Submission of Hon KP Chan, Member of the Legislative Council to the Chief Executive Elect on April 18th, 2012
Policy on Insurance
1. Insurance Authority to help develop business opportunities
Following the Lehman Brothers affair, primary concern of the Government has been preventing recurrence of financial disasters. It is paying more attention to regulation than business development. Financial officials should endeavour to help business sectors to develop. They should realize that the Government would not be blamed for poorly responded initiatives but there is no sympathy for inertia. Our rival, Singapore, has been aggressive in business development and its experiences are worth borrowing. Our Insurance Authority is becoming independent. The new framework should also provide for business development and support the industry to enter new markets. For instance, it should help expand investment choices and seek relaxation on renminbi assets to cover properties and securities for the benefit of all insurance companies. It should also set up specialist groups to study insurances for calamities and specialties and the proposal on a reinsurance centre. Singapore has been working hard to grow these businesses with impressive results. There are signs that Singapore is taking business away from Hong Kong. Moreover, the Government should appoint representatives from insurance companies and intermediaries to the Governing Board and committees of the new Authority for better coordination with the industry in business development.
2. Tax incentives to encourage savings for rainy days
Insurance is intended to encourage risk transfer from individuals to underwriters. In case of mishap, people need not look to the Government for livelihood and other assistances. Governments of many countries support and encourage people to get insured. The more people are covered by insurance, the less people would rely on the Government. In his platform, the Chief Executive-Elect proposes to introduce tax deductions for medical or healthcare insurance for children with a view to encouraging people to plan for medical expenses of their own and families. In turn, it would alleviate socio-economic pressure of an aging population. In the long term, tax incentives should be extended to other types of insurance and encourage people to look after their own future. The Government should provide tax incentives for purchase of personal insurance including life and retirement benefits in order to promote the philosophy of savings for rainy days.
3. Long term commitment to secure support of the Health Protection Scheme
The design and operations of the Health Protection Scheme need public support and acceptance. It could not succeed without commitments of the people and medical and insurance sectors. The Government should be open-minded and responsive to issues raised by the industry. Most people are looking forward to the launch of a viable and sustainable healthcare system. I ask the incoming Administration to review the earmarked sum of HK$50 billion for the Scheme in light of changing parameters. When the Scheme is launched in 2015, if on schedule, rising medical cost and further aging of population might call for modification of the original undertaking for longer term sustainability. Instead of annual cash injection for 25 years, for instance, an endowment might be set up with that HK$50 billion as seed money to invest and replenish annual payments. In fact, the crucial factor for a successful Health Protection Scheme is continuity. The Government should undertake to support and fund the scheme in order to eliminate any uncertainty.
4. Others
Please refer to the submission of Hong Kong Federation of Insurers attached.
Policies on Politics, Economy and Livelihood
1. Restore public support for better governance
a. In the old days of British Administration, Members of the Executive Council (ExCo) would take initiative to explain government policies through the media. For instance, they met the media almost daily to reiterate the position of the Government during the row on new airport. All knew that Hong Kong needed a new airport and the message was unambiguous. After reunification, however, ExCo Members are no longer playing this role and the Government is becoming more remote and helpless. The Government should reconsider entrusting such duty to ExCo Members and appoint those who are competent and committed to serve.
b. Similarly, senior officials used to meet the media often. Their exposures on television and reputations were high. After reunification, senior officials are reluctant to face the media for fear of criticisms. As their exposures have dropped substantially, a significant channel of winning public support has been given up. The Government should consider asking senior officials to resume public exposures, including speaking to the media or even tipping them off. They should make more appearance at luncheons and talk on public policies. As long as they are willing to talk and explain, public support is forthcoming. Unfortunately, many officials only care about counting supports in the Legislative Council (LegCo) and they are lethargic in appealing to the public. Thus, credibility of the Government has been falling like cascade.
c. CE should look for opportunities to appeal to the public. A good practice is perhaps weekly messages like Letters to Hong Kong on the radio. The public like to hear directly from their leaders. The Government should make better use of this channel.
2. Review population policy
According to immigration figures, settlers from the Mainland (arriving on single-trip permits) between 1998 and 2011 (Q3) amounted to 667,002 in total. They now account for 9.4% of total population. Among them, some 70 percent were over 15 years of age on arrival and their average age was between 27 and 28 years. In terms of education, about 20 percent are primary level, about 70 percent reached secondary level and the remaining 10 percent reached tertiary level or higher. More than half of them used to be homemakers. As Hong Kong is a knowledge-based economy, many of them have almost no other choice but to take up low-level job. Some might even have difficulty in finding employment. Unless there is policy change to improve the quality of new settlers, any measure to tackle poverty would be unproductive. The Government should review population policy urgently.
3. Set up a comparable department to State Development and Reform Commission for research and planning on economic development. Consider announcing general plans in the Policy Address every five years
The SAR Government is often criticized for indecision since reunification, leading to falling competitiveness of the economy. Critics say that economic development is falling behind Singapore. Hong Kong could no longer count on finance and property sectors. We have no alternative but to develop other sectors. Yet, exploration of new directions needs government leadership in planning as well as expertise in research and development. The Government should give up the psychology of positive non-interventionist and learn from experiences of Asian neighbours including the Mainland and Singapore in promoting and supporting the development of economic sectors. I propose to reorganize the Central Policy Unit and set up a separate section for research and think-tank duties. In future, the Policy Address should consider announcing general plans every five years. This would have the merit of driving the Government to draw up development plans and clearer vision. The downside is perhaps misconception of reverting to central planning economy. The idea should be considered with utmost care.
4. Increase supply of public housing and raise accommodation rate
Analysts say that the more accommodative is public housing, the more stable is the community. Poverty would also show improvement. Take Singapore as an illustration. Some 85 percent of people are living in public estates of the Housing Development Board. The city-state is known for its pleasant livelihood and social stability. At present, about half of the population in Hong Kong are accommodated by public housing, either rental or homeownership. I propose to raise the accommodation rate to, say, 55 percent, mainly with new rental units. For the private housing sector, the Government should supply adequate land for developers to respond to market demand.
5. Promote headquarters economy and attract international talents
Many countries and cities are pursuing headquarters economy. Our neighbours and rivals like Singapore, Beijing and Shanghai are attracting multinational enterprises to set up regional head offices with tax incentives. The Government should take positive steps to consolidate the role of Hong Kong as international financial centre of Asia. We should consider prompt responses like tax incentives and other attractions that would appeal to international enterprises in choosing Hong Kong for regional head offices and bringing in global expertise. In turn, they would create new jobs for the local labour market. New job opportunities and work diversities would broaden the scope of our young people and give them more room for social mobility.
6. Support the working poor
The incoming Administration should encourage the grass root to earn their living and support the working poor with measures that promote employment. The concept of “work-for-welfare” should replace “clean welfare”. If personal or household income does not meet certain threshold, the Government would provide financial assistance and encourage people to continue working and earn their living. Transport subsidy for workers is an example. The incoming Administration should consider work-for-welfare in totality in long term and replace itemized and fragmented benefits by a comprehensive system. For instance, a person or household who is earning less than a certain sum would be eligible for certain financial assistance subject to asset assessment. Apart from regularizing the system, it would allow low income persons or households more flexibility in applying public assistance.
7. Promote cultural, art, sport and entertainment business to help people pursue hobbies for spiritual fulfillment and help ease social discontent.
After years of high growth, the Hong Kong economy is reaching maturity. The sense of achievement from entrepreneurship and careers in good old days is no longer recurring. The Government should take steps to help the new generation pursue hobbies and resolve spiritual emptiness. Sociologists say that football is essential to social stability in Great Britain. The British are fond of football and spiritual fulfillment helps ease any social discontent. In Hong Kong, the same factor used to be horse racing but the game is aging with fewer participants from the younger generation. Moreover, it is indeed debatable to promote a game so related to betting. Moreover, local entertainment business including popular music, television and movies were thriving in the last Century. The public, young people in particular, were fond of idols. They would look forward to new albums, movies and concerts. These used to be their spiritual pursuits. Local entertainment business has been on the decline in the new Millennium and losing its appeals to young people. Thus, the lack of spiritual pursuits could be a cause for social discontent among young people nowadays. Therefore, the Government should look into the matter and find better ways to help people pursue hobbies after work including culture, art, sport and entertainment etc. The Government should also help promote these hobbies as business.
8. Extend social space of people and strengthen civic interflows across the border
Closer cooperation between the Mainland and Hong Kong has been focused on commerce and economy. In fact, civic relationship also needs closer cooperation. Many people are going to the Mainland for residence, entertainment, work, and even retirement, study and marriage. However, the Government never has much concern of civic activities and seldom offers to help. Actually, these cross-border interflows are natural and would only increase further. The Government should study ways to strengthen such interflows like helping Hong Kong residents going to the Mainland for retirement or study. The Government could also help residents getting married on the Mainland to settle down and even to find jobs or invest with the support of Mainland authorities. These assistances would not only foster harmony and interflow across the border but also remove the geographical barrier between the two places. Social space of people would be extended; job opportunities would be increased; social problems would be resolvable.
9. Government led energy conservation campaigns
Conservation and renewable sources are the future of global energy development. The incoming Administration should further study development in power generation and energy profiles. It should establish a high-level consultation framework and invite specialists to focus studies on joint development of renewable energy and conservation with the Mainland. The Government should take the lead to conserve energy, step up publicity and join hands with businesses and schools to hold campaigns on conservation and emission reduction. A territory-wide campaign would help develop the habit of conservation.
10. Improve air quality for protection of public health
Hong Kong is an international financial centre where global talents gather. However, air quality is so poor nowadays that many talents of multinational business are reluctant to come. The incoming Administration should have the determination to improve air quality with multiple measures. I ask the new Administration to review replacement programme of old model diesel commercial vehicles, including raising bonus payment or subsidizing de-registration, with a view to reducing these highly polluting vehicles on the road and improving road side environment.
11. Develop high value-added industries to help restore structural imbalance
The structure of the economy is imbalanced. It is highly skewed to services industry. Manufacturing has been in doldrums for years. Owing to repeated financial crisis, Hong Kong has suffered much from the structural imbalance. It is time to consider re-industrialization, particularly high value-added manufacturing, with the aim of providing more stable employment for the grass root. Even if economic benefits are not so significant, it still deserves government support. Many industrialists are willing and ready to invest in Hong Kong. What they ask from the Government are suitable land and policy support. It would be more efficient and effective than developing any other sector from scratch.
12. Improve retirement arrangement and propose on retirement protection
MPF is a good retirement scheme. However, it could not offer adequate protection to some people including those who are low in income, retiring or unemployed owing to inherent limitations. The Government should study ways to improve the existing arrangement, including the proposal on territorial retirement protection plan outside MPF to complement.
13. Study and reform of the linked exchange rate system
Hong Kong has been suffering from the linked exchange rate system since reunification. The mighty US dollar after the 1997 Asian financial crisis pushed up export prices and the road to recovery had been long and winding. Lately, the fragile US dollar has been depressing the Hong Kong dollar and pushing up inflation to affect livelihood and derive social problems. Unless the dilemma of linking to US dollar is resolved, the paradox of exchange rate system could never be removed. Actually, re-pegging the Hong Kong dollar to renminbi or a currency basket deserves further consideration. That said any change in the exchange rate system would bring new challenges. For instance, re-pegging to renminbi would push up local interest rate and derive other problems. A comprehensive study should be conducted.