BPA and Business Sectors Speak Out at Symposium on MPF Offset Mechanism

The symposium was successfully held with only 3 weeks of preparation and was supported by 15 business and SME associations expressing their concerns on the abolition of the MPF offsetting mechanism.

The BPA, in conjunction with 14 chambers, held a Symposium on MPF Offset Mechanism today (December 10). The symposium attracted more than 300 business and academia representatives who were invited to share their thoughts on the socio-economic impacts to Hong Kong should the Mandatory Provident Fund (MPF) offsetting mechanism be abolished. Participants from the various chambers, small and medium enterprises (SMEs) and business sectors were unanimous in their opposition of eliminating the MPF offsetting mechanism in the absence of any impact assessment analysis and social consensus. It was felt that forcible abolition would come at a high price on society.

Symposium co-organisors were, in no particular order, the Business and Professionals Alliance for Hong Kong, the Hong Kong General Chamber of Commerce, the Federation of Hong Kong Industries, the Chinese General Chamber of Commerce, the Chinese Manufacturers’ Association of Hong Kong, the Real Estate Developers Association of Hong Kong, the Hong Kong Chinese Importers’ & Exporters’ Association, the Employers’ Federation of Hong Kong, the Hong Kong General Chamber of Small and Medium Business, the Hong Kong Small and Medium Enterprises Association, the Hong Kong Retail Management Association, the Quality Tourism Services Association, the Federation of Hong Kong Property Management Industry, the Hong Kong Business Community Joint Conference, and the Institution of Dining Art.

Mr Andrew Leung, BPA Chairman, warned that cancelation of the MPF offsetting mechanism could lead to a tidal wave of layoffs and closures due to increases in business operational costs and diminished margins.

BPA Chairman Mr Andrew Leung Kwan-yuen said that despite the three weeks available for registration, there was nevertheless strong interest by and response from the industrial and commercial sectors to participate in the multi-chamber symposium. “It is a reflection of the widespread concerns among business, particularly SMEs, who have come together to make our voice heard by the Government,” he said.

He stressed that the general business community was strongly opposed to the cancelation of the MPF offsetting mechanism. If the Government were to cancel the offsetting mechanism unilaterally, this would have grave implications on the viability of SMEs and labour-intensive industries, which collectively accounted for over 1.3 million jobs. As SMEs typically operated on margins of less than 10%, the resultant losses from higher overheads brought on by a removal of the offset mechanism could give rise to a tidal wave of layoffs and closures. The BPA and the business community have therefore called on the Government to carry out a detailed and comprehensive study of the impact an abolition of the offsetting mechanism would have on the overall business environment before taking any action on the matter.

Preeminent economist and keynote speaker Prof Lawrence Lau Juen-yee suggested that the Government introduce an unemployment and disability insurance scheme to replace severance and long-service payments.

World renowned economist Professor Lawrence Lau Juen-yee told the symposium that the MPF offsetting mechanism was reasonable given the overlap in functions between MPF and severance and long-service payments. As such, it was unfair to employers if they were required to contribute twice. He said that the Government could draw reference to China’s adoption of a win-win approach to the successful implementation of economic reforms when dealing with the MPF offsetting issue. He felt that employers should not be compelled to assume sole responsibility for providing unemployment and disability protection for employees. In this connection, the Government should take the initiative of introducing an unemployment and disability insurance scheme to replace existing severance and long-service payments. The proposed insurance scheme would have the benefits of precluding employers from paying twice, as well as in rendering moot the issue of the MPF offsetting mechanism.

Keynote speaker Mr Stephen Ng Tin Hoi, Deputy Chairman of the Hong Kong General Chamber of Commerce, asserted that enhancement of the MPF system could be better achieved through optimising investment returns rather than an abolition of the offsetting mechanism. He also criticised the Government for shirking the responsibility of caring for the poor and shifting this to employers.

Mr Stephen Ng Tin Hoi, Deputy Chairman of The Hong Kong General Chamber of Commerce, pointed out that the Government should not ignore the issues of challenging economic conditions, SMEs’ ability to pay, and MPF underperformance if and when the MPF offsetting mechanism was subject to a review. He cautioned that abolition of the MPF offsetting mechanism could threaten enterprises’ survival by exacerbating the deterioration of business conditions in Hong Kong. He also pointed out that abolition could mean higher prices for consumers as businesses pass along the increase in operating costs. At the extreme, businesses could decide to downsize their workforce in anticipation of a formalization of the abolition putting long-serving staff at risk of losing their jobs. Mr Ng said SMEs were already struggling amid a growing laundry list of existing and proposed regulations such as Statutory Minimum Wage, Standard Working Hours and the unification of statutory and general holidays, among others. In relation to the issue of Hong Kong’s aging population, the Government should approach any review of the MPF system in a wholistic manner by conducting a comprehensive regulatory impact assessment instead of singling out just one aspect of the MPF system for consideration.

Dr David Wong Yau-kar, Chairman of the Mandatory Provident Fund Schemes Authority, acknowledged that the MPF system had failed to provide retirement protection for low-income workers because their incomes were often not high enough to require contributions although their employers were obliged to do so. As it was quite common for this group of workers to change jobs on a regular basis and given the prevailing offsetting mechanism, these had compromised the MPF system’s ability to fulfill its intended purpose of providing retirement protection. As the MPFA was not vested with the authority of setting policy, it was not in a position to address the offsetting issue and would not engage in formulating proposals. Public discussion and suggestions were however encouraged.

Keynote speaker Dr David Wong Yau-kar, Chairman of the Mandatory Provident Fund Schemes Authority (MPFA), said that as the MPFA was not a policy-making body it did not possess the authority to address the offsetting issue nor was it able to put forward proposals. However, public discussion and suggestions were welcomed.

Mr Stanley Lau Chin-ho, Honorary President of the Federation of Hong Kong Industries, said that abolition of the offsetting mechanism, whether partial or in its entirety, was neither legally nor morally justifiable. He stressed that the fundamental problem with MPF was in its inability to provide retirement protection and failure to perform satisfactorily. As such, there should be a comprehensive review of the MPF’s management and operations to achieve lower fees and better returns. He also rejected the notion of partial abolition as this would encourage employees on the verge of retirement to deliberately seek dismissal to qualify for severance payments. As it would be quite easy for employees to achieve their objectives of being ‘fired’, labour disputes could become more common and widespread. He said, “Abolition of the MPF offsetting mechanism will surely have a ripple effect. It is not as simple and straightforward as one plus one equals two.”

Mr Jeffery Lam Kin-fung concluded at the end of the symposium that the Government’s habit of reneging on its promises was not confined only to the matters of Statutory Minimum Wage and Standard Working Hours. The business sector had suffered time and again because of the Government’s policy about-face. He cautioned the Government on the grave consequences of abolishing the MPF offsetting mechanism by pointing out: “If the business and professional sectors were pushed into a fire pit, any rescue efforts would be futile.”