weekly
Written by: Guo Wende
2020-03-01 20:20
Last updated: 2020-03-01 20:20Last Wednesday (February 26), the Financial Secretary, Chen Maobo, read the 2020/21 Budget in the Legislative Council. He said before the speech: "We live together on this land. Depend on each other ... Even if the ideals are different, I still hope that everyone will set aside differences and create a space for resolving contradictions and push Hong Kong forward together. "Social reconciliation is indeed the wish of most Hong Kong people. Chen Maobo wrote in a budget talk about financial affairs. The finishing touch may be to show the society its political commitment as the treasurer of public resources. However, looking back at the content of the new budget, can it really help "move Hong Kong forward"? The answer seems to be no.
Compared with the past calendar year, the biggest feature of the new Budget in the use of overall expenditure is that it allocates a lot of resources to one-time relief measures, resulting in a high degree of economic bias in public expenditure by policy group. Field situation (Table 1 and Table 2). In the first seven years of the return, the total public expenditure of the government budget investment economic policy group was about 128 billion yuan, and the same figure in the past four years was 128.8 billion yuan. However, this fiscal year has reached 126.9 billion yuan, accounting for 16.4% of the total expenditure budget. Hit a record high since the reunification. This method of resource allocation echoes Chen Maobo's repeated budgeting guidelines of "supporting enterprises, protecting employment, boosting the economy, and alleviating the hardships of the people." He prioritizes revitalizing or stabilizing the Hong Kong economy as a "budget", and he said more "I decided to launch a large-scale counter-cyclical measure involving more than 120 billion yuan. I tried my best to respond to the expectations of the citizens ... I believe that only by doing so can we help everyone while the citizens and businesses work hard to overcome the difficulties."
(Hong Kong 01 drawing)
(Hong Kong 01 drawing)
However, given the limited public financial resources, the emphasis on the economy will inevitably lose sight of each other, reducing the expenditure that could have been invested in other policy groups, such as the total public expenditure budget allocated to education this year is approximately 112.3 billion Yuan, accounting for 14.5% of the total expenditure, hitting a historically low point contrary to the economic field; even if we only look at regular public expenditure, the government ’s proportion of resources spent on education in recent years also shows a downward trend. Above 21% fell to less than 20% in the past three years (Table 3). In addition, this year's environmental and food policy group's expenditure of about 40 billion yuan accounted for 5% of the total public expenditure budget, which was the lowest record in 2011. As for the health sector, about 97.7 billion yuan and community and external affairs Expenditure budgets of about 25.5 billion yuan in the sector, which accounted for 12.6% and 3.3% of the total public expenditure budget, respectively, are significantly lower than the average of 13.2% and 4.0% in the past ten fiscal years (Table 4).
(Hong Kong 01 drawing)
(Hong Kong 01 drawing)
Stimulate the economy and treat people's livelihood lightly
Under the impact of the current social movement conflict and the new pneumonia epidemic, no one will exclude the government today to use Hong Kong's "counter-cyclical measures" to help Hong Kong tide over the difficulties. However, maintaining a sustainable development of a society is by no means a short-term measure Stimulating the economic sector can do it, especially if they take up too much education, environmental protection, health, community and other areas of the people's livelihood that were originally used to ensure social sustainability, it will be more upsetting and putting the cart before the horse. This short-sighted attitude has actually existed since the inauguration of the current government and even earlier. It is just that Hong Kong enjoys the abundant fiscal reserves left by its brilliant economic achievements in the past, plus that there have been no unexpected unexpected expenditures like the past year. The problem was delayed until today. In the future, government officials must deeply reflect on the allocation of public financial resources. They cannot continue to act with a shallow attitude of "headache and foot pain," but must try to improve all aspects of local sustainable development.
Slow development of emerging industries
Moreover, even though the Budget puts a lot of resources in the economic field, it has not effectively helped the development of emerging industries to ensure sustainable economic development. Like this year, it reiterated once again that "looking for new growth drivers, actively developing emerging industries, and expanding "Economic foundation", "Maintain economic growth and vitality, and look for new points of economic growth", but we have heard these words for many years. Providing an appropriate economic environment "Developing emerging industries" is itself a requirement under Article 118 of the Basic Law. At the beginning of the reunification, the first Chief Executive Tung Chee Hwa used the name of "high value-added industries" to encourage the development of technology and innovative industries, and at the latest The "New Economic Growth Point" was mentioned in the 2005 Policy Address. Later, former Premier Wen Jiabao of the State Council wrote support for Hong Kong to "cultivate new economic growth points" into the 2010 government work report; even the first Chen Maobo in 2017 The "Budget" also said early in the morning "to support advantages and emerging industries and seek new economic growth points so that Hong Kong's economy can develop sustainably and diversified."
The budget's resource allocation method echoes Chen Maobo's budgeting policy of repeatedly saying "supporting enterprises, protecting employment, boosting the economy, and alleviating the plight of the people." (Photo / Photo by Zhang Haowei)
So what are the achievements in promoting Hong Kong's emerging industries over the years? The 2002/03 Budget establishes financial services, trade and logistics, tourism, professional and industrial and commercial support services as the four traditional major industries in Hong Kong (the "four pillars"). The 2009/10 Policy Address In response to the recommendations of the Committee on Economic Opportunities, six advantageous industries that can be further developed ("six major industries") were proposed in the fields of culture and creativity, medical care, education, innovative technology, testing and certification industries, and environmental protection.
In the past ten years, the "four pillars" accounted for more than half of GDP, while the "six major industries" accounted for less than 10% (Tables 5 and 6). From 2008 to 2018, the proportion of the trade and logistics service industry decreased by 4.4%, while the proportion of the tourism and financial services industry increased by 1.7% and 2.6%, respectively. It can be seen that the shrinking part of trade and logistics is just the same as the "four The latter two are absorbed. On the other hand, the total increase in the proportion of the "six major industries" is only 1.5%, and the proportion of the testing and certification industries has been at 0.3%.
(Hong Kong 01 drawing)
When the "six major industries" were first proposed, the then Chief Executive, Tsang Yam-kuen, immediately said that the government's strategy was to adhere to the "big market, small government" principle and focus on helping emerging industries to "remove walls and loosen them ... to remove obstacles to industrial development" And assist in developing new markets, "and the dismal results of the past decade are enough to prove that the above strategy is completely wrong. The current government has relatively few publicized the "big market, small government" principle, but its actual performance still tends to "break down the wall and loosen it", such as the 2018/19 Budget, which emphasizes the role of the government as the "facilitator", "Promoters", the relevant measures are mainly to "provide support and expand the market; and review the regulations and tax system requirements, unbundling walls and creating an environment conducive to doing business". This policy has not seen much change in the past two years. Even if the issue of "demolition and loosening of walls" is simply mentioned, the majority of the government's actions are limited to the existing operating environment. It has not touched the conditions of various funding programs provided by the government and the industry, and it is difficult to benefit young people who intend to invest in emerging industries.
(Hong Kong 01 drawing)
Long-term investment needs improvement
Of course, government officials are not completely thinking about how to invest in the future for the long term. For example, Chen Maobo announced last year that he invited senior financial professionals to set up an expert group to discuss the "Future Fund" investment strategy. The research direction is "striving for higher returns while consolidating Hong Kong's position as a financial, commercial and innovation centre will enhance Hong Kong's productivity and competitiveness in the long run. " The group recommended that the government should set up a "Hong Kong Growth Portfolio" to invest in companies, projects or funds that are "connected with Hong Kong" and "originally authorize real estate companies or projects that should not invest in Hong Kong". Management should also follow the "Exchange Fund" Separate, prevent conflicts of interest of senior officials, and disclose basic information such as their governance arrangements, investment objectives, first appropriations, and long-term returns. This year's "Budget" decided to accept the group's proposal to prepare to use one-tenth of the "Future Fund" (approximately 22 billion yuan) as the first fund to set up related work, which can be described as the rare real progress of the SAR Government on this issue in recent years.
However, the government's long-term investment options clearly have a lot of room for expansion. At least in terms of amount, although some people call the "Hong Kong growth portfolio" "Hong Kong version Temasek", its size is not as large as the Singapore government investment company Temasek Holdings, which has a net portfolio value of S $ 313 billion (about 1.80 billion). Temasek Holdings). The latest issue of the Annual Report of the Hong Kong Monetary Authority shows that at the end of 2018, the investment properties of the "Exchange Fund" and its subsidiaries were worth 25.321 billion yuan, while the equity of overseas investment properties through associates and joint ventures was worth 44.336 billion yuan. At the same time, assets The fiscal reserve account on the balance sheet, government funds, and statutory organization deposits totaled 1,494.018 billion yuan, accounting for approximately 35.22% of the total assets of the "Forex Fund" 4.242,029 billion yuan. The public funds used for investment properties under conversion amounted to 24.532 billion yuan. The amount involved is still greater than the "Hong Kong Growth Portfolio" proposal which is not placed on real estate companies or projects.
More importantly, the details of the "Hong Kong Growth Portfolio" have not yet been finalized, so its specific operation still has many questions to be answered. For example, the expert group suggested that "The Hong Kong Monetary Authority will provide the necessary administrative support on the basis of cost recovery. Therefore, it is generally believed that the "Hong Kong Growth Portfolio" will continue to be entrusted by the HKMA to host it. At the same time, it has also raised doubts about whether the international financial expertise in the bureau can properly measure investment in local projects, or with the original "long-term growth portfolio". Concerns about overlapping private equity roles; for example, the panel suggested that "the government should establish an effective mechanism to ensure that senior officials avoid any potential, actual or perceived conflict of interest", but what are the specific arrangements or Measures to prevent conflicts of interest are not clear; if the expert group opposed investment property projects, but did not explicitly state the conditions of investment targets other than "connected with Hong Kong", was the result really the media's new economy, biotechnology, innovation And the scope of life technology is unknown.
Although some people refer to the "Hong Kong Growth Portfolio" as the "Hong Kong version of Temasek," it is not as large as the Singapore government investment company Temasek Holdings, which has a portfolio value of S $ 313 billion (about 1.80 billion). (Profile picture)
Burden of recurrent expenditure
If the sustainable development of the investment economy or other fields is a visionary performance of a financial officer, then it should be his basic responsibility to ensure the sustainability of local public finances. Unfortunately, this year's Budget seems to reflect that the current government has not done well in this area. Of course, the Financial Secretary's speech, "The main reason for the deficit is that government revenue has failed to keep up with the sharp increase in expenditure. Among them, recurrent expenditure is the reason ... Such rapid growth cannot be sustained "," If the fiscal deficit continues to occur, the reserve will eventually run out of day "and other simple analysis, but no mention is made of any helpful solutions. The specific solution to the problem of deficit pressure is just a general discussion. "In the future, government expenditure will enter a consolidation period. We will focus on making good use of resources ... the increase in expenditure in the future. We must pay more attention to the government's long-term fiscal affordability and it must be related to revenue. The growth rate of the one-time relief measures may need to be gradually reduced. "
As we all know, fiscal sustainability is nothing more than open source and cost reduction. However, in the latest Budget, the two are almost completely deficient. In terms of open source, the government barely counts as an increase in some revenue sources. It will issue 66 billion yuan of government green bonds and at least 13 billion yuan of government inflation-linked bonds (iBond) and silver bonds in the next five years. However, the increase in tax rates or Government service charges remain at the "consideration" stage.
The last time the government launched iBond was in 2016. (Profile picture / Photo by Li Zetong)
Regarding throttling, as early as the first report of the Long Term Financial Planning Working Group in 2014, it was expected that Hong Kong might have a structural deficit in the future, and its first financial proposal was to "control growth in expenditure". Ironically, today The government ’s mid-term fiscal forecast has clearly seen that the four annual deficits will continue to increase due to "recurrent expenditures are higher than income" from 2021/22. The first reaction is to wonder whether it can continue to introduce tax rebates and relief in the future. Instead of thinking about how to reduce the creation of unnecessary civil service posts or subsidies in the future, and limit the department's waste of excessive funds to purchase equipment.
It is worth adding that the Chief Executive and politically-appointed officials donated one month's salary to the Hong Kong Community Chest for charity shortly after the Budget was announced. Regardless of this decision, whether the Singapore Cabinet and senior civil servants were paid a month of salary reduction For half a month's impact, at least from a financial perspective, the performance of the Hong Kong Government is definitely inferior to Singapore. Because Hong Kong senior officials donate salaries instead of salary cuts, these actions do nothing to reduce the burden of deficits. They can even be said to reduce the proportion of short-term relief measures on the books; not to mention that the Singapore government ’s salary reduction has spread to all cabinet members and senior civil servants. Even members of parliament have to reduce their one-month allowance, which has a much wider scope. When meeting with the media on Saturday (February 29), Chen Maobo also acknowledged that “salary reduction ... can save some expenses in the treasury”, but a group of senior officials would prefer to use the method of donation to deal with it, which just revealed them I don't seem to care too much about the financial sustainability of Hong Kong. I missed such an opportunity to reduce the burden of public expenditure.
After a lot of discussions among senior officials, they would rather replace salary cuts by donating wages, which just reveals that they don't seem to care too much about Hong Kong's fiscal sustainability. (Profile picture / Photo by Lu Yiming)
Shortsightedness and neglect will lag behind
Looking at the new "Budget", although there are many surprises such as the "Hong Kong version of Temasek", the whole is still full of indulgence in the "big market, small government" principle, and obsession with the "simple low tax system", and Hidden behind the one-time bailout measure is the short-sighted mentality of unwillingness to make long-term investments, and the scourge it has brought to Hong Kong has gradually emerged in recent years. The most obvious example is in the area of innovation and technology. Jones Lang LaSalle, a real estate services and investment management company, published a Global Research Report on "Innovation Geographies" last year, which lists the world's top 20 most technologically creative cities. However, Hong Kong was not seen on this list. Instead, it was full of neighboring cities such as Tokyo, Singapore, Beijing, Seoul, Shanghai, and Shenzhen, as well as San Francisco, London, New York, Los Angeles, and Berlin. Compared with other international cities, the main reason for Hong Kong's loss is that scientific research expenditures lag far behind them, and even after doubling, it is not as good as cities in the same district.
(Hong Kong 01 drawing)
In addition to the challenges of other cities, this year's Budget also mentions that the Organization for Economic Cooperation and Development (hereinafter referred to as the "OECD") has studied the establishment of global minimum tax rules. This initiative originated from the OECD from 2013 In response to the "Base Erosion and Profit Shifting" action plan, the first "Tackling the Tax Challenges of the Digital Economy", last May the OECD announced relevant work procedures and proposed the establishment of a "Global Tax-Based Erosion Solution" As a "second pillar" to counter this challenge, and expressly considering the introduction of global minimum tax rules; in the past, the SAR government's response to international tax cooperation has not been fast enough, which led to Hong Kong being included in the Council of the European Union in December 2017. The list of "non-cooperative tax administrations" was not removed until a series of commitments and remedial measures were made last March. The content of this year's "Budget" is empty, and it is inevitable that people will doubt whether they can repeat the same mistakes.
In his speech, Chen Maobo concluded with the phrase "promoting Hong Kong forward", but to make this wish come true can not flow through the slogan. It is not based on the basis of social harmony and cooperation, but it needs management. The governing body came out to preside over the big picture and show leadership. When he was a member of the Legislative Council in 2011, he moved to review Hong Kong's public financial policy and said in his speech: "Hong Kong needs a visionary, committed and righteous, genuinely caring for the public, and capable of modest and self-examination. Leaders, not a group of miserable ones, "today ’s pressure on the fiscal deficit makes it impossible for him to be a" slavic one ", but did the previous few require him to do it again? As a financial officer in charge, his responsibility should be to properly allocate limited public financial resources to solve social injustice, actively explore the best practices for the sustainable development of Hong Kong's society and economy, and financially guarantee the smooth operation of government agencies. Fang can really help "push Hong Kong forward."
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The above excerpt is from the 203th issue of the "Hong Kong 01" weekly report (March 2, 2020) "Is the weak budget of open source throttling and thrifty overcoming difficulties for Hong Kong? 》
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