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to the new migrants ranged from food, clothing, and medical attention, to employment projects, daycare centers, monetary assistance to college students and the needy, as well as interest-free loans for people to start up small businesses (HKCSS 1987, p. 30, quoted in Lee 2005a). The colonial bureaucracy did not even have a dedicated agency to deal with social welfare until the Social Welfare Offi ce was set up in 1948. The establishment of the HKCSS in 1947 by the various voluntary agencies to better co-ordinate their humanitarian aid efforts illustrates the extent of the state’s dependency on these voluntary agencies. Their Central Records Office contained the records of over one million welfare recipients and remained as the only keeper of formal social assistance records until it was transferred to the Social Welfare Department in the late 1960s, when the latter began to assume a more formal role in welfare provision.
At the same time, the government did begin to take up new areas of public provision as demanded by the political and economic change. In the early 1950s, to resettle squatters and clear land for redevelopment, it began to provide public housing in the form of resettlement estates,3 and in the two decades that followed (1954–1973), 234,059 units were built to shelter over 1 million inhabitants. In the 1960s, major white papers were published for education, social service, public housing, and health care, reflecting for the first time the commitment of the colonial government to making long-term policy plans for these areas.
The gradual trend of the colonial government to assume an increasing role in social and economic development was reflected in the steady increase in the number and size of departments (Hamilton 1969). A formal policy of localization was initiated in the late 1950s (Scott and Burns 1988, p. 96). These processes hastened in the 1960s, with the first major batch of locally recruited administrative officers (the new title for cadet officers), mostly graduates of The University of Hong Kong, joining the civil service in 1962.
These developments also intensified the problem of a colonial bureaucracy. The highly centralized structure of the bureaucracy created a bottleneck in communication and decision making as more departments were added, all of which were supposed to report to the colonial secretary. By the late 1960s, the Colonial Secretariat was greatly expanded by the creation of 11 branches (Hamilton 1969). This precipitated the administrative reform in the early 1970s, discussed further.
12.4Late Colonial Period: The Founding of the Public Service State (Early 1970s to Early 1980s)
12.4.1 Context and Driving Force of Development
The events that precipitated the changes in the 1970s were the two social riots in 1966 and 1967. They revealed massive social discontent, and prompted the colonial state to adopt major adjustments in their governance approach. Governor MacLehose, who assumed office in 1971, pledged to massively expand services in the areas of education, public housing, social service, and health care (which he termed “the four pillars” of public service). Social assistance in the form of benefit- in-cash was offered to eligible recipients for the first time. Under MacLehose’s administration, the colonial state evolved into the major financer and provider of health care and public housing, and the major financer of education and social service. Throughout the 1970s, social provision constituted over 40% of the yearly public expenditure (Lee 2005b, p. 5), even though the actual
3In 1953, a squatter fire in Shek Kip Mei left 53,000 people homeless, forcing the government to start building resettlement estates.
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amount of spending was still low by western standards. The late colonial state also tried to step up its management of society by launching the City District Office Scheme in urban areas and developing district administration. The expansion in the scope of public service and the enhanced management of society directly led to the expansion of the civil service.
The 1970s was also the period of Hong Kong’s hyper-economic growth. Throughout the 1970s, an average economic growth rate of 9% of the gross domestic product (GDP) was achieved (ibid.), making it possible for the colonial state to finance an expanding government despite its insistence on financial conservatism. At the same time, colonial officials were cautious about the financial implications of such an expansion. As a financial control measure, officials of the Treasury Branch instituted administrative guidelines in the early 1980s. The guidelines that annual public expenditure should be kept below 20% of the GDP and that annual growth in public expenditure should not exceed the growth in GDP have since become the golden rule of Hong Kong’s public finance.
Essentially, in this period, the late colonial state was transforming itself into a public service state, in which good policy and administrative performance became the basis of legitimacy to rule. By the 1980s, the expectation that the government had the primary responsibility for solving social problems (and thus should play the role of major provider of public services) had been firmly established among the population (Lau and Kuan 1988, p. 58).
12.4.2 Major Institutional Development
A major review of the administrative machinery was conducted. The McKinsey Report, aiming to redress the problem of bottlenecks, proposed a major administrative restructuring of the Colonial Secretariat by formalizing the layer of policy branches between the colonial secretary and the departments (McKinsey & Co. Inc. 1973). Each policy branch oversaw a series of relevant departments as executive agencies. With the reform, there was a more formal division of labor between generalists and specialists. Policy branches became dominated by the generalist administrative officers and were the major policy makers; the specialists were mostly in charge of the departments and were responsible for policy execution. This change amounted to ministerialization (Cheung 1997) and consolidated the generalist-dominated system, if not the identity of the administrative officers as a corps of administrative elites (or an administrative class). Various scholars have commented that this administrative class, with shared values, identity, and world views, were to function as the de facto government party of the late colonial period.
As mentioned, another important direction of administrative reform was for the late colonial state to build up its administrative capacity for community building from above. This was achieved through the City District Officer (CDO) Scheme, which divided the urban areas into districts, each headed by a district officer. This scheme originated as an attempt of the colonial state to improve its communication with the people after the two social riots. In actuality, the new district administrative system turned out to be a mechanism for the state to better penetrate the community, if not to manage it. On the other hand, the policy-making structure remained highly centralized, as the district-level administrative machinery had little policy-making power.
Given the “episodic” (Tang 1998) development in various social programs, the colonial state relied heavily on voluntary agencies to provide service. For education, the grants-in-aid system was expanded to include a wide range of voluntary agencies of different religious and social backgrounds that ran over 80% of the primary and secondary schools under government subvention. For social service, hundreds of non-governmental organizations (NGOs) were incorporated into the state’s funding regime and provided 90% of the social service. The employees of these schools and social service agencies, even though not civil servants by status, had their salary and benefits
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linked to the civil service pay scale and the service delivery of their agencies was closely monitored by the government. Thus, these non-profit organizations and their employees were practically agents of the state in delivering essential service to the community.
12.5 Political Transition (1984–1997)
12.5.1 Context and Driving Force of Development
In the 1980s, Hong Kong entered the period of political transition. Following the visit of Prime Minister Margaret Thatcher to Beijing in 1982, a period of negotiation between Britain and China finally led to the signing of the Sino-British Joint Declaration in 1984. This declaration stipulated that Hong Kong would be returned to China in 1997 and become the Hong Kong Special Administrative Region (HKSAR) under the “one country, two systems” arrangement. Provisions were included in the Basic Law to ensure that the basic institutions deemed important to the success of the city would be retained. These provisions included retaining the conservative public financial policies (Articles 107 and 108) and ensuring the smooth transition of the civil service (Article 100). During this period, Hong Kong society experienced tremendous political uncertainty as well as rising political consciousness brought about by a growing middle class and the mobilizing effect of political transition. At the same time, the city also underwent major economic restructuring as manufacturing industrialists relocated their production sites out of Hong Kong to south China. Benefiting from China’s open-door policy, the city was able to maintain a high economic growth rate through restructuring its economy to service industries. It was during this time that the government began to adopt some new public management (NPM) reform measures. Scholars have variously argued that NPM reforms during this period, unlike the reform in western liberal democracies, were not caused by financial or economic crises. Cheung (1996), for instance, argued that NPM reforms in Hong Kong were solely caused by the crisis of political transition, and that they were largely measures for “load shedding” and thus tactics for the colonial government to deal with the decline in legitimacy and capacity. Lee (1998) argued that the dual concern of the long-term financial sustainability of the public service state and the failure of democratization were the factors that compelled the late colonial state to adopt NPM reform. Despite the financial concerns, many major areas of public services actually experienced an increase in expenditure in the early 1990s, led by high revenue and the need to rescue political confidence after the Tiananmen Massacre in 1989.
12.5.2 Major Institutional Development
The 1980s witnessed a trend of corporatization. The Kowloon-Canton Railway Corporation (KCRC), which was originally managed as a government department, became corporatized. On the recommendation of the Scott Report (1985), the Hospital Authority was formally set up in 1990 and took over the management of all ex-government and ex-subvented hospitals. The Housing Authority was reconstituted into a public corporation chaired by a non-official member and with grassroots representatives. The Provisional Airport Authority was set up in 1990 and was succeeded by the Airport Authority in 1995 to take up the responsibility of constructing and managing the new Hong Kong International Airport. (The Civil Aviation Department managed the old airport.) The trend of corporatization seemed to come with a diverse agenda. The Hospital Authority was set up to improve efficiency through better management of public
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hospitals. While the ideas of user charge and cost recovery were partially implemented, public hospitals remained low cost and healthcare expenditure continued to rise in the 1990s. The restructuring of the Housing Authority was aimed at turning the public body into a more representative institution in view of the growing politicization of the public housing policy. The Airport Authority was set up to take up the project of building the new airport, which at that time was one of the largest infrastructural projects in the world. Privatization was only carried out in some service areas (e.g., the management of public car parks and public housing estates) and has not evolved into a massive scale. In sum, these NPM reform measures cannot testify to a major rolling back of the state.
In 1992, the Serving the Community Program was launched by the Efficiency Unit. The program stated four core principles, namely, (1) being accountable, (2) living within our means,
(3) managing for performance, and (4) developing our culture of service. Lee (1998) analyzed the significance of the program, and she regards the first two principles as representing the articulation of a public philosophy in order to establish a normative basis for administrative power. Establishing accountability as the normative basis of administrative authority aimed to resolve the inadequacy of the legitimacy of administrative power. “Living within our means” wished to articulate prudent financial management as the primal principle guiding the distribution of resources. For managing for performance and developing a culture of service, they are typical reform measures of the new managerialism. In the context of Hong Kong, they serve the purpose of improving administrative performance and responsiveness, and as substitutes for democratic reform.
12.6 Postcolonial Development (1997–present)
12.6.1 Context and Driving Force of Development
On July 1, 1997, 13 years after the signing of the Sino-British Joint Declaration, 155 years of British colonial rule ended and Hong Kong was returned to China as HKSAR under the arrangement of “one country, two systems.” A high degree of autonomy was formally granted, as the HKSAR government was delegated the authority on all its internal affairs except for defense and foreign policy. Institutionally, the constitutional design of the Basic Law (the mini-constitution of the HKSAR) largely aims to preserve the political, administrative, and economic institutions of the colonial regime, especially the essence of its executive-dominant system and the capitalist system. The intent of the Basic Law drafters was to preserve an executive-led system with senior civil servants remaining the most important pillar of governance. The governor was replaced by the chief executive, who in turn is advised on policy matters by an Executive Council. The 60-member legislature is partially democratized, with 30 members currently being returned by universal suffrage. The common law system is largely preserved. At the practical level, the “through-train” arrangement of the civil service was successfully implemented, providing for stability and a smooth transition of sovereignty.
On the other hand, the Asian financial crisis erupted right after the handover of sovereignty and threw Hong Kong into an economic downturn and financial austerity. Ending decades of prolonged economic boom, the crisis brought GDP growth down to –5.3% in 1998, while the budget deficit went up HK$70 billion (5.5% of GDP) in 2002. Reviving the economy and reducing the budget deficit became the top policy priorities of the newly established HKSAR government. This economic and fiscal crisis was met with a substantial political crisis, as problems in
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