One area of economic activity hitherto unexploited in Hong Kong comprises
“externalities” and long-term perspective.
Externalities are where the rate of return on a project might not
be attractive to the private investor concerned, but which,
upon taking into account benefits to the rest of the economy, would warrant the offering of public subsidy to
private investors as incentive. Likewise,
government may be the only investor so large and long-term in its
“business” as to be able to invest in or lend to projects that yield
attractive rates of return only over the long term.
might include stepped-up infrastructure construction: HK$10bn, say, per
year of direct incentives to enterprises that constitute new engines of economic growth, and
participating in long-term investments in
and loans to enterprises.
The government would not pick winners to invest in.
Instead, private enterprises will have to meet criteria for new
engines of growth, and to rely on their own judgment when investing
substantial amounts of their own money, in order to qualify for the
incentives. The government
would also work in partnership with venture capital companies and banks,
relying upon their expertise and judgment.
On another front, to boost Hong Kong’s attractiveness to businesses,
taxes would be cut across the board by, say, 2%. Given that tax rates in the region have fallen in recent
years, this would widen Hong Kong’s lead once again.
It would benefit all businesses, both existing ones and new
The above measures, as investments in competitiveness, would be made possible by savings from extending the allowances system to housing .
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for the paper “Government’s role in enhancing economic