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Opinion

Hong Kong’s fiscal policy is not miserly, but it does lack vision

Paul Yip says figures show public expenditure has increased substantially over the past two decades, in line with GDP growth. The problem is that the money has been spent to little effect

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The city shoreline is seen from inside a local ferry in Hong Kong. The inertia, lack of coordination and policy commitment within the administration over the past decade has taken Hong Kong nowhere. Photo: Reuters
Paul Yip
Hong Kong has enjoyed more than a decade of budget surpluses. Fiscal reserves are running at a high of nearly US$1 trillion. That would be the envy of many. Should we be proud of this? Unfortunately not, as the amount of fiscal reserves has not converted into something that benefits most people. And there has been little strategic and long-term sustainable development implemented effectively in Hong Kong for the past two decades.
In fact, the government can hardly be said to have been working hard and planning for the massive surpluses. Indeed, John Tsang Chun-wah consistently got the numbers wrong for budget estimates during his tenure as financial secretary. That would have been acceptable if this unanticipated surplus had been channelled better, into long-term development.

However, due to a lack of commitment and policymaking inertia, Hong Kong has missed the chance to develop into a healthier, growing economy. The unanticipated budget surplus has mainly come from larger-than-expected returns from land sales and stamp duties from the property and stock markets. Today, property prices are even more unaffordable and home ownership is beyond the reach of many. The community is paying a high price for the budget surplus.

A Hong Kong budget for officials and cartels, not ordinary people

The Hong Kong economy has grown but median wage levels have not improved at the same rate as GDP. As a result, wealth inequality is widening. Photo: Reuters
The Hong Kong economy has grown but median wage levels have not improved at the same rate as GDP. As a result, wealth inequality is widening. Photo: Reuters
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GDP growth has been around 3-5 per cent but median wage levels have not improved at the same rate. As a result, wealth inequality is widening in Hong Kong. Having a few more billionaires would not be such a concern in Hong Kong if the quality of life was also improving for the majority.

Public expenditure as a share of our gross domestic product has grown substantially, from 16 per cent during colonial times to 20 per cent since 1997. The proportion of social welfare expenditure to total public expenditure has increased from 9 per cent to 15 per cent, or HK$21.7 billion in 1997/98 to HK$80.5 billion in 2017/2018. On the other hand, the proportion of expenditure allocated to education and housing has been decreasing, down from 18 per cent to 16.5 per cent. Education and housing issues have caused much frustration in the community. The number of government-funded tertiary places has not increased much in the past decade, while property prices has skyrocketed by more than 200 per cent.

Watch: Why the Hong Kong government has so much money saved up

Hence, the recent remarks by former Monetary Authority chief Joseph Yam Chi-kwong about Hong Kong’s miserly fiscal philosophy is not quite correct; the government has spent money – expenditure has increased from HK$234.8 billion in 1997/1998 to HK$531.8 billion in 2017/2018, in line with GDP growth.

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