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Statement by the Chief Secretary for Administration to the Legislative Council on the Report of the Task Force on Population Policy


Following is the statement (translation) by the Chief Secretary for Administration, Mr Donald Tsang, to the Legislative Council today (February 26) on the Report of the Task Force on Population Policy:

Madam President,

I am most grateful to you in allowing me to release the Report of the Task Force on Population Policy at this Council's meeting today.

I set up the Task Force on Population Policy in September last year to develop a population policy as pledged by the Chief Executive in his second Inaugural Speech in July last year. The Task Force comprises the Financial Secretary, eight Principal Officials and relevant Heads of Departments.

Its task was to develop a comprehensive population policy by the end of last year. Given the shortage of time, the Task Force focused on analysing the demographic characteristics of Hong Kong's population; identifying the major challenges and concerns arising from these demographic trends; setting an objective which the population policy seeks to achieve and proposing a set of policy measures to be adopted in the short to medium term to achieve this objective.

Demographic Characteristics

Our people live longer and reproduce at a much lower rate than most communities. The most recent statistics show women living to 85 and men to 78 years. This compares with approximately 75 among females and 67 among males in the early 1970s.

We also have one of the lowest fertility rates in the world. In 2001, Hong Kong women bore an average of just 0.9 children over their lifetime. This is well below the "natural" replacement level, usually regarded as 2.1 children per woman.

Together, these facts mean that the profile of Hong Kong's population, like other advanced economies, is aging rapidly. Indeed, demographic trends indicate that one quarter of our population will be aged 65 or above by the year 2031. Among them, those older than 85 are expected to triple from the current 67,000 to 209,000. During that period, the total population is forecast to rise 30 per cent from 6.72 million in 2001 to 8.72 million but the labour force will grow by only 8 per cent, from 3.43 million to 3.7 million.

This indicates that 5 million people, or 58 per cent of the population, will be economically inactive by 2031.

We are also committed to a programme of admitting almost 55,000 immigrants from the Mainland each year. Apart from births, the entry of One Way Permit holders is one of the main sources of our population growth. Many of the adult new arrivals when they first arrive have few work skills and little education. Hong Kong faces a serious task to upgrade their skills to increase their competitiveness in the labour market and to meet the needs of our economy.

Meanwhile, though the education attainment profile of our local population is continuing to improve, our workforce will increasingly need to demonstrate higher skills as globalisation intensifies competition among developed economies in the shift towards high value-added and knowledge-based activities. We are also experiencing a growing population of migrant workers filling a diminishing number of unskilled jobs available.

Policy Objectives

Madam President, our people are hardworking and resilient. They know the importance of Hong Kong's transformation to a knowledge-based economy for our future success. All of us are alert to the need to ensure our emerging population profile can sustain our economic vitality in the long run. We all cherish the goal to continually improve the quality and standard of living.

With these in mind and in the light of our demographic characteristics, the Task Force considers the primary objective of the population policy is to nurture a population that can sustain Hong Kong's long-term economic and social development.

Our proposed population policy should strive to improve the overall quality of our population in fulfilment of our vision of Hong Kong as a knowledge-based economy and world-class city. In this context, we should also aim to redress population aging, foster the concept of active and healthy aging, promote social integration of new arrivals, and, most of all, to ensure the long-term sustainability of our economic growth. We believe the achievement of these goals will lead to a steady improvement of the standard of living of our people.

Population is a very complex subject. Almost all Government policies directly or indirectly impact on our demography in varying degrees. For this reason, this Report covers a wide spectrum of public policies. We hope that this exercise will lead to a set of coherent and consistent measures being put in place to achieve the objective of the population policy.

Addressing Population Aging and Low Fertility

The Task Force considered our extremely low fertility very carefully. We need to ensure new blood to rejuvenate our population - literally. Yet, parenthood is a very personal matter. We should respect the decisions of individual couples. Accordingly, we have concluded that it is not appropriate for the Government to adopt special policies to promote childbirth.

However, we consider the current tax deduction for third and subsequent children is out of line with the need to increase our numbers. The Task Force recommends that the Government should consider granting the same level of tax deduction for all a family's children, regardless of number.

The One Way Permit Scheme is the single most important factor in our demographic growth and composition. Our population grew by 0.7 per cent last year, only 28 per cent of which was due to net natural increase. Some 72 per cent of growth was generated by the net inflow of people, mostly coming under the One Way Permit Scheme. Given its importance, we reviewed this Scheme. The SAR Government has approached the Mainland authorities, which administer the scheme, in the course of this exercise.

The Task Force came to the view that, unless our fertility rate rebounds significantly, Hong Kong will be increasingly reliant on inward migration for our population growth. We respect the right of family reunion and the Right of Abode conferred by the Basic Law, and we have concluded that the present daily allocation of 60 within the 150 quota for children with right of abode in Hong Kong is appropriate. We have proposed that we should strictly enforce this daily allocation of 60 children and should not allow other categories of One Way Permit holders to make use of it.

This will also help to have children arrive in Hong Kong as young as possible. Academic studies show that there is little difference in the subsequent academic performance of children who come to Hong Kong by the age of nine.

As an improvement to the present arrangement, they will be provided with the added flexibility of choosing to settle in Hong Kong together with their Mainland parents and meanwhile retaining their residence status in the Mainland. This will help to alleviate the distressing problem of split families that has become quite common.

We have agreed with the Mainland Authorities that spouses in Guangdong will be allowed to continue to use un-utilised sub-quotas for long-separated families, which at present is 30 per day. We expect that this will reduce waiting time for spouses in Guangdong. In addition, we will encourage them to take out a Two Way Permit as soon as they have applied for a One Way Permit to allow them to become familiar with life in Hong Kong. This will help them to make an informed decision on whether to settle in Hong Kong while maintaining strong family connections.

For the time being, the total daily quota of 150 will remain unchanged. The SAR Government will liaise closely with the Mainland authorities with regard to the numbers and the allocation among the categories. If there is evidence that the demand falls, we will discuss with the Mainland authorities to reduce the quota.

The main changes to the One Way Permit Scheme I have just described will be put into force subject to agreement and legislation by the Central People's Government.

Fostering Positive Aging

The size of our workforce will shrink as the prime working age population declines. Steps must be taken to reduce dependency of the elderly and raise the productivity of old people. I also urge all people to view aging in a proper perspective. Notwithstanding the challenges presented by a growing population, aging represents first and foremost a success story for our public health policies as well as social and economic development.

To promote positive aging, we believe that we need to revisit and redefine the notion of retirement and old age. We need to promote a new awareness of elderly people, not as individuals needing help, but as people having much to offer and wanting to give. This should form the essence of our policy for the elderly.

Neither the younger generation nor the Government should shy away from shouldering the costs of taking care of our elderly population. They have contributed to the upbringing, education and acquisition of productive power of our entire younger generation. But we must also accept that the more a society spends proportionally on the healthcare of its elderly, the less can be devoted to productive investment or to the society's younger and more productive members. It is essential for us to look far ahead to find feasible and practical ways to develop a sustainable financial support system for the needy elderly. The Health, Welfare and Food Bureau is now undertaking this task.

Quality Improvement

In the immediate future, the simple population numbers do not constitute a crisis. We shall continue to admit new arrivals to reduce population aging and labour force shrinkage. However, quantity alone will not resolve the problem. We do need to attend to the quality of our population, upgrading our skill levels to meet the requirements of economic restructuring.

As most of the new immigrants are admitted for family reunion, we cannot, as in the case of skilled immigrants, exclude those without high education or skills. We shall continue to provide education, training and skills upgrading programmes to new arrivals of different age groups.

Indeed, investment in education is one of the Chief Executive's major priorities. We are taking two main approaches to meet the manpower needs of our economy. First, to upgrade the general level of education for all, and second to promote and facilitate skills upgrading and life-long education among the existing workforce. With the establishment of the Manpower Development Committee, we will adopt a strategic and coordinated approach to manpower planning and development to meet the changing demands of our economy.

Madam President, in order that Hong Kong may emerge successfully from this challenging process of economic restructuring, we cannot rely solely on the pool of home grown talent to raise the overall quality of our human capital. Indeed, the quest for talent and skills becomes a primary factor in determining economic success of developed economies around the globe.

Hong Kong has to attract the best and brightest from all over the world. This includes, of course, the populous and fast-developing Mainland of our nation. We will relax admission of Mainland professionals and talent to live and work in Hong Kong. The present restrictions on specific business sectors and admission of dependent family members will be lifted. We will also take active measures to attract more Mainland businessmen to set up business in Hong Kong. These measures, which we intend to implement in July 2003, will allow Hong Kong to enlarge the pool of talent needed to meet the requirements of a knowledge-based economy and enhance the competitiveness of our demographic structure.

Apart from business talent, we will also attract Mainland talent from more diversified fields, such as the arts and sports, as part of building a multi-faceted, world-class city. The Education and Manpower Bureau will implement a series of measures in September this year to attract more overseas students to pursue their tertiary and postgraduate education in Hong Kong. We think that this will help to create a multi-lingual and multi-cultural environment at our tertiary institutions. This will also further the essential process of building a critical mass of knowledge and skills that will fortify Hong Kong's status as a world city.

Furthermore, as more and more children of Hong Kong families are educated overseas, we should also step up efforts to encourage these young people to return to live and work in Hong Kong.

We will relax our current policy to attract investment immigrants to enhance our economic strength. We propose to allow foreign investors to settle here with effect from the second half of this year. This relates to people who have the financial means to make a substantial investment in Hong Kong but who do not wish to run a business.

We recommend that the threshold should be set at HK$6.5 million. Prospective applicants will be allowed a reasonable flexibility in their choice of investments. Qualifying asset classes will include real estate and specified financial assets. The new policy will apply to foreign nationals, Macau SAR residents and residents of Taiwan. Because of foreign exchange controls, the new policy will not, at this stage, apply to Mainland residents. For Mainland businessmen, we propose to encourage them to make greater use of the current multiple visit permit system in coming to Hong Kong to look for investment opportunities. We will consider amending our immigration law to allow visitors to engage in a wider range of business-related activities in Hong Kong. We believe that these new measures will help generate greater economic activity and in turn more employment opportunities in the SAR.

Integration and Long-term Sustainability

Madam President, Hong Kong has a significant transient population. It consists of imported low-skilled workers who are allowed to stay in Hong Kong so long as they remain employed.

They currently number almost 240,000, most of them employed as domestic helpers. A much smaller number is mainly admitted under the Supplementary Labour Scheme.

Despite the economic downturn in the past few years, there is no indication that the admission of foreign domestic helpers has slowed down. They make use of a wide range of local facilities and services. Because of their considerable and growing number, we have to include a review of our foreign domestic helper policy as part of our exercise.

The Task Force recognises the contribution by foreign domestic helpers in providing help to families who require full-time live-in domestic helpers. This may not be readily available from local domestic helpers and we recognise that there are two distinct markets for foreign and local domestic helpers.

The Task Force considers that several improvements should be made to enhance the integrity of the mechanism of admitting foreign domestic helpers with the aim of minimising abuse and displacement of local jobs by foreign domestic helpers.

Since the enactment of the Employees Retraining Ordinance in 1992, employers importing workers other than foreign domestic helpers have been paying a levy. It is a well-established principle that employers turning to imported workers, rather than local employees, should contribute towards the training and retraining programmes. At present, only employers under the Supplementary Labour Scheme are required to pay a levy. We recommend that the same levy, currently $400 a month, should also apply in the employment of foreign domestic helpers. The levy will be imposed under the Employees Retraining Ordinance. This will take effect from October 1, 2003. According to existing arrangements under the Supplementary Labour Scheme, the levy will be paid upfront by the employer and will apply to new contracts and renewal of contracts. To provide flexibility to employers, we will allow an option for the levy to be paid by four instalments, i.e. $2,400 each. The first instalment should be paid before the granting of a visa to the foreign domestic helper. Employers under the Supplementary Labour Scheme will enjoy the same flexibility.

The Employees Retraining Ordinance also stipulates that if an imported employee fails to arrive in Hong Kong having been granted a visa or having arrived but fails to complete the contract of employment, there will be no refund of the levy paid, but the Director of Immigration will take into account the relevant balance if a fresh application for an imported employee is submitted by the employer within four months.

As I have said, there is an urgent need to upgrade the skill levels and to provide for the life-long education of our workforce, against the backdrop of economic downturn, high employment and restructuring of our economy. Given the increased demand for resources in this regard, there is a strong case for expanding the source of levy income. Given all these considerations, we believe that employers of foreign domestic helpers, like employers of other imported workers, should contribute towards the training and retraining of the local workforce.

Along with the significant downward adjustment in various local economic indicators since the last adjustment to the minimum allowable age for foreign domestic helpers in 1999, the minimum allowable wage for foreign domestic helpers will be reduced by $400 per month for employment contracts signed on or after April 1 this year. The Labour Department and Immigration Department will step up enforcement actions against abuse of foreign domestic helpers, such as underpayment, undertaking non-domestic work or moonlighting. We hope that these actions will help to prevent exploitation of migrant workers and promote employment opportunities for local domestic helpers.

Madam President, it has become clear that Hong Kong faces a severe fiscal situation and is running a sizeable deficit.

Many public services in Hong Kong are heavily subsidised and various sectors in the community have expressed the view that the Government needs to take urgent steps to address rising public spending on social and other services, particularly in the light of population aging and continuing influx of new immigrants.

Some of the subsidised services such as public rental housing and social security benefits currently require applicants to meet a certain length of residence in Hong Kong; others such as public health services do not. Public health services are available not only to permanent and non-permanent Hong Kong residents, but also to the transient population such as foreign domestic helpers, migrant workers and visitors including Two-Way Permit holders.

The Task Force considers that in developing the population policy, the opportunity should be taken to address this anomaly. We have focused our attention initially on the Comprehensive Social Security Assistance Scheme (CSSA) and public health services which together took up 22 per cent of total public recurrent expenditure in 2001/02.

We consider that there is a strong case for applying a uniform seven-year residence rule for providing all heavily subsidised social services and public health and hospital benefits.

Eligibility based on a seven-year residence reflects a resident's contribution towards our economy over a sustained period. For CSSA, the Director of Social Welfare will have discretionary power to grant the allowance for exceptional cases on compassionate grounds. This measure will take effect from a date to be decided. All current residents will not be affected. Young children will be exempted and the measure will apply only to those aged 18 and above.

We further propose that, in principle, the same residence requirement should apply to users of subsidised hospital and public health benefits. We will initially apply it to Two Way Permit holders and visitors. This will take effect from April 1 this year. For the rest of the affected population, the Health, Welfare and Food Bureau will need to conduct an in-depth study to assess the impact before considering when and how this will be applied to them in the longer term.

Madam President, I would like to stress that these measures are to ensure resources are allocated on a rational basis for the provision of benefits to Hong Kong people.

In approaching this complex issue, we have to strike a very fine balance between the interests of different sectors and pay due regard to our long-term fiscal balance. We have noted the practices in other places regarding eligibility for public benefits.

Hong Kong is a free, open and cosmopolitan society. We will continue to open wide our doors to immigrants who treasure the free, enterprising, innovative society that Hong Kong offers and who are ready to capitalise on the bountiful opportunities that we provide. At the same time, we encourage new arrivals to be self-reliant.

We believe that our continuous efforts to promote retraining and skill upgrading will enhance their skills level and integration of the new immigrants with the rest of the community. We also encourage the community to take a positive attitude towards the new immigrants, some of whom have already achieved remarkable results in their academic and business pursuits in Hong Kong.

The Need for Regular Review

Within the six months it was given to work, the Task Force sought to analyse the main social and economic challenges that our demographic trends readily present to us and have explored a set of practical measures to be taken in the short and medium term to address these challenges.

Having worked on this subject, I have come to realise that many factors affecting the demographic conditions in Hong Kong are beyond the control of the Government. There are market forces in action and we have to respect the choices individuals make. We also accept the issues involved will inevitably change.

Above all, Hong Kong is integrating more and more closely with the Pearl River Delta. This will carry far-reaching consequences on demographic developments in Hong Kong as more and more people move across the Hong Kong and Pearl River Delta boundary in both directions.

The continuing review of our population policy is therefore essential. The Task Force recommends that there should be dedicated resources in the Government to continue to oversee the population policy, to follow up on the longer-term issues and to review the implementation of the various policy measures regularly.

The publication of this Report denotes not the end but rather the beginning of a mammoth task. I appeal to Members of this Council and the community to support this important exercise, which carries long-term consequences for us and for generations to come.

Madam President, we may not have sufficient time today to go into details of each and every aspect of the proposed population policy. If Members so wish, I would be more than happy to discuss the subject at my meeting with the House Committee on Friday. Relevant Bureaux are also prepared to brief their respective Panels on individual policy measures as appropriate.

End/Wednesday, February 26, 2003


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