The working group on long-term fiscal planning today proposed that the Government designate the Land Fund as endowment for the Future Fund savings scheme and inject 25% to 33% of the annual Budget surplus as periodic top-ups to seek higher returns through long-term investments.
That was one of the working group's suggestions for the Future Fund presented at a press conference this afternoon by chairperson & Permanent Secretary for Financial Services & the Treasury Elizabeth Tse.
The group pointed out that there will be budget surpluses, but not for too long if the existing policies and expenditure trends prevail. It recommended establishing the Future Fund as soon as practicable, adding that adopting an administrative route would be the most efficient and cost effective means.
It also proposed placing the Future Fund with the Exchange Fund to benefit from its established investment infrastructure, lower costs and balance of risk and return.
Half the fund would be invested in a long-term growth portfolio which includes high-risk products such as private equity and real estate.
Ms Tse said there should be a 10-year investment period before withdrawals can be made. When there is an urgent need to withdraw from the fund, the Government must consider both immediate and longer-term needs, and the Legislative Council must approve withdrawals.
She added that the fund should be subject to the same investment management regime and oversight by the Exchange Fund Advisory Committee.
The Monetary Authority should also consult the Financial Secretary and the Secretary for Financial Services & the Treasury at least once a year on the Future Fund's investment strategy and asset allocation.
The working group also outlined suggestions on how the Government can enhance its asset management.
It recommended that the Government consider reducing or disposing of its shareholding in some Government business enterprises, but remain the majority shareholder in strategic assets like railways and the airport during serious financial distress.
The advisers also stressed that one-off revenue from asset disposal cannot resolve a structural deficit problem. It recommended that the Government institute a more structured review for monitoring all Government business enterprises.
