Motion on “Appropriation Bill 2017” (2017.04.12)

MR CHAN KIN-POR (in Cantonese): President, this is the first Budget of Financial Secretary Paul CHAN. Since the Financial Secretary only has one to two months to prepare it, I believe that the skeleton of the Budget should have been formed a long time ago and he could only make some minor directional adjustments or add a small number of new proposals. Nevertheless, compared with the past Budgets, I see that there are not a few good ideas in this Budget, and I feel that the Government is steadily seeking sound and progressive development, without the mindset of a caretaker government.

The most frequent criticism we can hear about the Budget is that with a huge surplus of $90 billion, the Government is only willing to spend some $30 billion in giving out sweeteners, which is 10% less than the amount last year, but I think such criticisms are totally ungrounded. We should not give out more sweeteners when there is more surplus, as this will only be giving out sweeteners for no significant meaning. The principle of doling out sweeteners is that we will see whether there is any actual need. We will dole out sweeteners only where and when necessary. We should be able to remember that when the Budget was announced last year, the Hong Kong economy was in doldrums, and a ripple of panic swept through the retail, foreign trade, tourism, financial and real estate sectors. Hence, it was necessary to maintain a certain level of sweeteners to be doled out back then. However, since Brexit (meaning United Kingdom’s withdrawal from the European Union) was carried in the United Kingdom and Donald TRUMP was elected the President of the United States last year, the economy has gradually become stabilized. At present, the economy of Hong Kong is more stable than last year and it is actually unnecessary to maintain last year’s level of sweeteners being doled out. The present level can exactly reflect the economic trend.

Nonetheless, there are still uncertainties in the international environment. At the present moment, we cannot exclude the possibility of any economic turmoil. Thus, when the Government has money, it should save up, and should immediately put forward a new round of relief measures once there is any crisis. I hope that the Government can be fully prepared and can introduce pragmatic relief measures, in particular to the small and medium enterprises at the grass-roots level.

At the same time, some people criticize that the Budget is not giving due regard to livelihood issues and social development, but I disagree to this. The Budget is already in support of the planning in the Policy Address, as $60 billion has been reserved for social and elderly care expenditures. This will include $30 billion on elderly care and poverty alleviation, $20 billion on sports development and $10 billion on innovation and technology (“IT”) development. Most of these spending will be regularized by the Government to become recurrent expenditure. This means that after the development has commenced, there will be continuous investment year after year and thus the amount of expenditure will be enormous. These initiatives will be applied to areas in need in Hong Kong, and is better than giving out sweeteners blindly as they are target-oriented. Of course, I think that in terms of livelihood policies, not all the issues can be addressed, and the insufficient help to the “N have-nots” is an example. I thus hope that the Government can lend a helping hand to the “N have-nots” when putting forward any relief measures in the future.

Compared with the Budgets in the past, this Budget has some good points indeed. The Budgets in recent years are mainly being stable and conservative, whereas this Budget is more forward-looking and proactive. Principles of management of public finances were rarely touched upon in the past Budgets, and even if they were mentioned, they would be the simple principles of “positive non-intervention”, “big market, small government” and “keeping expenditure within the limits of revenues”, which are rather vague. In this Budget, the Financial Secretary mentions three objectives in public finance. First, the Government must be appropriately proactive in the development. Second, the Government must be forward-looking and invest continuously for the future of Hong Kong. Third, the Government must make good use of financial resources, so that people from all walks of life can share the fruits of economic advancement.

I think these three objectives in public finance are appropriately set out against the plight of Hong Kong at present, and they are also clearly and substantially explained in the Budget. The current economic structure of Hong Kong is getting more and more unbalanced towards the financial, service and real estate sectors, but these pillars are also facing different difficulties. Under the circumstances, we will be like putting all the eggs in one basket. If anything happens in the financial and real estate sectors, Hong Kong as a whole will also have problems. Therefore, the policy of big market, small government in the past will no longer suitable for the present time development. We need a Government which must be appropriately proactive in the development, forward-looking and invest continuously for the future of Hong Kong. In recent years, the Government is keen on IT development and re-industrialization. In fact, with the establishment of the Innovation and Technology Bureau which can coordinate the work in this regard, we hope that it can become the new engine for economic development of Hong Kong. Hence, I support these objectives in public finance and hope that under the guidelines, they can steer Hong Kong out of the current economic plight.

Another highlight of the Budget is the proposal to set up a tax policy unit to comprehensively examine our tax regime, and there are two perspectives. Firstly, it will study ways to foster the development of industries through tax measures so as to ensure that Hong Kong remains competitive. Secondly, it will explore broadening the tax base so as to increase government revenue. The Hong Kong tax regime has been operating for several decades. While it has the advantages of being simple and maintaining low tax rates, it also has serious setbacks like having a narrow tax base and is unable to exercise the function of wealth redistribution. Therefore, when welcoming the new economic era, Hong Kong must reform the existing tax regime. In fact, may countries have long been regarding Hong Kong as their competitor. In order to attract foreign investment, their tax rates are being adjusted on a par with the level of Hong Kong, and they are very successful in this regard. For instance, our main competitor Singapore has even offered many preferential conditions and subsidies to the companies in addition to tax concessions. Since Hong Kong is lagging behind in the international arena, our competitiveness is dropping and we should do our utmost to catch up.

In the past, I advocated many times the development of a headquarters economy, which is attracting international corporations to set up local headquarters in Hong Kong through offering tax and financial concessions. Apart from attracting foreign investment, this can also create quality jobs with international vision for the young people. But unfortunately, the Government does not take it seriously and our competitiveness keeps on dropping. According to the statistics from the Census and Statistics Department, a total of 22 regional headquarters and 45 regional branches of international corporations stationing in Hong Kong either retreated from Hong Kong or were degraded as common branches last year. Over the past few years, the number of regional headquarters stationing in Hong Kong has gradually dropped from 2 516 in 2012 to 2 352 in 2016, which is rather worrying. The Government thus has to set up an interdepartmental task force led by the Chief Executive to keep and attract foreign capital in Hong Kong through various effective measures adopted by the Mainland authorities and the Singapore Government. President, not only do we fail in keeping regional headquarters of foreign enterprises in Hong Kong, but we also fail in preventing foreign capital from retreating. This situation is worth our thinking deeply about.

In these few years, while we are focused on our internal dissension, our competitive edges have been slipping away. Some previous studies pointed out that the competitiveness of Hong Kong was dropping, but many people did not believe that back then. This is now being proved to us by foreign capital in action. I hope that we can reflect on this. Does Hong Kong have to keep on decaying? Do people still have to oppose development, or discredit the larger infrastructural projects as “white elephant” projects? Do we still have to remain complacent and narrow-minded? If we keep on doing so, are we being fair to the young people and the Hong Kong people?

There are only a few months left in the present term of the Financial Secretary, but he did not use this opportunity to dole out lots of sweeteners so as to win public applause and to enhance his popularity. He only prepared the Budget in accordance with the actual situation and the fiscal policies to which he adheres, and this is worth our compliments. No matter who will be next Financial Secretary, I hope that he can continue to promote the reform in tax regime and adopt these principles in public finance. Earlier on, the Financial Secretary announced that the Hong Kong Mortgage Corporation Limited (“HKMC”) would study a public annuity scheme. Within only two months, HKMC has already announced a preliminary proposal. Since it gains support from the public, this initiative can be implemented quickly for the benefit of the public. This can fully reflect the working ability of the Financial Secretary.

Besides, I would like to talk about the issues of concern of the insurance industry. The Voluntary Health Insurance Scheme (“VHIS”), which has been under discussion in two terms of the Government, will finally be formally introduced next year. For the government study on the details relating to tax reductions, the insurance industry has indicated its support and will cooperate as far as possible. When the study on VHIS commenced in 2005, there were two major targets of reform. First, it is optimization of medical insurance. In 2012, the Government put forward 12 proposals and 10 of them have already been implemented at present. The other target is private medical system. Unfortunately, no progress has been made in this aspect, including the diagnosis-related groups (“DRG”) model which we originally wanted to adopt. In brief, for each surgery, a value should be calculated in accordance with the cost involved, including the doctor’s time spent in the surgery, the use of the theatre, nurses, drugs, equipment and other fees, as the basis of compensation. Basically, higher cost of the surgery will mean greater amount of compensation, and reasonable insurance compensation can be made on the basis of medical cost. This is different from the current practice that insurance compensation will be made according to the highest amount of compensation in the insurance policy that one has taken out.

These claims with exaggerated surgical fees and doctor’s round fees, and the many hospitalization claims for which hospitalization was actually unnecessary, have already rapidly pushed up the medical insurance cost in Hong Kong. As a result, the insurance premium of not a few polices will increase more than 10% this year. I will sincerely remind the Government and the medical field that if they are unwilling to carry out a medical reform seriously, I believe that in a few years, the medical insurance premium in Hong Kong will be so high to be affordable by most people. We have to be well prepared that at that time, people can only go to public hospitals for any treatment. If the medical field has no courage to face up to this issue, and is also unwilling to resolve this problem through discussion with the insurance sector, but only blames the insurance sector in a protectionist and uncommunicative manner, this will be tantamount to killing the goose that lays the golden egg and only end up in a no-win situation for the Government, the medical field, the insurance sector and the public.

Another issue that the insurance sector is highly concerned is the progress of setting up an independent authority to oversee the insurance sector. We anticipate that the Insurance Authority will fully take over the duties of the Office of the Commissioner of Insurance (“OCI”) in the second quarter of this year. According to government information, the Insurance Authority has already employed 180 staff members, and more than 80 of them come from the existing OCI. I believe that with their abundant experience, the transition will be smoother. At present, the sector is very concerned about the implementation of the monitoring work. During legislation, the Government has undertaken that it will provide the codes of practice and guidelines concerned as soon as possible, so that while consumers can be protected, the sector also has the provisions to follow and can thus prevent its employees from breaching the law inadvertently. I reiterate that the Government has to realize its undertaking made during legislation and discuss with the sector as soon as possible.

I am also very concerned about the manpower training issue of the insurance sector. The Pilot Programme to Enhance Talent Training for the Insurance Sector (“the Pilot Programme”) was formally launched in the second half of last year, and some achievements have already been made. As at the end of February this year, over 600 people have received training. I hope that the Government will continue to encourage more people to participate in order to facilitate the long-term development of the insurance sector. Besides, after the Pilot Programme has come to an end, I hope that the Government can extend the programme in order to train more people for the insurance sector.

Finally, I would like to discuss the issue concerning young people. In this Budget, there are not a few initiatives relating to young people, including e-sports which is the concern of many people. At present, there are many places holding e-sports competitions. Through such competitions, young people who like playing e-games may find the way to a promising future. It will be a good idea for the Hong Kong Government to try this out. As the Government is always conservative, it is a forward-looking step for the Government to try to launch e-sports competitions at present, and I hope that this can be successful. And I also hope that the Government can continue to promote social development with a new mindset.

I also notice that the Government has reserved some resources to the Education Bureau for launching a career taster programme for secondary school students, which is a good deed to me. In reality, many students actually find it hard to pursue academic studies. If they are forced to study in traditional schools, this will be wasting their time and may even lower their self-confidence. It is absolutely a good thing for the Government to invest more resources for them to understand the various paths that they can take in life and for them to consider learning a skill.

I so submit.

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