Video #19 - Hong Kong: Wants to Buy a City
Tuesday, January 10, 2006BACKGROUND INFORMATION
The drive to privatize various government operations in Hong Kong began in March of 1999 when Financial Secretary Donald Tsang presented what he called the "toughest budget ever," in an effort to end the worst recession in the city's history. To cut the city's deficit of 32 billion Hong Kong dollars, the budget called for freezing public servants' wages and selling off many city-owned properties. The first to be handed over to the private sector was the company which runs Hong Kong's underground system, MTR Corp. Ltd.
MTR Corporation issued stock and was soon listed on the Hong Kong Stock Exchange in September of 2000. Then on August 6, 2003, Financial Secretary Henry Tang announced that the government would proceed with plans for the eventual part-privatization of the city's Airport Authority. This project includes introduction of the required legislation into the Legislative council in early 2004 and the availability of suitable market conditions in order for the initial public offering of Airport Authority stock to begin. "The government considers that privatization of the Airport Authority will be conducive to maintaining and further developing Hong Kong International Airport as a centre for international and regional aviation," said Tang. He added: "When successfully listed on the Hong Kong stock exchange, shares of the privatized Airport Authority will also help enhance the attractiveness of our stock market to investors." Mr. Tang added that the proceeds of the stock sale would help offset an expected shortfall in capital revenues.
In March of 2004, the government published another draft law, the Airport Authority (Amendment) Bill. When enacted, this will permit the operator of Hong Kong's Chek Lap Kok international airport to return a reported HK$6 billion of its capital to the government. This amounts to almost a sixth of its HK$36.6 billion in equity capital. "We believe the capital restructuring plan proposed is the right step toward the eventual privatization of AA - it can bring value to the government and also to AA," a government spokesman said.
The consensus of expert opinion is that Hong Kong will run a tight ship in managing its municipal finances in an effort to make the Closer Economic Partnership Arrangement (CEPA) with China work-- and to overcome the effects of the SARS epidemic and the current deficit. These pressures are widely expected to continue driving the city's economic decisions over the near-term. The long-term goal is to uphold Hong Kong's reputation as the financial center of Asia.
SOURCES
"Hong Kong delivers 'toughest budget ever." Australian BroadcastingCorporation, March 3, 1999
"Hong Kong government to privatize Airport Authority." Agence France - Presse, (via ClariNet), August 6, 2003. SOFTCOM Internet Communications, Inc.
"Hong Kong stars first share offering of government-owned utility." Indian Express Newspapers, 2000.
"Moving Hong Kong Forward." Bulletin Online Hong Kong General Chamber of Commerce (HKGC), January 2004.
Gopalan, Nisha, "Hong Kong Government Hopes For Airport Privatization Bill At End 2004." Dow Jones Newswire, March 19, 2004. MORNINGSTAR.com
Horne, Jackie, "MTR privatization an all-round hit." FinanceAsia.com, September 29, 2000.
LESSON PLAN
GRADE LEVEL/SUBJECT:
10-12 grade Economics, International Relations, World History, Geography, International Baccalaureate Programs (IB), Current Events.
PURPOSE:
To present activities to be used in a variety of classroom situations in order to enhance student understanding of the Hong Kong economy and its significance globally.
OBJECTIVES:
Students will be able to:
- Describe the economic history of Hong Kong.
- Analyze the problems faced by Hong Kong currently.
- Describe the Closer Economic Partnership Arrangement (CEPA).
- Evaluate the privatization program currently underway in Hong Kong.
MATERIALS:
- Background information provided.
- Resources on Hong Kong available at your school's Media Center and the Public Library System in your area.
- Background information available through Internet "search engines."
- www.chamber.org.hk
- www.hongkong.org.
- www.tid.gov.hk/english/cepa
ACTIVITIES:
May be assigned as group activities or as individual tasks. They may also be designed as preparation for related presentations either by individuals or groups.
- Use charts and graphs to illustrate Hong Kong's economic situation.
- Create a time line to highlight major economic events in the history of Hong Kong.
- Research and report on the privatization program developed by the Hong Kong government and its current successes and failures.
- Write an editorial about the effect that CEPA will have on the Hong Kong economy.
- Create a scenario, based on the above research, of Hong Kong's economic position in 2050.
EVALUATION:
Individual assignments should be graded by the teacher using established criteria.
Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale: Content 1 = Superior (A) Creativity 2 = Excellent (B) Clarity 3 = Good (C) 4 = Fair (D) 5 = Poor (F)
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