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Are YouBeing Served?
Thoughts on the interface betweenHong Kong’s public and private sectors
David O’RearChief Economist
The Hong Kong General Chamber of Commerce
Q-4 2010
Plan of Action•A look at the coming decade
•Some trends, and implications
•What others are doing
•Benchmarking: How we stack up
•Where to pick up the pace, and do better
•The Business Community’s View
In the coming decade . . .•The economy may well grow 3 - 4% per annum, to HK$2.7 trillion, or about US$45,000 per capita for our ~7.7 million people.
•By age, 75% will be 20-70 years old in 2020 (71.7% today), about 16% below that age (18.5% now) and the rest retirees. A lot of retirees!
In the coming decade . . .•The Civil Service will also age, losing its most experienced talent. Others might leave because the MPF isn’t much of an incentive to stay.
•We might expect the 18-20% of residents who pay Salaries Tax to remain fairly constant, but they will have to shoulder a larger burden.
•The challenge for all of us is to do more with less.
• In the past three years, public expenditure has equaled ~20% of GDP. 20 years ago, it was 15%.
•Over the past 20 years, government spending increased about 6.8% a year, the nominal economy 5.4% and real growth 3.8% p.a.
Doing More with Less
•We have the narrowest tax base in the developed world, and we have very strong aspirations for greater political representation.
• If we don’t build a direct connection between the pocketbook, and the policy book, we’re going to get into trouble.
Doing More with Less
•All but five OECD countries use some kind of fiscal rules to constrain spending.
•An average 45% of OECD government spending is out-sourced.
• Private actors provide 23% of OECD government-funded services.
•Here in Hong Kong, we are much more focused on creating efficiency within government, rather than between government and the “customer.”
We aspire to the OECD, but we’re falling behind.
When was the last time . . . ?
•When was the last time a department asked if it really needed to collect certain information in order to do its job?
•When was the last time a proposal for a new initiative began with the assumption that it would be provided by the private sector?
When was the last time . . . ?•When was the last time a regulation was removed from the books?
•When was the last time we benchmarked ourselves against the very best public sector practices in the world?
•When was the last time we asked if the fiscal reserves are too big?
BenchmarkingWorld Bank Doing Business in 2010: 3rd
Starting a business 18th
Registering property
11th
Dealing with construction permits
1st
(b) 45 days OECD avg 25(a) 5 procedures OECD avg 4.7
Total tax rate: 24.2% (NOT 16.5%)
Heritage Foundation Economic Freedom Index
1st
Cites non-tariff barriers such as nutrition labelling
WEF Global Competitiveness Index
75th
Points off for health and education short comings
OECD Government Simplification StrategiesNumber of Governments
30
19
25
30
29
27
21
Reallocate power / responsibility amongdepartments / levels
Streamlines procedures
Use of IT
Streamlines existing laws
Removes obligations
Sets quantitative targets
Has a plan to reduce red tape
N/A
N/A
19982008
N=33
OECD Trends in Regulatory Impact AnalysisNumber of Governments
0
5
10
15
20
25
30
35
1980 1990 2000
#
1985 1995 20051975
We readily accept environmentalimpact analysis requirements, butwe are far behind in providingregulatory impact assessment
N=33
The Civil Service•Hong Kong’s civil service is a huge competitive advantage. And, the business community is happy to pay for it. As compared to the general community, who are mostly tax-free.
•And, we wish Government would do things just a bit better.
• It is time to modernise human resource management.
• It is time to decentralise decision-making, particularly where personnel matters are concerned.
• It should have been done 20 years ago.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8New Zealand
Sweden
Australia
Iceland
United Kingdom
United States
Finland
Canada
Germany
Norway
O ECD26
Belgium
Japan
Korea
Denmark
Netherlands
Switzerland
Portugal
Hungary
Spain
Austria
Luxembourg
Mexico
Italy
Ireland
France
Turkey
Delegation of Human Resource Managementin the Civil Service (0=none; 1=full)
Source: OECD
Where would Hong Kong rank?
Average
UK
Japan
Austria
From Bureau to Trading Funds to . . . ?
What’s next in privatisation?
•Trading funds were a 1990s political stop-gap; they have served their purpose rather well.
•The next step is full privatisation, and graduation of another generation of bureaux to trading fund status.
From Bureau to Trading Funds to . . . ?
Electrical and Mechanical ServicesWater Supplies
Architectural ServicesSurvey and Mapping Office
All manner of transport
Industrial Technology Centre
Vocation TrainingTrade Development Council
Printing Department
Some candidates
Government Laboratory Drainage Services
One last word•The members of the Chamber frequently raise matters of policy and priorities with the Administration and the Legislative Council. That’s our job.
•We understand that many of the issues raised here today are matters of policy, rather than execution. We also understand that the CS has influence over policy.
•We strongly believe Hong Kong is blessed with one of the best civil services in the world, and we want to keep it that way. Our suggestions and advice are offered in that spirit.
Thank Youfor your attention
and for your serviceto Hong Kong