Expectations for HK over next 15 years
Updated: 2012-08-28 05:49
By Hong Liang(HK Edition)
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A local newspaper invited several distinguished Hong Kong citizens to predict what the city will be like 15 years from now. A lot of what was submitted was, of course, wishful thinking. Having seen what happened to Hong Kong in the past 15 years, we have learned to lower our expectations to avoid disappointment.
This is not supposed to be a condemnation of the government. There is really little it can do under the constraint of the political and economic system. Neither can we be too harsh on big business. They exist to maximize profits for their shareholders and they will do so by cashing in on whatever advantage the Hong Kong market environment can provide.
Those economists who believe that all inequalities will be ironed out in time by free market forces probably also believe in the tooth fairy, or, like the proverbial ostrich, have their heads permanently embedded in sand. The rest of us know all too well that the Hong Kong market, so overwhelmingly dominated by the property sector, is not free.
The government is Hong Kong's biggest landlord and derives a significant portion of its annual revenue from land sales at public auctions. The public auctions are dominated by an oligarchy of no more than half a dozen real estate developers. Gaining a stranglehold on the supply of commercial and apartment units, these developers can dictate the price of homes that Hong Kong people buy and the rents of retail premises that shops and restaurants must pay.
High land price may be good for the public coffers, but it deepens the inequality in society by denying more and more families the opportunity to own their homes. Many others who can afford the down payment for a home will have to skimp on other things to have enough for the monthly mortgage payment.
The government has repeatedly denied public accusations that it has ever pursued a high land price policy, although it is obviously in the interest of the government to do so. What has further fueled public mistrust was the reluctance of the government to take firm action to prevent developers from profiteering by manipulating the supply. It is a widely known practice by developers to withhold a sufficiently large number of apartments in a development project to push up prices.
Controlling property prices and rents also gives developers a disproportionately strong influence on the retail, catering and the tourism sectors of the economy. The last time I visited Hong Kong, the old "photo row" in upper central district was no more. Escalating rents have driven nearly all the old camera shops, where I used to bargain hunt for used lenses, out of business. In their place are fashion boutiques and fancy bars. To buy cameras, people have to go to those electronics mega stores in malls owned by real estate companies.
The growing reliance on land sale income to help fund the rapidly rising expenditure on infrastructure development and a wide range of public services is necessary if Hong Kong is to maintain its low tax rate, which is considered a pillar of its economic policy. As long as that policy remains intact, we cannot expect much change in the next 15 or even 30 years.
By whatever name it's called, Hong Kong's economic policy was shaped in the 1960s and set in the 1970s by the then British colonial government, to meet the specific requirements of ruling a borrowed place on borrowed time. It has worked so well in the past decades that it has become practically sacrosanct. Although more and more people are questioning its validity in today's social and economic environment, no one has attempted to produce an alternative plan for public discussion.
There have been many suggestions about making minor tweaks here and there to defuse public discontent. But none of these measures, including the building of more affordable housing by the government - a lynchpin of the new administration program - addresses the core issue of social inequality that irks Hong Kong people most.
What many economically disenfranchised Hong Kong people would like to see in the next 15 years is a more assertive government getting tough on entrenched business interests and creating many more jobs in a real economy. This would require the government to find alternative sources of revenue, such as introduction of indirect taxes, and channeling sufficient resources to reestablish a manufacturing industry for more balanced development.
Maybe we're wishing too much. But it's certainly better than giving up hope.
The author is a current affairs commentator.
(HK Edition 08/28/2012 page3)