MR CHAN KIN-POR (in Cantonese): Thank you, Deputy President. Hong Kong is hoarding a huge amount of fiscal reserves. The Government deployed $220 billion in 2015 to set up the Future Fund (“FF”) for placement in longer-term investments with a view to securing higher returns, so as to cope with the financial pressure arising from the ageing population and economic slowdown in the future. In 2020, the Financial Secretary decided to allocate $22 billion from FF to establish the Hong Kong Growth Portfolio (“HKGP”) to make strategic investments in projects with a Hong Kong nexus, so as to reinforce Hong Kong’s status as a financial, commercial and innovation and technology (“I&T”) centre, thereby enhancing Hong Kong’s competitiveness in the long run. In fact, as Hong Kong strives to develop emerging industries, there are also voices in society suggesting that the Government should set up an investment fund to promote industrial development in addition to earning returns.
I would like to thank Dr Wendy HONG for proposing today’s motion for us to discuss this issue. I believe the majority of Members will support the Government to promote Hong Kong’s industrial development through making investments with funds. As a matter of fact, the Financial Secretary has further allocated $10 billion from FF this year for injection into HKGP, of which $5 billion will be used to set up the Strategic Tech Fund. The Hong Kong Science and Technology Parks Corporation and the Cyberport will be invited to identify technology enterprises which are of strategic value to Hong Kong for the sake of promoting the development of the I&T industry. A number of Members have proposed amendments today to put forward suggestions to the Government regarding ways to promote industrial development, such as investing in technology projects of universities, exploring local “unicorns” and consolidating the offshore Renminbi businesses, etc. I believe they are worthy of in-depth study by the Government.
Yet, as pointed out in the original motion, Hong Kong already has a corresponding investment fund and mode of operation at present. Therefore, the question now is: Which mode of management should we adopt in order to achieve the desired results? Broadly speaking, there are two possible modes at present. First, the Hong Kong Monetary Authority (“HKMA”) will continue to coordinate the Government’s investments and supervise the fund managers. Second, a venture capital fund with government involvement is set up for making investments directly. I believe both modes have their merits and drawbacks.
Currently, FF is placed with the Exchange Fund (“EF”), invested by HKMA and subject to EF’s investment management regime. The advantage of this mode is that HKMA has extensive experience in selecting and managing funds, and the Government can avoid suspicion of transfer of benefits since it is not directly involved. The downside is that it is subject to EF’s regime and hence it cannot make investments locally or in the Mainland, thereby rendering the approach relatively conservative. While HKGP is managed by the Government, HKMA still serves as the administrator in effect and investment managers of the partnership are responsible for making investments. The merits and drawbacks are more or less the same as FF, but it is stipulated that investments can be made locally.
The second mode is direct involvement by the Government. As proposed in today’s original motion, we can follow the practice of the Temasek Holdings wholly owned by the Government of Singapore by setting up an investment institution with direct government involvement for making investments directly. The merit of this mode is that the Government can adopt a more flexible investment strategy to cater to the needs of society and promote industrial development. The downside is that the Government is all along lacking in investment experts. Besides, any decision would easily be regarded as transfer of benefits. Investment failures would also be criticized as being prodigal. Even Singapore’s Temasek often makes wrong investment decisions, so direct government involvement in making investments entails grave risks. Under this mode, actually it can be further divided into an approach in which the Government is only responsible for monitoring but not for selecting investment projects, while professionals of the industry are appointed to audit the projects. Rightly as Mr Duncan CHIU has pointed out earlier, there will be greater chances of successful implementation if the Government does not involve directly but merely assumes a monitoring role. But then, regarding how proper checks and balances can be put in place, it warrants further consideration as well.
In fact, the two aforesaid approaches both have their merits and demerits. I believe it is necessary for the Government to conduct an in-depth study to select the suitable system, so as to strive for reasonable returns while achieving the goal of promoting industrial development. Thank you, Deputy President.