Mind the Gap

Are policies to make Hong Kong liveable too little, too late to restore city’s competitiveness?

PUBLISHED : Sunday, 20 August, 2017, 1:32pm
UPDATED : Sunday, 20 August, 2017, 10:42pm

Now that Hong Kong is perceived to have created its own political prisoners and martyrs, the government will need wisdom and leadership to guide the city through this period of self-inflicted, post-Occupy crisis.

Poor leadership threatens to undermine our stability, geopolitical standing and economic prospects. Hong Kong is a society divided by a class war between the Haves and Have Nots.

Jailing activists does not dispel that fact. The rift only grows wider. Unconstructive tactics like filibustering fester until the government enacts meaningful social policies that favour consumers over the business establishment.

Beijing wants one aspect of Hong Kong to emulate the apathy, disinterest and distance that so many mainland Chinese have in the political process. But this is difficult to achieve, as few mainland leaders are western educated and don’t understand the dynamics that undergird liberal societies.

The Chinese Communist Party has long controlled media, schooling, penal and other social systems that reinforce its control over thought. However, Hong Kong is already a free society. Like other liberal societies, people and businesses view and demand open and accountable government as their right.

The Chinese government has mollified mainlanders with recent improvements in material wealth after previous eras of disastrous governance. But, Hong Kong seems to be regressing economically. Many residents recall better times under colonial rule.

The real tragedy of the persecution and conviction of the students is that the Hong Kong government and Beijing refuse to similarly apply themselves to Hong Kong’s real problems - plutocracy and consequent institutional exploitation by the city’s cartel monopolies who prey on every aspect of our lives.

Hong Kong’s social and business stability will largely depend on how the government establishes fiscal policies to redistribute wealth and invest in future growth. Vast surpluses built up over the previous four decades resulted in reserves of over HK$1.8 trillion (US$230 billion) if you include the accumulated surplus of the Hong Kong Monetary Authority.

Former Financial Secretary John Tsang Chun-wah’s simplistic attitude toward public finance was a travesty. He could not comprehend the importance in developing and funding sustainable social policies. Instead, he gave what he called “sweeteners” – non-recurrent expenses in each budget. They did little to solve any real problems or improve Hong Kong’s competitiveness..

The recent rise in English Schools Foundation institutions fees of up to 27.5 per cent as a result of government subsidies being phased out only raises costs for expatriates that Hong Kong sorely needs to transform its economy in areas like technology or media.

By focusing on the parochial, village-like bickering about its operations, bureaucrats ignored the overriding concern, that for Hong Kong to be competitive for foreign talent, it needs to attract middle class expatriate families with affordable, quality education - even with large subsidies.

The culmination of indolent policy making and intellectual bankruptcy occurred when Tsang dealt HK$6,000 hand outs in 2011 to every resident including those who lived overseas. It proved that the government was unable to, or was disinterested in, developing sustainable policies.

This budgeting philosophy is more suited to a third world country whose public finance sources are weak and requirements and expectations for its society are minimal - like when Hong Kong was a colonial deep water port and fishing village.

Recent remarks by the former head of the Hong Kong Monetary Authority Joseph Yam Chi-kwong offer some hope for changing Hong Kong’s miserly fiscal philosophy.

Together, they provide one positive sign that the government is willing to spend and invest more money in programmes to make Hong Kong liveable and prosperous. But, it may be too late.

Read: Hong Kong government should spend more to boost economy, says former HKMA chief

China will lower market access thresholds in areas like the banking and securities industry, the State Council said last Wednesday. A new and clearer set of “negative lists” for foreign investments will enhance transparency and simplify the investment procedures.

The mainland’s evolving economic policies will only increase China’s competitive edge over Hong Kong as more businesses will be encouraged to bypass the city’s misconceived role as “a hub.”

Peter Guy is a financial writer and former international banker.