‘Another wasted opportunity’ David Webb in HT’s Budget Rx #1

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The Budget is not particularly appealing to free market advocates like David Webb, even though there is a wee bit of hope for improved securities market regulation.

Accommodating political rhetoric aside, the Budget’s meatier content is receiving widespread complements, especially when compared to the Policy Address. David Webb, publisher of Webb-site.com, shares his first thoughts on the Budget Speech. Harbour Times contacted him to get his initial impressions just two hours after the speech.

“Overall, I think it’s another wasted opportunity and it’s the ultimate opportunity as well, because I don’t think he will be Financial Secretary after 2017. Next time round he won’t really have time to do anything meaningful before the end of the government due in 2017.

“By wasted opportunity, I mean there is no structural reform and there are more interventionist measures towards various sectors. [Tsang] has been stashing away part of the profit every year as if running the Government for profit rather than for the people.


Welfare ballooning

“The welfare budget has been doubled in the past ten years in nominal terms. The worrying thing is that you [the Government] didn’t do much to the parts of the budget which are not means tested. At the same time, as the Government is saying, we need the retirement payment to be means-tested, while they are still proceeding with things like the two-dollar transport fare concession, which are not means tested, and fruit money? The non-means-tested handouts cost billions every year.


Basic Law breaking?

“The Budget continues to break the Basic Law because it has not balanced the budget and it has not kept the budget in line with the GDP growth. It exceeded that and they are now deliberately running an unbalanced budget and stashing the surpluses in the so-called “Future Fund”. There is a big gap between where they should be under the Basic Law, which was 17% of GDP in terms of public expenditure in 1997-98, and where they are now, which is like 23% of GDP in revenue and 21% in expenditure. Each year they are sucking about 2% of GDP out of the economy and hoarding it in reserves, almost a trillion dollars since the Handover, including the surplus in the Exchange Fund.


Hope for better capital markets regulation

“One interesting thing is that Tsang mentioned the Government will conduct a research on enhancing the regulatory structure in respect of listing matters. I am hoping that means we are going to revisit the question why the Stock Exchange is still a regulator even though it is a for-profit company. Why do we have two regulators over listed companies – the Securities and Futures Commission (SFC) regulating takeovers and the Stock Exchange regulating listing rules? As the Government-Appointed Expert Group said in 2003, they should move the regulatory function out of the Stock Exchange and into the SFC. But we will have to wait and see what the details are on that.

(Budget #106: SFC and the Hong Kong Exchanges and Clearing Limited are planning to conduct shortly a joint public consultation exercise on enhancing the regulatory structure in respect of listing matters.)


Sukuk suckucks

“Meanwhile, Tsang also [regarded] the two sukuk issuances as a “success”. I don’t know what he meant by “success”, but if the goal is to establish a market, then they haven’t – the Government sukuks are practically the only HK-issued sukuks. It’s a waste of time. Tsang said in the Budget, that, “We shall seize the opportunity to issue the third sukuk in a timely manner.” What opportunity is that then?

(Budget #85: The success of the two sukuk issuances by Government in the past two years has demonstrated the ability of our financial market to support the launch of Islamic financial products and meet their financing needs.  We shall seize the opportunity to issue the third sukuk in a timely manner.)


Grandma, you’re doing it wrong

“The last thing is about the Government providing child care training for grandparents. Surely by definition any grandparent has already looked after children and knows how to do it. Before they have grandchildren they have to have children. So why do we need a pilot scheme to provide child-care training for grandparents. As some people would say, it’s “teaching a grandma to suck eggs.”

(Budget #140: A pilot scheme will also be introduced in the first quarter of this year to provide child care training for grandparents.)