1. Health Care and Education Prof. Ho Lok-sang Head, Department of Economics Lingnan University

2. Main Points to Make CEPA offers a unique opportunity for us to promote the growth of the health care sector and the education sector Instead of cutting funding to the two sectors, the SAR government should invest in the two sectors moderately and selectively, so as to consolidate the existing advantages that these two sectors enjoy Export of education and health care services, driven by market incentives and facilitated by government policies, will produce jobs, a better and healthier labour force, and greater fiscal revenues for the government over the longer term This is not to say that there is no further room to eliminate inefficiency and waste; rationalizing the two sectors will continue to be sensible, but rationalizing the two sectors ≠ cutting funding

3. Hong Kong’s Comparative Advantage We have highly trained and motivated professionals in health care and in education, and can offer top quality services in both Excellent networking with medical schools and experts abroad, and highly innovative medical teams in the HA hospitals and medical schools We have universities with excellent infrastructure support and more important first rate staff recruited internationally, with excellent research output and high quality teaching International recognition and international benchmarking much further advanced than on the mainland

4. Hong Kong’s Comparative Advantage (Cont’d) Many HK education service providers are proficient in Putonghua Existing linkage with Mainland universities an advantage Geographic location and SAR status within China Rising income on the mainland and rising expectations create a growing market Single child policy on the mainland underscores the willingness of parents to invest in their children

5. Excess Capacity in both the Health Care and Education Sectors With student numbers declining in primary and secondary schools due to demographic factors, we are seeing surplus facilities in the education sector We have surplus beds and underutilized facilities in the private sector.

6. Fiscal Background Hong Kong is facing a huge fiscal deficit largely as a result of a collapse in revenues and continuing pressures on expenditures in an aging society and weak economy Government is facing pressures to cut funding for the health sector and for the education sector

7. The Wrong Way to Go Cut funding to the bone and reduce the reputation of our health care and education sectors Cut funding to the bone, reduce advancement prospects even for conscientious, high-calibre professionals and destroy morale and retire first rate professionals prematurely

8. Hong Kong ’ s Problem in Tertiary Education Sector: Not Too Many Universities and Too Many University Places, but Irrational

9. New Zealand's Population 3.88 million at 30 June 2001; Universities and Colleges in New Zealand 1.Auckland Institute of Technology 2.Canterbury University 3.Central Institute of Technology 4.Christchurch Polytechnic 5.Lincoln University 6.Massey University 7.UNITEC Institute of Technology 8.University of Auckland 9.University of Otago 10.University of Waikato 11.Victoria University of Wellington 12.Waikato Polytechnic 13.Waikato University 14.Whitecliffe College of Art & Design

10. The Right Way to Go Rationalize the education and health care sectors, cutting funding or increasing funding according to a careful comparison of cost-benefit comparisons from the social interest point of view Continue to upgrade the quality and the morale of professionals in the two sectors by providing reasonable and competitive remuneration and advancement opportunities to the right people SAR government to maintain standards at high levels strictly for health care organizations but will allow them to market their services liberally and truthfully Market and export health care and education services aggressively at the high end market to utilize our excess capacities in education and health care sectors

11. The Right Way to Go (Cont’d) Charges for “standard services” in private hospitals to drop and to become more transparent; charges in public hospitals to rise; Annual health care expenditures per family CAPPED University professors should be paid separately for their teaching and research /administrative duties Rather than concentrating research at a few universities, set up research institutes that will provide support to research staff. Professors from any university can affiliate with these research institutes on the basis of their qualifications and they get extra pay for their research work. Teachers who do not affiliate or are otherwise not research-active will get a 30% reduction in pay, but can make up for the loss through a higher teaching load We can have one University of Hong Kong with different campuses or colleges, still maintaining diversity

12. The Results to Expect under the Right Way “Export-oriented” Private boarding schools in Hong Kong and on the mainland to be established, in part through the conversion of some existing schools in Hong Kong, whose students may be taken over by other schools Universities will expand enrollment by 25 per cent with students enrolled from the Mainland and internationally Private hospitals to take over many more patients from the public hospitals Higher employment in education and health care sectors; Additional revenue collected from export of services may even reduce fiscal burden on the government Quality and reputation of our education sector and health care sector upheld. Continued supply of high calibre workers to work for the prosperity of Hong Kong