Political 'bad blood' will ruin Hong Kong: Finance chief

Protesters demanding universal pensions outside the Legislative Council before the annual budget announcement in Hong Kong yesterday. Financial Secretary John Tsang expects Hong Kong's economy to grow just 1 per cent to 2 per cent this year on the ba
Protesters demanding universal pensions outside the Legislative Council before the annual budget announcement in Hong Kong yesterday. Financial Secretary John Tsang expects Hong Kong's economy to grow just 1 per cent to 2 per cent this year on the back of sluggish external economies and the mainland's economic slowdown.PHOTO: EUROPEAN PRESSPHOTO AGENCY

Dire warning comes as slew of measures are unveiled in Budget to rev up economy

Hong Kong's Financial Secretary John Tsang has sounded a dire warning about mounting political tension in the city, saying that future generations will grow up amid "hatred and malice" if the situation worsens.

It is, to date, the bluntest assessment of Hong Kong's political situation that a senior government leader has made publicly.

Mr Tsang yesterday noted the increasingly bad blood between rival camps, saying there is "not even room for dialogue in our society".

 

"Many of us feel suffocated by and indeed helpless, with the tiresome confrontations day in and day out," he said.

And the disputes will intensify in the coming months, he predicted, with a contentious Legislative Council by-election on Sunday and full elections due in September.

  • SOME KEY MEASURES

  • Silver Bond: An inflation-index bond will be launched this year, targeting people aged 65 and above. It is guaranteed by the government and the first issuance will have a maturity of three years.

    R&D and start-ups: Advanced manufacturing industries using robotics and IT will come together at the Tseung Kwan O Industrial Estate to promote smart production and research. This will cost HK$8.2 billion (S$1.5 billion) and will be completed in about five years.

    A HK$2 billion venture fund will be set up for co-investing in local technology start-ups.

    Small and medium-sized enterprises (SMEs): Similar to Singapore's productivity and innovation credit scheme, SMEs will get subsidies for the use of technological services to improve productivity and upgrade business processes. Each eligible company will get up to HK$200,000.

    Tourism: Development strategy of the tourism sector will be reviewed to attract more high-spending overnight visitors.

    Cantonese films: HK$20 million will be set aside for a film development fund to subsidise the distribution and promotion of locally produced Cantonese films in mainland China. Funding per film will be increased from HK$250,000 to HK$500,000.

    Internships: Secondary school students will be offered spots at technology companies; an internship scheme in Asean countries will also be expanded.

    Free Trade Agreement (FTA): Negotiations with Asean to ink an FTA have undergone five rounds, and will hopefully conclude this year.

    Infrastructure cost over-runs: To strengthen cost control of public works, an office will scrutinise cost estimates of 300 major new projects in the next three years.

In laying out the city's annual Budget for the coming year, traditionally a dry affair that focuses on the nitty-gritty of government spending, Mr Tsang did not mince his words as he called on society to look squarely at the reasons for the political conflicts. "If we allow the situation to get worse, what lies in store for Hong Kong will be even greater chaos, and our future generations will grow up in the midst of hatred and malice," he said.

CHAOS, HATRED AND MALICE

If we allow the situation to get worse, what lies in store for Hong Kong will be even greater chaos, and our future generations will grow up in the midst of hatred and malice.

HONG KONG FINANCIAL SECRETARY JOHN TSANG, on the continued political strife in the city.

The unprecedented focus on politics in the Budget speech comes some two weeks after the city was shocked by violent clashes between protesters and police in Mongkok on Feb 8. Critics, including Chief Executive Leung Chun Ying, blamed the outbreak on hooligans.The protesters claim that within Hong Kong's circumscribed political system, they have no choice but to use violence to "safeguard" the city's identity. Some observers cite uninspired governance, which has left unresolved problems like stagnating social mobility and unaffordable housing.

While Mr Tsang did not say what he thought were the reasons for the political strife, he warned of the price to be paid, especially in the current economic environment. He lambasted protesters for hurting the tourism industry which saw arrivals drop 2.5 per cent last year. The protesters had targeted mainland day-trippers who cross over from Shenzhen to buy essentials, heckling them and kicking their suitcases.

Said Mr Tsang: "These destructive acts have not only damaged the economy but also severely tarnished Hong Kong's reputation as a hospitality city internationally.

"While some have claimed the acts were committed out of concerns for 'local' interests, their actions are not the kind of behaviour that reflects love for Hong Kong."

Five per cent of Hong Kong's GDP comes from tourism. The economy grew 2.4 per cent last year, the fourth consecutive year that saw growth fall below the past 10-year average of 3.4 per cent.

Growth will be 1 per cent to 2 per cent this year, Mr Tsang predicted.

The Financial Secretary, who has been touted as a possible contender in next year's Chief Executive election, announced various measures to boost the economy.

These included trying to attract high-spending overnight visitors through new events such as the Formula E championship for electric car racing and promoting Hong Kong's natural scenery.

To ease the pain from the slowdown, companies and residents will get tax cuts and other relief measures totalling HK$38.8 billion (S$7 billion). The elderly will also be entitled to buy "Silver Bonds" backed by the government.

To address criticism that the government had not done enough to diversify the economy beyond financial services and tourism, Mr Tsang announced a slew of innovation policies, including promoting advanced manufacturing industries using robotics and IT.

But observers, such as Ernst and Young's Hong Kong tax managing partner Tracy Ho, while lauding the direction, noted that such innovation policies are unveiled annually with few follow-up details such as what the targets might be.

Economist Ho Lok Sang of Lingnan University is worried about the government's rising spending in view of the slowing economy.

Still, Mr Tsang concluded his speech with a feel-good flourish that should appeal to all: "With our love for Hong Kong, we are able to overcome any challenge ahead of us, no matter how difficult."

A version of this article appeared in the print edition of The Straits Times on February 25, 2016, with the headline 'Political bad blood will ruin HK: Finance chief'. Print Edition | Subscribe