CEO Comments
Make Sure Legislation Is Fit for Purpose

Hong Kong’s low and simple tax regime has long been the global benchmark which many economies aspire to. Coupled with our talent, expertise, speed and efficiency, we are the envy of many countries around the world. 

Yet are we in danger of becoming complacent? In the latest World Bank’s ease of doing business rankings released at the end of last year, Hong Kong slipped a notch to fifth place. Of course we mustn’t be overly worried about survey results, but we should not dismiss them out of hand either. Many factors contributed to such results, but we really should address the self-inflicted Achilles’ heels which are weakening our economy and competitiveness. 

In our “Budget Proposals for 2018-19,” submitted to the Financial Secretary in January, we presented a whole range of ideas to strengthen the business environment. In addition to the initiatives mentioned in the Chairman’s column, we can address one of our severe Achilles’ heels, which is outdated legislation. We proposed that the Government forms a working party to review the anachronistic regulations that companies have to comply with. Some of these date back to a time before many of the complexities of today’s business world were even imagined. 

For example, the Inland Revenue Ordinance (IRO) is out of sync with Hong Kong’s business climate and not prepared for changes coming in the next 10 to 20 years. A review and update of the IRO would help ensure that its provisions are consistent with economic and commercial conditions that businesses now operate under. 

In the same vein, legislation should be revisited to remove regulatory controls that impede the development of electronic commerce in Hong Kong. Similarly, building codes could benefit from a revamp in the interest of promoting efficiency, clarity and certainty. Under the current regime, building plans are required to be vetted by three different departments according to three different sets of standards. This of course creates added costs and frustration for businesses. 

Closely intertwined with the issue of inconsistent building codes are regulations in the realm of fire safety. This is exemplified by the continuing disconnect between fallow industrial buildings and pent up market demand. The lack of flexibility in use has driven legitimate activities and businesses such as gyms, art galleries, performance venues and artisan shops to operate underground. 

This is why the Government needs to set up a working party to oversee the work of evaluating Hong Kong laws as a matter of priority. To assist in fulfilling its mandate, and highlighting live examples, members from the private sector should also be involved in the working party. 

As part of this, we have proposed that the Government refer to the U.K.’s approach, which applies regulatory impact assessments (RIAs) to improve policymaking and reduce the costs to business. By applying the RIA process, the Government will itself be more efficient and able to achieve the five principles of good regulation: transparency, proportionality, targeting, consistency and accountability.  

While providing relief to Hong Kong companies, particularly SMEs, having a lean regulatory environment would also increase our efficiency and competitiveness, and at the same time increase our appeal as the best place in Asia to do business.


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