Government - towards an Agenda
Rising popular dissatisfaction with the Hong Kong Government cannot be dismissed as
a temporary phenomenon; it reflects deep structural instability in the system. It is
therefore important that an agenda for reform is developed and public debate on it
encouraged. Major progress on reform is likely to depend on changes to the constitution.
Articles in earlier issues of this newsletter(1)
have set out some of the shortcomings of the present Government structure. This article
attempts to set out the issues more systematically in the form of an agenda that may serve
as a basis for deeper public discussion.
The first eighteen months of the SAR's life have been a catalogue of disasters.
However, there has been one side benefit. Masked by years of prosperity, and by the
dynamism of Hong Kong's last Governor, the basic inadequacy of the Government's structure
has now been exposed.
Hong Kong is essentially entering the twenty-first century with a form of Government
rooted in the nineteenth - a colonial administration. This colonial inheritance would
present challenge enough. However, Hong Kong's case is worse because the constitution that
it has, the Basic Law, is not a fixed point of reference but actually mandates change in
ways that are likely to deepen the present contradictions. Thus constitutional reform is
likely to rank high on any agenda to deal with Hong Kong's malaise of Government.
The remainder of this article presents a possible agenda for reform. Some tentative
answers are put forward, but the main purpose of the article is to identify the key
questions, or areas for discussion.
Mandate for constitution
Normally, the constitution of a political entity, for example the United States of
America, is developed by representatives of the people as part of the act of founding that
entity. However, Hong Kong's constitution, the Basic Law, was developed by appointees of
one sovereign power with the concurrence of the other. The Basic Law enjoys no mandate
from the people of Hong Kong, nor did the people subsequently ratify their decision by any
means such as a referendum. In fact, no mechanism for such ratification exists.
As long as there remains no mechanism for the people of Hong Kong to endorse their
constitution, such constitution will lack validity. This is true of the Basic Law now, and
would also be true of any reformed version of it or any constitution that might replace
it, however well-intentioned. To establish a solid basis for a future constitution of Hong
Kong, therefore, it will be essential to develop the mechanism for popular endorsement.
Consideration should be given to developing a constitutional convocation(2), as employed in Australia's recent debate over whether to
become a republic.
Hong Kong's constitution, the Basic law, appears to have been designed mainly as a
policy document with the purpose of distinguishing and protecting the policies of the Hong
Kong system against China's very different system. This approach no doubt had its merits,
in that effort was needed to protect Hong Kong's system. However, policies not
infrequently require fine tuning, or even changing; indeed, the ongoing business of
Government is to do just that. So in many years, the Basic Law hampers the Government
going about its legitimate business. For example, it is difficult to see how the
Government's current budget deficit can be reconciled with the requirement of Article 107
to keep expenditure within the limits of revenues.
|Hong Kong is essentially entering the twenty-first century with a form of
Government rooted in the nineteenth - a colonial administration
Nor does the Basic Law seem sufficient to provide an effective separation of the two
systems. Its wording is loose and capable of differing interpretations at many critical
points. The actions of the Hong Kong Government in submitting, for example, to the
mainland China view of jurisdiction in the recent "Big Spender" case, give cause
for concern. And while the Basic Law does lay down procedures for determining whether or
not an action breaches its principles, in practice the machinery for making such
determinations is weak. The Hong Kong courts have little tradition of adjudicating on
constitutional questions, and have proved reluctant to depart from the Hong Kong
Government's view. And the final arbiter, the Standing Committee of the National People's
Congress (NPC), is not a court and cannot be expected to make judgements on purely legal
Thirdly, while the Basic Law has "too much" on policy, it has "not
enough" on the normal stuff of a constitution - the intsitutions of Government, their
functions and relationships, and their relationship to the people(3).
This deficiency needs to be made good.
Fourthly, the Basic Law mandates further development of the governmental system, but is
unclear how this is to be done, for example, how the ultimate aim of general election for
the Chief Executive and the Legislature is to be achieved. Until this question is settled,
Hong Kong faces a period, perhaps a long period, of instability.
Fifthly, the development trends that are evident from the Basic Law tend to exacerbate
contradictions rather than resolving them. For example, the social and economic policies
set out in the Basic Law tend to be of a conservative and business-orientated nature; yet
the long term trend is to greater democratisation. The increasing mandate enjoyed by Legco
is at variance with its limited powers. The Chief Executive has the power to initiate
legislation but no means to assure that Legco will accept it. There are a number of stress
points in the structure that are likely to come under increasing pressure as the system
Separation of powers
There is a formal separation between the executive, legislative and judicial branches
of government. However, there are concerns regarding the impartiality of the public
prosecution process, for example, in the Government's refusal to prosecute well-connected
parties apparently in breach of the law.
Head of executive branch
The Chief Executive has no mandate from the people of Hong Kong, and yet has much more
power than the Legislature whose mandate from the people is set to grow under the Basic
Law. Worse than this, the Chief Executive is selected by a small circle - itself elected
by a committee appointed by China - and owes some allegiance to this group.
There is no formal cabinet. The task of making policy and publicly defending and
promoting policy is left largely to civil servants who are tenured and so suffer little or
no consequence for poor policy decisions. Civil servants are also able to evade public
responsibility for the policies by reverting to their role as executors rather than
deciders of policy. Executive Councillors do not constitute a cabinet either. They have a
behind-the-scenes advisory role, in which their power is largely divorced from
responsibility. The ranking of Executive Councillors in the Basic Law is lower that of
Policy Secretaries (i.e. senior civil servants): changes in the latter have to be reported
to the NPC while changes in the former do not. Exco has a long colonial pedigree, but it
seems that if it did not exist, it would not have to be invented.
As stated above, the making of policy lacks political mandate, and there is a tendency
to avoid change - witness the lack of initiatives in the Chief Executive's 1998 Policy
Address. Policy is made by civil servants, who are usually generalists without
longstanding expertise in their area. This embodies the amateurism of the British colonial
era - with possibly some input from Confucian bureaucratic traditions - but appears
increasingly inadequate to handle the complexities of the modern world. Moreover, too
often the civil servants develop policy directly from raw data, rather than selecting
policy options from analysis and studies done by academics, think tanks and lobby groups
as in many developed countries(4).
There is a channel for tapping expert opinion in the development of policy: the
Advisory Committees. However, these committees are appointed by the Government and tend to
represent a fairly narrow section of interests - more often those of the producer rather
than of the consumer. They are no substitute for the self-developed interest and lobby
groups of many developed societies. Moreover, given the number of committees - more than
350 - and the Government's preference for tame appointees, the individuals appointed to
these committees often have too little time to make a useful contribution.
The Basic Law imposes great restrictions on the introduction of private member's bills,
thus blocking a potential source of policy innovation.
Efficiency and structure of bureaucracy
The structure of the Bureaux and departments includes conflicts of interest. For
example, the Financial Secretary has power over not only the raising of revenues and
approval of expenditure, but also many of the major spending departments. The Environment
Branch is located in Planning, Environment and Lands, even though the objectives of
planning and lands often conflict with those of the environment. At a different level, the
many functions of the Monetary Authority conflict with one another.
Sporadic efforts have been made over the years to improve the efficiency of Government
and obtain value for money. Some of these efforts, such as the performance pledges and
culture of customer service, the work of the Audit Department, and the recently launched
Business and Services Promotion Unit, have been fruitful. However, many of the
prerequisites for a modern and effective civil service are lacking.
|Executive Councillors do not constitute a cabinet. They have a behind-the-scenes
advisory role, in which their power is largely divorced from responsibility.
One weakness is the staffing of key positions by generalist Administrative Officers
rather than persons with relevant professional experience and expertise. This weakness is
exacerbated by the rapidity with which AOs are moved from one policy area to another
totally unrelated to the first(5).
Consideration should be given to hiring more experts from the private sector, and to
developing expertise internally within specific functions. Another weakness is in
incentives. It is rare for poor performers to be fired. It also appears likely that many
civil servants are now overpaid compared with their private sector counterparts.
A third weakness is the lack of a proper system of accounting for Government. The
preparation of the annual budget on a cash basis provides an incomplete and misleading
picture of the actual resources employed and consumed by Government. Full accrual
accounting is needed to give a true picture of the Government's assets and liabilities,
and the flow of resources through Government. Hong Kong should learn from the Government
of New Zealand, where full accrual accounting has been practiced since the start of the
decade. In the absence of proper accrual accounting, including costing of non-purchased
resources like land and internally-supplied services, it can be dangerous to attempt to
set Government operations on a commercial basis, as in the case of the various trading
A fourth weakness is the basis of funding of Government. The revenue base has become
too narrow, as exposed during the current recession. Perhaps more seriously, the effects
of Government revenue-raising on the broader economy and society are deleterious. The
Government's reliance on property-related revenues and its desire to maximise those
revenues by restricting the release of land was a major contributor to the property bubble
and hence to the current recession. The Government must move to less economically damaging
methods of raising revenue, probably through taxing consumption through some form of goods
and sales tax.
The legislature is has only one-third directly-elected seats, which is at variance with
the aspiration of the people. Movement towards full direct elections should progress as
soon as possible.
The requirement of the Basic Law for decisions of Legco to be passed by the
directly-elected and other members separately is proving unworkable. Because of this rule
Legco has proved unable to function, for example, its failure to express a view on the
The local government structure inherited by the SAR was in many respects
unsatisfactory. Formed originally to undertake very limited functions of public hygiene
and recreation, the two councils had been allocated disproportionate revenues (thanks to
the effect of the property boom on rates) and had swollen to absorb them without
restructuring and adopting adequate management processes. The two-tier structure of
district boards and councils was also inefficient.
However, the Government's cure - to abolish the two councils, and absorb most of their
functions in the central government - is worse than the disease. In developed societies
local government performs an important role. Moreover, the people of Hong Kong want local
The Foundation has therefore proposed that Hong Kong expand rather than reduce the role
of local government(6). A small number of Area
Councils should be formed and given real powers in areas like health, social welfare and
public housing, similar to those enjoyed by their counterparts in democratic societies.
Not only would this empower the citizen and give him a stake in his local community, but
it would introduce healthy competition between regional providers of services, which would
result in higher standards all round.
Boundary of Government
Although the Hong Kong Government on paper is relatively small, in practice the
Government's influence is much more extensive and this is detrimental to society and the
economy. There is a need to determine the proper boundary of Government.
Government-owned entities and operations carry out too large a share of the economic
activity. The Hong Kong Government should learn from developed and Asian countries and
privatise its "state-owned" industries, such as the KCRC, the MTRC, the Airport
Authority, the Housing Authority, the Hospital Authority, and should also privatise or
contract out the various government operations such as water supply and management of
Government property. The shareholdings recently acquired by the Government as a result of
its market intervention should be disposed of immediately. Land should not be owned by the
Government and should be privatised by the granting of freehold as soon as possible.
|Although the Hong Kong Government on paper is relatively small, in practice the
Government's influence is much more extensive and this is detrimental to society and the
Even where Government does not own economic operations, it heavily influences outcomes
via subsidies - e.g. to the subvented welfare sector, vocational training and to the
school sector - and mandates monopolies and restrictive agreements in areas such as
banking, rice supply, gambling, etc. Health, education and property-related services such
as public housing, which are likely to be major areas of potential growth in the future,
are dominated by Government or Government-influenced providers, leaving little prospect of
capturing growth opportunities. The Government must relinquish control over these sectors
and promote initiative by competing providers of service.
Finally, the Government has tried to extend its reach even beyond this already very
wide scope by applying pressure on private and supposedly independent bodies to comply
with its short term policy objectives. Employers are being encouraged not to fire staff,
or to do so as quietly as possible.
There is "double charging" for services provided by the Government: fees and
charges in addition to direct and indirect taxation. If services can be charged for on a
full cost-recovery basis, it is likely they need not be provided by Government at all but
could be hived off to the private sector.
There should be a review of the nature of services to be provided by the Government.
Core policy and administrative functions and the provision of public goods (security,
justice), should be provided by the core civil service. Other public services (regulation)
should be provided by independent agencies operating under their own charter to specific
performance criteria. Everything else should be privatised.
Policy committee, HKDF
Kong's leadership crisis, Issue 4, February 1998; Tied
down by the system, CK Lau, Issue 5, April 1998
(2) As proposed by Christine Loh
(3) Role of the Chief Executive
& Exco and the Civil Service, Professor Yash Ghai, Seminar on Government in
Evolution, 1 March 1998
(4) Hong Kong's policy research
level should be raised, HKEJ, 4 March 1998
(5) It's time for civil service
review, Joseph Cheng, SCMP, 2 August 1998
the system of Government, HKDF Newsletter Issue 7, August 1998