We have reached the sixth year of our return of sovereignty to China. In the last few years, democratic development was retarded. The rights and freedoms we once enjoyed, as well as the sound legal system we once took pride in were being eaten up. The government is even going to put a "knife" above everybody's head by legislating on Article 23 of the Basic Law. The downturn of the economy and the record level unemployment rate had led many into financial difficulties. Our economic competitiveness diminished. Where should we go then? To redevelop industries which have long been transferred into the Mainland, to develop information technologies, or to strengthen our position as a financial centre? The government does not have a clear answer for this, and its position has shifted from one to another in the past few years. This endless debate is no consolation to the public, whose imminent threat is salary cut, absence of job security and tax increase. What we need from the Tung administration is an economic agenda that promises economic re-engineering and job creation. Though we are running burgeoning budget deficits, it would be suicidal to cut government expenditure to make ends meet. We have to rely on comprehensive plans for economic growth.
The Tung administration should make rejuvenating the economy and creating jobs its top policy agenda. To promote trade among Taiwan, Macau, Hong Kong and the Mainland, the Democratic Party urges the government to build up a "Greater China Free Trade and Economic Zone". The government should attract foreign investments by means of tax incentives to foreign businesses and trade, as well as adjusting the present immigration policy to attract immigrants who would invest in Hong Kong.
The record level unemployment rate, with its snowball effect on the retail and catering industries, has caused the local economy to shrink further. To boost employment, the government should take the lead in requiring contractors to have the pre-casting work done in Hong Kong for government construction works. This can create jobs in the construction industry, which is one of the hardest-hit industries in Hong Kong. We also urge the government to boost the recycling industry by providing the necessary infrastructure. It can also assist in the setting up of industries in the border areas by attracting the inflow of industries from the Mainland, thereby creating more job opportunities in the manufacturing sector.

The economic recession had also resulted in fiscal deficits which had reached an all-time high level. This has created a dilemma for the government. If the government refrains from cutting expenditure, the deficit will worsen. If the government chooses to cut expenditure, the economy will shrink as a result, which would then result in a vicious cycle. Both cutting government expenditure and increasing taxes to resolve the deficit problem will only make matters worse. A delicate balance is needed.
Economic analyses show that cutting government expenses may not be the right approach to bring under control the deficit. The government should turn to increasing government expenditure to stimulate economic growth and raise revenue by issuing asset-backing bonds and moderately adjusting the tax system.

The advantages of issuing asset-backing bonds are manifold. The government can realize the cash values of its assets immediately, which are not reflected in the income accounts at present. It can also boost the bond market. The low interest rates have led to a lack of outlet for savings, which is a golden opportunity for the bond market to develop. High quality asset-backing bonds can attract foreign investments, or attract those with foreign currency savings to switch to government bonds as an alternative. By issuing bonds, the government can increase revenue by $50 billion.

The tax system can be moderated to bring about an increase in revenue. By making the profits tax and salary tax system slightly more progressive, by introducing green tax, and canceling the exemption of duty on diesel oil, the government can increase revenue by $5 billion.

The government needs to conserve to bring the deficit under control. It should streamline the civil service establishment whenever possible by extending the voluntary retirement scheme. This, however, should in no way affect the present level of service provision, particularly social welfare and medical services provision. All the above measures, if fully implemented, may help the administration save up to $17.5 billion annually which can offset the $15 billion deficit each year.

The government is heading an entirely wrong direction in making the poor bear the brunt of the budget cut. It has asked each government department to cut expenditure by 1.8% across the board. Common sense tells this is unreasonable. The most obvious examples are the Social Welfare Department and the Hospital Authority. An aging population, high unemployment rate and poverty have created a greater demand for social welfare services. But these services will be cut. The government has actually warned of an 11 percent cut in the Comprehensive Social Security Assistance scheme. Instead of alleviating the hardship of the poor, the administration has created more hardship for them. It takes riches out of poor pockets when it is poor. This is a wrong direction.
Instead, the administration should establish a "poverty line" and assist needy families. It should also refrain from cutting social welfare expenses, and medical services for the elderly, the disabled and the lower income groups.

This is not simply mal-administration. This is hard evidence that we have a government that takes care of the rich while the lower echelons have to fend for themselves. Without a democratically elected government, the noises of the masses will go unheeded. Last month, sixty thousand people took to the streets to demonstrate against the legislation on Article 23 of the Basic Law. Mr. Tung dismissed the concerns and fears of the public by implying that they do not understand the legislation, and by telling white lies that the proposed legislation will not be as ominous as it sound. He ignores at his peril this outcry against the legislative proposals, an outcry that signifies a vote of non-confidence in his governance. The rift he has created for himself can only be mended by an assurance that the government is serious about listening to public views, and by publishing detailed provisions of the legislation in the form of a White Bill before introducing it to the legislature. It is not only a rift between those who are in support of the legislation and those against it. It is also a rift between the pro-Beijing camp who are in support of the government and the people who have completely lost confidence in the Tung administration. Social cohesion, that Tung claims to cherish so much, can only be fostered by rebuilding a legal system which promises equal justice for all, and by safeguarding our fundamental rights and freedoms that have been eaten up in the last few years.
Mr. Tung, stop selective prosecution now. Promise us not to seek re-interpretation of the Basic Law. Do not unduly limit our freedom to demonstrate and speak up. Promise us a time-table for democratic reforms. The masses have demonstrated they will not remain silent. They never will.

Yeung Sum
Chairman of the Democratic Party
Directly Elected Legislative Councillor

[South China Morning Post, Jan 08, 2000]