Hong Kong is making vital choices that will lead to impoverishment or prosperity, and we are at risk. Critically, we need to identify our comparative advantages among China's cities, and develop them. Others can speak for tourism, finance and health care. My choice is for Hong Kong to be China's education hub, its Boston.
Why? Because in a knowledge-based global economy, living standards depend not on natural resources (witness Africa) or location (we have the internet). Rather, they depend almost entirely on education levels and research innovation. Why are Silicon Valley and Boston in the United States, and Britain's Oxford and Cambridge so prosperous and resilient? The answer: research universities. How did Finland and Ireland get ahead? By making education a priority.
Consider two starkly differing visions of Hong Kong's future. The first, dark view cites the estimated $78 billion deficit and calls for shared sacrifice. It claims that the special administrative region has 'too many universities', education budgets are too high, and its campuses are plump for cuts, with mergers as cost-saving tools.
This is all nonsense. In truth, Hong Kong undereducates its young, with college attendance in the league of Mexico, Mongolia, the Philippines and South Africa, and far below other developed economies. Hong Kong also underspends on higher education as a percentage of gross domestic product, even compared with Thailand and Malaysia. Hong Kong's research budgets, that elsewhere significantly fund universities, are tiny.
Our costs per student are reasonable and in line with efficient public institutions elsewhere. Mergers do not save money. They are hugely costly and rarely successful. Hong Kong does not have too many universities, but rather too few. At the same ratio per capita as the US, Hong Kong should have 98 colleges and universities.
Certainly, efficiency and structural reforms should be encouraged in higher education, as in all government sectors. There is also a compelling need for universities to play very different roles. But higher-education budgets have already been cut by 10 per cent and salaries by 5 per cent, when other government sectors were protected. Another 10 per cent budget cut is proposed for 2004-05, plus further salary cuts of 6 per cent by 2006, with more cuts threatened. This would be disastrous for Hong Kong. Education spending is not current consumption. Rather, it is investment in future living standards, and universities are fragile. Talented faculty always have opportunities, regionally and globally, and competition is increasing, especially from the mainland. If they are lost now, they will be very difficult to replace.
