Hong Kong Government Policies on Trade
Introduction
This papers aims at discussing different policies employed by Hong Kong government in different areas of concern. First of which is the discussion on government policy on the labor markets. Second is the fiscal matter and how does the Hong Kong government respond with this respect. Third is the discussion of government policy on the monetary or money supply in Hong Kong. Last is the discussion of the government action and policy towards international trade or relevant international matters. These four related areas are based on four separate articles in the latest released development in each respective area.
I. Government Policy on Labor Markets
Article Title: Labor Market in Hong Kong
Hong Kong has the very converse of an over-regulated inflexible market.
Notwithstanding its market inflexibility, Hong Kong has passed a considerable amount of labor legislation aimed at improving the working conditions and welfare of the workers. On example and the main labor ordinance passed is the Employment Ordinance. Under this ordinance is the preset condition of service in general employment and which includes provisions for paid holiday leave, sickness allowances and severance pay.
Another important ordinance set by the Hong Kong government with regards to its labor market is the Factories and Industrial Undertakings Ordinance. Such government action serves for the purpose of strictly regulating the employment practices of the “sweat shop economy” with which Hong Kong has long been associated. According to the provisions of the Employees Compensation Ordinance, injured workers can claim compensation for work related injuries. If employment disputes should happen, it will come before the labor tribunal whose proceedings are conducted in Cantonese and are generally very informal.
Notwithstanding all the above-mentioned government actions on its labor market, a survey in 2002 cast some doubt on the competitiveness of the Hong Kong labor force. The survey, however, was looking primarily at the quality of labor within the Asian region as a whole. The survey then suggested the inadequate education investment and rising labor costs have meant that although salaries for white collar workers and managerial staff are higher, the quality of services provided is not necessarily any greater than that provided by labor in other Asian countries.
In its positive findings, the survey showed that the jurisdiction still excels in terms of language skills, overall professionalism, and technical expertise, but warned that on a comparative ‘value for money’ basis, the competitive margin between Hong Kong and the Chinese mainland is narrowing, and regional rivals such as Singapore, Taiwan, and India have overtaken the Special Administrative Region ().
The Department of Labor in Hong Kong promotes several programs for the labor and employment. One in which is the Employee Rights and Benefits Program that was setup to establish and enhance employment standards in Hong Kong. Aside from that, is also serves for the purpose of creating a balance between the interests of employers and employees.
In promoting safety and occupational health in the region, the Department of Labor provides training courses, training providers and the registration of safety officers/auditors for companies. In showing the output of the department, there were over 800 training courses held on occupational safety laws in Hong Kong in 2004 including more than 300 custom sessions. That totaled for up to 13,000 employees and employers who attended the training sessions during the year.
Aside from the above-stated labor training programs, the Department of Labor also fights unemployment through different areas. For young workers, the department established the Youth Work Experience and Training Scheme (YWETS) that offers guidance and counseling services to youth and focuses on such areas as communication and interpersonal skills. For Mid-Level Workers, the department launched the Re-employment Training Program in 2003 that aims at assisting those who are age 40 and above in finding new employment opportunities ( 2005).
II. Government Policy on Fiscal Matters
Article Title: Hong Kong’s Fiscal Policy – Look beyond the good times
The fiscal performance of Hong Kong has improved sharply since the depths of the Sars crisis in mid-2003. This is due to the rapid growth of gross domestic product helped by a robust global expansion and strengthening integration with the mainland including deeper financial cooperation and a surge in tourist arrivals. The fiscal policy of Hong Kong government has been apparently successful. Additionally, an improvement in public finances also provides additional confidence in the sustainability of the currency board system – which locks the value of the Hong Kong dollar to that of the US dollar – and assures markets of the predictability of Hong Kong’s low-tax environment.
However, these financial improvements came along with fiscal challenges. According to the commentary of (2006), there are three challenges that Hong Kong has to face. The Hong Kong government has to broaden the tax base and reduce reliance on such unstable income. Several options are being proposed including the introduction of a consumption tax.
Public policy concerning this issue would be much better served by fully and openly debating these matters in the context of formulating a longer-term budget strategy rather than speculating over how much taxes can be cut this year, says (2006). Hong Kong government should take a hold of the opportunity provided by the good times.
III. Government Policy on Monetary Affairs
Article Title: Base II Compliance in Hong Kong
The Hong Kong Monetary Authority conducted a seminar on the update of the implementation issues in relation to the Basel Committee on Banking Supervision’s revised capital adequacy standards for banks (or what is known as “Basel II”). The said seminar focused on the practical steps to be taken by authorized institutions to achieve compliance by the implementation date of 1 January 2007.
Hong Kong is the first wave of jurisdiction to introduce the new requirements in conjunction with other major international financial centers such as London, Paris, Frankfurt and Tokyo. This implementation of Hong Kong government can enhance institutions’ reputation and standing and the stability and effective working of the banking sector.
Moreover, the implementation approach has been developed in close collaboration with the industry, the emphasis being on cost-effectiveness and pragmatism. The possible drawback to the said implementation approach would be the high cost. However, Mr. , speaker of the seminar (HKMA Executive Director) said that they have developed a range of approaches so that there is an option that is suitable and of course cost-effective for every institution ranging from the smallest DTC to the largest internationally-active bank.
In further supporting the government’s stand on the issue, Mr. added that much of the cost attributed to Basel II compliance is in fact necessary expenditure to upgrade risk management systems which institutions would have been undertaking for business reasons even if there had been no Basel II.
In addition to Mr. ’s support, Dr. shows up his side through presenting on internal ratings-based (IRB) systems (cited in 2006 March 17). Furthermore, he highlighted the considerable potential benefits to institutions of developing such systems to help enhance their credit risk management. Dr. additionally said that there is considerable scope for institutions in Hong Kong to make greater use of internal ratings systems.
IV. Government Policy on International Trade
Article Title: Do Business with the Mainland through Hong Kong
Hong Kong is amenable and accessible to investment and does not discriminate between foreign and domestic investors. As of the moment, the government of Hong Kong has a worldwide network of economic and trade offices to promote overseas investment in Hong Kong. Hong Kong’s foreign relation and international trade are considered widely beneficial, even crucial for economic stability.
Hong Kong government has created the CEPA (Closer Economic Partnership Arrangement). In particular, CEPA is a World Trade Organization (WTO)-compliant, free trade agreement. Generally, CEPA aims at accessing more markets and saving on tariffs. In other words, CEPA paved the way for greater market access. In such policy, Hong Kong opens new trade opportunity in cross-border trade and investment between Hong Kong and the Mainland. Additionally, CEPA reinforces Hong Kong’s role as a bridge between China and the rest of the world.
Signed in 2003 by the Central People’s Government and the Government of Hong Kong, CEPA has its main provision of preferential access to the Mainland market and reduced tariffs for the export of certain finished goods and services by certain enterprises and individuals in Hong Kong both locally or foreign-owned.
Moreover, CEPA II was created that effect from 1 January 2005. This development serves as the second phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement. Effective 1 January 2006 is the CEPA III. Under the newly-signed arrangement, all finished goods of Hong Kong origin may be exported tariff free to the Mainland upon the CEPA rules of origin being met. Of course, such policy has exception for prohibited articles and articles that are subject to special requirements.
The current CEPA has been greatly perceived to have a significant effect on trade in goods, trade in services, and trade and investment facilitation. These CEPA benefits are exclusive to Hong Kong, that is to say no other jurisdiction in the world can enjoy these preferential market access and import tariff rules. This package further strengthens Hong Kong’s position as the ideal location from which to do business with China and underlines Hong Kong’s importance as an international trade and business center ().
Hong Kong government has also been looking forward for the advantages CEPA will bring on investing multinational companies and firms. CEPA offers advantages to these overseas investors. One way is through partnering with, investing in or buying a CEPA-qualified firm in Hong Kong to gain full benefits from the Arrangements. In this way, overseas investors can take advantage of zero tariffs by manufacturing brand name products or locating manufacturing processes with high value-added content. Another reason for the Hong Kong government in creating CEPA is the faster market liberalization measures for trade in services to secure a first mover advantage for Mainland markets. As a final point, overseas investors can take advantage of broader benefits afforded by CEPA as it is WTO accredited ().
REFERENCES
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