It is commendable that the Budget has adopted a lot of new thinking to counter economic adversity. Nevertheless, the HKSAR Government must exercise strong leadership to make economic recovery more stable.
Recently, the Legislative Council (LegCo) deliberated and passed the Budget for 2021-2022 in accordance with the further enhanced Rules of Procedure, showing a further improvement in both efficiency and smoothness during its meetings. Speaking their mind freely, members of the LegCo put forward diverse opinions and suggestions on the Budget, with the focus on how to tide over the economic meltdown and revitalize the economy.
Appropriate launch of expansive budget
Indeed, it is still a difficult time for Hong Kong and the rest of the world: Although economic recovery is in sight as COVID-19 vaccines present new hope, the COVID-19 pandemic remains a threat, with some places facing resurgence of the virus or even falling into a state of emergency. Various businesses are badly affected and the unemployment rate remains persistently high amid the pandemic, and many SMEs and members of the public are still in dire straits. Without a doubt, the primary task of the Budget is to focus on overcoming the pandemic and help all sectors of society tide over the difficulties and recover together. This is also my overall expectation for the Budget that I have already expressed to the Secretary.
To this end, this Budget does have concrete measures. Following last year’s unprecedented fiscal deficit of over HKD250 billion due to the counter-cyclical measures rolled out to support the economy and relieve people’s burden, the Government has continued to adopt an expansive fiscal budget by unveiling a deficit budget of over HKD100 billion to fully combat the pandemic and address the pain of the public. It is commendable that the Government has adopted a lot of new thinking to counter economic adversity. However, there are still challenges ahead besides the uncertain pandemic situation, such as the Sino-US rivalry, geopolitics, etc. To lead Hong Kong out of its predicament, the HKSAR Government must show strong leadership to make the economic recovery more stable and look for more diversified ways for Hong Kong’s SMEs and young people to get out of their difficulties.
Urgent need to raise vaccination rate
First, the pandemic remains a major threat to the global economy. A wide adoption of COVID-19 vaccines is crucial for Hong Kong to accelerate economic recovery and maintain competitiveness. Across the globe, Hong Kong is in an advantageous position in terms of resources, as it not only has adequate vaccines, but also advanced medical care and electronic technology assistance. However, for various reasons, Hong Kong has still not yet reached zero infection and its current Covid-19 vaccination rate is not only well below the estimated threshold for herd immunity of at least 70%, but also far behind that of international financial centers such as the US and the UK. It has also been discovered recently that variants of the virus have spread into Hong Kong's communities, triggering public concerns over a new wave of COVID-19 infections and disrupting plans and arrangements such as cross-border travel with the Mainland and the establishment of a “tourism bubble” with foreign countries or places. In this regard, the HKSAR Government urgently needs to find ways to raise the vaccination rate, continue to adopt a high-level war-room mentality, and demonstrate a forward-looking and efficient governance capability to lead the society to win this protracted battle against the pandemic.
With regard to relieving people’s burden, the Government has already introduced counter-cyclical relief measures costing more than HKD300 billion previously. This year, it further rolled out relief measures costing over HKD80 billion and embraced a new mindset to offer preferential loans for the unemployed. However, there are still voices among the people insisting that the needs of the grassroots are overlooked. To address this, when formulating and implementing relief measures, the Government must listen more closely to the needs of the people and adopt a more personalized perspective to refine the details of the measures, focusing on enhancing people’s sense of gain to reduce public restlessness.
Strengthening help for businesses to capture opportunities
Regarding support for SMEs, the Budget has strengthened the introduction of many measures, including raising the maximum loan amount of the SME Financing Guarantee Scheme (SFGS) and raising the funding ceiling and expanding the scope of the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund), which are all laudable. More importantly, the HKSAR Government must be more proactive in integrating into the overall national development, leading all sectors of Hong Kong to capture the golden opportunities arising from the Guangdong-Hong Kong-Macao Greater Bay Area (Greater Bay Area) and the “dual circulation” strategy. The relevant new measures announced in last year’s Policy Address have been implemented, including the inclusion of the first batch of eligible biotech companies in the Stock Connect Scheme and the plan to enhance the Lok Ma Chau/Huanggang control point. There are, however, some projects still at the stage of discussing details, such as the plan to lease certain areas in the Shenzhen-Hong Kong Innovation and Technology Co-operation Zone, which are closely scrutinized by the business community.
Innovation and technology (I&T) are central to the development of the Greater Bay Area and Hong Kong. The HKSAR Government should provide more appropriate support to SMEs, including providing subsidies for Hong Kong businesses to hire local and overseas scientific and technological R&D talents, raising the tax exemption threshold for SMEs regarding R&D expenditures, and allowing the tax deduction arrangements to be applied to Hong Kong businesses conducting R&D in the Mainland. In addition, the HKSAR Government can appropriately increase the investment ratio as well as simplify and shorten the duration of the application and vetting procedures of the Innovation and Technology Venture Fund to support the development of start-ups. The Greater Bay Area Youth Employment Scheme, launched by the Government to encourage Hong Kong’s young people to develop their career in the Greater Bay Area, has also been well-received. Although there is not enough to satisfy everyone, it is still a good start. I hope the Government will introduce more incentives in the future to make this a trend.
Should strive for green finance
Regarding Hong Kong’s economy, the Government’s new initiative of distributing HKD5,000 consumption vouchers is undoubtedly a bright spot. The Government should ensure that the details are simple and attractive in order to achieve the target effect of boosting the economy by 0.7%, extend e-payment to MSMEs and the elderly, and help pandemic prevention and control, creating a multi-win situation. Addressing climate change is currently a major global challenge and opportunity. In response to the country’s call to support “green recovery”, the HKSAR Government should pay equal attention to carbon emission reduction and economic benefits, striving for green finance and green technology to become new economic growth drivers.
In addition, the issue of the soundness and sustainability of public finances cannot be ignored. Hong Kong’s financial reserve will likely continue to decline in the coming years due to the need for the ongoing fight against the pandemic in addition to the sharp drop in revenue. Together with the continuous increase in recurrent government expenditures in recent years and the structural problems of an ageing population, they are all a cause for concern. The Government should deliver on its promises by conducting in-depth studies as soon as possible and put the issue back on the social agenda in due course.
This is a free translation. For the exact meaning of the article, please refer to the Chinese version.
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