The ‘trading fund’ reform in Hong Kong: Claims and performance

Trading funds are a recent initiative in Hong Kong under public sector reform, with the objective to turn commercially-oriented government departments into self-accounting entitres capable of improving responsiveness to consumer needs at the same time as enhancing producer efficiency. This article studies the features and claimed benefits of trading funds and compares and contrasts these with the initial performance of the six trading funds set up since the enactment of the Trading Fund Ordinance in March 1993. Although all of them have experienced increased management flexibility and operating autonomy, with some improvement in service variety and quality in certain cases, it is arguable that the cost of improvement is more likely borne by the customers than the producers in the form of enhanced productivity, since most trading funds still enjoy a monopoly or quasi-monopoly status. Under the existing regime, so long as trading funds continue to generate sufficient business revenue to meet financial targets, there is insufficient pressure to be cost-sensitive. So far managers have gained because of the newfound flexibilities, but the benefits available to customers are as yet uncertain. Copyright © 1998 Hong Kong Public Administration Association : Dept. of Public & Social Administration, City University of Hong Kong.