Greenpeace jointly published the ‘Analysis of Lantau Tomorrow’s Impact on Hong Kong Public Finance’ report with Prof. Andy Kwan Cheuk-chiu, former associate economics professor at the Chinese University of Hong Kong and director of ACE Centre for Business and Economic Research. The report finds that Hong Kong’s public finance is facing multiple crises such as the ongoing COVID-19 pandemic, aging population and economic downturn. If the government pushes through the “Lantau Tomorrow” reclamation project, Hong Kong’s fiscal reserves may risk being drained in 11 years. Greenpeace urges the government to exercise prudent management of public finance, and to prioritize development of brownfields which are more cost-effective.
Greenpeace commissioned Prof. Andy Kwan, director of ACE Centre for Business and Economic Research, and his team to study the city’s fiscal position and the impacts of Lantau Tomorrow on it.
The report is based on the revenue and expenditure projection model adopted in the Working Group on Long-Term Fiscal Planning’s report released in 2014, and methods commonly used in economic and statistical analysis. It draws four expenditure and five revenue scenarios, coupled with expenditure on anti-epidemic measures in order to calculate government revenue and expenditure between 2019-20 and 2041-42. In total, it projects forty future fiscal positions (including the years of occurrence of fiscal deficits and negative fiscal reserves).
All the projection findings reflect structural deficit is looming or even happening already. If the government wilfully pushes through Lantau Tomorrow at the estimated cost over HK$624 billion, the city’s fiscal reserves could be wiped off in 2031-32, even adopting the most conservative expenditure with high-revenue scenarios (Table 2), as well as spreading the cost of reclamation over 10 years. By then, there is the possibility the government would have to depend on borrowing debts to maintain public expenditure or even being dragged in a massive debt vortex.
The report also points out that the city’s fiscal sustainability is facing challenges of aging population, shrinking workforce, and further increase of the top 3 recurrent expenditure of social welfare, health and education. Under the ongoing COVID-19 epidemic, relief measures in the Budget and the two rounds of Anti-epidemic Fund has swollen the city’s deficit to nearly HK$290 billion, meanwhile the public reserves has also plunged to about HK$800 billion. There is also global economic uncertainty to further exacerbate the situation. One of the projected fiscal positions in the report even finds that the debt level could reach over HK$14 trillion in the financial year of 2041-42.
Download the report: Analysis of Lantau Tomorrow’s Impact on Hong Kong Public Finance