SCMP Friday, March 9, 2001

Donald bows out while Leung suits up
CHRIS YEUNG
On Tuesday, the eve of his final Budget Address to the Legislative Council, the Financial Secretary said his sixth budgetary blueprint would contain "three nos": no high expectations, no major unfinished business and no empty promises.
The immediate reaction to Donald Tsang Yam-kuen's 168-paragraph speech has been characterised by a few more nos. No new initiatives. No new taxes. No pleasant surprises. No scary surprises. No major gestures.
Mr Tsang joined the chorus by adding: no gimmicks.
The dearth of new measures in the Budget should come as no surprise, given the economic fragility prevailing here and elsewhere, and questions about whether Hong Kong's public coffers have slipped into chronic deficit.
An uncharacteristically humble Mr Tsang hinted his successor, Antony Leung Kam-chung, would bring a bagful of fresh ideas to the job. He said in a television interview Wednesday night: "I have already done six-and-a-half budgets. Hong Kong needs new faces, new thinking. Mr Leung is more aggressive than I. It will be better for Hong Kong."
The outgoing Financial Secretary emphasised the importance of continuity in formulation of the budget but maintained he did not want to leave a long list of unfinished business for Mr Leung's agenda. He does, however, leave a long list of unanswered questions.
These include: whether the SAR Government faces a structural deficit; how best to address the narrowness of the tax base; whether to go ahead with land- and sea-departure taxes; whether to legalise betting on soccer matches; and whether to slap more "green" taxes on polluters.
Key and contentious though these issues are, they are not central to Mr Tsang's message, which he chose to entitle "Honing Our Strengths, Striving to Excel".
If one reads between the lines of Mr Tsang's Budget Address and considers it against the backdrop of Chief Executive Tung Chee-hwa's Policy Address in October - which focused on livelihood and governance issues - a clearer picture emerges of the Government's development and governance strategies over the medium and long term.
Mr Tsang did not launch major initiatives to foster Hong Kong's economic integration with neighbouring Guangdong province. Nevertheless, his remarks on this issue are already being interpreted as signalling a more active government role in helping local companies go north.
"We cannot sit back and wait for this to happen," he said, referring to China's expected accession to the World Trade Organisation. "We must work together with the mainland."
The Financial Secretary confirmed he would lead a high-level delegation of senior officials and business leaders to see for himself China's plans to develop its western hinterland.
Eden Woon Yi-teng, the director of the General Chamber of Commerce, described this as a significant change in the Government's attitude about supporting local companies that do business on the mainland.
"It's [been] an embarrassing issue after the handover," Mr Woon said on a Wednesday-night radio programme. "The Government [has been] worried about the impact on 'one country, two systems' with closer ties with the mainland."
Pro-Beijing figures have openly criticised the Government for failing to think beyond the Shenzhen River in mapping out long-term plans for Hong Kong. They complain that Chief Secretary for Administration Anson Chan Fang On-sang, who co-heads the Hong Kong-Guangdong Co-operation Joint Conference, has failed to play an active role in boosting cross-border co-operation.
It now looks likely that Mr Tsang, who takes over from Mrs Chan in May, will give economic-integration issues higher priority. In line with this, Mr Tsang announced the revival of a scheme to allow in more information-technology and financial-services professionals from the mainland.
Increasing co-ordination in southern China is an idea that has been floated for some time, and any assistance the Government provides to local enterprises is likely to be limited. Nevertheless, re-energising the "go-north" strategy and re-introducing the mainland-talent scheme might foster far-reaching socio-economic changes.
On the domestic front, Mr Tsang revisited a theme covered in the Chief Executive's last Policy Address: the poor and disadvantaged. The Financial Secretary said the underprivileged had not been forgotten, pointing to the Government's $375 million spending package for the disabled, youngsters at risk, and workers with little education. But taxpayers' money would be given only to those in genuine need and assistance would be basic, covering subsistence needs.
While attempting to convey a message of greater governmental responsiveness, Mr Tsang also highlighted the limits beyond which the administration could not go without forsaking fundamental principles, such as fiscal prudence.
For example, he decided not to introduce tax relief for the middle classes, despite grievances among middle-income people about their depreciating property values and allegedly unfair tax burden. Quite the contrary, Mr Tsang raised several charges - including vehicle registration and parking fees - that will hit the middle classes.
Increases in taxes on tobacco and some spirits, though small, are likely to be seen by lower- and middle-income groups as yet another example of government indifference towards their plight. For his part, Mr Tsang sees such taxes as ways to ease the deficit. He believes, perhaps rightly so, that the increases are overdue and too small to lead to real hardship.
Given the small amount of additional revenue involved - estimated at about $700 million - the Financial Secretary might feel confident of mustering enough votes to pass the increased fees and charges into law. But the amount of money involved might turn out to be less important than the mere act of increasing fees.
The hikes could accentuate a deeply held feeling among middle- and lower-income folk that they suffered most in the recession and that the Government remains oblivious to their hardship. Worse still, these people could be highly vulnerable if Mr Leung, the incoming financial secretary, attempts to widen the tax base.
The new Tsang-Leung team led by Mr Tung will, sooner rather than later, have to face pressure from lower- and middle-income groups for relief from their economic pain.
Chris Yeung ( cyeung@brookings.edu ) is the Post's political editor and is currently a visiting fellow at the Brookings Institution in Washington.