CY Leung's maiden Policy Address has steered Hong Kong in the right direction following his announcement of policies that will return the city to the foundations of its success. The strengthening of the city's finance, trading and shipping capabilities is crucial as these traditional pillars were what made our city such a successful business center.

However, while CY Leung outlined his intention to establish a number of new commissions and steering committees, he needs to share in more detail the structure, objectives, timeline and deliverables that they need to work towards. Three key areas of the address that will influence Hong Kong's economic growth are property, economic policy, and small business.

Property was a hot topic of the address, with Leung asserting that the government is "determined to uphold the principle of assisting grassroots families in moving into public housing and the middle-income families in buying their own homes." In addition to increasing the land supply, there needs to be the introduction of a new regulatory body to govern the integrity and transparency of information relating to the residential property market, so that investors can avoid being misled in buying into properties. The HKEx and SFC protect share investors, and as property is still the favored investment choice of Hong Kong people, this industry needs to be regulated in the same manner as well.

CY Leung commented that global economic gravity is shifting to the East and his mandate to reinforce and enhance Hong Kong's status as an international finance, trading and shipping center is pleasing. The introduction of the Economic Development Commission (EDC) is welcome, but long overdue. As a priority, we would like the EDC to develop a long term plan that maps out policies to achieve fiscal and structural stability, achieve economic growth, job creation, talent development, and how to widen the tax base to finance the accelerating social welfare costs created by Hong Kong's aging population.

The Chief Executive's commitment to joining the China-ASEAN Free Trade Area will allow Hong Kong to integrate itself into the wider Asian economy in addition to building its relationship with the mainland. This is in line with policies many governments are introducing as part of their strategic approach to the Asian Century.

It is pleasing to see CY Leung's commitment to the development of SMEs, the pillar of the city's economy, but it would be good to see the government providing greater cost structure and financial management advice to SMEs. It is already known from CPA Australia's own member surveys that small businesses here are overleveraged and need to be encouraged not to take on more debt.

It is refreshing to see Leung acknowledging the significant contribution that innovation has to the development of local economy and industries, by committing to fostering their growth. Many of these innovative companies are small and infant, so will blossom with continued support.

The intentions of CY Leung's policies are clear, but the sustainability of the funding for the initiatives is not. The upcoming budget address needs to include a comprehensive tax review in order to broaden Hong Kong's narrow tax base and ensure a sustainable future. A comprehensive tax review by an independent commission is required as the city's economy has changed dramatically since the last review in 1976. It remains to be seen whether or not CY Leung will develop and share the detail of his administration's policies. If this information is not forthcoming, the population will see a lot of his intentions as delay tactics.

The author is divisional president of CPA Australia, Greater China.

(HK Edition 01/17/2013 page3)