Submission on Policy Address and Budget of 2014

Government Policy on Insurance

(1) Complement Support for Health Protection Scheme (HPS) and Avoid Regulating Private Medical Insurance Market

The community is still divided on the proposed HPS regarding operations, regulations and product design. The Government has released a draft plan but its content differs from proposals of the last Administration in many ways. For instance, private medical schemes would also be brought under the regulation in the latest plan. In my view, regulating the private medical insurance market would unduly hinder development. In fact, the private medical market is adding 150,000 new policies and growing premium at doubt-digit rate per year. According to official statistics from the Insurance Claims Complaints Bureau, complaints relating to hospitalization and healthcare insurance are as low as 100 odd new cases yearly. All indicators show that the medical insurance market is mature and vigorous. Thus, I ask the Government to listen and avoid regulating the private medical insurance market. On the other hand, it should ensure that supports for the public scheme are complementary starting from hardware and manpower, like bed spaces and qualified personnel, to ensure successful launch. Thus, the goal of HPS would be achieved and the public would enjoy its benefits.

(2) Turn the $50 billion Healthcare Insurance Pledge into Sinking Fund

Despite substantial alternation of the original plan, the public is still expecting delivery of viable and sustainable healthcare insurance. The Government should review adequacy of the sum of $50 billion already earmarked in light of inflation, aging society and rising costs in the leading years to launch in 2015 or beyond. It should also renew its long term commitment. I recommend turning the pledged sum into sinking fund. With replenishment of investment returns, exhaustion of the pledged sum after launch might be avoided. Actually, sustainability is essential for the success of healthcare insurance. The Government should promptly turn its pledge into fund for such purpose.

(3) Carry Out LegCo Proposals on Fighting Insurance Fraud

In the report of Joint LegCo Panels on Transport Insurance released in July 2012, several measures were proposed to fight insurance fraud. The Police have adopted many of them, including dedicated reporting procedures for insurance, and pledged to follow up suspected fraud in reported traffic accidents. However, the Government has neither followed up the remaining recommendations nor responded positively, including fraud involving Hospital Authority sick leave certificate and case overstatement. I urge the authorities to further study the report, to adopt its recommendations and to chase after insurance fraud relentlessly.

(4) Extend Tax Concessions to More Insurance Types

In his election manifesto, the Chief Executive has pledged to offer tax concessions for healthcare insurance as an incentive for longer term personnel planning in medical expenses. In my view, such tax incentives should be extended to all insurance types by phase, including life and retirement benefits etc., to encourage people making life long planning to ease the burden of the Government in future.

(5) Improve Competitiveness of Offshore Captive Insurance

In the Budget of 2013/14, the Government did move ahead in developing offshore captive insurance. It proposed to reduce Profits Tax on captive insurance to the same extent for re-insurance, i.e. 50 percent concession. Hong Kong has taken the first step but is still behind Singapore, our main rival where the same offshore business is free of corporate tax. I recommend the Government to reduce concessionary tax rate to zero progressively with a view to improving competitiveness in captive insurance.

(6) Continue Discussions on Particulars of the New Insurance Authority

At this juncture, preparation of the independent Insurance Authority is entering its final stage for commencement in 2015. However, there is still room for improvements in the latest plan and our industry still begs to differ in certain areas. I ask the Government to continue dialogue with our Industry on particulars of the Bill, including the best mode of operation and practice, with the view to establishing the new Insurance Authority on time.

(7) Continue Discussions on Particulars of Policyholders’ Protection Fund

Following completion of consultation last year, Financial Services and Treasury Bureau has released the final proposal on Policyholders’ Protection Fund. There would be two separate plans for life and non-life insurances. I urge the Government to pay special attention to views of the insurance industry and avoid unduly improving protection for consumers at the expense of excessive burden to insurers.

(8) Improve MPF

The Mandatory Provident Fund Schemes Authority (MPFA) is studying specific reforms to further reduce fund management fees. Core Funds subject to fee control are under study. Further measures to reduce administrative costs would be released including electronic payment and settlement system in mid-2014. I wish MPFA would accelerate these studies and step up publicity on low fee funds like benefits of Index Funds. Automation of process, simplification of administration and posting of fee revisions should also be stepped up. Thus, people would be promptly informed of actual reductions in fees.

Policy on Economy and Livelihood

(1) Make Better Use of Fiscal Reserves to Stimulate Investment and Refund Surplus to People

Hong Kong has fiscal reserves of over $700 billion. It is time to get out of legacy of conservatism and get started on investment for future. I oppose indiscriminate cash distributions but support making better use of public finance to help overcome social problems. A simple and straightforward way is cutting both Profits Tax and Salaries Tax. Lowering Salaries Tax is tantamount to refunding fiscal surplus and increasing disposable income to stimulate consumption. Apparently, revenue would suffer from lower Profits Tax but actually it would rebound with increased reinvestment. Competitiveness in commerce and trade would also be strengthened. The best illustration is perhaps abolition of Estate Duty earlier that has facilitated development of international estate management centre in Hong Kong. On the other hand, surging housing prices and rental in recent years are in effect “land tax” in disguise for occupants and investors. Lowering Profits Tax and Salaries Tax would alleviate indirectly rental burden of business and people. Moreover, I ask the Government to make better use of public spending for helping the poor with measures like subsidies for low-income earners.

(2) Lifting Total Competitiveness

Hong Kong is facing crucial challenges in competitiveness. I ask the Government to response positively with measures that would help upkeep our competitiveness. My recommendations are:

a) Accelerate study on formation of Guangdong-HK-Macao Pilot Free Trade Zone (FTZ) and seek close cooperation with the China (Shanghai) Pilot Free Trade Zone;
b) Launch headquarters economy to attract multinational enterprises setting up regional offices, and offering more refined jobs of global perspective and challenges that would help foster more competition with businesses around the world;
c) Accelerate study on lifting competitiveness of logistics as one of the four pillar industries because Hong Kong is losing ground as leading container port, slipping from first to third place in the world league and might be overtaken by Shenzhen not before too long; and
d) Resolve shortage of international school places without delay, followed by longer term planning, to facilitate global talents bringing their families along to work or invest in Hong Kong.

(3) Improve Competitiveness of Young People

Young people are our future. I urge the Government to make better plans for their development in longer term. My recommendations are:

a) Promote general education to help young people better master language, communication, management and accountability skills so that they may demonstrate excellence in different jobs; focus should be placed in cross-industry capabilities in future education, particularly at the tertiary level;

b) Offer positive assistance to young entrepreneurs as popularity of internet shopping allows them to start new business at much lower entry level; online business fits their profile and appetite because of less start-up capital and their competence in information technology;

c) Continue raising social image and status of construction and other industries to encourage more young people who are not good in studying to become skilled workers instead; improved image of industrial workers in recently years is attracting new bloods; and
d) Provide positive information on further education and employment to young people, i.e. practical and constructive advices that may truly help them face the future rather than empty words or customary doctrine.

(4) Promote Safe City Policy

Lately, accidents of considerable casualties have been recurring simply because of aging urban facilities, sloppy safety awareness and lax law enforcement. I have moved to debate on “Building a Safe City” at LegCo earlier this year and the Motion asks the Government to set up an inter-departmental committee to review extensively laws related to municipal safety as a means of upgrading safeties in Hong Kong. According to a progress report submitted to LegCo, Policy Bureaux are following up on traffic safety, computer–related crimes, information system protection, building safety and occupational safety. I wish the Government would continue monitoring potential perils in the city and take preventions for a safer Hong Kong.

(5) Resolve Early Conflicts between Mainland and Hong Kong

I am paying special attention to conflicts between Mainland and Hong Kong, including children born of non-resident parents (NRP children), shortage of formula milk powder and miscellaneous conflict of different magnitudes. These incidents indicate that the spirit of mutual understanding and mutual reconciliation that Hong Kong used to enjoy is diminishing. I wish the Government would resolve these problems at root causes and commence work on harmony between residents on both sides of the border. They would include concrete population policy, comprehensive guidelines on migrants and NRP children, and estimates of NRP children resettling in Hong Kong. Thus, medical and educational policies would be able to meet these challenges, and local residents would realize that their welfare entitlements are not compromised. Actually, the Government should help people understand Mainland travelers, be they visitors or migrants, are valuable assets not liabilities. Conflicts merely arise from differences in culture and habits. In fact, similar problems occurred in postwar years when an influx of resettlement from Mainland did create social tensions. These migrants had subsequently proved themselves and contributed enormously to our socio-economic development. I wish the Government would do a better job in promoting social harmony so that these newcomers would continue to be the assets of Hong Kong and make invaluable contributions.

(6) Develop a Twin-Track Public and Private Healthcare System

At present, our medical system is entrapped by an increasingly laden public sector. In my view, private healthcare should be stepped up and private hospital beds should be increased to support HPS in the pipeline. I also propose to expand full payment “private” medical services in public hospitals to cross subsidize public healthcare.

(7) Launch Replacement Programme of Old Diesel Vehicles Early

The Government has revised the special compensation plan for replacing pre-Euro 4 commercial diesel vehicles. Total subsidy would go up to $11.7 billion, an increase of $3 billion over the original $8.7 billion budget of January 2013. I wish the Government would pay attention to the transport industry and address their concerns so that consensus may be reached for launching the plan early. Thus, roadside air pollution would be improved and the environment might be refreshed. In turn, it would help restore faith of global talents who might have declined job offers on the ground of poor air quality in Hong Kong.

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