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Published: 01:24, November 07, 2022 | Updated: 10:01, November 07, 2022
Livelihood measures must live up to cost-benefit expectations
By Chow Pak-chin
Published:01:24, November 07, 2022 Updated:10:01, November 07, 2022 By Chow Pak-chin

Studying Chief Executive John Lee Ka-chiu’s first Policy Address, one cannot help but notice the glaring absence of one set of crucial details — the estimates of the expenditures and therefore the revenue needed to fund his ambitious project agenda, including the part on healthcare.

As a medical professional, I am reassured our leader is sincere in his efforts to enhance public healthcare. Earlier, I submitted proposals during the Policy Address consultation. The majority of these were accepted by the government. However, the crucial issue of healthcare financing was not addressed in the CE’s policy blueprint.

In his address, Lee touched upon a public-private partnership to provide healthcare services. Hopefully he will increase funding for the so-called “disaster zones” overwhelmed by cases; these include specialist care for eye patients — who endure a new-case waiting time of 204 weeks — and those for patients with bone and mental diseases.

The larger question is: Why is there such an imbalance in the use of public and private health services? Mainly, I believe, it is due to public healthcare being heavily subsidized (more than 90 percent of costs) by the government, while the private system relies on a fee-for-services and full cost-recovery model. As a result, the majority of Hong Kong residents flock to public clinics and hospitals, despite the long waiting times.

We must strive to maintain the Hong Kong dollar peg.  And this means budgetary prudence on the part of the government. Navigating the uncertainties ahead, the government needs to reassure its own people, and the global financial community, that the city balances its books according to the “make ends meet” principle

A better mix of public and private funding in our healthcare system will reduce any service coverage gaps. One way to achieve this is through third-party payment made by insurance companies, and co-payment by the patient. The latter, it must be said, would need some fine-tuning to prevent potential abuses.

Another important area of focus is primary healthcare. Keeping people healthier from the get-go will lower medical costs and bring long-term benefits, along with reductions in cases requiring secondary and tertiary care.

The system has been tested by three years of the COVID-19 response. Concern about the effects and impacts of long COVID on recovered patients is legitimate. Hong Kong’s overall vaccination rate of 81.1 percent, which, though impressive, still has room for improvement, especially among the elderly and children, who are most vulnerable.

Hopefully, soon, we will advance from no compulsory hotel quarantine with three days of medical surveillance at home or in a hotel (“0+3”) to nothing at all (“0+0”), while remaining vigilant against imported cases.

Last year, the government spent HK$90 billion ($11.5 billion) for recurrent spending on healthcare. Most of this will be allocated to the Hospital Authority, with less than 20 percent going to primary healthcare.

Simply put, if we want to improve primary healthcare services, we need to inject more funding. The government would need to apportion at least an extra HK$20 billion to allow a 30 percent increase in services.

Lee also talked about creating 4,500 new hospital beds and 80 operating theaters in five years. This increase in hospital hardware will not only be costly, but doesn’t factor in the additional nurses, doctors and other medical staff these new facilities will require. The chief executive may have a grand plan for Hong Kong’s healthcare, but he seems to overlook the sources for funding it.

Aside from healthcare, Lee also has grand plans for our infrastructure. He proposes to highly interconnect Hong Kong’s transportation system by pursuing three major road projects and three strategic railway projects.

In Hong Kong, strategic transport development is generally meant to be revenue-driven or supported by building new road and rail networks that help unlock the development potential of land along transport corridors — providing land the government can sell to private developers. Alternatively, it enhances the value of private land along these new transport corridors, resulting in government raking in revenue in the form of modification premiums when landowners seek to change the use of the land. However, the proposed road and rail projects outlined in the Policy Address don’t seem to offer much suitable land for housing development, and may be unable to return sufficient revenue to cover their colossal construction outlays. We only have to look at the Hong Kong-Zhuhai-Macao Bridge — an impressive engineering feat, no doubt, but one that fails to attract enough traffic to break even — to see how these proposed road and rail projects in the Policy Address may end up.

I am reminded of the early 1990s, when the British Hong Kong government put forward its controversial “Rose Garden” infrastructure projects. This part of the Port and Airport Development Strategy ended up costing the city more than HK$160 billion. When the idea was first floated, it sent shock waves through the city, prompting Beijing to highlight concerns about the impact this would have on the financial reserves of the future Hong Kong Special Administrative Region government. The other point that should be made is that the then-government actually came up with an estimate of costs, at the conceptual stage of the projects.

On the public housing front, I am concerned about the idea of “Light Public Housing”. The government has proposed building 30,000 such units over the next five years in a bid to reduce waiting time. Again, the CE left out the cost estimate regarding the construction of these simplified units. He and others in the government have not given an estimate of costs per square foot, the estimated lifespan of these temporary projects, or how long these units will stay on the temporary sites before they are removed. It would be useful to have such crucial details for the public to assess the cost-in-use of these temporary housing units and there the overall cost-benefit.

If these cheaper and nonpermanent units fail to live up to the cost-benefit expectations, the whole idea will have to be justified in more details. There is also this question: If land is available on which these temporary units can be built, why is the land not used for permanent public housing?  Unfortunately, answers to these questions were missing from the Policy Address.  More surprisingly, such questions have not been publicly asked.

Are the city’s current fiscal reserves sufficient to sustain huge future infrastructure projects as well as our healthcare system? Already Financial Secretary Paul Chan Mo-po warns our fiscal reserves have been reduced to HK$800 billion, with this year’s fiscal deficit expected to be HK$100 billion.

During the pandemic, the SAR government reportedly spent several hundred billion Hong Kong dollars, including on two rounds of cash handouts to residents. There were also public COVID-19 tests and vaccine expenses, the cost of which the government has yet to divulge.

Finally, a note of caution:  We need to prepare for a new round of global financial instability, and possibly recession. The US Federal Reserve is ramping up interest rates as inflation in many countries reaches new highs. A continuation of this trend has resulted in several rounds of sell-offs of the Hong Kong dollar, leaving us with no choice but to defend the local currency’s peg against the US dollar. Lately the Hong Kong dollar interest rate has to play catch-up with the much higher US-dollar rate, resulting in stock market crashes.

We must strive to maintain the Hong Kong dollar peg.  And this means budgetary prudence on the part of the government. Navigating the uncertainties ahead, the government needs to reassure its own people, and the global financial community, that the city balances its books according to the “make ends meet” principle. Projects and other initiatives without cost numbers do not instill confidence.

The author is president of the Wisdom Hong Kong think tank.

The views do not necessarily reflect those of China Daily. 

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