10 September 2021
The Hon Mrs Carrie Lam Cheng Yuet-ngor, GBM, GBS Chief Executive Hong Kong Special Administrative Region Tamar Hong Kong
Dear Chief Executive,
Policy Address Submission 2021-22
We appreciate this opportunity to submit the business community’s views on policy priorities ahead of your forthcoming Policy Address.
Managing the health risks of the pandemic is, and should continue to be, a top priority. At the same time, we need to find innovative ways to support businesses that are still struggling and use Hong Kong’s unique advantages to accelerate our economic recovery.
Among other things, we should search for opportunities to relax our stringent quarantine and other pandemic-related restrictions where this can be done without jeopardizing public health. Our attached submission contains several recommendations in this respect.
We hope that our views on this, and other pressing issues, will be useful in formulating your policies for the year ahead.
Yours sincerely
Peter Wong
Chairman
Att.
Hong Kong General Chamber of Commerce 2021 Policy Address Submission
Introduction
1. Although the pandemic appears to be largely under control at the time of writing and the number of citizens being vaccinated is on the rise, the risk of another outbreak in Hong Kong is still very real based on the experience in other jurisdictions. As we move gradually towards the resumption of normality, the Government’s policy agenda will understandably have to be a balance between managing the pandemic and preparing Hong Kong for a post-pandemic landscape. 2. In formulating our recommendations for this year’s Policy Address, we suggest that the Government give priority to the following issues over the next 12 months:
i. Re-energising Hong Kong’s Economy
ii. Cementing connectivity with Mainland China and capitalizing on opportunities in the Greater Bay Area (GBA)
iii. Attracting, retaining and cultivating talent
iv. Increasing the supply of land and affordable housing
v. Promoting the adoption of ESG and Sustainable Finance
vi. Building resilience against future shocks
I. Re-energising Hong Kong’s economy
3. As Hong Kong gradually stabilises after the implementation of the National Security Law, attention should be given to restoring confidence in the city amongst the international business community as a stable, efficient and vibrant business destination. There is also a need to rebuild our image on the Mainland, in the wake of the negative perceptions associated with the social unrest over the past few years. At the same time, SMEs will require continued support from the Government, as they recover from the effects of Covid-19. Our recommendations in the foregoing regard are as follows:
3.1 Vaccination Takeup Review existing quarantine requirements, to explore the feasibility of further relaxing quarantine requirements for those who have received two doses of the Covid-19 vaccine. This would help fast-track Hong Kong’s economic recovery, while encouraging people who have not received their vaccinations to do so. This would also help rebuild Hong Kong’s image as a destination that is keen to welcome international businesses;
3.2 Positive Messaging (Major Events) Direct resources and efforts to presenting a positive image of Hong Kong to the international community. We suggest putting together a revival campaign, similar to that in 2003 after SARS. Major events organised under such a campaign could include a number of high-profile international Meetings, Incentives, Conventions and Exhibitions (MICE) events to put Hong Kong “back on the map”. Intensive promotion of Hong Kong in overseas markets by the Hong Kong Trade Development Council, InvestHK and Hong Kong Tourism Board, as well as through the appointment of prominent figures is also essential;
3.3 Positive Messaging (Mainland Market) Lift Hong Kong’s profile and restore our standing on the Mainland as a safe, inclusive and welcoming place to visit, study, work and live. The core message in these campaigns should emphasize the unique advantages that Hong Kong offers, whether in the provision of goods and services, or as a place to live and work. In the case of the latter, Mainland citizens living in Hong Kong could be recruited to share their experiences in studying, working and living in Hong Kong, as well as in providing testimonials on the unique opportunities that are available in the SAR;
3.4 Enhanced Individual Visit Scheme (IVS) Explore the feasibility of allowing residents from certain Mainland cities to enter Hong Kong subject to a shorter quarantine period or waiving such a requirement for those who have been fully vaccinated. Consideration could be given to Mainland cities that have maintained a continuous record of very low or zero cases over a certain period, say, 100 days in order for residents to enjoy such a special arrangement;
3.5 SMEs Provide continuing and targeted support to SMEs in sectors badly affected by Covid-19, through programmes such as extension of the Pre-approved Principal Payment Holiday Scheme, which could be tapered-off as conditions improve, as well as through enhancements to the various funds aimed at helping SMEs upgrade their digital and other operating capabilities;
3.6 Better Legislation Enhance Hong Kong’s reputation as a business-friendly city, by adopting an evidence-based approach to the legislative process through implementation of a regulatory impact assessment (RIA) framework. As explained in past submissions, RIAs promote inclusiveness in the consultation process by canvassing views across a broad cross section of the society. The RIA also offers a rigorous, transparent and unbiased perspective to policymaking, which helps to promote public support for new policies; and
3.7 Policy Innovation and Coordination Office (PICO) As an extension of the foregoing, enhance the profile and capacity of PICO to provide “money for value” services to the private sector, especially in identifying and removing unnecessary bureaucracy that would otherwise impede the growth of innovation and technology in Hong Kong. We believe that PICO should play a pivotal and facilitative role, in working closely with various bodies such as the Hong Kong Science and Technology Parks, Hong Kong Applied Science and Technology Research Institute and Cyberport to help incubatees and start-ups navigate and overcome regulatory issues.
II. Cementing connectivity with Mainland China and capitalizing on opportunities in the Greater Bay Area (GBA)
4. The GBA is the single most important opportunity for growth for Hong Kong companies, as this region is expected to bounce back much faster than other regions from the effects of Covid-19. As Hong Kong goes about revitalizing its economy, there should be plans to restore and enhance connectivity between Hong Kong and the other GBA cities. We recommend seizing the opportunities arising from the enlarged economic region by:
4.1 Cross-border travel (during the pandemic) Restoring cross-border travel with the Mainland in phases as the vaccination rate increases, by easing restrictions initially on fully vaccinated business people, and then on other fully vaccinated travellers, who are based on either side of the border. Despite a recent upsurge in cases on the Mainland, the situation there and in Hong Kong is relatively better than in other places. To facilitate the resumption of travel, consideration could be given to reducing the quarantine period, or to substitute this with a track-and-trace programme. We also suggest that the Government work closely with the competent Mainland and Macao authorities to provide real time information on their respective quarantine requirements, to facilitate smooth passage across borders;
4.2 Cross-border travel (post-pandemic) As and when the travel restrictions are lifted, ensuring that the ability of individuals to move freely around GBA is further enhanced especially in the case of businesspeople and those who with legitimate work or professional interests (such as academics, researchers and technicians) on both sides of the border. In this regard, we would like to reiterate our recommendation of a visa system, modelled, more or less, on the APEC Business Travel Card Scheme, for qualified GBA residents to enter Hong Kong and vice versa for work and business purposes;
4.3 Financial Services Leveraging Hong Kong’s unique advantage as the largest offshore RMB centre and devise new schemes (such as the issuance of GBA-wide green bonds) to further cement Hong Kong’s status as the premier international financial centre within the region. At the same time, Hong Kong should be taking part in the pilot launch of the Mainland’s Digital Currency Electronic Payment (DCEP) / digital RMB (e-CNY). To that end, we would appreciate early visibility on plans to launch any e-CNY cross border payment pilot scheme in Hong Kong. We also suggest that Hong Kong explore the possibility of harmonizing financial regulations between Hong Kong and the Mainland with a view to further facilitating cross-border RMB business, foreign exchange settlement and payment management. Furthermore, consideration could also be given to establishing a Hong Kong-based Greater Bay Area Financial Regulatory Coordination Committee that is tasked with addressing cross-border regulatory issues of a financial nature. The proposed Coordination Committee’s brief would also include enhancing financial-related regulations to promote financial innovation;
4.4 Connect Schemes Ratifying and/or publicizing as soon as possible implementation details reached with Mainland authorities on the Wealth Management Connect and other Connect Schemes (namely, Southbound Bond Connect and Insurance Connect). It would be useful to have greater visibility on the launch timeline and other regulatory parameters, such as the scope of eligible investments and customer protection aspects of cross-border transactions, so that the relevant sectors can prepare for the launch of these schemes;
4.5 Customs Simplifying customs clearance of goods across the border, by following up on the seven proposed trade facilitation measures as set out in the latest agreement on Trade of Goods under the Closer Economic Partnership Arrangement. Consideration should also be given to reviewing our export and import licensing control regime, so that this is not a direct transplant of US conventions, and is more suited to the local context. To that end, there should be efforts to simplify and reduce the complexity of the existing licensing control regime, to make it easier for manufacturing and trading companies to manage their supply chain inventories here;
4.6 Talent Sustaining government initiatives in talent development, such as the GBA Youth Employment Scheme announced in the last Policy Address, to cultivate skills and provide funding support to Hong Kong companies in, or considering expanding into, the GBA. At the same time, the Government should provide support to Hong Kong tertiary institutions in setting up campuses in the GBA, to promote teaching and R&D capabilities which are critical to maintaining a continuous supply of skilled labour. Similar measures should also be extended to supporting the provision of continuing education and lifelong learning;
4.7 Start-ups Exploring the feasibility of providing start-ups resident at the Hong Kong Science and Technology Parks and Cyberport with the opportunity of continuing their incubation programmes in other GBA cities. Through such extended programmes, start-ups would be able to enjoy the benefits of attracting new investments, tapping into local networks, and accessing a much larger market, to scale quickly into unicorn companies that could ultimately be listed in Hong Kong; and
4.8 National Treatment Lobbying the Central Government for incentives and / or concessions enjoyed by other Free Trade Zones (FTZs) on the Mainland but currently not extended to Hong Kong. This is particularly the case of aircraft leasing and financing, wherein Hong Kong-based leasing companies suffer from a comparative disadvantage relative to Mainland-based leasing companies, which are using FTZs such as the Tianjin FTZ as their tax platform. We would therefore urge the Central Government to lower the withholding tax for Hong Kong companies to 3% and eventually 0% to help Hong Kong-based leasing companies to participate in the Mainland domestic aviation leasing market.
III. Attracting, retaining and cultivating talent
5. Female Workers There are ongoing concerns over Hong Kong’s labour supply given our aging population and low replacement rate. According to the Legislative Council Panel on Manpower Key Findings of Manpower Projection to 2027, local manpower supply is expected to decrease at an annual rate of 0.6% from 2022-2027 as the number of male workers experience a gradual decline although this would be slightly offset by an increase in the number of female workers. That being the case, the labour force participation rate (LFPR) is still projected to dwindle to 54.9% in 2027 from 2017’s 59.1%. Maintaining an adequate pool of workers by boosting the female LFPR should therefore be an important aspect of the Government’s population/labour policy. To encourage more women to join or re-join the workforce, we suggest that consideration be given to policy measures that (1) encourage employers to provide flexi-hour jobs, and (2) foster an environment conducive to the delivery of childcare services. Specifically, our recommendations are as follow:
5.1 Conduct studies to understand the issues preventing or deterring employers from providing late shift or early shift jobs other than the traditional 9 to 5 jobs that do not lend themselves to the circumstances of single-mothers, and devise appropriate policies and incentive schemes accordingly;
5.2 Take the lead in creating shared job opportunities; this is a concept well-received in some European countries where a job is ‘shared’ between 2 to 3 staff, for a total of about 40 hours per week. This offers part-time workers the benefit of scheduling their calendars within a group. On the demand side, employers do not have to constantly go through the process of recruiting part-time support;
5.3 Create a centralized online and offline platform for flexi-hour job opportunities;
5.4 Increase the number of day care centres;
5.5 Enhance the supply of caregivers for children 9 years or younger by reclassifying the work they do as a vocation instead of their existing status as volunteers, which prevents them from being paid a proper wage;
5.6 Issue ‘caregiver vouchers’ to enable working mothers to allocate as appropriate in balancing their family and work commitments;
5.7 Subsidise nurseries and schools on both insurance and staff pay to support the extension of operating hours up to 7pm. This would allow working mothers to pick up their children after office hours; and
5.8 Incentivise schools to open during school holidays to double as day care centres through such means as subsidising salaries and additional insurance premiums.
6. Young Workers The past year has seen a worrying trend of young people emigrating and seeking opportunities outside of Hong Kong. As Hong Kong is already facing labour shortages in many key sectors and should this trend continue, Hong Kong would face a major talent crunch, not to mention the attendant rise in labour costs as employers compete to recruit from a diminishing labour pool. Consideration should be given to creating schemes that retain and attract talent through supportive measures to help Hong Kongers raise a family (e.g. childcare and elderly care subsidies). 7. Mainland Students Mainland students graduating from Hong Kong universities provide a source for Hong Kong businesses to recruit high calibre talent. It is therefore vital for the Government to continue with the development of effective strategies to attract and retain these students to work and live in Hong Kong. Recent geopolitical developments have reduced opportunities, or made it less attractive, for Mainland talent to advance their careers in economies like the U.S. Hong Kong should seize this opportunity to position itself as the ideal place for Mainland graduates to launch their careers with the SAR serving as a springboard to international markets while also seeking to attract skilled workers who are looking for career prospects outside of the Mainland. This includes attracting data scientists and experts to work in Hong Kong to support the Government’s ongoing efforts to promote Hong Kong as a regional data centre and IP trading hub. 8. Overseas Talent An unfortunate by-product of existing stringent quarantine measures is the loss of foreign talent who are deterred from coming to Hong Kong, have left Hong Kong, or are considering leaving indefinitely. It is imperative that this situation be addressed immediately, by reviewing the current travel restrictions, and providing affordable and tolerable quarantine conditions for frequent travellers to Hong Kong. For instance, those subject to quarantine could be permitted to move freely around in a designated quarantine area with a much larger space instead of being confined to a small hotel room. For those living alone, the option of home quarantine could also be considered. As well, the Government should consider ways to mitigate the possible negative psychological consequences of prolonged quarantine periods, such as making available counselling and other psychological support to people during and after quarantine. 9. Employable Workforce The demand for technology-conversant skills is expected to rise along with the pace of digitisation and Hong Kong’s pursuit of a new growth engine through investments in and the cultivation of innovation and technology. To ensure that Hong Kong has an adequate supply of workers with the requisite skillsets, the Government should consider a multi-pronged approach to training and equipping our next generation to be more employable by:
9.1 Supporting STEM education through providing dedicated resources for schools (such as the IT Innovation Labs in Secondary Schools implemented by the Office of the Government Chief Information Officer). Schools should also be encouraged to incorporate digital education (for example coding and computational thinking, fundamental knowledge of AI/machine learning) into their core curriculum to better equip students for the future;
9.2 Encouraging upskilling, to equip the existing workforce with the skills and capabilities that are sought-after in an increasingly digitized economy. To that end, the Government should consider allocating resources to incentivise corporations and individuals to futureproof themselves by acquiring knowledge and competencies in emerging innovation and technology trends (e.g. fintech, cloud, big data analytics, AI / machine learning, digital marketing); and
9.3 Collecting information on manpower every year, instead of every two years, to facilitate the review and updating of the vocational education curriculum, thereby ensuring a timely and precise response to the changing needs of businesses and society.
IV. Increasing the supply of land and affordable housing
10. A major impediment to attracting and retaining talent in Hong Kong is the prolonged and acute shortage of affordable housing. Given that the Government’s primary focus is on providing subsidized public rental housing, this would exclude most skilled workers whose incomes and assets often exceed the prescribed thresholds. As such, the Government must find a way to make private housing more affordable in order to attract and retain young talent. We therefore welcome the Government’s commitment to address Hong Kong’s housing issue as a matter of priority, and would like to reiterate our call in last year’s submission to deliver a major programme of infrastructure spending, by setting out a clear roadmap on land supply, major developments and housing target over the next five years. At the same time, the Government should introduce the measures put forward in the last Policy Address, aimed at increasing the supply of affordable housing as soon as practicable. To achieve these objectives, we suggest that the Government:
10.1 Publish a timeline for land acquisition and housing construction, to provide a clear schedule for attaining specific objectives;
10.2 Review and update guidelines governing housing standards in Hong Kong, to better reflect current housing needs and building technology, as well as in planning for the redevelopment of Hong Kong’s ageing building stock not to mention new projects;
10.3 Reorganise the Transport and Housing Bureau, to free up the necessary capacity and capability to better address housing problems in Hong Kong. As mentioned in our submission to last year’s Policy Address, we believe that this would help bring about a “win-win” situation by improving policy delivery and outcomes through the separation of international transport from domestic housing, which is currently an unwieldy and incompatible mix;
10.4 Reinstate the New Town Development Programme, to improve the acquisition of land, implementation of related policies, and the delivery of housing and essential infrastructure;
10.5 Increase the supply of land for industrial uses to promote investments in such economic activities as value-added warehousing and distribution to serve domestic and international markets including the Mainland.
V. Promoting the adoption of ESG and Sustainable Finance
11. Capacity Building As Environmental, Social and Governance (ESG) and Sustainable Finance continue to pick up momentum, we welcome recent announcements made by the Government in these areas to boost Hong Kong’s competitiveness. These include the Government’s Green Bond Programme, consolidated Grant Schemes, and the launch of the Centre for Green and Sustainable Finance under the Cross-Agency Steering Group co-led by the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC), with a specific focus on talent development and capacity building. To build a sustainable talent pool and attract foreign professionals, the Government could consider recognizing the relevant training courses on Sustainable Banking and Green Finance through the Hong Kong Qualifications Framework. 12. Leading by Example Over the medium to long term, public-private collaborations, where banks work with the Government to develop more green finance products on top of green bonds, could be strengthened. Efforts could also be made to streamline the process for the listing of climate economy or technology companies. Furthermore, we believe that the Government’s Future Fund and Growth Portfolio could incorporate sustainability as one of its investment criteria, to endorse and support sustainability and a low-carbon future. 13. Private Sector Collaboration On climate risk management, we are pleased to see that The Green and Sustainable Finance Cross-Agency Steering Group co-led by HKMA and SFC is making progress on the formulation of climate-related disclosures, sustainability reporting and climate-focused scenario analyses, including a recently-completed HKMA Pilot Climate Risk Stress Test, to strengthen the local ecosystem for green banking. Given that this is still an ongoing process, and that the private sector is a key stakeholder, we suggest that the Steering Group continue to work closely with the financial sector to develop and implement relevant policy initiatives.
VI. Building resilience against future shocks
14. The cataclysmic impact of the pandemic has served to drive home the severe and disruptive effects of unforeseen events of a global nature. These “Black Swan” events can happen very quickly or over a period of time, and can either be man-made or natural. Examples include climate change and cybersecurity attacks. In the case of the former, the effects of climate hazards are being manifested in extreme heatwaves, intense and frequent storms, catastrophic floods, and prolonged droughts. In the case of the latter, the consequences of cyber-attacks are typically in the form of widespread paralysis in the delivery of essential and public services. 15. Hong Kong has thus far been fortunate in being spared from such disasters, but we cannot afford to be complacent. This being the case, there should be efforts to:
15.1 Set up a cross-departmental agency with the power and capability to prepare for, protect against, respond to, recover from, and mitigate any potential hazards;
15.2 Update existing contingency plans and procedures to address potential emergencies and other catastrophic events. This includes devising strategies to contain, mitigate and minimise potential threats to essential services (such as Internet blackouts, water shortage, rising sea levels, power outage and the like);
15.3 Invest in bolstering the resilience of public infrastructure and utilities; and
15.4 Involve businesses in drawing up preparedness plans, whether on relocating away from flood zones, securing alternative supply chains, or transitioning away from carbon-intensive business models to safeguard against worse case scenarios.
Conclusion
16. Hong Kong has been confronted by a variety of crises, yet has emerged each time better and stronger, thanks to its resilience and “can do” spirit. As society gradually returns to normal after the pandemic, we should act as quickly as possible to seize the opportunity of re-energizing Hong Kong’s economy, and creating a more prosperous, equitable, and sustainable future.
HKGCC Secretariat
September 2021
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