Hong Kong needs to invest in human capital urgently
In order to sustain its productivity growth, HK needs to put more resources in nurturing talent
Singapore and Hong Kong are well known for their growth miracles. They have taken different approaches - in Singapore, interventionist; in Hong Kong, non-interventionist.
As we build more subsidised housing, our economic growth rate becomes lower
They have also adopted different policies on human capital investment, with repercussions for their future. In Hong Kong's case, the situation is worrying.
First, let us look at per capita real growth rates of gross domestic product since 1960. As it turns out, Singapore's growth rates have been higher than Hong Kong's. From 1960 to 2011, Hong Kong's GDP grew at 4.7 per cent, an average 0.56 percentage point slower than Singapore's.
About half the difference can be accounted for by the fact that the market values of government-subsidised housing units in Hong Kong are not adequately reflected in GDP figures because they cannot be traded on the open market, unlike those of Singapore's Housing & Development Board.
So as we build more subsidised housing, our economic growth rate becomes lower because valuable land resources are taken out of the market and turned into non-tradeable assets.
But there is another important difference: human capital.
Hong Kong's population growth has declined over time, while Singapore's has risen. From 1960 to 2011, Hong Kong's rate was 1.63 per cent per year on average, compared with Singapore's 2.28 per cent.
From 1960-70, employment in Hong Kong grew an amazing 9.16 per cent per year on average. But in the absence of a proactive immigration policy and with an ageing population, employment growth has been progressively falling off. By 2000-11, the annual growth rate had slumped to 0.83 per cent.