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Speech by FS at Asian Venture Philanthropy Network Conference 2016 (English only) (with photos)

     Following is the speech by the Financial Secretary, Mr John C Tsang, at the Asian Venture Philanthropy Network (AVPN) Conference 2016 today (May 25):

Ms Batra (Chief Executive Officer of the AVPN, Ms Naina Subberwal Batra), distinguished guests, ladies and gentlemen,

     Good afternoon.

     It is indeed my great pleasure to join you all here today for this hugely meaningful conference.

     I would like to start by saying how much we welcome the Asian Venture Philanthropy Network here in Hong Kong. This gathering today is actually refreshingly different to the many investment conferences that we host throughout the year. Not only does it focus on maximising the financial returns of investors, like many other agencies, it also seeks to maximise the social benefit to the community of the investments made by the philanthropic foundations or the investors that you represent.

     Investment, as you know, is not a zero-sum game. Well-considered investments can always bring financial returns to individual investors, and at the same time, increase the wealth of the entire society. In fact, I believe it is the investments that seek to create shared value as well as social and environmental capital that bring the best returns to everyone.

     Of course, it is an idea that is easy to express but it does require careful thought and tremendous effort when put into practice. The key, I believe, is to create an enabling environment for social investing, an environment that allows individuals, businesses and investors to make free and informed choices, also an environment that is conducive to innovation and adaptation of new ideas, and an environment that facilitates effective responses to the constant shifts in economic and social conditions.

     I would like to spend the next few minutes to outline for you three key aspects of Government's role that I personally believe are essential in building this enabling environment, and how Hong Kong fares on various fronts. I shall describe the three aspects as, one, the "necessary negative"; two, the "predictably positive"; and, last but not least, the "inciting of the innovative".

Necessary Negative

     First is the "necessary negative" activity of Government, in the form of regulation and enforcement. It is one of Government's fundamental duties to instil well-defined laws and a robust market mechanism that can be effectively enforced in order to offer certainty and security for all businesses and investments, and help maintain a level playing field that forms the foundation of a favourable business environment.

     For Hong Kong, the rule of law has always been an indispensable building block of our sustained success. The sound and rigorous legal system of Hong Kong protects all entities and their investment. And laws in Hong Kong are constantly under review to ensure that they serve their intended purposes amid changing circumstances.

     The effectively upheld laws and regulations in Hong Kong, together with our free and open market that is gauged at the international level of best practice, help to give confidence to investors and build a climate of trust in which it can make sense for them to invest to bring return over the longer term.

Predictably Positive

     But perhaps more important than the role as a regulator, the Government must also actively, as well as, consistently, invest in social and economic goods, such as education, transport, healthcare, sanitation, housing, etc. This is what I call the "predictably positive" role of Government. This is the role of Government that provides the institutional arrangements whereby a society can ensure the "decent provision for the poor", which, in the words of Samuel Johnson, the famous 18th century English writer, was the true test of civilisation, and that role includes also the advancement of education that enriches the entire society, and the creation of infrastructure that benefits everyone.

     In my Budget in February this year, I have allocated over HK$72 billion for social welfare, HK$77 billion for healthcare, HK$84 billion for education and HK$85 billion for infrastructure. That accounts for over 65 per cent of planned public expenditure for the current financial year. And over the past decade, provision for social welfare has more than doubled in real terms, while education spending has risen by about two-thirds and healthcare by 90 per cent.

     Those figures are impressive in today's fiscal environment, but they raise a pertinent question, and that is, "If Government is doing so much on social investment, what need is there for other investors like yourself?" Thinking about that question leads nicely into the third aspect that I want to touch on, that of the "inciting of the innovative".

Inciting Innovation

     Societies and economies, like young children, they don't stand still. Very often, actions taken to address particular needs at one time lead to the emergence of different needs that cannot be met simply by scaling up the old measures. Investment in education, for example, creates new generations with different expectations and demands on society. Investment in healthcare, on the other hand, gives people longer, healthier lives, but creates new demands on extended care and extended services.

     Even where needs and services remain constant over time, maintaining the quality and effectiveness of service demands requires attentive and creative management. There will always be demand for governments to encourage and to make use of entrepreneurs and ventures that can bring insight and innovation to social services and investments.

     The ways in which governments can do this are many and varied.

     Many people moan about regulation, but too few think about it as having effect not just to prevent harms, but also to spur innovation. Here in Hong Kong, for example, the Companies Ordinance has in recent years been amended to require annual directors' reports to include discussion of environmental policies and performance, legal compliance and relations with employees, customers, as well as suppliers.

     The Securities and Futures Commission is introducing requirements this year for listed companies to comply with guidelines on environmental, social and governance reporting, or to explain why there has been deviation. These new requirements do not just ensure minimum standards are kept. They enable investors to engage in constructive discourse with businesses and make more informed choices about their investments, they stimulate companies to think about how they can create better social and environmental impact for the community in the course of their businesses, and they provide an environment in which the search to achieve competitive advantage for businesses through the creation of shared value can be sustained.

     Large though the scale of government investments is in relation to any individual venture philanthropy or social investor, the scale of private sector investment and private sector employment actually dwarfs Government. Enlisting the private sector's assistance and tapping the latter's expertise in searching for new ways of meeting emerging social needs is indeed crucial to societies successfully meeting the huge changes being brought about by older populations.

     Another way to incite innovation is to stimulate new businesses and services to emerge. For many years, Hong Kong has developed many social programmes not by direct provision through public agencies but by engaging not-for-profit organisations or private companies in delivering these services. Traditionally, funding was provided through subventions or contract arrangements, but since the 1990s we have given NGOs greater room to determine how their subventions are used, and we have set up funding programmes to encourage the development of social enterprises that are able to earn and retain income to help themselves scale up and sustain their activities.

     More recently, in 2013, the Social Innovation and Entrepreneurship Development Fund was set up with the intention of further improving the ecosystem to facilitate creation and growth of social ventures in Hong Kong. I also see great opportunity for cross-fertilisation between social entrepreneurs and the growing body of talent coming up through the universities and the infrastructure and funding schemes that we have been establishing to drive innovation and investment in science and technology.

     Having said that, I would caution that while providing public funds to help stimulate innovation is often necessary, limits must also be recognised. Easy access to public funds can discourage more disciplined private sector investment. And also, by directing attention towards how to apply for public funds, it can take attention away from what is most important, which is attention to the voice of those in need, in the community. We tend to assume that we know exactly what the poor and needy in the community really need, and we tend to treat them as objects for charity and intervention, rather than what they are.

     The author of "The Little Prince" made the point well in his memoir "Flight to Arras" when he wrote, "The dignity of the individual demands that he be not reduced to vassalage by the largesse of others." I think that one of the most interesting areas for innovation in public service is for governments to find ways to give dignity to individuals by giving them a voice in the design of services and the ability to exercise substantive choice. I think this is an area of innovation that can bring benefit to the social investment market as well.

     Here in Hong Kong, we are encouraging government agencies to apply the techniques of user-centred design to listen to and engage with the intended beneficiaries of services, to draw on their own insights to inform and shape the design and delivery of programmes that are intended for them. We are also developing the use of tools that give people more effective choice - like vouchers to purchase services, minimum wage legislation, low-income family allowance, etc - things that enable individuals and families to exercise agency for themselves rather than simply to receive services that have been procured on their behalf by others.

     By giving people means to exercise choice over how expenditure is made, such measures may also create revenue streams that give incentive for investment in ventures that better meet their diverse needs, whether by venture philanthropists or by business investors.

     I appreciate that I have been able to do little more than touch the surface of the subject you have identified for me, but I trust that what I have said may help with thinking, with discourse and action on social investment here in Hong Kong, and also in the many other cities from which you have come.

     So ladies and gentlemen, set against government investments that measure in billions are all the funds under management. In Hong Kong, these add up to huge sums, all driving patterns of consumption of resources, impacts on our environment and on our societies. The more we can develop our discourse to create productive collaboration between government initiatives and private innovation in bringing the assessment of environment and social impacts into the heart of all investment decisions, the better the prospects for people, for our cities and for our planet.

     So thank you once again for bringing this conference to Hong Kong. I look forward to the further articulation of your ideas as well as the further spread of your influence and your investments in society like ours.

     Thank you very much and have a great evening.

Ends/Wednesday, May 25, 2016
Issued at HKT 20:17


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