The Financial Secretary indicated in his Budget Speech in February that the SAR government will offer HK$5,000 (US$643) in electronic consumption vouchers, which are expected to be handed out to Hong Kong permanent residents and new arrivals aged 18 or older. Under the proposal, monthly amounts of HK$1,000 each will be handed out over five months. The amounts designated for a particular month should be used in that month and will not be carried forward.
The public response to the proposal has not been positive. Many complain that there are too many restrictions. Some people say that some residents, especially the elderly who suffer from morbidity, may not have electronic wallets or even an Octopus card. They could be wheelchair-bound and rarely go out. Many say they would prefer a direct cash handout over consumption vouchers. It was also pointed out that many family-run shops might not be equipped to process Octopus card payments, let alone payments on other platforms.
I can understand why the Financial Secretary wanted to use electronic consumption vouchers instead of paper coupons. He obviously wants to use this opportunity to promote the use of digital payments, which are an important element in fintech and financial innovations. He also wanted, for obvious reasons, to leverage public spending to bring about the greatest amount of additional private spending. He does not want the HK$5,000 to end up being saved. If people save the money instead of spending it, the hope that the scheme will provide relief to businesses which are under stress will be dashed.
However, I would advise considering the needs of different groups.
The government does need to consider the needs of those who suffer from disabilities and who may not have electronic wallets. In my view, there is a real need to give people the option to receive physical consumption vouchers. These may be distributed in batches as the Financial Secretary suggested. For others, we need to give some incentives for them to opt for electronic consumption vouchers instead.
It is understandable that many people would prefer a cash handout rather than consumption coupons. But cash handouts are far less efficient than a well-designed consumption voucher scheme in terms of providing relief to hard-hit businesses
I would propose that those who opt for electronic consumption vouchers be permitted to use more than HK$1,000 in one go, up to HK$5,000, provided that they match the amount of the withdrawn amount with their own out-of-pocket spending. For such matched spending items, I would propose that the seller of the big-ticket item or costly services provide an additional discount. This way, it is possible to produce a significant multiplier effect with the money committed for the program.
We can assume that those who are going to spend more than HK$1,000 in one go will all have digital wallets. Since the digital wallets are provided by large enterprises, it is not difficult for them to program the payment system so that a single payment for half the bill can be paid with the consumption voucher up to HK$5,000. The merchant selling the good or supplying the service will get the rest of the payment from the buyer and will offer an additional discount (say 5 percent to 10 percent) as an incentive. Such programming requirements are not difficult at all and do not require the merchants selling the goods or services to bear any set-up costs. These merchants will get more business; consumers will get greater value; the government will get greater bang for its buck.
It is understandable that many people would prefer a cash handout rather than consumption coupons. But cash handouts are far less efficient than a well-designed consumption voucher scheme in terms of providing relief to hard-hit businesses (particularly restaurants and retailers other than supermarkets). Much of the cash handouts will be saved, and there may not be much additional spending at all. On the other hand, the proposed arrangement provides a strong incentive for people to spend more before the vouchers expire. At the same time, a physical voucher parallel alternative allows people suffering from disabilities and other disadvantaged people to benefit from the consumption voucher scheme without inhibitions by the digital barrier.
Macao’s scheme uses a consumption stored-value card that will be given to qualified Macao residents in two rounds, in April and August respectively. There is a daily spending limit of 300 patacas (US$37). A similar scheme implemented earlier showed that more than 60 percent of the spending went to small and medium-sized businesses. The use of a stored-value card and the daily limit do help channel the spending to SMEs and is convenient. The fact that the implementation date is sooner than Hong Kong’s is another plus. A minus is that shops need to have the equipment to process the payment with the stored-value card.
I think this is fine for the Financial Secretary to leverage the program to push fintech. But I also think that making things easier for underprivileged people is equally important. Moreover, the scheme would lose meaning if there is much delay in implementation. Timeliness is truly important. The SAR government must expedite the implementation process no matter what it decides over the design of the scheme.
The author is a senior research fellow at Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University.
The views do not necessarily reflect those of China Daily.
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