In formulating our recommendations to this year’s Policy Address, we suggest that the Government give priority to the following:
- Maintain financial sustainability
- Relaunch Hong Kong
- Improve the delivery of land and housing infrastructure
- Capitalize on opportunities in the Greater Bay Area (GBA)
- Strengthen our role as a global transportation hub
Maintain financial sustainability
According to a recent Chamber survey, the business community expects the Government to provide ongoing policy and financial support to help companies weather the extremely difficult conditions that have engulfed Hong Kong and much of the global economy. Until an effective Covid-19 vaccine is found, travel restrictions, social distancing and other preventive measures are the main options for containing the pandemic.
There is compelling need for the Government to keep in place the various financial assistance to the business sector. Otherwise, a wave of closures would create a domino effect that could seriously damage the economy. Rescuing the economy from a full-on collapse would be more costly than prolonging the existing support for the business community.
At the same time, we are mindful of the importance of maintaining healthy reserves.
A sustained drag on our fiscal reserves could give rise to concerns over the sustainability of Hong Kong’s public finances, which could in turn lead to speculative attacks on our currency system, as was the case during the SARS period. To ensure that the Government’s financial capabilities are not impaired, we suggest that it:
1 Practise financial prudence by reviewing government spending to restrain cost increase wherever possible;
2 Make continuous refinements to the various government assistance programmes aimed at providing relief to targeted groups; and
3. Consider a large-scale issuance of green bonds to top up fiscal liquidity, which can also pave the way for the development of a strong and viable green bond market in Hong Kong.
Relaunch Hong Kong
In addition to external factors, we are also suffering from serious domestic problems that include a lack of confidence in the Government. The social rift has grown worse in recent years, and it has affected the international business community’s confidence in Hong Kong.
To address these issues and support the re-opening of Hong Kong’s economy, we suggest:
1. Directing resources and efforts to correct misperceptions about Hong Kong by providing factual information on the ground. A marketing campaign led by the Hong Kong Trade Development Council and InvestHK could be organized in conjunction with the international chambers in Hong Kong.
2. Providing certainty amid the Covid-19 situation through the formulation of a set of clear guidelines for businesses to ascertain as and when it is appropriate to operate. To that end, the Government should work closely with the relevant sectors to develop objective and industry-specific guidelines that could then be implemented without these sectors being subjected to ad hoc government directives.
3. Implementing as soon as possible the proposed health code system to facilitate the safe resumption of cross-border traffic to restore full functionality to business operations and revitalize Hong Kong’s economy. The health code system would also be helpful in fast-tracking the establishment of “travel bubbles” with low-risk jurisdictions. We suggest that priority be given to the Mainland, especially the Greater Bay Area given the amount of business and investments that Hong Kong has in the region.
4. Encouraging wider testing by reducing the costs of doing so. Notably, there was overwhelming support for fighting the coronavirus and improving the healthcare system in the Chamber’s survey mentioned earlier.
Improve the delivery of land and housing supply
We suggest that the Government commit to a major programme of infrastructure spending by setting out a roadmap for the next five years on land supply, major developments, and housing target. Measures to rapidly increase the supply of affordable housing are needed for the medium to long term, both to boost economic activity in the construction industry and address the chronic imbalance between housing supply and pressing demand. To achieve these objectives, we suggest that
1 Priority be given to increasing the supply of formed and serviced land for new housing development. There should also be efforts to repurpose agricultural land and brownfield sites for residential and commercial use through the use of appropriate land exchange, compensation and other existing statutory powers, and if necessary, to establish a Land Acquisition Authority to take charge of the exercise. Similarly, developers building large residential communities should be required to provide a minimum number of affordable units within the development as well as housing for the elderly and singletons, a formula that has been successfully adopted in London and New York. The proposed Land Acquisition Authority should also be tasked with reviewing land use to ensure that existing designations are warranted. Otherwise, such sites should be repurposed for residential or other more compelling uses.
2. Improvements be made to address bottlenecks to create a more liquid secondary market for public housing stock. Although there are such programmes currently in existence, enhancements could be made by easing resale restrictions in the case of the Housing Authority’s Tenants Purchase Scheme. Consideration could also be given to reviewing the premium process for Home Ownership Scheme projects to better incentivise owners to upgrade to the private sector.
3. Consideration be given to reviewing the Double Stamp Duty (DSD) and other demand-side management measures. As the rationale behind DSD was to stabilise soaring prices in the real estate market when this was introduced in 2014, circumstances have since changed. It would therefore be opportune to re-assess this and other related measures to ensure that they do not have the unintended consequences of worsening market sentiment and undermining the overall macroeconomic and financial stability of Hong Kong.
4. Construction and infrastructure development work should be conducted in as an environmentally friendly way as possible, using best-practice techniques to reduce waste. At the same time, there is the need to revise our outdated and far too prescriptive planning and building regulatory framework. Finally, it is also important to rethink how we can adapt, refurbish and retrofit many of our existing buildings.
Capitalize on opportunities in the Greater Bay Area (GBA)
The GBA is the single most important opportunity for growth for Hong Kong companies. As the region is expected to bounce back much faster than elsewhere from the effects of the coronavirus, so will Hong Kong. To support this recovery, there should be plans to enhance connectivity among the nine plus two cities. Our recommendations on seizing the opportunities are as follows:
1. The groundwork has already been laid for the introduction of additional cross-border “Connect” arrangements that tap into Hong Kong’s financial prowess. These include the Insurance Connect scheme, which was mentioned in the 2019 Outline Development Plan for the GBA, and the Wealth Management Connect pilot scheme announced in June this year. We look forward to receiving more details on these schemes, which will enable service providers to market their products across the GBA.
2. There is significant interest from Mainland investors to invest in private equity (PE) through Hong Kong investment vehicles. Recent announcements to support the industry should be accompanied by an ability to move PE investment capital into Hong Kong, perhaps through a closed loop arrangement similar to the other Connect schemes. Such a scheme could also contribute to the scaling up of Hong Kong start-ups and assist in bringing their innovation and technology into the much bigger Mainland market.
3. There is also an opportunity for an IPO Connect scheme to be developed, including a similar closed loop like Stock Connect to control capital flows. This would build upon the current schemes, starting with Hong Kong-Shenzhen first to allow greater participation in IPOs, thus improving liquidity and price discovery.
4. There is also a need to improve support for logistics connectivity in the GBA. Although there should be continued investments in hard infrastructure, the emphasis should be on developing soft infrastructure, with investments in and alignment of customs systems, processes, single-window systems, and other trade facilitation measures.
5. There should also be active measures to promote the freedom of movement by individuals within the GBA. We continue to call for a special visa system, based on the APEC Business Travel Card Scheme, for selected categories of GBA residents to enter Hong Kong and vice versa for work and business purposes. We also suggest active consideration be given to raising the cap on Hong Kong cross-boundary private cars, which currently stands at 10,000, for the Hong Kong-Zhuhai-Macao Bridge.
6. Greater attention should be given to providing Hong Kong SMEs assistance to access the opportunities offered in the region. Although there is already a network of government Economic and Trade Offices (ETOs) and Trade Development Council Offices (TDCOs) across the GBA, the footprint could be further expanded to support SMEs looking to expand into the region.
7. The regional relationships and opportunities provided by the GBA should include environmental issues, which include the crafting of a robust circular economy. By partnering with its GBA counterparts, Hong Kong would be in a much better position to overcome longstanding issues such as allocating land resources, developing market-based solutions, and stimulating demand for re-manufactured and re-conditioned goods.
8. Given Hong Kong’s integral role in the GBA, it would follow that the SAR should be included in the Nation’s next and subsequent Five-Year Plans. This would provide policy guidance on the objectives that Hong Kong should pursue to align with overall plans for the region’s social and economic development.
Strengthen our role as a Global Transportation Hub
In her 2018 Policy Address, the Chief Executive acknowledged that “the Transport and Housing Bureau was overburdened and should be split into two, with the establishment of a policy bureau to coordinate housing and land policies.”
Indeed, the Bureau currently oversees an unwieldy mix of international and domestic policy issues relating to transport and housing. In order for the international aspects of Hong Kong’s transport portfolio be given the support it deserves, we suggest that:
1. The Government revives the idea of establishing a dedicated government bureau on cross-border transport that would be charged with looking after day-to-day issues arising in relation to the Hong Kong’s maritime port and airport. This is especially important in reversing the steady erosion of shipping-related businesses.
2. There is also a need to establish a maritime and port authority with statutory powers similar to those that exist in other maritime centres. The Hong Kong Maritime and Port Board and its predecessors have not been able to fulfil the functions of a fully fledged port authority. In order for Hong Kong to compete more effectively in the global market, it is crucial that a maritime and port authority be created.
Hong Kong has confronted a variety of crises and emerged each time better and stronger. The recent spate of domestic and global events does pose a significant challenge but – consistent with our ability not to “waste a good crisis” – we should seize on Covid-19 as a catalyst for bringing about much-needed progress towards a more prosperous, equitable and sustainable future.
This is an abridged version of the Chamber’s submission. You can read the full paper on the Chamber's website and app.