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Finance chief John Tsang warns against ignoring Hong Kong's pillar industries

Finance chief warns against 'blind' pursuit of new sectors to boost growth and says failure to balance the books could lead to tax increases

PUBLISHED : Monday, 31 December, 2012, 12:00am
UPDATED : Monday, 31 December, 2012, 4:58am

Financial Secretary John Tsang Chun-wah warned yesterday against "blindly" pursuing new industries to drive growth, suggesting "conventional economic pillars have their edge".

On his official blog, Tsang also said taxes may rise or more government bonds could be issued if the administration fails to keep its budget in the black.

He said while people always paid attention to public spending, they should not forget about government income.

He rejected criticism that Hong Kong had relied too much on the so-called pillar industries - finance, logistics and trade, tourism, and professional services.

His comments - ahead of Chief Executive Leung Chun-ying's maiden policy address - were challenged by economists for lacking long-term vision.

Tsang said: "We must understand that a new industry takes a long time to nurture and develop, and its success is not guaranteed.

"Therefore, we should not blindly pursue the development of new sectors and overlook the established pillar industries.

"The four conventional pillars have become our major economic backbone because they have the edge … While developing new sectors, we should make more effort to expand the edge of the pillar industries."

Tsang referred to the final shootout in the latest James Bond film Skyfall, in which a companion hands Bond a knife to fight the villains, telling him: "Sometimes the old ways are best."

Tsang said: "I believe 007 would agree that, whether it is a knife or a laser gun, it is a good weapon so long as it can be used to kill the enemy."

Tsang stressed the importance of the economy growing "sustainably" to support rising government spending.

And he emphasised the importance of prudential management of public finances.

"With an ageing population, it is unavoidable that we will have to pump in more resources in welfare and medical areas.

"If our economy cannot develop sustainably, it is likely the government will fall into deficits in the long run. And it will leave us with only two choices - either increase taxes or issue bonds."

Tsang denied the economy was too reliant on the pillar industries. He said the finance sector accounted for only 16 per cent of gross domestic product in 2010 and the four pillar industries combined accounted for about 58 per cent.

Professor Raymond So Wai-man, dean of Hang Seng Management College's school of business, said: "I agree it is easiest to follow the old ways. But for the long-term, we have to find new drivers for the economy."

Dr Li Kui-wai, an economist at City University, was surprised Tsang seemed to have departed from what Leung said during his election campaign.

Leung stressed the importance of diversification and developing "technology-based industries" to "enhance the competitiveness and growth of Hong Kong's other industries".


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This article is now closed to comments

With the warning shared by Financial Secretary John Tsang Chun-wah on existing pillar industries, I am worrying that Financial Secretary Tsang seems to have over-focused on the financial balance sheet of Hong Kong in terms of monetary figure in the short term but not the important development for the Integrated Strength and Competitiveness of Hong Kong in various domains including existing pillars like finance, logistics, trade, tourism, and professional services as well as new pillars including demand-driven technology developments like, energy-efficiency (energy intensity reduction), environmental-protection (carbon emission reduction), communication/IT (globalization) related industries of which other similar cities/countries like Singapore, Finland, Israel have been investing huge amount of resources to cope with the global trend and demand in this respect.
The success of existing pillar in Hong Kong is contributed a lot by the preferential treatments from our motherland, China including IPO of mainland companies in HK (finance), permission of visit by main-landers to HK (tourism), and the high price land policy (professional services), which have resulted the current HK situations. If the external environment suddenly changes due to external global factors, it's obvious that our existing core competences could no longer support the Hong Kong GDP growth. Hence, this is important to develop our new economic pillar when our existing pillars are still effective.
I would be happier if "FS 007" said his real spy master is John Cowperthwaite (HK Financial Secretary from 1961-1971). Then we know he's insisting that HK should remain a free market economy and he's against investing government money on industries. We could then ask him about the "Positive" part of Cowperthwaite's "Positive Non-intervention" -- has he done everything he can to encourage private sector investment? In fantasized logic of how to develop HK's economy, "FS 007" will always win! In real life, "FS 007" is in charge of running the 36th largest economy in the world and his competitors have all developed high-tech secret weapons. In real life, he will be clobbered if he insists on using old weapons!


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