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Following is the transcript of remarks by the Chief Executive, Mr Donald Tsang, at the question-and-answer session of the Joint Business Community Luncheon 2011 held at the Hong Kong Convention and Exhibition Centre today (November 2):
Question 1: Chief Executive, as you may know, many other countries have raised their retirement age from 60 to 65 or above. In order to cope with the ageing problems in Hong Kong, will the Government take the lead to raise the retirement age of the civil servants? Thank you.
Chief Executive: First of all, personally I have an open mind, although, you see, I'm 67. I'm well beyond the 65 you talked about, so first of all I have no personal interest or a personal axe to grind, so to speak, in this. I have an open mind. But let me tell you I have consulted my civil service colleagues on this question not too long ago, and although there are some supporters for this proposal, but the vast majority of them, whether they are those who are senior or they are junior, there is strong reservation for a change of the present policy.
For those approaching 60, they believe they have earned their service and they will be able to draw the pension when they retire at 60, and not at 65. The younger ones, they said, If you allow these oldies to remain, how about our promotion? So there has been a lot of reservation for this to happen, but I know that moods will change. And this is a matter which personally I have an open mind, and I agree with you, for the community to move towards this direction, the Government may have to take a lead, but it is something I would be quite happy to look at again. But it is a big issue. Perhaps it is a matter for good debate for those contending to be the Chief Executive, isn’t it? But, as I said, this is an issue on which the community as a whole must find its own consensus. It is not a question of the Government imposing by law when exactly we shall retire. This is the sort of thing that would cause riots in France and everywhere else.
We have to be very careful how it should be done. And at the moment, there are people who believe, in Hong Kong's case, when you retire at 60 at one job, you'll go on another job. Life expectancy for men is now 80 – that leaves a lot of unspent life in that, and they can continue on, perhaps in a new career. And for women, who are going to 86, perhaps there is some justification also for lengthening the working life in the mainstream career. But this is something the community will have to address, and it must have some consensus. Like the minimum wage policy, you must have a community consensus, we can move forward. As I said, I have an open mind, and every one of us should have an open mind and look at it from a holistic point of view, where the best community interests lie in this.
Question 2: Chief Executive, in your recent Policy Address, you have taken a lot of measures in easing off some of the grass-roots problems, which I think the business community at large will support those measures. However, our concern really is when we have seen the national debt problems in the US and the European countries, it mainly stems from the ever-escalating social welfare spending. Now, would you have any advice for your successors when drawing up their new government budget on how to address and firmly adhere to the principle of keeping the Government's expenditure within the limits of revenue, and to ensure the increase of our welfare spending is kept at a measured, affordable pace? Thank you.
Chief Executive: I think it's not my place to tell whoever running for the next term (how) to run an economy. But I have a firm view on this, and, indeed, if you look at my Policy Address this year, towards the very end, I mention the dilemma which every country, every economy, faces in dealing with public pressure to spend more, on welfare, on spending on education, a whole range of services.
In Hong Kong's case, we are very fortunate, in that even with a low tax regime and efficiency of the Government, we're able to deliver a whole range of services, from social welfare to health care right through education and so on. We also have our social security net. But in order to spend more, which I'm sure that we might need to do, and as a community as a whole, we must have sympathy for people working in the grass roots. But there is always a dilemma there.
We at the moment have stuck by a regime whereby we spend roughly about 20 per cent of our GDP, or we tax to a level about 20 per cent of our GDP. If you want to do more, as I mentioned in my Policy Address, you immediately face a question of what am I going to do, where the money comes from. And money will come from either taxation or from borrowing. So I'm not saying that we shouldn't do it, but it is something which the community as a whole should have to think hard. In the Western Europe case, they do it first by taxation. Having reached a level beyond which you cannot tax more, they started to borrow. What the situation they have found is they can neither borrow nor tax. And this is the crux of the issue facing Western Europe.
Hong Kong is nowhere near that. We have got zero debt at the moment, and we balance our budget and we have reasonable reserves. But in order to advance these things, we have to be careful in making sure the community knows what's the consequence. But I have lots of sympathy for people at the grass roots. We have continued to look after their interests, and making sure, whenever there are additional resources, the resources will be directed to the people at the grass roots, making sure that this is a fairer society, is one which can encourage social mobility and so on. But there is always a price to pay. Our tax rate is now 16.5 percent – it's the envy of a lot of people. But there's also a catching up which other people are doing very rapidly. Singapore is marching up the ladder, and other people are marching up the ladder. And we know we survive on financial services and services industry as a whole operates on very narrow profit margins. If they believe, as for instance some firms in Europe believe, that taxation goes to a certain level, they will move. These are footloose companies, so it is always a price to pay. But I have firm belief Hong Kong is a very sensible place, a very disciplined population who can talk reason, and I'm sure our politicians, including those participating in the race of Chief Executive, are reasonable people too, and that we have to discuss these things openly. I have already done my part, I have delivered my view. My view can be found in the latter part of my Policy Address. I think that is good enough as far as I'm concerned. But it is up to every one of us to decide what we want to do. The freedom of choice is ours, but we must know the price we pay.
Question 3: Chief Executive, you campaigned for CE Election some five years ago. You said that you would consider lowering the profits tax rate to 15 per cent when the time was right. Since then, we have been through the worst economic contraction in many decades and now face another, and our fiscal reserves are more than double. In your opinion, what economic or fiscal conditions would warrant reducing the tax rate? Thank you.
Chief Executive: I know you're going to complain. I made 174 pledges in my manifesto for election in 2007, and those 174 pledges were reflected in my Policy Address delivered in that year. And I have delivered up to now 169 – four of them all related to taxation or tax concessions. As far as profits tax is concerned and salaries tax is concerned, salaries tax has now gone down to 15. I delivered that part. Profits tax was initially 17.5, now brought down to 16.5. But I got stuck. Financial Secretary had a hard time, because we have the financial crisis, because revenue stream is uncertain. I think we should have a lot of sympathy for him, and perhaps for me as well, that I can’t deliver this one quite fast.
We were able to come out of the financial tsunami in 2008 among the first ones in the world because we were able to introduce a lot of measures. We helped the SMEs, we helped others to recover quickly. We did not lose many jobs, and we were able to revive the economy very quickly, and it's growing at a very rapid rate, very robustly. At the moment, I believe we should hold our powder dry, making sure that we have enough ammunition, we have enough resources, to deal with a possible – hopefully not – recession to come. But all the signs are not good. What we have seen in Europe, what we have seen in Greece, and the decision for instance of Greece going into a referendum, it worries the market a great deal. We must make sure Hong Kong is able to cope with this. I'm confident we have. We can do that. But we must keep, as I said, our powder dry. We must be able to have the resources to handle these things when it comes. So I owe you some, still 1 per cent profits tax. Maybe I'll talk to my successor when it comes into being.
Question 4: Chief Executive, in your Policy Address, you've made a number of references to both the Home Ownership Scheme as well as the East Kowloon business district, which we find extremely positive. Can you perhaps give us some more detail of the Hong Kong Government's longer-term vision towards creating a stable real estate market, with particular reference to the annual land supply? Thank you.
Chief Executive: I think I have done quite a bit this year, sir, in my Policy Address. I devoted nearly an hour's speech to land supply and land property market this year. As far as the property is concerned, there are two parts. First of all is the residential property, which I think I have dealt with at length by saying that we are going to have a very aggressive land production programme. The sale of such land onto the market will depend on market conditions. But our determination, our policy, is to provide at least sufficient land to build 20,000 private residential homes, 15,000 public rental housing and then 5,000 Home Ownership Scheme flats. And that is not a fixed number. If the market demands it, we can adjust it also. But at least we're able to produce land we'll feed into the land sale programme to enable us to deliver this sort of production.
As far as commercial land is concerned, I realise that, particularly with Grade A offices, we are running shortages. Well, we must do something about that. I talked about in the speech, for instance, just now reminded you, that we're developing the old Kai Tak site into a new CBD. And I think that is a good idea. We have a very good plan, and that will produce 4 million square metres, which is very good indeed. In addition, we are now releasing land, evicting some of the government offices from Wan Chai and then releasing buildings in the Wan Chai area for office buildings, and after the removal of all the Central Government Offices into Tamar, we have the West Wing, which will be developed into commercial purposes. So all these will feed into the system.
In the past, we haven't got a firm, a regular, a consistent land production system. In my Policy Address, I pledged we are going to do this. But it does not mean that we are going to put all the land onto the market – that will depend on market conditions. But we will have the capacity, the resources to meet sudden demands, when such demands emerge in the years to come both in the residential market and in the business market. But Hong Kong is a small place. We have to think about other things, we have to be creative, including digging into caverns, even on reclamation in non-sensitive areas, and even looking at the density of buildings in the future. I assure you this would be something we'll be working along the lines which I have portrayed in the Policy Address – a regular, a consistent land production programme which would meet the market needs both for the commercial sector and for the residential market. Thank you very much.
This is my last Policy Address, and I cannot thank you more in that, over the last seven years, Hong Kong has seen a great deal, particularly in terms of financial market turmoil. Not of our own creation, but we overcame them. We overcame them quickly. Of course, I must not belittle the work my colleagues do and have done in Government in reacting promptly to the plight of our businessmen, but I must thank you, all of you, for doing your part. I'm sure that, with your heart in Hong Kong, you perform what is needed to your shareholders, to the owners and the businesses themselves, to employees, but also as responsible citizens of Hong Kong, for the larger, poorer part of the community. Thank you very much for an opportunity of thanking you personally. Thank you.
Ends/Wednesday, November 2, 2011
Issued at HKT 20:32
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