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Published: 08:43, October 26, 2023 | Updated: 09:40, October 26, 2023
Results-based policy the right way to go
By Ho Lok-sang
Published:08:43, October 26, 2023 Updated:09:40, October 26, 2023 By Ho Lok-sang

Consistent with his pledge during his bid for the chief executive post, Mr John Lee Ka-chiu continues to emphasize a results-oriented policy approach. In his previous Policy Address, Lee proposed, in the Annex to the Policy Address, 110 indicators for specified tasks (ISTs).

In this year’s Policy Address, he also listed 150 ISTs, including 77 old ones that continue to be in effect. His strong desire to deliver is also reflected in a special section, “Strive to Improve Governance”. I applaud the spirit of results-oriented policymaking. However, in my view, a holistic view of results would be better than listing a large number of specific quantitative indicators.

This year’s Policy Address does offer a number of bright spots, and they include efforts to kick-start the economy and efforts to improve people’s livelihoods.

In kick-starting the economy, obviously the focus is on various infrastructure projects to push innovation and industrial upgrading. These include the New Industrialisation Development Office and the Hong Kong Microelectronics Research and Development Institute. The policy blueprint also proposes more support for small and medium-sized companies in terms of flexible repayment arrangements.

Lee’s administration is keenly aware of the benefits of bringing the headquarters of major companies to Hong Kong, and I am sure that the benefits flow both ways. For one thing, our infrastructure, our talent pool, our status as part of the Guangdong-Hong Kong-Macao Greater Bay Area, our strong rule of law, and our status as part of China, which is an economic powerhouse, mean that corporations headquartered in Hong Kong will find the city’s business climate unbeatable. Executives and professionals in these companies will find Hong Kong a great city, strong in livability and innovation. The proactive approach to building a “headquarters economy” through direct invitations to companies that are Hong Kong-listed but registered elsewhere to move their domicile to Hong Kong is certainly a bright spot in the Policy Address. The availability of multiple-entry visas to expatriates working and living in Hong Kong will enhance Hong Kong’s attraction to foreign talent and enhance Hong Kong’s competitiveness. Doubling the nonlocal student quota in publicly funded postsecondary institutions to 40 percent will ultimately improve the city’s talent pool and its ability to innovate.

In improving people’s livelihoods, the focus is not only on phasing out the lousy rental rooms from subdivided flats. Lee proposes developing Hong Kong into a health and medical innovation hub, and improving access to medical care through facilities across the border. I have been concerned about Hong Kong’s declining fertility, and in a recent column argued that promoting parenting education can push up the fertility rate in Hong Kong. I am glad to see that “promoting family education” is included under the section on enhancing fertility. An innovation that Lee proposed is to give families with newborn babies priority for receiving housing benefits. Families with newborn babies waiting for a public rental flat can also see their waiting time reduced by one year starting in April next year. This benefit, in my view, is very substantial and will have an effect. I had earlier proposed that Hong Kong families should all be entitled to buy a Home Ownership Scheme flat as long as the flat is of “basic design” and can be priced at eight times the median annual income of economically active households. My argument is that “self-selection” will lead those who can afford it to the private market, where they can buy better quality flats.

I am glad that the Hong Kong Special Administrative Region government has decided to replace the earlier “pay now, refund later” arrangement for the Buyer’s Stamp Duty with a “buy the home now, pay later if the residence requirement is not satisfied” arrangement. The Buyer’s Stamp Duty will also be halved to 7.5 percent. Similarly, investors who buy a second home for investment will have the applicable stamp duty lowered from 15 percent to 7.5 percent. I am disappointed that the Special Stamp Duty (SSD) is not being scrapped, because on studying the statistical record, it is clear that the SSD, by hammering trading-up activities, has reduced the supply of existing housing and has driven up home prices. Statistics show that in 2012 (the year the SSD was enhanced) and 2013, instead of more families buying homes, Hong Kong’s home-owning households actually declined by 13,700 and 9,100 respectively.

The government has proposed that properties held over two years before resale will now be exempt from the SSD. This is unlikely to trigger a noticeable increase in transaction volumes. With mortgage rates elevated, and confidence about a housing market recovery still weak, trading up could lead to a double whammy: If one has to sell at a loss within two years, one has to endure a further loss that is at least 10 percent of the resale price. The markets are obviously disappointed at the government’s “timid” approach in dealing with the SSD. The Hang Seng Index on Wednesday morning rose by more than 400 points, but the gain shrank to only 93 points at the end of the trading session.

Many commentators had also urged the government to reduce the stamp duty on stock trading. The government responded positively to this proposal, but the apparent beneficiary from the stamp duty reduction, Hong Kong Exchanges and Clearing Ltd, suffered a sharp decline of about 4 percent in its stock price, falling to a six-month low. The earlier hike in the stock trading stamp duty was meant to bring in revenue to the fiscally challenged public finance. Reducing the stamp duty will have little effect on investors but does have significant effect on high frequency algorithmic trading. This should improve the liquidity of the market but doesn’t do a thing to improve the real economy. 

The author is director of the 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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