03/26/2009, 00.00
Send to a friend

Hong Kong government short on answers to financial tsunami

by Lee Cheuk Yan*
GDP has gone from +7.3% in the first quarter of 2008 to -2.5% in the latest quarter. The government is considering short term solutions, but has no long term plans capable of reviving the economy. Emerging from the crisis will require the reinforcement of social safeguards, a relaunching of collective bargaining, and massive investment.

Hong Kong (AsiaNews) - As a result of the financial crisis and a slowdown in the global economy, Hong Kong's economy suffered a heavy blow in the latter half of 2008. Gross domestic product (GDP) growth fell successively from 7.3 percent in the first quarter, to 4.3 percent in the second quarter, 1.7 percent in the third quarter, and minus 2.5 percent in the fourth quarter.

2009 will also be a very difficult year. Both external trade and domestic demand are expected to remain subdued. The government forecast a decrease in GDP by two to three percent for 2009, the first negative growth for a whole year since the Asian financial crisis in 1998. The unemployment rate has risen drastically by half a percent point every month to 5%, and I expect it to rise to above 6% by the end of the second quarter, and further after school graduates start to join the labour market.

Employment situation

According to data from February of 2009, there are 3.68 million workers, compared to 3.53 million in 2005. The unemployment rate is 5%, compared to 3.4% in 2007. The youth unemployment rate is 19.5% for the 15-19 age group, and 7.9% for 20-24. In terms of long term unemployment, 30% of cases last between 2-6 months, and 22% more than 6 months. The unemployment rate is highest in construction, followed by manufacturing, transport and catering and retail.

Hong Kong response to the financial crisis: short term measures without long term solutions

The financial crisis once again exposes the structural problems confronting Hong Kong, but the response of the Hong Kong government has always been short term, without any determination to solve the long term structural problems.

1)       Lack of social security protection: without unemployment insurance in place, the unemployed have nothing to turn to whenever there are fluctuations in the labour market. The problem was quite obvious back in the Asian financial crisis in 1998, and the SARS epidemic in 2004. There are again no efforts on the part of government to introduce an unemployment insurance scheme as a long term solution to cushion the impact of unemployment. The present means-tested Comprehensive Social Security Assistance Scheme is only able to assist less than 10% of the unemployed population. How many more crises and sufferings for the people before the government is ready for real change?

2)       Workers denied rights to collective bargaining: the wave of layoffs and wage cuts by big business was conducted by business in a high-handed manner, without any prior consultation or transparency as to the business situation of the companies. The government's call to business to avoid laying off workers is only paying lip service without fulfilling its role as government to set down rules through legislation. We have been calling upon the government to legislate on the rights to collective bargaining for trade unions so that unions can negotiate with companies on any actions affecting workers. Let the unions monitor the companies, and leave it to the unions to protect workers with legal backup. This is the only way to strike a balance between the interests of workers and employers. If not, workers are always in a disadvantaged position and are forced to accept changes imposed by employers. Painful experiences of past recessions showed us that workers had to bear the impact of the financial crisis, but were the last to benefit from any recovery. As in 2008, when the economy had rebounded, there was still little improvement in wages and working conditions. The lack of collective bargaining is a major cause for the widening gap between rich and poor when workers’ wages are always suppressed.

3)       Restraint in government spending even in time of economic downturn: in a time of economic downturn, the government has to spend its way out of a recession. Disappointingly, the government plans to spend 16 billion dollars less than it did last year. The so-called job creation program is very limited, with most jobs created in the construction sector. The wage subsidy for employers of 2,000 Hong Kong dollars (a little more than 258 U.S. dollars) has limited impact on the job market, since this does not represent adequate incentives for employers to employ more workers. In this year's budget as in the past, the government is refusing to spend more on social welfare and health care to address the long term problems of aging and family problems.

The Hong Kong Confederation of Trade Unions has put forward its proposal to the government, including 14 billion dollars to create 60,000 jobs over the next two years, a short term unemployment assistance scheme with a study of a long term solution, and travel subsidies for low income workers.

Lee Cheuk Yan is secretary general of the Hong Kong Confederation of Trade Unions, and a member of the legislative council. He is part of the pro-democracy movement that was destroyed in the massacre in Tiananmen Square on June 4, 1989. Because of his involvement, Lee was arrested and deported to Hong Kong. For this reason, although he is a member of the territory's parliament, for 16 years he has been banned from traveling to mainland China.
Send to a friend
Printable version
See also
Growing unemployment in the Philippines, also due to corruption and waste
Global crisis forces Kazakhstan to cut 2009 budget
World Bank: Chinese growth will fall to 1990 levels
Jia Qinling: Maintaining order and social stability in Tibet
Sony cuts 16,000 jobs, fails to restore market confidence


Subscribe to Asia News updates or change your preferences

Subscribe now
“L’Asia: ecco il nostro comune compito per il terzo millennio!” - Giovanni Paolo II, da “Alzatevi, andiamo”