Thomas Chan, who is critical of last week's Budget, argues that raising the living standards of the poor will boost the economy through consumption

The latest budget speech of the SAR government seems to follow the tradition since the colonial times, without clear objectives and policy goals to develop the local economy and society by fiscal policies. Before 1997, the colonial government had not the interest, nor the obligation to develop Hong Kong; it simply carried out housekeeping measures to achieve fiscal balance so the British government would not need to subsidize its colonial expenses. Only in the 1970s, under Murray MacLehose's governorship, did the colonial government under the direction of the British home government undertake reform and reorganization of the local polity and economy by engaging in longer-term fiscal commitments. The goal was not for the general interests of Hong Kong society, but primarily for preparing the British in the coming negotiations with China for the renewal of the unequal treaty over Hong Kong. It is a great pity that since the 1997 handover the SAR government's fiscal policy has never been overhauled to put emphasis more on the longer-term development of the city; instead, the two financial secretaries since 1997 have insisted on the colonial tradition and refused to make positive changes.

Since John Tsang's assumption to the post as financial secretary in 2007, Hong Kong has enjoyed prosperity, thanks to the consumption boom by mainland visitors and the general mainland factor that has been supporting the local financial market and industries. The SAR has been the envy of many other cities and countries in overcoming the negative impact of the financial tsunami of 2008 effortlessly. With a good economic performance and large fiscal surplus, Tsang has been able to offer "sweeteners" to please the general populace. However, it is regrettable he has not used the abundant fiscal resources to assist the local economy in improving international competitiveness.

It is right to spend more money in public services. But Tsang's focus has been on short-term and one-off measures - and almost totally for waiving fees without any attempt to initiate new policies or reforms. Even the one-off benefits this time have offered more to the middle class rather than the more needy lower classes and social groups. This is helpful in enhancing Tsang's own popularity with the middle class and the media. It is about personal gain or a public relations exercise, but it is not of lasting economic benefit to Hong Kong.

When Hong Kong's tourism is suffering declining visitors, especially from the mainland, Tsang's offer is but HK$140 million for waiving the annual license or registration fees of travel agencies, restaurants and hotels plus HK$240 million for advertisements and promotion. No one would expect these meager measures to reverse the downward trend in local tourism.

He is more generous in helping innovation industries. He proposes to spend billions on setting up more funds, innovation and research funds, middle stream research and development (R&D) projects, the R&D cash rebate plan, the startup subsidy fund, the technology enterprise investment fund, plus HK$20 million for the local film industry. True to his convictions in the "small government" type of neo-liberalism, the administration has eschewed direct promotion to help start new industries and commercialize new technologies. Its role is simply to process applications and be stringent in distributing already committed public funds to local entrepreneurs. The evidence is that all the funds set up over the years still have large amounts of money sitting idly in government coffers.

Hong Kong's investment in R&D has been one of the lowest even by world standards - about 0.8 percent of GDP - while its northern neighbor, Shenzhen, has devoted more than 4 percent of its annual GDP to R&D spending. Hong Kong has a lot of ground to catch up with the many cities competing with it on the mainland and in the Asia region. It has already lost to Singapore and Taipei, not to mention Tokyo and Seoul. The financial secretary talks about innovation, robotics, a smart city and the like. Unfortunately we could not see any real vision and real commitment from the government he represents in developing these industries and technologies, even in the confused terminology we read from his speech. Of course, it is better than a lack of funding for the empty and similarly confused program of six major industries of the last SAR government in which Tsang was also the financial secretary. But once more, for another year we do not see any efforts to rescue Hong Kong from its declining international competitiveness. Time is wasted again even though the government further increases its fiscal reserves - already the eighth largest in the world at the end of 2014, surpassing all developed countries except Japan, Switzerland and the US.

Hong Kong achieved a budget surplus of more than HK$70 billion last year. Tsang projected there will be another HK$11 billion in the coming year. If the government does not simply engage in the piecemeal PR-style pleasing measures of tax and fee waving, but devotes half of the surplus to helping the poorer segments of the population, the money will be returned into the economy in a positive way through local consumption - not leak out of Hong Kong through traveling expenses and investment; and if the other half of the surplus will be invested directly and strategically in innovative industries and services for improving local competitiveness, Hong Kong will be in a better position to overcome the current economic downturn and grasp the future opportunities for growth and development. If Tsang does not know what to do, he could consult local experts and overseas experts. Singaporean, Korean and even those from Shenzhen and Israel should be willing to help.

(HK Edition 03/01/2016 page10)