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. 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.
In 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. Relaunching Hong Kong’s economy
ii. Improving 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
Relaunching Hong Kong’s economy
As Hong Kong gradually stabilises after the implementation of the National Security Law, attention should be given to restoring confidence in the city among 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 in 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 are:
- 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 to fast-track Hong Kong’s economic recovery, while encouraging people who have not received their vaccinations to do so;
- 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;
- Lift Hong Kong’s profile and restore our standing on the Mainland as a safe 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;
- Provide continuing and targeted support to SMEs in sectors badly affected by Covid-19, through programmes such as the Employment Support Scheme, which could be tapered off as conditions improve; and
- 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.
Improving connectivity with Mainland China and capitalizing on opportunities in the GBA
The GBA is the single most important opportunity for growth for Hong Kong companies. We recommend seizing the opportunities arising from the enlarged economic region by:
- 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. 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;
- 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;
- 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);
- Launching a “GBA Expansion Fund” or other loan interest subsidy schemes to support Hong Kong companies looking to expand into Mainland cities. Such a fund would also have the advantage of providing tangible benefits for foreign companies seeking to access GBA opportunities through Hong Kong;
- 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 U.S. conventions, and is more suited to the local context; and
- 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 the GBA. At the same time, the Government should provide support to Hong Kong tertiary institutions in setting up campuses in the GBA.
Attracting, retaining and cultivating talent
The past year has seen a worrying trend of young people seeking opportunities outside of Hong Kong. If this continues, Hong Kong could face a 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 incentivising young talent to stay and work in Hong Kong, such as providing them with better access to affordable housing and subsidies that would help them to raise a family.
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.
The demand for technology skills is expected to continue to grow along with the pace of digitisation. 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:
- Supporting STEM education through providing dedicated resources for schools (such as the IT Innovation Labs in secondary schools). Schools should also be encouraged to incorporate digital education into their core curriculum to better equip students for the future; and
- 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.
Increasing the supply of land and affordable housing
A major impediment to attracting and retaining talent in Hong Kong is the shortage of affordable housing. We welcome the Government’s commitment to address Hong Kong’s housing issue as a matter of priority, and 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 targets over the next five years. To achieve these objectives, we suggest that the Government:
- Publish a timeline for land acquisition and housing construction, to provide a clear schedule for attaining specific objectives;
- 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;
- Reorganise the Transport and Housing Bureau, to free up capacity and capability to better address housing problems in Hong Kong;
- Reinstate the New Town Development Programme, to improve the acquisition of land, implementation of related policies, and the delivery of housing and essential infrastructure; and
- Increase the supply of land for industrial uses.
Promoting the adoption of ESG and Sustainable Finance
As environmental, social and governance (ESG) and sustainable finance continue to pick up momentum, we welcome the recent announcements made by the Government in these areas to boost Hong Kong’s competitiveness. These include the 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).
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.
On climate risk management, we are pleased to see that the Green and Sustainable Finance Cross-Agency Steering Group is making progress on the formulation of climate-related disclosures, sustainability reporting and climate-focused scenario analyses.
Building resilience against future shocks
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 they can be man-made or natural. Examples include climate change and cybersecurity attacks.
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:
- Set up a cross-departmental agency with the power and capability to prepare for, protect against, respond to, recover from, and mitigate any potential hazard;
- 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 shortages, rising sea levels and power outages);
- Invest in bolstering the resilience of public infrastructure and utilities; and
- 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 worst-case scenarios.
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.