Monday, 12 February 2018

HK Government's Whopping Surplus

All eyes will be on Chan when he delivers his budget at the end of this month
Financial Secretary Paul Chan Mo-po will be giving his budget speech on February 28 and already the projections are that Hong Kong will have a surplus.

How big a surplus?

At least seven times the original estimate of HK$16.3 billion to just under HK$120 billion. But it could go as high as between HK$160 billion and HK$180 billion. If that's the case, then it will beat the record set last year when the surplus was HK$92.8 billion, eight times the estimate of HK$11.4 billion.

Economic experts have criticized the government for not only its conservative math skills, but also its failure in investing in things like public hospitals, and helping the elderly and the young.

Previous administrations didn't do enough for the elderly
They warn that with the growing elderly population, the government's revenue will shrink, while it will cost more in healthcare to look after them.

Two economists said the government failed to take into consideration the "China factor" that fueled rises on the Hong Kong stock market and the record-high land prices in recent years into its surplus projections.

"Hong Kong has been experiencing the biggest structural economic growth and it is because of China," said Franklin Lam Fan-keung, founder of think tank HKGolden50 and a former investment bank analyst who served the government's Central Policy Unit during the Asian financial crisis in 1997.

"But we did not food the growth, we did not pour money into social and economic infrastructure... Offices, hotels, and hospitals ended up being very expensive in Hong Kong.

"Yet with so much money [at hand], the government didn't build a new hospital or build a land bank, and elderly people's savings have been eroded by inflation," Lam continued. He said former financial secretary John Tsang Chun-wah had taken an overly frugal fiscal approach and failed to invest to grow the economy.

The government needs to invest in infrastructure like hospitals
Meanwhile Chinese University associate professor of economics Terence Chong Tai-leung expected the stamp duty to expand, making duty paid on property and stock purchases the biggest source of government income and further driving up total revenues.

It is shocking to find the government has totally missed the mark --again -- and again -- for underestimating its revenues. Do they think the general public will be so thrilled to hear that the surplus is X number of times the original estimate?

Sounds like really bad accounting skills and as Lam said, not taking into account how mainland Chinese buyers have totally jacked up housing prices in Hong Kong. The next question is what will Financial Secretary Chan do with the mind-boggling surplus?

If he can only think of one-off sweeteners and nothing long term then we know what we're in for. If this administration really cares about Hong Kong people then it will have the foresight to think really long term on how it can make lives better for its residents 10, 20 years down the road, not in the coming year.

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