Hong Kong Reduces Civil Service Positions and Invests in Artificial Intelligence to Tackle Deficit
Hong Kong’s Financial Secretary, Paul Chan Mo-po, recently announced that to address the rising fiscal deficit, the government plans to cut thousands of civil service positions and increase investment in artificial intelligence (AI). Specifically, the government aims to reduce recurrent expenditure by 7% before the 2027-2028 financial year and cut 10,000 civil service positions by April 2027. Additionally, civil service salaries will be frozen this year.The Hong Kong government emphasized that this decision is intended to ensure the sustainability of public finances and improve departmental efficiency. Officials believe that AI applications can compensate for the reduction in manpower by enhancing administrative efficiency. Reportedly, the government will invest HKD 10 billion in digital transformation, including developing AI customer service systems, intelligent data analysis, and automated administrative processes.Cutting civil service positions will impact the quality of public services and may lead to higher unemployment rates. (Photo / Sourced from Pexels)However, the move has faced strong opposition from civil servant groups and labor organizations. The Hong Kong Civil Servants General Union expressed concerns that cutting civil service positions will impact the quality of public services and may lead to higher unemployment rates. The union also highlighted the growing demand for public services, particularly in healthcare, education, and social welfare sectors, arguing that the government should allocate more resources rather than reduce manpower.In addition to these measures, the government plans to issue HKD 195 billion in bonds to finance infrastructure projects and stimulate economic growth. Another financial measure includes increasing the airport departure tax to boost government revenue. However, tourism industry representatives have raised concerns that this may further weaken Hong Kong’s competitiveness, as neighboring regions have lower airport fees, potentially driving travelers to choose alternative airports for transit.Hong Kong’s financial situation has been severely impacted by the downturn in the real estate market and declining land premium revenues. The decrease in property transactions has resulted in reduced government land income, contributing to the widening fiscal deficit. According to government forecasts, Hong Kong’s fiscal reserves may continue to decline without intervention.Some economists believe the government should consider more long-term reforms, such as expanding the tax base and increasing taxes on corporations and high-income earners, rather than relying solely on spending cuts to improve financial stability. They warn that extensive civil service cuts could negatively affect public services and reduce administrative efficiency.
