Chamber Submission to the 2022/23 Policy Address

9 September 2022

The Honourable John K C Lee, SBS, PDSM, PMSM Chief Executive Hong Kong Special Administrative Region Central Government Offices Tamar Hong Kong

Dear Chief Executive,

Policy Address Submission 2022-23

In anticipation of your first Policy Address next month, the Hong Kong General Chamber of Commerce (the Chamber) is pleased to present for your consideration our thoughts on the challenges, opportunities and policy measures that we believe will help Hong Kong’s recovery and future development.  These proposals are the result of extensive discussions with our industry-specific committees and experts, as well as views expressed by members in three brainstorming forums.  The Submission is attached herewith for your review.

Following years of severe disruptions as a result of the pandemic and growing geopolitical conflict, Hong Kong’s economy has had to face unprecedented challenges to uphold its status as an international financial and business center.  While we have implemented strict quarantine control regulations and kept our borders closed, the world has already fully opened up.  We are not only losing our business to competitors, but also our talent along with their valuable expertise and skills.

A change in leadership offers an opportunity to take a fresh look at the direction that Hong Kong is heading in, the challenges we are facing and the actions that we need to restore our competitive advantages.  Events at home and abroad have changed our previous way of life forever.  It is crucial that we provide the best operating environment for the economy to grow and prosper, and more importantly, for Hong Kong to remain a world-class city and premier business hub.

We stand ready to assist and support you and your Administration in creating a positive, harmonious, and prosperous Hong Kong for all.

Yours sincerely,

Betty Yuen Chairman Encl.

HKGCC Submission to the 2022 Policy Address

Executive Summary

1.    Relaunch Hong Kong

It is important that a timetable be published for rolling back Covid-related restrictions to enable the public and businesses to plan ahead. Unless unfettered travel including that to the GBA resumes, it would be difficult for the local economy to recover. To protect public health and lives, stronger efforts should be made to achieve a higher vaccination rate amongst vulnerable groups. We also suggest that the Government’s pandemic response be based on the severity of cases rather than the volume to ensure that the local healthcare system is not overburdened.

2.    Human Capital

To address Hong Kong’s human capital needs, a whole-of-government response is needed. This could involve the introduction or updating of legislations and administrative arrangements to facilitate labour importation, and providing incentives such as temporary subsidised housing and fast-tracked residency. On the home front, cultivating an adequate and diversified pool of local workers who are VPET trained, and boosting the Female Labour Force Participation Rate are also necessary. At the same time, barriers to working in GBA should be addressed to facilitate people flows between Hong Kong and the region. 

3.    GBA 

Hong Kong companies have a keen interest in contributing to the overall development of GBA. There are however market barriers preventing them from operating on a level playing field relative to their Mainland counterparts. To capitalise on the advantages and opportunities of an enlarged common market, there should be policy coordination between Hong Kong and other mainland GBA cities in the strategic areas of energy, ports and data to create a synergistic partnership that is mutually beneficial to all. 

4.    Land & Housing

The proposed solutions, both strategic and technical, put forward by the Chamber focus largely on short-term measures or “quick wins” that the Government could implement expeditiously to effectively increase supply, restore affordability, and shorten public housing waiting time. In terms of strategic measures, these would involve cultivating a change in government mindset to reduce red-tape and the revival of the House Committee to serve as an overall project manager to coordinate and ensure the timely delivery of medium to large scale housing projects. As to technical Issues, our recommendations include allowing the transfer of plot ratio, reaffirming the Government’s role as the primary provider of infrastructure, adopting and broadening the use of a standard premium, providing certainty on the processing period, and reviewing Comprehensive Development Area zoning for effectiveness. The Government should also look at measures over the medium to long term by harnessing the benefits of Public Private Partnerships, re-examining its policies on green belts and securing supply through reclamation.  

5.    Innovation and Technology (I&T)

To further develop Hong Kong as an I&T hub, we suggest that the Government (1) lead by example by proactively applying technologies in its operations, (2) adopt a risk management approach to optimise operational resiliency and promote public trust, (3) implement a preferential procurement scheme to support startups, (4) encourage the adoption of innovative solutions across industries by broadening the scope of the FinTech Proof-of-Concept  Subsidy Scheme to other sectors, (5) task the recently established Digital Economy Development Committee with introducing new digitization initiatives and capitalizing on the Northern Metropolis as a pilot for smart city transformation and smart mobility development, (6) accelerate data sharing on city planning and transport operations to build a cross-industry and cross-boundary big data platform, (7) expand Hong Kong’s role as a data and technology super-connector between the Mainland and the rest of the world, and (8) promote IP trading and IP-backed financing in Hong Kong. 

6.    Financial Services

Continued efforts should be made to strengthen our role as the preferred financial gateway between the Mainland and the rest of the world by capitalising on Hong Kong’s unique characteristic as a SAR. In that regard, we have identified a number of areas where the Government should be focusing. These include consolidating Hong Kong’s capital markets whether in terms of IPOs or enhancing and expanding existing Connect Schemes, promoting Hong Kong as the leading offshore RMB centre, attracting talent, and facilitating the use of a Central Bank Digital Currency.

7.    Retail & Tourism

Hong Kong’s consumption and tourism-related sectors such as retail, accommodation, and food services have continued and will continue to struggle as long as travel-related restrictions remain in place. Over the medium to long-term, Hong Kong must re-invent itself as a tourism destination to cater for a market that has been reshaped by the pandemic and evolving consumer demands. These include placing more emphasis on the development of local tourism, creating synergies with GBA destinations, and supporting businesses by facilitating their operations and helping their digitization efforts. 

8.    Liveable City 

The Chamber welcomes and supports the Government’s “Hong Kong’s Climate Action Plan 2050” to achieve carbon neutrality before 2050. To achieve such an objective, concerted efforts are required from the community and across both the private and public sectors. To reduce and ultimately eliminate Hong Kong’s carbon footprint, attention should be given to two key sources of emissions, namely, buildings and transport. Consideration should also be given to the production process and types of input used to curb emissions. For such a green transition to succeed, financial support is critical. Given the significance of financial markets in fostering environmentalism, Hong Kong is in a strong position to reap the benefits of a transition toward a low carbon economy given our intrinsic strengths as a leading international financial centre. 

9.    Port, Transport and Logistics

As a pillar industry, the port, transport and logistics sector is an important component of Hong Kong’s economy and in creating jobs. However, the Port of Hong Kong is facing an ever-changing and increasingly challenging global environment. Our recommendations to sustaining Hong Kong’s competitiveness as an international port include (1) preserving the existing cabotage arrangement with the Mainland, (2) implementing a Smart Port digital platform, (3) creating a Port Authority, and (4) setting up a Land Bank for Warehouse and Industrial Use.

HKGCC Submission to the 2022 Policy Address

1.    Relaunch Hong Kong

1.1    We welcome the relaxation of restrictions since the new term government took office. These included the removal of the circuit breaker system on flight suspensions and the reduction in compulsory hotel quarantine stay to three days with the balance of four days spent under medical surveillance. That being the case and as pointed out by the Secretary for Health, this is “by no means a relaxation because arrivals are (still) subject to stringent testing requirements1.” It is therefore imperative that a timetable be published for rolling back these measures to remove any lingering uncertainties associated with such restrictions and to enable the public and businesses to plan ahead. The stop-gap stimulative initiatives that include the disbursement of consumption vouchers are useful but not sustainable given their nature. Unless unfettered travel resumes, it would be difficult for many sectors such as retail and tourism to recover, which would in turn impose a drag on the overall economy. 

1.2    As a leading international business and financial centre, Hong Kong is home to many financial institutions and regional business headquarters. To uphold our standing and appeal, the Government should facilitate people entering Hong Kong for business purposes under appropriate pandemic mitigation measures to balance the risk of a pandemic outbreak while maintaining international travel and mobility of business personnel.

1.3    We share and support the Government’s overriding goal to protect public health and lives, and, in that context, would suggest that stepped up efforts be made to achieve a higher vaccination rate amongst vulnerable groups that include those with chronic conditions, the elderly and the very young. We also suggest that the Government’s pandemic response should not be so much contingent on the number but severity of cases as this would be more sensible approach in ensuring that the local healthcare system is not imperiled while also managing the impact on our economy. 

1.4    Re-instating and then improving connectivity in the Greater Bay Area (GBA) is important to get Hong Kong’s economy back on-track. It is therefore important to re-open the border with the Mainland and, as such, the Government should finalise negotiations with the Mainland authorities, as soon as health conditions allow and vaccination rates have improved, with the implementation of a mutually recognised testing and vaccination mechanism to allow Hong Kong and Mainland residents to travel freely without the need for mandatory quarantine. This should also apply to key contractors and other specialist resources from the Mainland needed to support construction and infrastructure projects in Hong Kong.

1.5    We believe in the future success of Hong Kong and are confident that we will overcome current challenges just as we have weathered previous ones. Following the difficulties caused by the pandemic, further efforts are needed to re-energise the economy, shore up the confidence of both local people and overseas businesses based in Hong Kong, and create hope for the younger generation.     2.    Human Capital

2.1    Despite the lack of natural resources, Hong Kong has risen to and remained at the top of the competitiveness league over the years by leveraging on its human capital. However, Hong Kong’s labour pool is under threat due to such worrying trends as an ageing population, negative population growth, and, more recently, Covid-related measures and a sharp increase in emigration. We urge the Government to address this as a matter of urgency and priority by adopting a whole-of-government response that addresses critical issues such as training, labour importation, living quarters and other factors of note. In this connection, we believe that the recommendations that were put forward in our response2 to a 2014 Public Engagement Exercise on Population Policy, which includes the setting up of a dedicated agency to steer policy on manpower issues, continue to remain very relevant. The following serves to supplement the points made in the foregoing submission. 

2.2    Dire shortages of professionals and other experienced labour will adversely impact our ability to fulfil plans for the timely delivery of critical infrastructure and housing.  In the short term, the Government should introduce policies to ensure there is an adequate supply of overseas professional and skilled labour that can be brought into Hong Kong to meet market/project needs over the next few years.  This would necessarily involve the introduction of legislation and administrative arrangements (e.g. larger quotas).  Consideration should also be given to incentives, such as temporary subsidised housing and fast-tracked residency status similar to that in Singapore where a 5-year work visa is granted to skilled personnel who can then obtain full residency thereafter, to attract more people to come or return to Hong Kong including those who have emigrated. 

2.3    Given the importance of digitalisation and technological development to an economy, the Government should continue to strengthen STEM education and enhance the attractiveness of the engineering, construction and infrastructure sectors to young people, not only in supporting VPET education but helping to strengthen and fund the development of more apprenticeships, internships and graduate recruitment schemes in Hong Kong and GBA, to help young people get started with their careers. 

2.4    As part of the GBA, Hong Kong offers considerable opportunities for those looking to develop their careers or work for themselves. However, the qualifications of certain professionals such as engineers are not formally recognised in China, which has the effect of creating barriers for Hong Kong companies and their staff from conducting business on the Mainland. In this regard, the Government should lobby the Mainland Authorities to recognise the qualifications and experience of Hong Kong engineers, who wish to work in the GBA, by building on the accreditation regimes granted to other professions under CEPA. Conversely, the Government should work towards establishing a framework to recognise the broad range of engineering licences and qualifications granted by Mainland institutions to facilitate the import of Mainland talent, which would be critical to the delivery of major infrastructure and development projects in Hong Kong over the coming decades.

2.5    According to the Equal Opportunities Commission, the Female Labour Force Participation Rate (FLFPR) in Hong Kong in 2020 was 49.6%3. This compares to the 61% in Mainland according to 2020 estimates by the International Labour Organization, 64.2% in Singapore as of December 2021, and the OECD’s average of 52.4 in 202114. To tap into such a latent workforce, the Government could consider a blend of policies and incentives to promote gender equality and helping women find or return to work. This could include (1) organizing free seminars by professionals to educate employers on how to set up relevant policies and execute them; (2) setting up incentive programmes such as funding schemes to subsidize companies that are willing to provide part-time roles and flexible working hours to women in need; (3) promoting such incentive programmes to employers by using various social media platforms, which are preferred recruitment channels; (4) encourage diversity and inclusion to accommodate candidates who have taken time off from their professional careers; normalize work-from-home practices to save time and cost on commuting to work, and optimize flexible work hours; (5) increase the number of day care centres and helpers; (6) introduce a “Free Care Hours” programme that would entitle eligible applicants to 15 to 20 free care hours per week depending on their income level; (7) relax visa requirements for domestic helpers and workers in the childcare, elderly care and healthcare industries to facilitate the import of such manpower to relieve women a