Unsolved problems hang over Hong Kong leader's last policy address

HONG KONG (Reuters) - Hong Kong’s leader on Wednesday delivered his last annual policy statement before stepping down, addressing longstanding problems including high property prices and stalled political reform though providing no substantial new measures to tackle them.

Hong Kong Chief Executive Leung Chun-ying sits behind security guards before his policy address at the Legislative Council in Hong Kong, China January 18, 2017. REUTERS/Bobby Yip

Chief Executive Leung Chun-ying took office in 2012 pledging to make housing more affordable, and to bring greater democracy to the city of 7.2 million, issues that had also stymied his predecessors.

Home prices have bucked repeated cooling measures, including a hefty new sales tax in November, to rise ever higher, putting prices on a par with those in New York and London.

Political reforms have stalled amid growing worries among democracy activists about mainland interference that they see threatening the city’s autonomy.

Demands for fully democratic city elections triggered Hong Kong’s most tumultuous protests for decades in late 2014 but Beijing refused to make any concessions.

Leung said surging property prices posed the “gravest potential hazard” to society and he reiterated a need to increase the supply of land, including through reclamation and expanding new towns.

“If the government and the community do not resolve to expedite the identification of land for housing production, the housing problem will remain a tough nut to crack,” Leung said.

Only seven percent of city land is zoned for housing and the average price per square foot of city flats is about HK$10,700 ($1,380), spawning a boom in ever smaller “mini” flats no bigger than a car parking space. [L4N1F81CQ]

In the next decade, 460,000 housing units are expected to be built, he said.

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Politically, Leung has been divisive. He is viewed by many democracy activists as close to the Beijing leadership.

He stressed in his address that the city remains an inalienable part of the mainland.

“There is no room for independence or any kind of separation,” he said.

“It is the obligation of each and every Hong Kong citizen to safeguard our country’s sovereignty, security and territorial integrity.”

His administration used teargas against protesters during the 2014 “Umbrella Revolution” that blocked major roads in Hong Kong for 79 days.

Leung’s push to ban lawmakers advocating self-determination or independence triggered a highly contentious “interpretation” of Hong Kong’s mini constitution by China’s parliament last year, raising questions about the independence of the city’s judiciary.

Hong Kong, a former British colony, returned to Chinese rule in 1997 under a “one country, two systems” arrangement granting the city a high degree of autonomy, but worries about creeping Beijing control over the city have arisen in recent years.

Before he spoke on Wednesday, a small group of protesters threw fake money at Leung, calling him a “liar” for not keeping policy promises, while a pro-democracy lawmaker held up a effigy of Leung resembling a monkey.

Leung said recurrent expenditure on social welfare would increase to HK$66.2 billion ($8.5 billion), a nearly 55 percent rise compared with four years ago. Allowances for about half a million elderly would be increased by almost a third.

He said the government would also “progressively abolish” a controversial provision concerning retirement funds that has allowed companies to offset severance and long-service payouts by dipping into individual mandatory provident funds.

Business lobby groups fiercely oppose the government’s decision to abolish the provision.

($1 = 7.7559 Hong Kong dollars)

Additional reporting by Twinnie Siu, Donny Kwok and Anne-marie Roantree; Editing by Simon Cameron-Moore, Robert Birsel