Antony Leung's new agenda

Antony Leung, who loves fast cars and enjoys the company of Chinese diving queen Fu Mingxia, who's less than half his age, is one Hong Kong financial secretary that the local paparazzi dare not ignore. But investors find that the 50-year-old Leung bears watching as well. They're worried that Hong Kong's legacy as one of the world's freest economies may not be safe in his hands.

Leung's qualifications aren't at issue: Articulate and market-savvy, he was previously Asia-Pacific chairman of J.P. Morgan Chase & Co. and, before that, a longtime Citicorp executive. Last May, when Leung took over as financial secretary , essentially, Hong Kong's economy czar , he was viewed as the ideal candidate to restore direction to an economy that had strayed from its time-honored laissez-faire philosophy. But confusion now swirls around where he stands on the role of government, largely because of his March 6 budget address to the Legislative Council.

Leung said government's economic mission should be to invest in "projects beneficial to our economy as a whole when the private sector is not ready to invest in them." He summed this up as "proactive market enabling," but to some listeners it sounded a lot like a prescription for betting taxpayer money on shaky business projects.

Certainly, it seemed a world apart from the "positive noninterventionism" practiced by Leung's predecessors. That philosophy, dating to the 1960s, emphasized limits to government and undergirded Hong Kong's stunning economic success.

多年来,香港严格laiss软化了ez-faire stance, introducing welfare, bailing out bad banks and splurging on a new airport. Yet financial secretaries continued to harp on limits, protesting whenever they did intervene in the economy that their hand was being forced by exceptional circumstances.

By contrast, Leung's proactive market-enabling philosophy, framed within a can-do spirit, is fueling expectations of greater public sector involvement in the economy. And this makes many Hong Kong residents uneasy. In an editorial on the budget address, the Hong Kong Economic Journal, a well-regarded Chinese-language daily, fired off a warning that "government isn,t God."

Leung, in an interview with Institutional Investor, denies strenuously that he has any intention of playing God and points out that over the years Hong Kong has had its share of taxpayer-backed projects, such as subways.

The sorry fact is that, for the interventionist-inclined politician, temptations abound in Hong Kong today. The city has lost some of its shine after decades of prosperity. When Hong Kong Chief Executive Tung Chee Hwa, who was appointed by Beijing to run the British colony, took office in 1997, per capita GDP was $26,154. The forecast for 2002 is $23,688, a decline of 9.4 percent. As in Singapore (see Singapore, page 66), investment, along with jobs, has migrated to the increasingly competitive manufacturing cities of mainland China.

在这种压力下，也许梁最艰难的挑战是抵制不仅仅是他自己的冲动而且滋润，也是董。董东举行的前航运公司曾试过了许多治疗经济的补救措施。然而，他的沉重干预创造了令人困惑的政策，预算赤字和可疑项目。

The most notable debacle: Cyberport, meant to be Hong Kong,s Silicon Valley. In 1999 Tung granted Richard Li, a son of powerful property magnate Li Ka-shing, government land on the south side of Hong Kong island to build an industrial park for the government and luxury housing for Li to sell. But Cyberport is having trouble attracting tenants, and Hong Kong is no closer to having a Silicon Valley. Li, however, is doing just fine.

With the exception of the chief executive and some part-time advisers, Hong Kong's entire administration is made up of career civil servants. That makes Leung a rare outsider.

The son of a waiter, Leung was drawn to Chinese Communism in its more radical phase , though he says he never joined the Communist Party , during his student days at the University of Hong Kong. Even today he proudly acknowledges that he can recite the teachings of Mao Tse-tung, although he declines to do so. But after earning a bachelor's degree in social sciences in 1973, Leung pragmatically joined Citibank, where he made his mark as a trader in that most brazenly capitalistic of institutions, the foreign exchange market.

Leung recently discussed his plans for Hong Kong's economy with Contributor Jesse Wong at his office in Hong Kong.

Institutional Investor: Some say that the positive noninterventionism policy caused problems for Hong Kong, such as an overdependence on the property sector. Is that one reason you,re moving away from it?

Leung:积极的不真实主义是已经使用的标签之一，有时过度使用，并且已经变化。由于政府对土地销售的限制，该物业部门在很大程度上被高估了。所以我们使用了非行动标签，但看看实际发生了什么。现在是更加准确地描述政府应该做的事情而不是依靠旧标签的时间。

你的计划是什么?

我想让市场更加推动，希望通过减少政府参与大量活动，并降低官僚主义和监管费用。

How would you reduce the government's role?

First, I have announced, with actions backing it up, that I would like to reduce public sector expenditure from 23 percent of GDP to 20 percent in five years. Second, as I said, I intend to reduce bureaucracy and regulatory costs. Also, we would like to work with private sector firms to see how we in government can provide better services through such things as outsourcing and corporatization and privatization. Hopefully, that will give people a clue as to my fundamental belief of the role of the government, and that is to actually retract our hands.

Can you give an example?

目前政府正在为香港提供97％的医院护理。人们并不是真正抱怨，但经济上它不是真正可持续的。此外，我们的一半人民居住在补贴住房。我们有大型预算赤字意味着我们必须改变。

尽管如此，主动市场可以拒绝削减公共部门。你最想要启用什么？

The market. The market. This isn,t about enabling a particular firm or an industry. I,m enabling the market. Read my lips.

You,ve talked about the government investing in projects the private sector wouldn,t touch. Is that enabling the market?

Look at the Mass Transit Railway Corp. The MTR is a venture that has benefited the entire economy, and unless the government supported it, our roads would be very congested. Guess what? Now the MTR is a publicly listed company. At a particular time, the private sector may not be able to provide backing for a project like that that would benefit the entire economy, so the government would consider promoting it.

您如何启用市场？

Another very illustrative example is that even though we,re suffering from a very large budget deficit, we,ve chosen to contain the expansion of growth rather than impose a lot of new taxes. I believe that a high-tax regime would not enable the market.

Then is the government less likely to impose a goods and services tax now that you,re financial secretary?

不太可能，特别是在今天的经济环境中。我们的税基非常狭窄。香港少于10,000人，支付15％的薪水标准税率。这是一个非常狭隘的税基，显然会产生各种问题。另一方面，经济并非如此美好，失业率仍处于历史新高。这显然不是时候引入回归税，消费税是根据定义回归。此外，由于通货紧缩，收入分配越来越不均匀。但是，我相信，在某些时候，我们应该扩大税基。但是是否消费税是我们可以学习的唯一机制。

Singapore is thinking of shifting away from its version of proactive market enabling and more toward Hong Kong,s traditional hands-off model. Doesn,t it seem strange that Hong Kong, meanwhile, would be simultaneously shifting toward the Singapore model?

We,re all reacting with the change of time. They were at one extreme. We were at the other extreme, maybe. And maybe we,re all seeing the same position that we should be in. Interestingly enough, they have been very involved in the economy, and yet they have sometimes been rated as a very free economy. Maybe the analysts should rethink these labels.

How do you respond to investors who worry that proactive market enabling is a slippery slope that will lead to more Cyberports?

The strongest demonstration of my belief in the need to actually reduce the size of public sector expenditure is that I have resisted the temptation to impose much higher taxes. And we,re taking moves to reduce bureaucratic and regulatory costs by reprioritizing, reorganizing, reengineering and working very closely with the private sector to outsource, corporatize and privatize. I would wish the international business community and investors to look at all these very concrete and very major actions.

The economist Milton Friedman used Hong Kong literally as a textbook example of an extremely free market. Now it sounds as if that is an extreme you,d like to move away from. What would you like Hong Kong to be known for?

Milton Friedman wrote his book quite a long time ago, and since then things have changed. Obviously, I,m not trying to return Hong Kong to the 1980s, because times have changed. The entire world has moved from an industrial economy to a knowledge economy, and, most strikingly, China has reemerged from a centrally planned economy to what they call a socialist market economy but is, nevertheless, a very open economy. All these changes have happened, and Hong Kong has to respond. I,m doing that and at the same time trying to make sure Hong Kong remains the freest economy in the world.

很多人认为上海是香港的强大竞争对手。你应该担心吗？

我想提醒您的读者亚洲，我谨慎地选择亚洲，而不是中国，这是至少两个金融中心，香港和上海的足够大的市场。但在近代中期，香港仍然拥有上海可能没有的一些优势。最值得注意的是，国际投资者更加习惯于香港的法律制度，法治，监管环境和我们的低和简单的税收制度。