Next SAR govt built on strong foundations

Chief Executive candidate John Lee Ka-chiu is set to take over as the leader of the Hong Kong Special Administrative Region within two months. This will be exactly halfway through the initial period of 50 years during which the “one country, two systems” regime is specified to operate, according to Article 5 of the Basic Law. This new government faces demanding challenges. So, how positive is the outlook?

The current government, led by Carrie Lam Cheng Yuet-ngor, has encountered a range of extraordinary headwinds, including a willfully dysfunctional legislature, an intensely destructive insurrection, and the COVID-19 pandemic. All of this has unfolded as the US continuously intensified its antagonistic project to contain the rise of China. However, the government has, given the conspicuously adverse circumstances, dealt with these grim circumstances remarkably well, with substantial assistance from the Chinese mainland. The result, overall, is that the new government will be able to build on strong foundations.

Freedom from fear has been restored and Hong Kong has become, once again, one of the safest big cities in the world. The return of this vital stability is now prominently underpinned by the National Security Law for Hong Kong. The Legislative Council has been converted, by further far-reaching reforms, from being one of the most dysfunctional governance institutions in East Asia to being an active and effective legislature.

The COVID-19 omicron fifth wave has had a huge and deadly impact in Hong Kong. But do not forget the central advantages secured by managing COVID-19 so well over the first two years. By late January this year, the total number of COVID-19 infections in Hong Kong stood at under 14,000, with fewer than 220 deaths recorded. Public hospitals and clinics in the HKSAR handle millions of individual outpatient cases every year. Hong Kong’s successful “zero-COVID” approach underwrote the ability of this program to continue looking after its massive, vulnerable client base very well, until early 2022.

Moreover, again with important help from the mainland, this fifth wave has been brought significantly under control. In many other jurisdictions, omicron infections continue to build in the thousands, day after day, compounding staff shortages and long-COVID problems. Though the battle with COVID-19 is far from over, Hong Kong has returned to a comparatively favorable position within a period of around three months. And it is now equipped with greatly enhanced isolation and additional medical facilities. Much could still go wrong, but those far-reaching, grassroots public health facilities have come through an extremely grim crisis and have been able to return to doing vital, day-to-day work for Hong Kong’s very large low-income population.

Financially, Hong Kong also remains in comparatively very good shape. Massive extra spending has been applied to help the HKSAR cope with the very grim economic fallout from the pandemic. A leading accounting firm, EY, recently reminded us, however, that our fiscal reserves still stand at around HK$900 billion ($114.7 billion) — enough to fund about 1.5 years of regular, total government annual expenditures. There is no fresh debt that has to be repaid. Compare this to the US, UK, Australia and so many other jurisdictions in the developed world, where massive new debt mountains have been created to cope with the economic impact of COVID-19. And now they are all encountering the return of serious inflation and the end to years of super-low borrowing rates.

The incoming government promises both policy continuity and a freshly renewed emphasis on certain pivotal livelihood issues. One way of expressing where it stands is to note that the three primary areas of concern appear to be housing, housing and housing. This is good. The enduring problem of disgracefully substandard housing for many thousands of Hong Kong families is rightly being framed as a paramount concern. It is a very difficult nut to crack, as previous governments have all found. Today, the lack of ready access to land on which to build an ample supply of new Public Rental Housing (PRH) is a primary adverse factor. But it is also true that the very best foundation-building to resolve many other livelihood problems is to advance the availability of PRH on a major scale as a core priority. Every land-supply option should be robustly considered, including the use of marginal country-park land located close to urban areas.

Aged care and grassroots medical and hospital care are also sharply in focus. Recent experience signals how lethally vulnerable this critical infrastructure is when placed under exceptional stress. The steady aging of Hong Kong’s population is adding a profound ongoing stress factor to the acute-stress risks recently witnessed. Hong Kong should, in my view, actively reconsider introducing a low-rate goods and services tax (GST), from which all funds raised would be applied to rejuvenating these two crucial systems. In this way we could devote serious, enduring additional resources to rebuilding our aged care infrastructure and upgrading and extending basic public healthcare. Offsetting mechanisms to protect lower-income groups from the inflationary impact of a new GST should be a part of this package.

There have been regular expressions of concern about Hong Kong suffering slippage as an international financial center because of its very tight COVID-19-related entry controls. These, frankly, are driven by immediate problems and inconveniences. They are real problems, but they are ultimately transitory: The pandemic controls will be adapted over time and resolved. As John Lee recently said, Hong Kong’s unique financial linkages to the massive mainland economy give it “an irreplaceable advantage”. Follow the money: The bankers and their like, in due course, surely will.

It is widely expected that John Lee will provide strong leadership. With the support he enjoys, he is well-placed to put together an effective team. The challenges facing the new government are immense, of course. Apart from those noted above, there are many other local matters calling for attention. Furthermore, the adverse external environment is worse than it has been for over 40 years, driven above all by Washington leading the West (whether they like it or not) to contain the rise of China. And now it looks like the US may favor prolonging the terrible war in Ukraine in order, ultimately, to punish Russia more vehemently.

Professor Lau Siu-kai has stressed that to build trust, John Lee will need to deliver measurably positive results, without undue delay, by demonstrating “courage and strength in execution”. As explained above, the fundamental foundations in Hong Kong are admirable, based on any comparative measure, while Lee is deeply experienced, highly focused, thoughtful and pragmatic. This is a promising combination. Moreover, John Lee is one of the best-equipped people in Hong Kong to deal, as a leader, with the badly disordered external world that China and the SAR face over the coming years.

The author is a visiting professor with the Law Faculty of the University of Hong Kong.

The views do not necessarily reflect those of China Daily.