A financial tale of two cities

The Straits Times, March 7, 2007
By Lee Huay Leng

HONG KONG'S Financial Secretary announced an extremely generous budget, with surplus amounting to HK$55 billion or over S$10 billion. The Hong Kong government proposed that 'wealth be shared among its people'; HK$20 billion in tax concessions and one-off incentives would be given to different strata of society. The Hong Kong media called it 'goodies for all'. Amid the praises received, the criticisms by the pro-democratic camp were perceived as routine and will not have any effect.

One way to interpret the Hong Kong Budget is to see it as a 'pre-election Budget', just like Singapore's 2006 Budget was perceived.

Hong Kong does not have general elections but the race for the Chief Executive post has begun. The Hong Kong budget pleases the citizens and gives the current Chief Executive an edge.

Moreover, the favourable external economic situation in the past one year had brought Hong Kong much wealth to fill up its coffers. Hong Kong Financial Secretary Henry Tang might run for the Chief Executive post in future. The Budget might help him to collect brownie points and pave the way for his future.

After viewing the full Hong Kong budget speech, I felt that Hong Kong's tax reductions and handout measures were clear and swift, in stark contrast to Singapore's complicated tax reductions and assistance packages to help the disadvantaged.

When it comes to giving, the Hong Kong government does so without much further ado. Singapore's handouts, which were really not much in some people's views, come with many strings attached. A government will want to do good when it has the money. The Hong Kong government earmarked millions of HK dollars to implement schemes to help its poor, such as providing 'transport support on a trial basis' to encourage the unemployed or low-income residents living in remote areas and in financial difficulties to take up employment and find work further afield. It is a clear concept and easily comprehensible.

The Singapore Government, however, more often than not, has made it difficult for the needy to understand how the assistance packages work. Designing these schemes based on an engineer's mode of thinking makes the explanations very technical. Coining English terms and literally translating them into Chinese words does little to help the people waiting to receive aid. Sometimes, they simply do not understand.

Hong Kong's straightforwardness and Singapore's complexity tell much about the differences between the two cities.

The differences stem from different development conditions and cultures shaped over the years.
Hong Kong, with its narrow tax base, is financially more vulnerable than Singapore. After being hit by the post-1997 Asian financial crisis, Hong Kong's fiscal revenue was obviously driven by its real estate industry. The sluggish property and stock markets during those years had a direct impact on its consumer market. Huge fiscal deficits arose and the wages of civil servants were cut, much to the chagrin of some 180,000 of them. 'Economic transformation' was oft-mentioned by the Hong Kong government but remained as lip service.

Hong Kong eventually resolved its economic woes by turning to the central government for help. It was also blessed with some bouts of good luck. With the external economic situation picking up and large inflows of capital, the situation naturally improved. Yet the mentality of making a quick buck and spending big bucks did not change.

Looking at the Budget speech, one wonders if Hong Kong has learnt its lesson from the past few years. It seems it could afford not to engage in introspection, nor does it have time for long-term planning.

As money rolls in quickly, people must act fast. Hong Kong is busy making money and spending it. Make merry while it lasts - this is an apt description of Hong Kong.


Singapore's Budget reflects careful planning which takes into consideration the immediate and long-term concerns of the country.

Foreseeing that the gap between the rich and poor will widen, the Government introduced the Workfare Income Supplement Scheme, which is designed to narrow the income gap.

The Government wants to help the poor but it has to be seen to be fair; it has to take precautions to prevent laziness and dependence, which is part of human nature, from rearing their heads and to avoid the Western-style welfare system.

It values education. But it did not channel the funds directly to the Ministry of Education. Instead, it came up with the Edusave Account. As if one scheme is not sufficient, the Government has now introduced the Post-Secondary Education Account, taking care of the education of the people after they complete their secondary school education.

Handouts from the government to the people will certainly not come as easily and quickly in Singapore as in Hong Kong.

But putting aside one's immediate interests, one can see that the Government's sights are always set on the future. The general election, held every five years, is important. But in comparison to the dangerous situations Singapore has to face frequently, elections are just a low threshold which has to be crossed.

Fifty years into the future, Hong Kong will still exist. The question is what kind of Hong Kong will it be? Besides defending the freedom of 'two systems' in the 'one country, two systems' concept, what conditions does Hong Kong have to uphold its freedom and what is its long-term strategy? I have yet to see any.

Hong Kong's sister provinces have mapped out their long-term positions and are working hard to achieve them.

In contrast, Hong Kong seems to have found its own position and has done all it could have done. Yet, it also seems to be waiting for the central government to affirm its position and therefore does not need to do much.


The constant concern of Singapore is not what the island will be in 50 years' time. Rather, its concern is whether the country will still exist 50 years down the road. In the face of tides of change, it cannot afford to drift along. It does not have the means to behave like a 'profligate son'. It only has neighbours which often sling arrows at it.

Even in distributing red packets, the Government is not very generous and seems to calculate every cent. The money it spends on investments may not always be right but much thought has been put into each venture. The Government weighs the pros and cons, fearful of being cheated.
Singapore now reduces its corporate tax, bringing it closer to Hong Kong's levels.

Hong Kong will invest more than HK$20 billion in providing free Wi-Fi wireless services on the island. It seems that Hong Kong is taking Singapore head on. But looking at Singapore's Budget, while the island is deploying its tactics, it is in fact preparing for the next battle.


This commentary, translated from Chinese, appeared in Lianhe Zaobao. The writer is the paper's Local News Editor.