Hong Kong Democratic Foundation
Towards an Economic Policy for Hong Kong
Elements of a Vision of Hong Kong economy
- Packager and integrater of activities, leveraging China's low added-value with knowledge intensive processes in Hong Kong (Enright)
- Commitment in major infrastructure investments (Enright)
- Metropolitan economy, capital of a hinterland stretching far into China (Enright)
- A mid-stream operator, mid-tech (Davies)
- Glimpses of a 21st century economy: networked, transnational, virtual, small-scale and quick, knowhow-based, focused on adding value (WEF)
Critical success factors
- Adaptability
- Energy/entrepreneurialism of people
- Openness to factor inflows (capital, labour, technology)
- Rule of law
- Free market orientation
- Low tax
Current positioning
- Basic strategies sustainable for considerable time to come
- But adaptability threatened by structural problems
- New threats (not yet severe)
- Predeliction of Tung's Government for intervention and industrial policy
- Openness diminishing: localisation in Civil Service, retrictions on labour imports
- Asian crisis will at best reduce growth next year to 2-3% (HSBC prediction), at worst have major impact if link goes
Actions by Government
- Clearly state vision, reaffirm free market principles, etc. Lead.
- Privatisation (may include breakup or other measures to enhance competition) of major state-owned enterprises and activities (KCRC, MTRC, Post Office, Sewage, Water, Airport, Housing Authority)
- Deregulation of monopolies and cartels in private sector (banking, property, gambling, containers, telecoms, airlines and air services, etc).
- Fundamental reform of education system
- Reform currency mechanism to establish "clean" currency board
- Give a lead on productivity improvement, by studying the problem, publicising solutions (through HKPC?), appointing a Director to head the initiative, and leading by example by reengineering work practices within the public sector.
- Fiscal boost now highly appropriate: regional demand is much weakened and HK growth slowing: a good time to pay out some reserves
- Consider an Asia Recovery Fund? (Problematic, but someone has to put back some investment into Asia)
- Gather better economic information (BOP, more timely GNP figures, info on China activities, etc) without which good economic policy for Hong Kong cannot be made
- Adopt "cleaner" currency board mechanism for HK dollar
Grassroots economic concerns
- Jobs
- Cost of living (including Government-provided services, Government-set utility and transport fees)
- Housing
- Inequality of wealth
- Influx of Mainland immigrants, job seekers
- Interest rates (mortgages) for some
Key points for May 1998 Legco election
- Economic concerns likely to dominate May election
- Prize for anyone (political party or Government) that can meet grassroots concerns while remaining business-wise
- Suggestion: A New Deal on the Economy to facilitate adjustment. Government gives a clear message that Hong Kong needs to adjust to remain competitive. It launches a major programme of deregulation/privatisation of business (which will benefit the grassroots by reducing prices and improving services) while at the same time pushing firmly ahead on grassroots-sensitive issues such as labour market flexibility, deregulation of public housing and public health care.
- Problem: the benefits of deregulation may only be seen in the medium term, while some jobs will be lost immediately and some service prices will rise)
- Probably needs improved welfare package as a support, including unemployment benefit? Consider new US (and emerging UK) philosophy of "workfare".