Universal pen­sion scheme could ease hous­ing short­age

Peter Liang ar­gues that a more com­pre­hen­sive pen­sion scheme will ad­dress Hong Kong’s so­cial prob­lems and ease grow­ing pub­lic dis­con­tent

China Daily (Hong Kong) - - COMMENT - PETER LIANG

Nearly all politi­cians and so­cial an­a­lysts in the city seem to agree that hous­ing is the is­sue which is of great­est pub­lic con­cern. It fol­lows that in­creas­ing sup­ply to make hous­ing more af­ford­able than it is now would go a long way in eas­ing so­cial ten­sions aris­ing from the widening wealth gap.

To this end, the gov­ern­ment has de­voted tremen­dous ef­forts and re­sources in the past sev­eral years to mak­ing more land avail­able for pub­lic and pri­vate hous­ing devel­op­ments. In the process, the gov­ern­ment has drawn bit­ter crit­i­cism from vested in­ter­ests who claim that their land rights are be­ing chal­lenged and from en­vi­ron­men­tal­ists who com­plain about en­croach­ment on pub­lic parks and wildlife sanc­tu­ar­ies.

The long and painful process of ne­go­ti­at­ing through count­less hur­dles to in­crease hous­ing sup­ply is not pro­duc­ing in­stant re­sults that can help to si­lence skep­tics and drum up pub­lic sup­port. In­stead, prop­erty prices have kept rising and the size of the newly built apart­ments is shrink­ing. The pub­lic has ev­ery right to feel out­raged when they see that some apart­ments no big­ger than park­ing spa­ces are put up for sale by de­vel­op­ers.

The set­back of the gov­ern­ment hous­ing pol­icy can be blamed on mul­ti­ple fac­tors, some of which — in­clud­ing the flood of over­seas capital into the prop­erty mar­ket — are be­yond the con­trol of the of­fi­cials in charge. What’s more, in­creas­ing hous­ing sup­ply in land-scarce and densely pop­u­lated Hong Kong is in­her­ently a pro­tracted and costly un­der­tak­ing.

For that rea­son, some economists are be­gin­ning to ask if much more can be done in ad­dress­ing Hong Kong’s so­cial prob­lems and eas­ing grow­ing pub­lic dis­con­tent by shift­ing the em­pha­sis to pro­vid­ing a more com­pre­hen­sive pen­sion scheme to bet­ter cover the needs of the rapidly swelling ranks of re­tired work­ers.

To be sure, the pub­lic’s hous­ing need has to be an­swered. But it must be seen as a long-term project span­ning many years, with re­sults that can never be as­sured be­cause they are sub­ject to mostly un­pre­dictable mar­ket forces.

In com­par­i­son, of­fer­ing work­ers a bet­ter deal for their re­tire­ment is a much sim­pler and more straight­for­ward en­deavor that can be shaped and con­trolled by the gov­ern­ment which has a fis­cal re­serve of about HK$800 bil­lion at its dis­posal. The size of the pub­lic cof­fers is widely deemed to have far ex­ceeded the need to meet ex­pected contin­gent li­a­bil­i­ties, in­clud­ing the manag­ing of the cur­rency peg and cov­er­ing the sea­sonal bud­getary short­falls.

The ex­ist­ing Manda­tory Prov­i­dent Fund (MPF) scheme is too small to sup­port the liveli­hood of the av­er­age re­tiree with mod­est sav­ings. It is made worse by a con­tro­ver­sial pro­vi­sion which al­lows the em­ployer to charge off part of the fund from the scheme against sev­er­ance pay to which the re­tired worker is en­ti­tled.

The gov­ern­ment has been drag­ging its feet in re­form­ing the fund in the face of stiff op­po­si­tion from em­ploy­ers rep­re­sented by var­i­ous in­flu­en­tial cham­bers of com­merce and other trade or­ga­ni­za­tions. They claim that with­out the off­set­ting mech­a­nism the ex­tra ex­penses are too much for many small- to medium-sized en­ter­prises.

It is a tac­tic em­ploy­ers used in

An even more am­bi­tious move to win pub­lic sup­port and good­will is to scrap the MPF en­tirely and re­place it with a universal pen­sion scheme that can pro­vide far bet­ter sup­port to the re­tirees.” Of­fer­ing work­ers a bet­ter deal for their re­tire­ment is a much sim­pler and more straight­for­ward en­deavor that can be shaped and con­trolled by the gov­ern­ment which has a fis­cal re­serve of about HK$800 bil­lion at its dis­posal.”

re­sist­ing the min­i­mum wage pro­posal. But no shop or caterer was known to have been forced out of business when the law was even­tu­ally passed.

In one stroke, the gov­ern­ment can win wide­spread pub­lic sup­port by stand­ing up to the en­trenched business in­ter­est in re­form­ing the miserly MPF scheme. It can count on the sup­port of the leg­is­la­tors in strik­ing down the charge-off pro­vi­sion which every­one who is not an em­ployer hates.

An even more am­bi­tious move to win pub­lic sup­port and good­will is to scrap the MPF en­tirely and re­place it with a universal pen­sion scheme that can pro­vide far bet­ter sup­port to the re­tirees. Cit­ing bud­getary con­straints, the gov­ern­ment has pro­posed one with a means test so ex­clu­sive that it has been deemed un­ac­cept­able.

Even some se­nior of­fi­cials have ex­pressed reser­va­tions about the gov­ern­ment’s ul­tra-con­ser­va­tive bud­getary pol­icy which is seen to have thwarted ef­forts to make much-needed im­prove­ments to var­i­ous so­cial ser­vices. To make changes, a more in­clu­sive universal pen­sion scheme is a good place to start.

Many Hong Kong peo­ple are of­ten con­sid­ered to be ob­sessed with prop­erty. They con­sider buy­ing prop­er­ties as the surest way of hav­ing sav­ings for old age. The in­tro­duc­tion of a more com­pre­hen­sive pen­sion scheme, which is well within the ca­pa­bil­ity of the gov­ern­ment, can help ease the de­mand for hous­ing and, at the same time, boost pub­lic morale.

The au­thor is a vet­eran cur­rent af­fairs com­men­ta­tor.

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