The total net assets under all of the Mandatory Provident Fund (MPF) schemes reached HK$248.2b on 31st March this year, or $103,000 for each worker on average. When the government forces us to invest every month, what do we lose?
Someone tried to cash his MPF investments for a surgery on his daughter. Another wanted to do so for his son’s overseas school fee, but the Mandatory Provident Fund Schemes Authority (MPFA) rejected both requests. I believe from time to time we want to realise our investments to get married, raise our children, study or start our own businesses instead of holding MPFs, which is the only choice allowed by the government. Reason? An aging population, it claimed.
According to the estimation of the Census and Statistics Department, the percentage of people over 65 in the population will rise from 12% in 2006 to 26% in 2036. To avoid the burden of the elderly in the future, the government therefore started forcing everyone to save. The burden sounds scary, but there is nothing to say about how well the government can forecast. For example, in 2006 there were 4 million people visiting Disneyland Hong Kong, only 73% of the estimate in 1999 when the contract was signed. Before the government believes it could predict the situation of the whole city in 28 years, it should convince itself that it was able to forecast the number of visitors of a theme park 7 years later.
The department stated clearly that the estimate is based on 6 assumptions. It will be wrong if any one of them does not realise. For instance, one assumption is that the birth rate will fall from 0.984 in 2006 (984 births among 1000 females) to 0.9 in 2016. Now the turbulence in the last few years is over, and the birth rate rose from 0.9 in 2003 to 1.024 in 2007. In fact, because of the many young immigrants to Hong Kong, a birth rate of about 1.35 can stop the trend of aging. In the first quarter this year, there were 19,006 births already, 13% higher than the corresponding figure last year. Furthermore, if people can get back their MPF balance, spend it freely and no one takes away one tenth of their income in the future, would they not be more willing to give birth?
The government implemented the MPF scheme because they thought the working class cannot plan for themselves and save. They would become dependents of the society when they get old, like the MPFA and the fund managers do today. (In 06/07, the MPFA spent $36,000 every month on a staff member on average, while in the first quarter of 2007 the average salary in Hong Kong is about $11,000. For the pals making $11,000 per month, do you think that you are entitled to a benefit of $25,000?) Today we see old people over the retirement age earning their bread on the street, so we may think this way. But the fact is most people retire with their savings of many years or monthly subsidies from their children. Now there are 41,400 people possessing an asset of HK$9.9m or more, 78% of who are over 40. If this example is too ‘expensive’, how many of the seniors on the street have to rely on the welfare scheme?
If you also think that the MPF system is unreasonable, can we change it? The power of the MPFA’s forcing us to buy investment funds comes from Mandatory Provident Fund Schemes Ordinance . It was enacted by the Legco, and it can be repealed there, too. It is the people, not the government, to decide how to spend the money they earn.
Apart from the MPF, there is another ordinance which makes the rich get richer. Today if the bureaucrat of the Urban Renewal Council (URA) thinks a building does not look nice, they can force the residents to move, demolish it and re-build it with developers who are quite rich apparently. That happens even if the building is solid and safe structurally. In return, the URA will generally take 20-50% of the profit from the sale of the new building. With this operation, the URA earned $2.3b from 2001 to 2007. Mr Mr. Billy Lam Chung-lun, former managing director, was so satisfied with his performance that on top of his annual salary of more than $3m, he took a bonus of $998,000- in 2003.
Before forcing the residents move out from their properties, the URA will offer to purchase them, usually at the price of a 7-year-old property of the same kind. The price is, however, too little to purchase a replacement property in the same district. With no other choice, they have to move to suburbs and break the community network. For that, most residents reject the offer, rather stay and keep their neighborhood. If it had been the case, the URA would not been able to demolish the old building with developers to ‘create quality and vibrant urban living in Hong Kong’.
For the goodness of the residents, the URA is reluctant but will apply the Land Resumption Ordinance. Under this ordinance, regardless of the willingness of the owner, the Chief Executive, for a ‘public purpose’, has the power to take any property in Hong Kong with a 90-day notice to the owner and compensation decided by the court. The problem is the compensation is based on the condition of the property without taking into account whether it is enough to replace the old property with a new one. In our case, if the CE wants, all properties in Hong Kong must be sold to the government at the price of a 7-year-old property of the same kind, no matter whether the owner agrees or not. Otherwise, the owner may be charged for occupying a public land 90 days later automatically.
Actually, residents in affected districts have been requesting ‘flat-for-flat’ and ‘shop-for-shop’ exchange arrangements in order to stay after the renewal project is completed. As new buildings can be much taller than the old, it is not a problem at all for the URA and developers. For instance, in the project at Johnston Road, Wan Chai, there were 105 property interests before the renewal. The new building (J Residence) has 381 apartments and commercial properties, nearly 3 times more.
If the loophole of the Land Resumption Ordinance seems to be far away, please consider the following: according to the URA, today in the island, Kowloon, Tsuen Wan and Tsing Kwai district, there are 13,000 private buildings of 30 years old or older. The number will increase to 14,000 in 2011. I think no one would like to read a letter from the URA at home after working hard for the whole day, saying ‘your property is included in a renewal project, within 90 days…”
We work to earn our pay cheque every day, which the MPFA do not spend any effort; we pay our mortgage every monthly, which the URA do not pay a penny. Law is to protect our money and properties, not to empower the government to take them away without our consent.
