Hong Kong Special Administrative Region (HKSAR) Chief Executive Donald Tsang.[File photo]

Hong Kong Special Administrative Region (HKSAR) Chief Executive Donald Tsang began delivering the 2011-12 policy address, his seventh and last piece, on Wednesday morning at the opening of the Legislative Council, outlining the city government's policy direction in the coming year.

"To sustain economic growth, we must seize opportunities and rise to challenges. During my term, I have had to deal with two major issues," Tsang said in his annual policy address at the city's Legislative Council, which was live broadcast for Hong Kong's 7. 1 million people.

The first, he said, was to leverage the National 11th and 12th Five-Year programs to develop Hong Kong into the global financial center of China and to facilitate entry to the Chinese mainland market for the city's industrial, commercial and professional sectors.

The second was to respond to the global financial tsunami in 2008. Hong Kong's economy started to recover in the second quarter of 2009 and has since remained strong. Hong Kong achieved growth of 7 percent in 2010 and expected the economy to grow by 5 to 6 percent this year, he said.

"The wealth gap, housing and the aging population are the issues of greatest public concern," he said in the policy address titling "From Strength to Strength".

Tsang, who turned 67 last Friday, was elected the Chief Executive of Hong Kong in May 2005, after Hong Kong's first Chief Executive Tung Chee Hwa announced his resignation for health reasons. Tsang then served out the remaining two years of Tung Chee Hwa's 5-year term. In March of 2007, he was re-elected for a full five-year term, which will end on June 30 of 2012.

Focusing house

"Housing is an issue of great public concern", and the financial tsunami has led to surging asset values and soaring property prices in Hong Kong, said the Chief Executive, who admitted several days ago that the city's government had made mistakes in housing and land-supply policies over the last several years.

"(Hong Kong) People have become frustrated because it is more difficult for them to own a home. I am striving to tackle the problem by increasing land supply, combating property speculation and adjusting our subsidized housing policy," Tsang said.

The Hong Kong government, led by Tsang, has been facing pressure and criticism over its housing policies amid soaring house prices.

Over the past year or so, the property market has been exceptionally vibrant because of the relatively small supply of private residential flats, abundant liquidity and persistently ultra-low interest rates, which he said is the root of people's difficulty in purchasing a home.

"Property prices in August this year increased almost 18 percent over August of 2010. The mortgage to income ratio was 47 percent in the second quarter of this year. Both figures indicate that people face greater pressure and higher risks in home purchase," he said.

In addition, owing to strong demand from China's mainland and overseas investors for high-priced residential properties, developers have in recent years shifted towards the provision of high-end units.

Tsang identified six problems with the housing market in Hong Kong -- difficulties to maintaining public rental housing production, private house prices exceeding people's affordability, inadequate land supply, malpractices in selling properties, aging buildings in old urban areas and problem of sub-divided units.

According to Tsang, Hong Kong has a total of 2.6 million residential units, accommodating 2.35 million households in the city.

Of those, 730,000 households live in Public Rental Housing and 380,000 in self-owned units acquired with government subsidies under the Home Ownership Scheme. The two are Hong Kong's major subsidized-sale public housing programs.

In other words, almost half of the households in Hong Kong are benefiting from some form of housing subsidy by the city government. While 1.24 million households are living in private properties, he said.

Tsang announced seven measures to tackle problems in Hong Kong's house market, which included the long-awaited resumption of the Home Ownership Scheme (HOS), which allows the city's households to buy a flat at 30 to 40 percent discount.

"In response to the aspirations of low and middle-income families to buy their own homes, the government now puts forward a new policy for the resumption of the HOS."

The new scheme will be targeted at families with a monthly household income under 30,000 HK dollars (3,851 U.S. dollars), mainly first-time home buyers. Flats with a saleable floor area of 400 to 500 square feet will be offered at affordable prices, he said.

Tsang's other measures included providing more public rental houses, enhancing the My Home Purchase Plan, developing old districts and increasing land supply.

Helping the needed,elderly

Tsang said the widening of the wealth gap is still a source of social discontent in Hong Kong and poverty in the city is related to economic restructuring.

"While the income of the grassroots has increased, we are also facing enormous inflationary pressure... I am very concerned about the impact of high inflation on the livelihood of our people, especially the grassroots."

The average inflation rate for this year is expected to reach 5.4 percent, which is the highest annual rate since 1997. The city government will strive to ease domestic inflationary pressure by such measures as cooling the property market and preventing excessive credit growth, he said.

Tsang thus announced some short-term measures to ease the burden on the grassroots, such as paying two months' rent for around 700,000 public housing tenants and providing an extra allowance to comprehensive social security assistance recipients.

In face of surging global food prices, the city government will endeavor to ensure an ample supply of food at stable prices by expanding the sources and types of food supply and reducing the risks brought about by unstable conditions in individual places.

It will also continue and improve the service under the city government's Short-term Food Assistance Service, ensure the implementation of the statutory minimum wage and Work Incentive Transport Subsidy Scheme, and enhancing training and employment support.

Regarding the elderly, Tsang said Hong Kong's population aged 65 or above is expected to surge from about 900,000 at present to 2.1 million by 2030 to account for a quarter of the population. The rapidly aging population will bring tremendous challenges to elderly and public healthcare services.

The city would take specific measures to deal with the issue, such as improving the mode of elderly care, offering concessions for the elderly, providing retirement protection and offering medical support for Hong Kong's elderly residents in the mainland.

The policy address is an annual address by the Chief Executive of the Hong Kong Special Administrative Region. Usually, it is addressed in October at the opening of the city's Legislative Council.

The fresh annual session of Hong Kong's Legislative Council was opened in the day at the new Legislative Council complex, at Central on Hong Kong Island, which was completed about two months ago.

It is part of a huge building project which also houses the office of the Hong Kong's Chief Executive, the city government's offices, an open space, two covered pedestrian walkways and other ancillary facilities. The project's total cost amounted to 4.94 billion HK dollars (633 million U.S. dollars).