SUBSCRIBE TO THE BULLETIN TODAY!

Budget Should Not
Raise Business Fees

Every March, the Financial Secretary's Budget speech comes to the forefront of our minds, as the various taxation and expenditure policies that it contains can have a significant impact on Hong Kong's business environment and our livelihood. Although the Budget had yet to be unveiled at the time of writing, Legco members had forwarded their views, through a motion debate, to government on what it should contain.

The motion urged the government to avoid cutting social welfare, medical and education expenses substantially, in addition to freezing government fees and charges which directly affect people's livelihoods. The Liberal Party and I basically agreed with the motion, but still felt that it failed to adequately take into account the business environment.

As I have written in past columns, Hong Kong's economy has just turned the corner of recovery after several years of decline. Therefore, the government must avoid any policies that might disrupt the business environment. If the government freezes fees and charges affecting general citizens, but increases business charges, Hong Kong companies, especially SMEs, will be forced to shoulder a bigger financial burden and these vulnerable sectors will again suffer.          

Higher fees hit businesses

As such, the Liberal Party proposed amending the motion, demanding that the government freeze all fees and charges affecting people's livelihood and the business environment to avoid derailing the economic recovery. The amendment was seconded by other members and passed.

I also opposed some Legco members proposal of further postponing the target date for restoring fiscal balance. Last year, the Financial Secretary revealed that the goal for balancing the budget will be pushed back two years to 2008-09, a move which has made people both at home and abroad skeptical about the HKSAR Government's determination to tackle the deficit. Any further delays in balancing the budget will only aggravate the deficit and put an Herculean financial burden on the next term of government. It will also shake foreign investors confidence in Hong Kong's linked exchange rate and financial markets, which could devastate our economy.

Excessive spending is the crux of the current budget deficit problem. I believe the government's annual expenditure of HK$220 billion can be substantially reduced. The administration must step up efforts to cut public spending instead of financing its expenditure by raising revenue. This is a reasonable and fair request and would avoid negatively impacting the economy. 

Of course, the government could set various cost-cutting levels for different policy areas. For instance, education should be regarded as a long-term investment in Hong Kong's future, as opposed to just an expense. Therefore, it would be more acceptable for the government to reduce education expenses by less than 11 percent over five years, which is a moderate cut compared with proposed cuts for other policy areas.        

Some people have also suggested that the government allocate HK$10 billion from its foreign exchange fund to cover the deficit. I do not believe such a move is feasible. Because the government is the shareholder of the fund, transferring the money from one pocket to another would not really help solve the problem.

Support securitisation

Legco also passed a measure to help the government raise revenues through the securitisation of five public toll tunnels and one bridge. I support the move because through securitisation, which is different from the sale of assets, the government can issue bonds to raise money without giving up ownership. With interest rates for Hong Kong deposits now standing at almost zero, the securitisation plan provides a new investment channel for the public. Given the current global low interest rates, the government can benefit by issuing five- or ten-year term bonds even at an interest rate of 3 to 4 percent. This is a win-win situation for both the government and community.

I am also pleased to inform you that I have been appointed to the newly formed Economic and Employment Council under the purview of the Financial Secretary. The council, announced to be set up in the Chief Executive's 2004 Policy Address, is responsible for streamlining procedures and improving regulations. 

At the council's first meeting, it was decided that a working group would be set up to examine the possibilities of simplifying or abolishing outdated procedures to remove business obstructions to enhance the business environment and creating job opportunities.  I support this move and will monitor the developments and continue to reflect the views of the business community for the council's due consideration.

If you have any comments or proposals on my views, please send them to me directly at, Legislative Council Building, 8 Jackson Road, Central, Hong Kong.
Or email me at tpc@jamestien.com. Tel. 2500 1013, Fax 2368 5292.