As 2010 drew to a close, we could look back at what happened in Hong Kong this past year, and learn from both the successes and failures to better prepare ourselves for the future.
Our economy made an impressive comeback last year. The International Monetary Fund recently raised its forecast for Hong Kong's economic growth in 2010 to 6.75 per cent, but expected it would drop to between 5 and 5.5 per cent this year. Growth was mainly due to robust financial and housing markets that, in turn, fuelled the economy.
The growth was not prompted by local factors but was the result of a monetary phenomenon; many major economies implemented a loose monetary policy to counter the global financial crisis. The mainland's 4 trillion yuan (HK$4.6 trillion) stimulus package and a moderately loose monetary policy to help maintain its high gross domestic product growth caused a flood of funds into the market and led to huge investment demand.
The introduction of the 100 per cent bank deposit guarantee, the absence of foreign exchange control policies, the free flow of capital, the linked exchange rate system and a consistent rise in the yuan's value have all made Hong Kong an attractive investment choice and a great launch pad into the mainland market.
During his annual duty visit to Beijing, Chief Executive Donald Tsang Yam-kuen met Premier Wen Jiabao , who spelled out three tasks for the city's administration: to maintain Hong Kong's financial stability and become more competitive; to solve its deep-rooted conflicts and improve people's livelihood; and to plan ahead for its long-term prosperity and stability. Wen was right to observe that, to solve our deep-rooted conflicts, we must improve people's livelihood. To achieve that, the government must focus on housing, transport, health and education.
There is no doubt that the administration is determined to curb speculation and runaway property prices. Although the measures introduced last year did cool housing prices and reduce speculation, most prices remain relatively high.
The government's 'My Home Purchase Plan' will definitely not be enough to solve our long-existing housing problems. The most realistic option is to relaunch the Home Ownership Scheme - a subsidised-sale public housing programme - and increase the supply of public housing flats. And the government must find ways to stop speculators from moving into the subsidised and public housing market.
We all know that the high cost of transport is a major financial burden for most Hong Kong people. The scheme-of-control mechanism is outdated and ineffective in monitoring fare rises. The city-wide transport-subsidy scheme is also a waste of time because, in the end, it will only benefit the franchised bus companies. So, the best way forward is to nationalise the main transport modes such as buses, trams and ferries and take over the operation of the eastern and western cross-harbour tunnels. Eventually, that will all help lower transport costs and boost our competitiveness.
With regard to medical services, the government must increase funding to improve the quality of public health services before launching the voluntary health insurance scheme.
Education is one of our biggest challenges. There have been many education reforms over the years; many have proved ineffective. Education holds the key to our future economic success. If we want to change our economic model and become an innovation-led and knowledge-based economy, the government must keep investing in education and training.
Our foreign exchange reserves amount to US$267 billion and the government is expected to record a staggering budget surplus of up to HK$70 billion at the end of the 2010-11 financial year. With our financial strength and stability, I have no doubt that we can improve the quality of our housing and education, and enhance our transport and health services. Where there's a will, there's a way; it all comes down to a change of mindset in policymaking.
Albert Cheng King-hon is a political commentator