Benefits of Privatization

5. Benefits of Privatization

(a) Alleviate the financial burden of HA

The divestment scheme has relieved the tiding budget deficit of HA. As HA's budget surplus dropped from $32 billion in 01/02 to $13.2 billion in 04/05. In the coming four years, HA would need $23.6 billion to build 66,700 units of public housing in order to keep the waiting period not more than 3 years, resulting in an anticipated deficit of $10.4 billion (HKSAR, 2004). By receiving $ 32billion one-off from the sale, HA would not run into a financial deficit. Furthermore, under the influence of the Asian Financial Crisis and SARS, the Government and HA encountered problems arisen by the drop in government revenue and the rise of public expenditure, such as decreasing income from salary tax, reduction in business performed in HK, increase in CSSA cases and the extra precautionary measures against SARS. Moreover, since the maintenance of public services had now been born by the LINK-REIT, HA could save up resources and subsidies on the operations of public housing estates and their shopping centers, thus concentrating on its chief aim as a public housing provider.

Nonetheless, I believe that the benefits gained by reducing the financial burden are more on a short-term basis. Since the financial deficit of HA might not be a long term effect, and the rental income from public facilities and stores was a major income for HA, after the transfer of ownership, the revenue for government derived from the public estates and renting out public facilities would be reduced. I doubt the tendency for HA to run into financial deficit again in the long run given that the slowdown in global economy.

(b) Reduce the political pressure of the Government

The administrative burden has been transferred from the Government to the Link. HA would no longer liable for the issues regarding the quality and managerial matters with the housing estate facilitates. Privatization could free the government from the political pressure triggered by the housing problems (Wiltshire, Pirie and Chiu. Wiltshire, 1987). The privatization could decrease the governmental intervention to the market and increase the role of the private sectors on the service provision. People would then divert their attention to the prices instead of the political issues regarding privatization Chiu (1994). Therefore, the Government could reduce the political burden significantly. Besides, HA would not be responsible for monitoring the public housing services and reduce the chance of being complained about its weak managerial skills. As proposed by HA, the Government could concentrate on policy making and services delivery in other social services and welfares, while HA could save more resources on constructing public housing and remove its liability over the public services. As a result,