OPINION> Liang Hongfu
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OPINION> Liang Hongfu
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An open government is the best firefighter
By Hong Liang (China Daily)
Updated: 2008-11-25 07:50
In a meeting at the London School of Economics last week, Hong Kong Chief Executive Donald Tsang told the audience that his government has no plan to cut public spending, which, he said, will "help reduce the impact of the current economic downturn and stimulate demand for goods and services." Almost in the same breath, he added that Hong Kong adheres to the principle of "big market, small government," declaring, "the less the government intervenes, the more is left for the private sector to contribute" to economic growth. As the Hong Kong economy is sinking into what could be the worst slump since the end of World War II, the government is facing increasing pressure to initiate a stimulus package, centering on a massive increase in public expenditure to break the much dreaded recessionary spiral. As an international financial center and an entrepot of the badly-hit light industrial base in the Pearl River Delta region, Hong Kong has slipped into what the government referred to as a "technical" recession, meaning that it has registered two consecutive months of negative growth. The stock market has crashed and property prices, an important barometer of Hong Kong's economic health, are tumbling. Frequent reports of layoffs by the major banks and corporations are weighing heavily on the minds of many citizens. The resulting slump in consumer spending has forced many restaurants, bars, fashion boutiques and other retail outlets and service providers either to downsize or close down. Unsurprisingly, the call for the government to act is getting louder and louder. Proponents of the stimulus package contend that the government should embark on new public works projects, preferably with private sector participation, and speed up the building of those that have been planned. Cynics may argue that in Hong Kong's external-oriented market economy, the government can only be expected to play a limited role in the adjustment process. Some may even argue that in time of distress, the government should actually go into a contraction mode to make resources available at lower costs to the private sector; a notion that already has been rejected by the Chief Executive.
In keeping with the free-market principle, the Hong Kong government has always considered the use of fiscal measures to influence the course of economic adjustments as political expedience rather than sound economic policy. As deficit budgeting, on a longer-term basis, is not an option, the government is not in a position to devise a grand enough spending program to counter the devastating market forces that are dragging Hong Kong deeper and deeper into recession. The low and simple tax regime of Hong Kong leaves very little room for further reductions in the corporate and salary tax rates. Lowering the levies on stock and property transactions is not expected to inject new life into the market at a time when evaporating asset values, failing corporate earnings and diminishing job security have remained predominant in the minds of many investors and prospective home-buyers. What we need from the government is a genuine and open dialogue that can keep us informed on what the government is doing within the constraints and limitations of a "small government" that remains faithful to the free market principle. In this winter of discontent, the people of Hong Kong would appreciate all the reassuring messages and comforting words from the government, particularly from Mr. Tsang, who is well-known for his sincerity and eloquence. E-mail:jamesleung@chinadaily.com.cn (China Daily 11/25/2008 page8) |
