Kong Government"
Dao-Phooy
Agree with the observations. These 3rd rate people in the civil service have been promoted well above their very limited abilities. Those reaching retirement age are then given plum postings in Quangos and so double dip - receive their pensions plus a salary all on taxpayer's expense. They system is rotten and in serious need of reform.
Stephan
love it that you use the word HANGOVER!
caractacus
All true and fair comment. At the heart of the weakness and inaction of the administration is the Crony Appointments System which has been accompanied by lack of transparency and accountability, arrogant abuse of power and corruption at the very top.
I suspect the last thing Hong Kong may need is China "think tanks" - will that only make the corruption worse?
likingming
Their salaries should be cut by 4% each year until the wastage rate (turnover) is raised to the normal levels (3 - 4% per annum).
Giwaffe
At best, the people in the present government are 95% "administrators" that you have to put up (much like anal HR people) and 5% "leaders" that you would want to follow and lead you.

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