Faced with a cloudy economic outlook, Hong Kong is casting a keen eye on action taken in Singapore, a fellow open economy buffeted by external forces – and an old rival.
Thursday offered a good look. Finance Minister Heng Swee Keat announced a Budget that includes government spending of $73.4 billion.
It comes a month after Hong Kong’s Financial Secretary John Tsang announced its Budget with an expenditure of HK$490 billion (S$87 billion). The reaction here is that, at first glance, the two financial czars – both men coincidentally have a Master’s in Public Administration from Harvard – might have been studying the same playbook.
Given tough times ahead, they announced near-term relief mainly in the form of tax rebates and loan schemes for small and medium- sized enterprises (SMEs), and handouts for people to help boost consumption. Buzzwords such as innovation, robotics, and research and development also liberally litter the duo’s respective long-term visions.
Ernst and Young’s Hong Kong tax managing partner Tracy Ho puts it thus: “They (Singapore) watch us, and we are watching them too.”
Hong Kong is facing headwinds from a mix of political tensions and economic trends. Its retail sales recently suffered the worst decline in 13 years. Tourist numbers are down. The economy will grow between 1 and 2 per cent this year, Mr Tsang has said. But a greater anxiety is over the city’s long-term prospects. One nagging worry is the lack of diversity in its economy, in terms of its dependence on China and in its industry mix. Hong Kong is heavily dominated by the financial, hospitality and other services sectors, with a negligible manufacturing presence.
It is in this broader vision that Singapore’s Budget on Thursday offers takeaways for Hong Kong, say those interviewed. Businessman David Ting, past president of the Chamber of Small and Medium Business, laments that unlike in Singapore, Hong Kong SMEs “do not have a clear direction on where we should go”. In particular, he lauds the Singapore Budget for being “very focused”. The $4.5 billion Industry Transformation Programme offers targeted industries a road map for how they can grow.
On why Hong Kong businesses, known for their entrepreneurial spirit, will need such guidance now, Mr Ting says the landscape has changed. With China closed off in the past, it was easier for businesses to suss out opportunities, he adds.
Lawmaker Charles Mok, an IT entrepreneur, says that while there are superficial similarities between both Budgets, given the emphasis on R&D, there was a distinct difference in how it is to be applied. In Singapore, the focus is on how to reinforce the manufacturing industry by introducing automation, he says.
“In Hong Kong, we talk of developing R&D. But who is it for? Factories in China? What about our domestic industry – how do we help them get restarted?” says Mr Mok.
On the flip side, Singapore’s Silver Support Scheme to help the elderly does not go far enough, notes social work expert Nelson Chow. “(It) helps the bottom 20 per cent. But in Hong Kong, this is something we’re already doing. The next step is to introduce a universal pension.”
This article was first published on March 27, 2016.
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