18th February 2024 – (Hong Kong) In the weeks leading up to Hong Kong’s annual budget address on February 28th, public discourse has centred around high-profile events, tourism promotion and mega infrastructure projects. However, some political and economic experts argue that this focus on spectacle is misguided and risks overlooking substantive priorities that will truly strengthen Hong Kong’s economy over the long-term.

The recent media frenzy surrounding Michel Lamuniere, CEO of event company Tatler Asia, exemplifies the danger of this hype cycle. Lamuniere gave inconsistent accounts about when he learned of football star Lionel Messi’s unavailability for a promotional match, sparking a public backlash. Legislative Councillor Doreen Kong argued today that dwelling on this matter was counterproductive, saying “If we continue to nitpick over this, we are the fools.” She advocated shifting attention to more consequential economic issues in the upcoming budget.

Despite Hong Kong’s bustling reputation, Kong contends its infrastructure cannot sustain a tourism-led recovery. She argues that even a surge in visitors would not transform Hong Kong into a leading finance and technology hub. Kong asserts the city should focus on areas with the greatest economic potential, like reviving financial markets and improving living standards.

Contrasting Hong Kong and Singapore, Kong notes an absence of ‘tourism’ in Singapore’s recent budget discussions. She praises their focus on high-value investments, technological progress and creating well-paying jobs. Singapore’s budget also emphasised enhancing citizens’ living standards and skills training. With the budget approaching, Kong reiterates that tourism models relying on sheer visitor volume are ill-suited to Hong Kong’s small size and high costs. She advocates a strategic approach beyond flashy infrastructure, questioning the wisdom of multi-billion dollar projects without a viable long-term economic strategy aligned to Hong Kong’s strengths.

While some urge fiscal prudence, finance experts counter that Hong Kong should take a bolder approach to infrastructure investment and debt financing. Given the city’s strong fiscal position, they argue Hong Kong has ample room to borrow for major construction initiatives.

Economist Liu Pak-wai highlights Hong Kong’s low debt-to-GDP ratio of just 6%, far below other advanced economies. He proposes raising the ceiling to 10%, still quite conservative, to help fund essential projects through bond issuance. This could also meet strong demand from banks and insurers seeking long-term bonds to match future liabilities. Fiscal reserves are dwindling, inflated construction budgets are drawing scrutiny and land sale revenues have plummeted. However, Professor Chau Kwong-wing argues Hong Kong cannot afford to repeat the mistake of the early 2000s, when development stalled amid deficits after the SARS epidemic, which hampered growth. He contends Hong Kong must continue investing in its future competitiveness.

While fiscal prudence is important, both experts argue the strategic value of infrastructure like Lantau Tomorrow and the Northern Metropolis outweighs short-term budgetary concerns. With mainland China’s support, Liu asserts Hong Kong is well-positioned to transform its economy through integration, innovation and market expansion.

Rather than turn away from these long-term projects, Hong Kong should reduce reliance on volatile land sale revenues through more stable debt financing options. The government could also set up project-specific corporations enabling broader investment.

Alongside infrastructure, budgetary priorities should include sustaining Hong Kong’s competitiveness and improving economic security for residents. The upcoming budget offers an opportunity to reorient policies towards these strategic goals. As an export-dependent economy, experts describe competitiveness as the capacity for innovation and productivity growth to deliver employment, incomes and quality of life. Government policies must help businesses remain globally competitive. Expanding the Productivity Solutions Grant, boosting technology adoption through new AI funding schemes, and enhancing access to green financing could be impactful measures.

Experts also recommend initiatives to develop talent and skills, like raising the SkillsFuture credit and enhancing reskilling programs for career transitioners. More financially secure individuals contribute to a productive, competitive workforce.

For households, the budget should address inflation’s toll on living standards but avoid overstimulating consumption. Targeted relief through existing assistance programs, rather than indiscriminate electronic vouchers, can support those most affected. Promoting financial resilience is also prudent, given volatile global conditions. Reforms to increase competitiveness may involve politically tough decisions on the city’s tax regime and government revenue streams. But charting a growth strategy aligned with Hong Kong’s capabilities and constraints is vital for the city’s continued prosperity.

With Hong Kong facing potential structural deficits, some have called for fiscal prudence and scaled-back public spending. However, finance experts and industry groups argue the government should take bold measures to remove all existing property cooling taxes and resuscitate the wheezing housing market.

Property taxes were implemented over a decade ago to curb excessive speculation as prices soared out of control. However, with the housing market languishing at historic lows, experts believe abolishing these extra stamp duties would stimulate sales without risking another destabilising boom.

In recent public dialogues, Financial Secretary Paul Chan has met with politicians from both the pro-establishment and pro-democracy camps voicing support for eliminating cooling taxes. Lawmaker Holden Chow argues relaxing these curbs in October provided an immediate boost, proving stimulatory effects without dramatically moving prices. Other lawmakers believe scrapping cooling taxes altogether would have an even greater impact in reinvigorating the dormant housing market.

According to analysts, current economic weakness and high-interest rates will prevent any growth from overheating. Cooling taxes were necessary in the past, but economists widely agree they now impose excessive burdens on homebuyers during this downturn. Removing these obstacles would release significant pent-up demand and energize the broader economy.

Critically, the extra revenue from reactivated housing transactions could help narrow the government’s yawning budget deficit. While property taxes accounted for over 50% of land sale incomes in the past, this crucial revenue stream has evaporated over the last year. Experts argue decisive moves to reignite housing would ripple through related professional services. By generating new growth, the policy would ultimately pay for itself.

As a matter of both financial and social policy, Hong Kong must balance stimulating housing demand while keeping prices affordable. However, the current excessively restrictive stance has clearly backfired. Within prudent boundaries, recalibrating policies to reflect new realities would sustain the market’s ongoing viability.

Beyond immediate stimulus measures, Hong Kong must sustain strategic investments to reinforce the city’s core economic pillars going forward. The upcoming budget offers a critical opportunity to reaffirm support for the financial services and technology sectors as foundations of future growth. Enhancing Hong Kong’s role as a global offshore RMB hub would strengthen financial sector integration with mainland China. Providing tax incentives to attract family offices could further consolidate Hong Kong’s private wealth management dominance.

Technology initiatives should aim to establish Hong Kong as a regional base for high-value activities like corporate innovation centres, advanced R&D and IP trading. Generous subsidies for technology adoption and skills upgrading can help firms transition to higher value-added activities. Targeted talent attraction programs providing visa incentives, tax breaks and housing can also build workforce capacity.

Critically, the budget must sustain funding for Hong Kong’s world-class universities and research institutes. As generators of IP and talent, these institutions are linchpins for knowledge-based industries. Ongoing research investment is essential, including in emerging technologies like biotech and clean energy where Hong Kong can establish regional leadership.

While staying financially prudent, the government should avoid overreacting to short-term revenue fluctuations. Cutting support for pillar industries would have dire long-term consequences. With a clear-eyed strategy focused on competitiveness, Hong Kong can reinforce its stature as Asia’s premier financial and technology hub.

Health experts are urging Hong Kong to raise tobacco taxes by 75% in the upcoming budget, bringing the city in line with WHO guidelines. They estimate this tax increase could lower smoking rates to meet the government’s target for 2024.

Hong Kong aims to reduce smoking prevalence to 7.8% by next year, from the current high of 9.5% according to surveys. The anti-smoking council asserts that aligning with WHO standards, under which tobacco tax comprises 75% of the retail price, is essential to achieving this goal through fiscal policy.

Based on econometric studies, a 75% tobacco tax increase could cut smoking rates by 0.7 percentage points, bringing prevalence down to 8.8%. This would translate to 28,000 fewer smokers and prevent 9,350 premature deaths related to tobacco use. The policy would also generate an extra HK$4 billion in revenue even after factoring in declined sales.

Anti-smoking groups consider tobacco taxes the most effective measure for reducing smoking. But they stress tax hikes must be sizeable enough to influence consumption, given the pricing lag from Hong Kong’s years-long tax freeze until last year. While any tax increase faces opposition, research indicates higher prices compel more low-income smokers to quit, thereby improving health and freeing up income.

Critics argue tax hikes will expand Hong Kong’s illicit cigarette trade instead of lowering smoking. However, health groups point out manufacturers themselves increased cigarette prices during past tax freezes without raising illicit trade concerns. The budget must balance economic and public health trade-offs, but evidence strongly supports lifting tobacco taxes to meet urgent health targets.

In light of Hong Kong’s bleak fiscal situation, finance groups have called for prudent economic relief measures that avoid excessive deficits. However, social welfare organizations argue the budget must strengthen support for marginalised communities, especially low-income elderly residents. Even amidst deficits, Hong Kong maintains reserves to design targeted relief that makes meaningful impact. For groups like the Elderly Commission, an extra half-month allowance for seniors could provide urgent support without breaking the bank. Raising disability and child allowances should also be considered.

While cash handouts may pose risks, enhancing social security enables vulnerable residents to cover essential living costs, stimulating local consumption. Reserved measures like broad consumption vouchers could wait for healthier finances.

During the pandemic, community isolation facilities demonstrated Hong Kong’s ability to build flexible infrastructure. Repurposing these assets, like converting the Kai Tak facility into transitional housing, would address urgent housing needs.

Financial prudence is critical, but Hong Kong’s resilience depends on supporting citizens through challenges. Investing in social security makes both ethical and economic sense to sustain an inclusive, dynamic society. The budget must expand assistance where it’s needed most.

In light of ongoing political unrest and youth radicalization, national security authorities are requesting dedicated funding to strengthen enforcement capabilities and engage disaffected youth. Given constrained finances, some may question the need for additional security funding. However, safeguarding sovereignty is arguably the government’s most fundamental duty. Moreover, enhancing national security ultimately sustains Hong Kong’s reputation as a stable, rule-based society for investment and business.

Specifically, increased training, international collaboration and youth engagement programs for the disciplinary forces would bolster enforcement capacity. Dedicated university funding for national security education across all institutions could help immunize youth against radicalization. Promoting youth participation in uniformed groups provides productive outlets for idealism.

Of course, resources are finite, and the budget involves difficult trade-offs. But a peaceful, patriotic populace is the bedrock for prosperity. Investing in national security capabilities demonstrates both Beijing’s and Hong Kong’s resolve to end unrest. It protects Hong Kong’s future stability.

In conclusion, Hong Kong faces difficult budgetary choices given significant fiscal deficits. However, both short-term relief and long-term competitiveness hinge on focusing spending on substantive priorities aligned with strategic goals. Mega-events and tourism promotion may provide temporary entertainment but contribute little to economic transformation. Removing property cooling taxes, investing boldly in infrastructure, supporting pillar industries and social welfare, and strengthening national security will pay far greater dividends.

Beyond the hype, Hong Kong must channel its limited resources towards the foundations of lasting prosperity and social well-being. The upcoming budget will indicate whether policymakers are willing to make tough but necessary choices to secure Hong Kong’s future.