SCMP Friday, October 5, 2001
Give people 'what they deserve' . . . a break
Officials have been doing their best to manage expectations ahead of Chief Executive Tung Chee-hwa's Policy Address on Wednesday. But judging from the tenor of calls to radio phone-in shows, this is no easy task.
Many people are coping with desperately difficult economic situations and are in no mood to have spin doctors tinkering with public expectations. The people expect the Government to take decisive action to revive the economy.
The intensity of social discontent can be seen in this recent sampling of views from my morning programme on Commercial Radio, Teacup in a Storm:
- Ms Leung is irritated by Tsang Hin-chi's remarks to the press. The local delegate to the National People's Congress Standing Committee says homeowners with negative equity - that is, those whose property is now worth less than the outstanding balance on their mortgage - deserve what they got. The implication is such people were greedy and bought beyond their means in expectation that prices would rise and allow them to sell out at a profit.
Ms Leung, who is single, says she bought her apartment for her own use, not for speculation, and that it was originally affordable because she was earning $40,000 a month.
But her salary and the value of her property have since shrunk, and she is having to draw on savings to make her mortgage payments. She cannot sell the flat because there is no market for it and because she would then have to pay the bank the difference between the selling price and the balance on her mortgage.
She notes approvingly a comment she read somewhere to the effect that what Mr Tung has done to Hong Kong's housing market is more terrifying than what Saudi-born dissident Osama bin Laden is alleged to have done in last month's terrorist attacks on America. Whereas bin Laden allegedly brought down the World Trade Centre, Mr Tung has destroyed the value of all the residential real estate in Hong Kong with his announcement that he had dropped his target of expanding the housing market by 85,000 new flats a year.
- Ms Cheung says she married in 1994, bought a subsidised flat through the Home Ownership Scheme (HOS) in 1995 and, unfortunately, was widowed in 1996.
She says that when she asked Housing Department officials to help her switch to a smaller unit, they dismissed her request as a personal matter and said they were in no position to help. She struggled to keep up with her mortgage-interest payments until the company she worked for folded and she lost her job. Since then, she has depended on assistance from relatives.
The Social Welfare Department has nothing to offer her, and the Employees' Retraining Board considers her over-qualified for its programmes. She is not sure whether she has slipped into negative equity, which would put her in the category of those who, in the view of the NPC's Mr Tsang, "got what they deserved".
- Ms Lee, who says she can no longer work because of an occupational disease, lives with her son and daughter. Her son is a high school student, and her daughter was until recently the family's sole breadwinner, earning $10,000 a month. But her daughter was laid off by United Airlines last week, and the family's savings will last only a month. They now live in a state of anxiety.
- Mr Chow says his wife lost her job last year, making the family entirely dependent on his monthly salary of $24,000. Most of this goes towards the monthly mortgage payment of $17,000. The family is caught in the negative equity trap and cannot afford to move to smaller quarters. Instead, they are making ends meet by cutting back on basic expenses, but Mr Chow worries his employer might cut staff or salaries.
He says his mortgage-interest rate is now the prime rate plus two percentage points and he hopes the Government will do something to reduce this to prime minus two. This would save the family several-thousand dollars a month, which would be a big help.
There are many other similar cases. Further government inaction is clearly unacceptable to these people. They expect the Government to play a more active role in tackling the current crisis. Many remember how the pre-handover administration responded 12 years ago, when the world was traumatised by the bloody Tiananmen Square crackdown and Hong Kong's stock and property markets plummeted. The colonial government kept its cool and hammered out a $170 billion package of infrastructure projects, dubbed the Rose Garden scheme. Although some people were still eager to apply for foreign passports, the Rose Garden scheme did succeed in stimulating the economy and boosting morale.
The Gulf War ended in 1991, China's open-door policy regained momentum the next year, and signs of prosperity re-emerged in Hong Kong. Those who had emigrated started to return.
Today's problems are different from those of 10 and 12 years ago - for one thing, Hong Kong is now in a stronger fiscal position. In 1989, the territory had fiscal reserves of only $110 billion, and the Rose Garden plan ended up costing $170 billion. Chinese cadres worried Britain would deplete Hong Kong's reserves before the 1997 handover. After extensive negotiations, Britain guaranteed it would leave at least $25 billion in the future SAR's coffers. In the end, the final figure was more than $70 billion, achieved mainly through the policy of charging high premiums for government land.
The SAR is now sitting on fiscal reserves of more than $400 billion. Suppose we launch a "Bauhinia Garden" scheme on a similar scale as the Rose Garden plan, with the Government injecting, say, $800 billion into new infrastructure projects. Even if we invested just $200 billion - half the fiscal reserves, the impact would be substantial. Surely we can afford to do this - after all, in addition to our fiscal reserves, we have more than $900 billion in foreign-currency reserves.
Such a huge investment would create jobs, spur domestic consumption and make Hong Kong more competitive in the long run. Money released through a Bauhinia Garden scheme could be used to construct more public housing, accelerate urban-renewal projects, fortify risky slopes, build more primary and secondary schools, lower student-teacher ratios, construct a fourth cross-harbour tunnel and erect a bridge linking Hong Kong with Shenzhen and Zhuhai. The list could go on, but the idea is to make the best use of our idle reserves to stimulate the economy and bring down the unemployment rate, now 4.9 per cent.
The Government should also take action to ease the burden of the estimated 300,000 families with negative equity. This substantial portion of the middle class has already become a major source of social discontent which could worsen if left unaided. Authorities could intervene by restructuring mortgage payments, many of which are still fixed at interest rates well above prime.
War in Central Asia looms in the wake of the terrorist attacks on America, and Hong Kong is likely to slip into recession even sooner than previously expected. Unfortunately, Financial Secretary Antony Leung Kam-chung appears unconvinced of the importance of taking decisive measures without delay. Mr Leung continues to suggest that the roots of our problems are external and that the Government can do little to buck the global trend.
In his National Day speech on Monday, Mr Tung called upon the people of Hong Kong to stand united. But the problem is not that Hong Kong people do not want to foster a sense of solidarity; the problem is that the Government gives us little to rally around. A $200 billion Bauhinia Garden scheme might be just the ticket.
Albert Cheng King-hon (
) is a broadcaster and publisher.