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Following is the full text of the speech by the Financial Secretary, Mr Donald Tsang, at Concordia Hong Kong Foundation Fund Raising Dinner tonight (November 23):
Dr [Frederick] Lowy, Dr [William] Yip, Concordia Alumni, Ladies and Gentlemen,
I am delighted to be here tonight to be part of this special occasion for a very worthy project. And I'm also pleased that Canadians celebrate Thanksgiving Day on the second Monday in October and not the fourth Thursday in November, as your neighbours do on the other side of the border. Otherwise, I'm sure most people would be at home with their families tonight eating roast turkey with all the trimmings!
So, let me extend a warm welcome to our guests and visitors who may have just flown in from the other side of the Pacific. I sincerely hope you have a pleasant and fruitful stay.
The American poet and critic, Mark Van Doren, once wrote - "Any piece of knowledge I acquire today has a value at this moment exactly proportioned to my skill to deal with it. Tomorrow, when I know more, I recall that piece of knowledge and use it better". That was penned many years ago, but it is just as appropriate today - perhaps even more so - as the switch to the knowledge-based economy gathers momentum and the need for a tertiary education takes on added significance.
The future of Hong Kong rests on the ability of our young people to gain that knowledge - whether it is here in Hong Kong or at an institution overseas like Concordia University - and to apply it wisely in building us into the World City of Asia. And I would like to thank the Concordia Hong Kong Foundation for playing its part in helping future generations of bright students from Hong Kong and the Mainland. While the foundation is still in its infancy, you are already funding two scholarships at Concordia University and more will be available in the years ahead.
However tonight, with your indulgence, I plan to speak in some detail, not about education, but on a topic that, in some ways, is just as important - the need to have a proper roof over our heads. Housing is one of those subjects that can, and does, raise the temperature of debates and features prominently in the economic fabric of Hong Kong.
Earlier this month, for the seventh year in a row, the Heritage Foundation voted Hong Kong the world's freest economy on its Index of Economic Freedom. That is a badge of honour we are proud to wear.
It is an axiom of our Government that we try to keep bureaucrats away from decisions best made by businessmen. At the same time, we seek to provide a stable and predictable environment for business. Check the Budget Speeches of all of my predecessors and myself over the past three decades, and, almost without exception, you will find these words. We recite them as part of a mantra: rule of law, open markets, low taxes, level playing field and a stable and predictable environment for investment.
Business cycles move to their own rhythm; our aim is to do nothing which interferes with them, or indeed exacerbates them. Proof of our success in keeping this pledge is Government spending which has remained historically below 20% of our Gross Domestic Product, lower than any other developed or developing economy.
Where we have unavoidably intervened, for example in the fields of health, education and housing, we have tried always to ensure that the interventions themselves are carefully calibrated, totally transparent and steady enough to be predictable.
However, recently there have been suggestions that, in one area, this is not the case: specifically that we have been sending mixed signals on land supply that may have had an unhelpful impact on the market. Let me take this opportunity to remove this misperception once and for all.
First land supply. In a crowded metropolis such as Hong Kong, land is an especially scarce resource so we must manage it carefully. That means consulting widely, not only on new strategic growth areas, but also on reclamation adjacent to existing development. We also consult the public on changes to zoning and land-use in older areas.
All this is necessary because we believe that the continuous adjustment of our dynamic economy often affects the demand for different types of land development. We want to ensure that the supply of land should complement economic development, as well as providing investors with a predictable environment in which to operate.
We have occasionally used the word "stable" to describe the climate we wish to create and maintain. Some have criticised our use of this word and suggested that our intention is to put a cap on price levels. That is disingenuous. It is just as disingenuous as criticism on other occasions that we are deliberately trying to collapse asset values, or on still other occasions prop up the property market.
Let me put it as plainly as I can. We are not trying to bring prices down. We are not trying to prop the market up. Nor are we trying to put a cap on profits. Our aim is simply to avoid a repetition of the unhealthy volatility prevalent in the market place in recent times. No more, no less.
We recognize that investors invest in the expectation of taking some reward for the risk they take, whether it is in commercial or residential development. We will strive to ensure a steady and sufficient land supply to meet the needs of our economy, and in as transparent a manner as possible so that all have an equal chance.
Similarly in the residential market, we recognize that for the ordinary family including mine the purchase of a home is the single most important investment made in a lifetime. We want to feel confident that this home will be a good investment for our own future and a store of value which we can pass onto our children. This sentiment is always on our mind when we frame our housing policy.
Under a committee which I chair, we have thus mapped out a steady supply of land for housing over the next decade, sufficient to meet a careful estimate of the likely needs of a growing and changing population. This is what a responsible government should do. But we are not, I repeat not, setting any target. The amount of land to be released will depend on the market situation and actual demand at the time. We need to ensure that we are in a position to meet likely demand and the autonomous response of developers to that demand.
Our policy is to supplement private sector production by maintaining a steady production of serviced sites for residential development. As far as possible, we distribute the production evenly throughout the territory. In order to encourage competition, but without compromising town planning priorities, we avoid making any site so huge that only the largest developers can afford. We put these sites, representing up to five years of production, on a published list.
Periodically we release a small number of these sites for sale through auction or tender in order to establish reliable benchmarks for the market. We hold the bulk of the sites in reserve, only to be released for sale on application by a developer prepared to place a reasonable deposit that reflects the prevailing market price. In other words, market conditions determine the amount of residential land the Government may put out for sale. Public revenue from land sale remains a secondary consideration.
Consequently, there can be no question of our forcing developers to meet specific production targets. Nor would we ever flood the market with land. Thus, earlier reports about the Government plans for 730,000 residential flats to be produced over eight years simply missed the point. We do not have such production targets nor do we have a pool of formed land which lasts for eight years. But we do plan ahead by working out a long-term land formation programme and are determined that the developers will never have to drop production on account of inadequate land supply. Our aim is to reassure developers and investors that the land is there, and for all to see in a totally transparent list.
Nor, despite some somewhat bizarre recent reports, would we ever flood the market with publicly built flats for sale. These reports seem to confuse completions with actual or proposed sales. Allow me to clarify. The Housing Authority has sensibly been careful to avoid any negative impact on the market by spreading out its sales programme, and by transferring some projects originally designated for sale to rental. As a result, actual HOS sales would not exceed 20,000 new units in any one year all the way through to 2003/04. By comparison, the Housing Society has a much smaller subsidised flat sale programme in the next three years: less than 2,000 flats a year or even none.
There is a further dimension. Historically, the public and private sectors have contributed 60% and 40% of all new production respectively. Ideally, in an open economy such as ours, the shares would be different, with the private sector providing more and the public less. In the past, that has not been possible because of the huge fluctuations in demand resulting from uneven migration and land production.
With migration and land production now more stable, it should be possible for the private sector to take a larger share. Indeed, we have already indicated our intention to offer more loans in place of direct provision of public sector flats and the Housing Authority has agreed to reduce construction of HOS flats proportionately from 2003/04 onwards.
In this context the experience of both the Housing Authority and the Housing Society of offering increased numbers of loans to its customers over the last few years is instructive. More than half of all applicants for loans under the Home Purchase Loan Scheme buy second-hand HOS properties. As most of them are existing public housing tenants, each loan brings a triple benefit -
* the recipient of the loan is required to surrender his rental flat and this is immediately allocated to a family on the waiting list who clearly needs it more;
* the recipient of the loan purchases a flat of his own choosing, transforming happily from tenant into owner; and
* the satisfied seller similarly moves on to a flat of his own choosing, typically in the private sector.
The overall impact of loans is thus a positive ripple up effect on both the property market and the homebuyers.
None of this should be taken to mean that the Government intends to do less for those in genuine need at the lower end of the income spectrum. We will continue to provide housing for those unable to find an adequate and affordable home in the open market. We remain committed to reducing the length of the housing queue and the time spent in the queue. We have already reduced it from the high of over 150,000 households in 1996 to 107,000 today, and waiting time will be reduced to three years by 2003.
Perhaps I should also mention the Housing Authority's Tenants Purchase Scheme. The scheme was devised in accordance with the Long Term Housing Strategy to provide Housing Authority's tenants the missing rung in the home ownership ladder. It has proved remarkably successful. Over 70% of tenants offered the chance to purchase under the scheme have done so and we will continue to roll it out to all those who are eligible.
In practice, almost all those who enter public housing today do so as potential home owners. Frankly, apart from being socially more desirable, it makes both more economic and financial sense, to assist families to purchase their homes than insist that they remain as tenants for life.
In time the purchasers of TPS flats, just like the purchasers of HOS flats, will be able to dispose of their flats through sale or rent in the open market. This will happen gradually and, as with the loans scheme, its effect will be entirely positive.
Families previously stuck in public rental housing with no way out will be able, indeed will be encouraged and assisted, to climb the housing ladder. In social terms, by privatizing public housing through sale, we are restoring freedom of choice. In economic terms, by unlocking the asset value of these previously subsidised rental flats, we are restoring the bottom end of the market.
To recapitulate, our policy as announced by the Chief Executive is to continue to provide 50,000 housing assistance opportunities a year in the form of flats and loans to people in need of accommodation. We are working on an enlarged role of the private sector in the provision of public assisted housing so as to make the best use of its expertise, resources and experience. Our housing strategy depends on the continued co-operation of the private sector. I trust that we can continue to rely on this.
Ladies and gentlemen, I hope I haven't upset your appetite, not just for the dinner, but for the fund raising efforts of the Concordia Hong Kong Foundation. I wish you every success in your endeavours and look forward to welcoming more Concordia graduates back to help build a better Hong Kong for the future.
Thank you.
End/Thursday, November 23, 2000
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