In a smarter budget, Hong Kong would spend HK$20 billion on buying back Link Reit and improving welfare

The budget unveiled last week was a disappointment, and has proven to the public that Paul Chan Mo-po is the most incapable financial secretary since the handover. With a decent budget surplus of HK$58.7 billion but without a reasonable rationale, he scaled back relief measures and handouts.

Owing to the linked exchange rate system, Hong Kong has no real monetary policy, and fiscal policy is the only aspect where the government can make a difference. However, the conservative leadership has stayed on the beaten path, away from anything that could lead to a breakthrough.

After the brouhaha over last year’s HK$4,000 handout scheme, it should be obvious that Chan is incompetent. He has come up with one bad policy after another.

The new budget proposes allocating HK$20 billion to buy 60 private properties and convert them into welfare facilities including childcare and elderly centres, a proposal that has been widely criticised. When asked why the government was buying, not renting, the properties, Chan said he would keep an open mind and leave it to the Secretary for Labour and Welfare, Law Chi-kwong, to explain the details. Chan and Law are two non-experts at policymaking who are bringing the city to the edge of a catastrophe.

The global economy is going downhill, and obviously the property market in Hong Kong is falling. Vacant commercial properties are seen on the busiest streets. Now that the government is proposing buying private properties with public funds in the name of social welfare, it naturally raises questions about whose interests it is serving.

What amateurs the two officials are. They seem utterly ignorant of an easier way to reclaim commercial lots. One practical, economical way is to offer developers larger plot ratios when granting them commercial or residential lots, with the condition that a certain amount of area has to be allocated for welfare facilities. This way, the government need not spend a cent and also helps build an inclusive community downtown.

At a press conference, Law said the government was unlikely to buy properties from property investment giant Link Reit, which manages many of the malls in Hong Kong’s public housing estates. Clearly, he has not thought things through. His remarks were as nonsensical as Regina Ip Lau Suk-yee’s proposal to cap shop rents in the estates run by Link Reit. This would ultimately undermine Hong Kong’s free-market credentials and tarnish the city’s reputation as the world’s freest economy. In fact, buying back Link Reit would be the lesser evil and also a solution to a long-standing problem.

Quite simply, the government, which in 2005 transferred previously publicly-run public estate malls to Link Reit’s management, could spend that HK$20 billion on buying back Link Reit. The real estate investment trust has a market capitalisation of HK$189 billion, so the government would need to borrow the rest from the bank. But given the decent annual return rate for properties owned by Link Reit, the government should earn some money from the buy-back.

Furthermore, with the announcement of Hong Kong Monetary Authority chief executive Norman Chan Tak-lam’s retirement, it is the best time to redefine the role of the HKMA. The authority could take the lead in the buy-back and invest its own funds.

Buying back Link Reit serves multiple purposes. It means public estates, which accommodate nearly half of Hong Kong’s population, will get the elderly care and rehabilitation services Hongkongers need. It would straighten out the problems created by Link Reit and allow the government to meet the requirement set in Section 4(1) of the Housing Ordinance, which is to provide ancillary amenities.

Now is the time to right wrongs. The government must not miss the opportunity.

Albert Cheng King-hon is a political commentator. [email protected]