Government has role to play, even in a free market

Hong Kong’s next administration must lead the way to enable a new generation to meet the challenges of the 21st century

PUBLISHED : Wednesday, 01 March, 2017, 3:49am
UPDATED : Wednesday, 01 March, 2017, 3:49am

Hong Kong has once again been ranked the world’s freest economy by the Washington-based Heritage Foundation for the 23rd consecutive year. In the past, such a distinction would have government officials and business leaders uncorking champagne. Nowadays, though, it’s greeted with scepticism. More and more people think governments have a role to play in promoting growth, even in a free port such as Hong Kong. Certainly officials in recent years have not been shy about being more interventionist – or what they prefer to call “market-enabling”.

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The real question is how to strike a balance for the government to play a constructive role in encouraging innovation and growth, something that many of our neighbours such as Singapore have done with varying degrees of success.

Since the global financial crisis, neoliberalism, and the free-market economics it champions, has fallen off the pedestal. The mantra of small government and big business no longer goes unchallenged. Governments in many major economies had intervened to prevent economic collapse.

Still, being the world’s freest economy is not without benefits, indeed vital ones if Hong Kong is to maintain its prosperity. Despite concerns that Hong Kong is losing its edge to the mainland and regional rivals, the city has been ranked the world’s most competitive economy, by the IMD World Competitiveness Centre, in an annual survey of 61 jurisdictions. Our low and simple tax system and free capital flows are still the envy of the world. It is obviously advantageous to have less bureaucracy and fewer obstacles to setting up and running a business. A free market may not be a panacea, but it is still an essential ingredient for economic success.

But now the city must look carefully at the next step for future direction.While the old guard such as former chief executive Donald Tsang Yam-kuen and ex-finance chief John Tsang Chun-wah had been champions of the free market, Leung Chun-ying has made the government play a greater role in economic development.

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Indeed, we can no longer afford to focus on the very narrow way such as the Heritage Foundation has used to define “freest economy”. This is because despite our general prosperity, it has failed to reach many people in Hong Kong. Like many developed economies, our wealth needs to be spread more evenly, and the wealth gap narrowed. This means the government must help small- and medium-sized businesses grow, and invest in education, technology and innovation. In these fields, it must lead the way to enable a new generation to meet the challenges of the 21st century. The next chief executive has his or her work cut out.