CITY UNIVERSITY OF HONG KONG

COMPARATIVE PUBLIC POLICY

Dr. Richard Walker

SECOND ASSIGNMENT:

Policy Transfer Proposal and Analysis

LUJAN ANAYA, Raul Alejandro

Student No. 52915639

Semester A/ 2012-2013

December 2012

Policy Transfer Proposal and Analysis

Topic of Interest: Transfer of the Extensive Housing System (EHS), from Singapore to

Hong Kong.

The object of this work is to undertake an analysis on the implementation feasibility of

policies adopted in Singapore (SG) in the housing field, to the reality of policy-making

in Hong Kong (HK/ HKSAR), undertaking a one-way transfer evaluation, previous

comparison between equivalent policy tools adopted in both City-States (ie.: the EHS

adopted in SG within the last four decades, vs. the Home Ownership Scheme, HOS,

currently adopted in the HKSAR), in the light of contextual matters (mainly of space

and time) which both States have been facing in common.

It’s important to notice that the matter of housing ownership is a relevant field for

comparative study in policy-making between both City-States… Especially in Hong

Kong, the issue of housing ownership insufficiency has drawn particular attention on

international grounds, when we consider the fact that this City-State has its’ reputation

on the line as a Global City: one competitive in matter of international trade and

finance, an example of multicultural coexistence, and a panacea of socio-economical

development, thus deserving to be placed as one of top-tier urban areas around the

planet, pretty much like New York, London, Shanghai, Tokyo, and precisely Singapore

(among others) [1]; at the same time it has been facing serious problems of social and

spatial inequality, which can be seen on specific issues to be effectively attended, such

as: nonstop demand for acquiring permanent household and proportionally increasing

numbers of people in waiting lists to enter subsidized home schemes, permanent or

temporary (the majority of them in urgent need), among other; in relation with a hostile

market where acquiring Real Estate property by own right has become a ludicrous

luxury which can only be afforded by the rich.

As mentioned before, we would have to consider that both SG and the HK governments

had common challenges to face (mainly in the historical and demographic dimensions),

such as:

a) Both of them used to be British colonies, and now these two operate as free-market

economies. Likewise, both of them have risen up as two cities of international

projections for trade and finance, and two gravity centers of “technocratic”

governance (understand this concept, as the rule and policy-making of technician-

managers under the principles of ‘small government’ and ‘efficient management’:

officers and civil servants which have been “encouraged to be entrepreneurial and

to cut through the red tape” to achieve the goals of the State [2]) in Southeast Asia;

b) In a time of 40-50 years ago, both of them had a substantial percentage of citizens

facing poor living conditions and governments fell short to provide housing supply,

according to actual demands;

c) High numbers of density population: SG possesses a population of approximately 5

million inhabitants living in an urban area of almost 700 square kilometers (sq.km),

while figures in HK are of approx. 7 million people living in an area of almost 1,100

sq.km;

d) Medium income population: the average income per capita in Singapore is of

approximately US$29,610.00 per annum, while that of Hong Kong is of

approximately US$27,000.00-28,000.00 per annum (according to official figures

from the CSD, by year 2010) [3], indeed SG has managed to continue increasing the

average of income per capita of its population;

e) Around the decades of 1960 and 1970, both of them started implementing their

public housing-ownership programs (in fact, SG started earlier, in the year of 1964,

short before its’ formal independence, while HK started in the year of 1976 after the

constitution of its Housing Authority, HA);

f) In addition to the circumstances before mentioned, it’s also worth saying that both

SG and HK governments implemented their housing ownership policy programs as

tools for gaining political legitimacy from their people (even when the motifs in

each case have been different).

Then, having such challenges standing there for several decades, both governments in

HK and SG have been historically concerned about satisfying one important need of

their people: to enjoy property of household by own right… To the extent, for instance,

that in Singapore, rather more than being a mere social demand, it’s been seen more as

a specific right (in the legal extent of the word) to which citizens are entitled to: to live

in a dignified household that conforms an essential part of their personal (and family)

wealth.

Though implementing similar models of offering housing ownership through the

subsidized sale of public flats, both City-States adopted their policies under different

approaches: while Hong Kong adopted an (orthodox) decentralized approach:

facilitating a hybrid scheme of offering means-tested subsidies for both permanent and

temporary housing (under the HOS and Public Rental Housing, PRH, programs

respectively), and allowing both the public sector (through the HA) and private sectors

to serve the housing demand and provide the services, under equal conditions;

Singapore went for an innovative decentralized approach, as follows…

Beginning from the first years of the implementation of the EHS, the SG government

acquired vast extensions of the land at under-market prices from private developers, and

constituting itself as the biggest, unchallenged, landlord. Also, the government adopted

measures in order to control the costs in housing production (such as the supply of the

building materials for construction)… In addition, the government adopted a very

unique combination of policy tools (using Christopher Hood’s NATO approach), be

them:

a) Nodal (information), such as a widespread and continuous promotion of the values

and ideas that would uphold the implementation of such innovative model in its

time, both locally (same directed to citizens as government propaganda, or to

scholars and policy-analysts as an academic case of study) and on international

grounds;

b) Authority (regulation), such as the development of new laws, such as the Land

Acquisition Act (which nowadays remains under force), and other official decrees

and ordinances, which would serve as a normative frame for the design and

effective implementation-enforcement of the policy;

c) Treasury (financial), such as the constitution of centralized funds (like the Central

Provident Fund, CPF), the reduction of tax bases and the implementation of a

culture of employment under which common workers were motivated (or mostly

compelled) to enter into a contributions scheme, and also the government entered

into agreements and covenants with the private financial sector in order to provide

credit tools to citizens which would aid them in acquiring a place they could call

home (loans and mortgages of easy access);

d) Organizational (administrative) such as the implementation of a radical urban

reform (the redevelopment of the vast territorial extensions acquired for residential

purposes), the creation of a central authority competent on housing affairs (the

Housing Development Board, HDB, equivalent to the now HKSAR’s HA), and

restricting the provision of public rental housing schemes most exclusively to the

lowest layers in the social pyramid (citizens whose incomes drop to amounts below

SG$1,500.00 per month, which would be equivalent to US$1,230.00);

With such combination of policy tools, which in the end was described to be

“phenomenally successful” (Ramesh, 2003) [4], Singapore’s policy motto in this field

was to having achieved a quality “Home Owning Society”, which rose from a cipher of

a total of 29% in 1970, to more than 90% (by the decades of 2000 and 2010) of overall

resident population [5]… On the other hand, the decentralization scheme for housing

provision in the HKSAR got stuck in achieving to enhance the number of its home-

owning population: according to statistics of the the Census and Statistics Department

(CSD) between years 2006 and 2009, approximately 50% of total population in HK

held ownership on private housing, and 20% held ownership over subsidized-sale flats

from HA [6]: then, what about solving the situation of the other 30% of resident

population, which has found itself in the need of sticking to the Public Rental Housing

(PRH) and temporary programs, implemented by the HA, as their means to satisfy (or

better said, palliate) their need of acquiring permanent housing by themselves? (!)…

What can Hong Kong learn from its cousin Singapore, in order to solve the situation of

that remaining 30%?

As main strategic advantages of the EHS model implemented by the SG government,

we can find the following:

1. It has reinforced a culture of self-sufficiency: starting with promoting employment

in collaboration with the business sectors, attracting foreign investment, and

promoting the values of self-sufficiency in saving and investing to attend their basic

needs, thus reducing reliance of citizens on public welfare;

2. As an innovative policy project in its time, it’s been considered by many scholars in

the field, as one important milestone in the establishment and consolidation of the

recent Asian Welfare Model during the last 3 decades of the XX century, and which

has been influenced by the social and historical values upheld in policy-making

processes and institutions of most East Asian nations, such as the (Confucian) ideals

of conforming self-sufficient communities and strong family nuclei;

3. By strengthening the domestic financial sector, as the government entered into

agreements with the banking corporations and finance houses for facilitating loans

and mortgages, it created a profitable market in which all parties (corporations,

government and citizens) gain proportional benefit from a fair scheme where

“everyone wins”;

4. In the reality dimension of policy-making, the project achieved outstanding success,

that it caused astonishment and caught the eye of policy-makers and scholars in the

international community, to the extent that even nowadays, it has become an

example to the world (“too big to be ignored”).

On the other hand, we can find the following disadvantages, which can make the model

very complex, and non-operant to policy-making in the HKSAR:

1. The model requires a mostly authoritarian and centralized control, “with major

decisions on savings rate, savings allocation, land use, housing production, and

housing prices being largely determined by the government” [7];

2. It has caused a crowd-out of private investment, the weakening of private

developers, and in general, of the domestic corporate sector [8];

3. It has created a constant need for the government, to control inflation and fixing

prices in the Real Estate market;

4. It has created a problem of “asset-rich, cash-poor” citizens, which means that

citizens have found themselves in the need of providing a high percentage of their

income, into the contributions scheme of the CPF (and to pay their housing credits

and mortgages as well), in detriment of the liquidity in their wealth, and diminishing

their capacity to respond effectively to other needs or contingencies that may

eventually present, such as unemployment or health illness conditions;

5. Transparency issues, because, as the government entered into agreements with the

financial sector and insurance companies for the facilitation of credit tools, and

investment of monies in the centralized funds, the economic dimension of the policy

is handled at the discresion of third parties whose interests are not clearly related to

those of the major stakeholders (government and society), in what we may call a

“black box” experiment: in which outcomes may be uncertain; likewise, it’s well

known in the media and academy forums, that politicians and policy-makers in SG

aren’t transparency-friendly neither open to criticism, so it’s very unlikely that they

would be willing to disclose information on the processes implemented and

outcomes achieved in the operation of housing policies.

In addition to the previous comparison of strategic advantages and disadvantages about

the EHS policy model from SG, we should take into account, for the case of Hong

Kong, the fact that, even when there have been subsidies and incentives granted to

common citizens (mostly middle-income) under the HOS program implemented by the

HA, the housing ownership model in the HKSAR has been affected by the PRH

policies, which by matter of law and polity, have been required to coexist in balance, so

the government can’t change the current framework so swiftly, by setting up restrictions

in the means-test system for entering the PRH scheme (specifically by matter of

income), as the Singaporean government did. Also, and in the light of increasing

demand for entering into both temporary and permanent housing schemes, it would be

certainly unlikely that the HA would allow applicants in waiting lists, to apply as twice

or more, as the SG government has lifted such restriction… In this specific case, we can

observe one more typical case of path dependence prevailing for the implementation

and operation of housing policies in Hong Kong.

As specific lessons to be learned from the Singapore experience regarding EHS, for

adapting into the practical dimension of policy operation in the HKSAR, we may find

the following:

1. A government-centered scheme may lower the costs on development of lands,

relying on scale economy (as it’s been happening not only in SG, but in other

nearby countries, as Brunei [9], which have been facing a new paradigm: an

increasing demand of small family nuclei and young singletons seeking to acquire

household of their own), for as the market would continue to expand and

operational efficiency is achieved, it would result feasible to reduce the costs of

newer units (flats) produced; in contrast, any core problems coming from within the

government (such as corruption issues, or procedural inefficiency), may increase

negative effects on policy economy;

2. At some extent, concentrating the allocation of resources coming from compulsory

savings schemes into centralized funds (as both the CPF in SG, and the MPF in HK)

for the operation of housing ownership programs, may bring economic efficiency in

providing the relevant public services, but we should also consider that priorities of

the government in operating policy programs in one field may also enter in conflict

with the needs of citizens: as we’ve seen in the case of SG, compelling workers to

contribute into the CPF with substantially higher percentages of their income, may

affect liquidity in citizens’ wealth (affecting their response capacity to other

contingencies); and similarly, concentrating more revenue resources from the public

funds into the housing field may affect the provision of other welfare facilities, such

as those concerning healthcare, unemployment and retirement, among other;

3. Also, in contrast to what the SG government has done, letting banking and

insurance companies invest funds coming from the CPF savings in the “black box”

experiment previously mentioned, the HKSAR government could consider

providing grants (even when minimal), using the resources from the MPF in-hand;

4. The HDB in recent years, implemented a new plan named “Built to Order” (BTO),

which may be used as a reference to achieve balance between supply and demand in

the housing market, as the SG government realized that if it continued developing

lands for housing purposes indiscriminately, considering that in recent years, more

than 90% of overall resident citizenship has achieved to live within a household of

their own, market inefficiency (excess in housing stock) would drive the concerning

authority to cancel the EHS, causing inflation of Real Estate prices and hurting the

local economy;

5. Subsidies and loans granted by the HKSAR government to facilitate access to the

domestic HOS may be granted under a means-test system, in order to relieve

pressure derived from limitations in supply and demand, such as limited capital

resources and increasing ownership numbers.

In addition to the specific lessons that HK may learn from the SG experience, and

considering the issue of path dependence mentioned a couple paragraphs above (the fact

that the HOS program needs to coexist with the PRH in legal and political synchrony),

success in the implementation and running of the domestic policies can only be

measured according to the balance achieved between both temporary (PRH) and

permanent (HOS) housing provision programs, and not merely by the amount of people

acquiring units from the HOS program.

To summarize, by undertaking one final assessment (revisiting the NATO approach) on

how can policy tools from Singapore be applied in this policy transfer proposal to

reality in Hong Kong, we found the following:

a) Nodal: The promotion of the housing policy-model in SG has been successful in

domestic and international grounds; in contrast, it’s unlikely that certain policy

aspects would be friendly received by: as it’s happened in the case of the compelling

contributions scheme, since it’s well known that HK people aren’t very fond of

entering into enhanced contribution schemes, as it has happened in the case of the

Mandatory Provident Fund (MPF), in which many employees in the HKSAR

haven’t found themselves willing to provide more than the compulsory 5% [10] in

current terms of the MPF;

b) Authority: New regulations and decrees would be relatively easy to implement; in

contrast, the outstanding legislation in matter of Housing in the HKSAR would

require major amendments which would be time consuming, and would represent a

slow process for carrying out the consultations and reeducating both citizenship and

civil servants in getting used to new frameworks, not to mention that the interests of

the Central Government in the People’s Republic of China (PRC) must be

considered as well;

c) Treasury: The implementation would be favorable to the economic interests of

lower and middle income average households, and even convenient for banks and

financial houses, because they would have thousands of new customers; in contrast,

it would carry unmeasurable costs at government level, which may affect revenue,

and cause damages and liabilities to private business developers and within the

public sector, as I’ll explain furtherly;

d) Organization: It would bring a substantial enlargement in the public sector of the

HKSAR, which in the end would be a double-edge sword, representing on one

hand, more menpower in the civil service working to attend this social need, but

bringing collateral effects of costs in both policy economy and economic policy.

As preliminary to conclusion, we could tell from our presentation that, at least from a

theoretical point of view, the prospect of transferring permanent housing ownership

policy implemented in SG, specifically the EHS program, seems to be a good idea,

however in practice it would result very much less feasible, for it would result in

unmeasurable costs, since the HKSAR government, nowadays doesn’t possess enough

capacity, menpower, or economic might to centralize (even monopolize) the housing

market… Indeed, this has also become a very much politicized topic, since from a

historical point of view, the SG government made a smart move in implementing an

adventurous project, in a time when social and economic conditions worldwide weren’t

as complex as today, and when most governments around the globe were big enough to

afford intervening in markets and implementing gradual changes: today it would result

suicidal, considering a current context of quick shifts in economic conditions, and

tighter interdependence in finance and trade between States and business personae

around the world, as these two are the most tasty fruits reaped from the Globalization

phenomenon, thus right now would be “too late” for the Hong Kong government to

make such a risky move…

Why a risky move? Because importing the disadvantages of the SG model, would not

only affect the government in its economy and capacity, but also damage the Real

Estate market and eventually affect foreign investment: private developers are some of

the most relevant actors and stakeholders in the policy field, as we can observe that

direct intervention by the SG government has caused substantial inefficiencies in their

domestic market (monopolization, lack of innovation and transparency): an undesirable

outcome when it comes to the fact that public development in the HKSAR is pegged, or

at least proportional, to growth in the local business sector, and which would represent a

wrongful lesson which none of the relevant stakeholders: the government (along with

the Central Government of the PRC), representatives of the business sector, middle

income citizens, and on a lesser extent, NGO’s, is prepared to learn the hard way.

As conclusion, and providing a “best-guess” approach, let’s say, if the model was

feasible for being implemented in the HKSAR, we can take the chance to do a

projection under which, within the following 8 to 10 years, we may expect a substantial

reduction in waiting lists for people intending to enter public housing schemes

(temporary) by around 60-70% (considering a current figure of approx. 300,000

applicants, from which an estimate of 200,000 find themselves in urgent need); at the

same time, it may be possible to extend the number of home-owning population in

Hong Kong, from 20% to 30-35% of total residents in Hong Kong (with an overall

projection of almost 7.8 million people by early 2020’s [11])… In the end, most

probably our transfer proposal will be another idea that shall remain in paper, even

when it’s “worth spreading”; however it certainly was a very interesting topic for

academic discussion.

Thank you for your Attention!

References and Remittances List:

[1] “Global City”; Wikipedia, the Free Encyclopedia:

http://en.wikipedia.org/wiki/Global_city

[2] Scott, Ian. The Public Sector in Hong Kong: Policy, Government, People. Hong

Kong University Press (2010), p. 58;

[3] “Hong Kong, the Facts: Population”; Hong Kong Government Factsheets:

http://www.gov.hk/en/about/abouthk/factsheets/docs/population.pdf

[4] Sock-Yong Phang; The Singapore Model of Housing and the Welfare State;

Singapore Management University, School of Economics (2007); p. 15:

http://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1595&context=soe_research&

sei-

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eb%26cd%3D1%26ved%3D0CCwQFjAA%26url%3Dhttp%253A%252F%252Fink.lib

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search=%22singapore%20model%20housing%20welfare%20state%22

[5] Ibid., p. 15;

[6] “Housing in Hong Kong”; Wikipedia, the Free Encyclopedia:

http://en.wikipedia.org/wiki/Housing_in_Hong_Kong

[7] Sock-Yong Phang; The Singapore Model of Housing and the Welfare State;

Singapore Management University, School of Economics (2007); p. 39 (Link referred

in number [4]);

[8] Ibid., p. 39;

[9] “Economies of Scale: A superlative housing scheme gets under way”; Oxford

Business Group:

http://www.oxfordbusinessgroup.com/news/economies-scale-superlative-housing-

scheme-gets-under-way

[10] “Hong Kong, the Facts: Mandatory Provident Fund”; Hong Kong Government

Factsheets:

http://www.gov.hk/en/about/abouthk/factsheets/docs/mpf.pdf

[11] Hong Kong Population Projections 2007-2036 (July 16, 2007):

http://gia.info.gov.hk/general/200707/16/P200707160137_0137_29676.pdf

Bibliography, Support Material and Additional References:

• Scott, Ian. The Public Sector in Hong Kong: Policy, Government, People. Hong

Kong University Press (2010): Chapters 3, 10;

• Howlett, Michael. Designing Public Policies: Principles and Instruments. Routledge,

New York (2011): Chapters 4, 9;

• Sock-Yong Phang; The Singapore Model of Housing and the Welfare State;

Singapore Management University, School of Economics (2007) (Link referred

before);

• Fong, Peter K.W. A Comparative Study of Public Housing Policies in Hong Kong

and Singapore. Hong Kong University, Centre of Urban Studies and Urban

Planning (1989) [From HKU Scholars’ Hub: http://hub.hku.hk/]

• Wong, Lili. United Nations Public Service Award: Singapore’s Home Ownership

Program (PPT Presentation). Housing and Development Board;

• “Squatters no More: Singapore Social Housing”; Global Urban Development

Magazine:

http://www.globalurban.org/GUDMag07Vol3Iss1/Yuen.htm

• “Hong Kong’s Land Policy: A Recipe for Social Trouble”; Hong Kong Journal

(2011):

http://www.hkjournal.org/archive/2011_spring/3.htm