Albeit the budget is the longest, taking almost 150 minutes to read, it is a sweet good-bye by John Tsang in his last budget. Undoubtedly, he has been the most generous financial secretary since the establishment of the SAR, let alone before 1997.

During the past five years, he has distributed sweeteners of more than HK$160 billion, about HK$33 billion per year in average, mostly to the needy, depending on how the figure is calculated. These include tax rebate to the middle class, public housing rental relief, additional Comprehensive Social Security Allowance (CSSA) to the lower class, electricity allowance to all registered household and direct cash distribution to all.

Despite no direct cash fork out this year, the government will pay two months’ rent for more than 700,000 public housing tenants, provide one month’s extra allowance for CSSA, Old Age Allowance (OAA) and Disability Allowance (DA) recipients, give tax rebate of up to HK$12,000 for individual and small and medium enterprises, and increase various taxable income deduction to different degrees etc.

Hong Kong is lucky. While the US is facing a financial crisis following the Lehman Brothers’ collapse since September 2008 and the European economic catastrophe triggered by the Greek debt crisis last year, plus many more challenges yet to come, which are driving the global financial system to the blink of collapse, Hong Kong has a huge budget surplus. Last week, the World Economic Forum held in Davos, Switzerland, ended without a consensual solution. Donald Tsang, the Chief Executive who attended the Forum, said he had never been as scared as now about the world economy, while the Hong Kong people appear to be calm and are not worried.

Why? To this interesting question, the answer is simply that, first, we have caring parents and a helpful neighbor; second, we have a prudent fiscal policy guided by the Basic Law; and third, we have a wise and hard working population who believe in the “One Country, Two Systems”.

In contrast to the economic slowdown in the USA and recession in the European Union, the mainland’s GDP has grown 8-9 percent annually in recent years. Well-off Chinese are more willing to travel and spend overseas, particularly in Hong Kong. Within a decade, our tourists have doubled to 40 million, including a five-fold increase in mainland visitors. It is a strong stimulus to the Hong Kong consumers market and the various undergoing infrastructure projects here. Our unemployment rate has fallen from its peak of 5.5 percent in mid-2009 to 3.3 percent recently, a level regarded by Western economists as full employment.

However, it must be recognized that Hong Kong is not immune from the recession in the Western world. With a budget surplus of more than HK$66 billion this year, the government should prepare for the rainy day. The public expenditure should not be targeted at a level exceeding 20 percent of our GDP, and those expenditure registered for people’s livelihood should be increased commensurable to the GDP growth, to follow the principle of keeping expenditure within the revenue limits in drawing up its budget, and in proportion to our GDP growth rate as stipulated in Article 107 of the Basic Law. Panache should be avoided.

Thanks to Hong Kong entrepreneurs and the working people, our GDP achieved a cumulative growth of 19 percent over the past five years, and 55 percent between 1997 and 2010. Our GDP per capita reached an all time high of $34,200, and medium household income has risen by 11.1 percent from HK$18,000 to 20,000. The “One Country Two Systems” has been proven in Hong Kong to be successful in both good and bad times.

Despite favorable figures and statistics, we still have persisting and deep root problems of income inequality and a narrow tax base for which the government has not found a panacea. As our economy is facing more acute wealth gap generated by globalization, the government has eased the resulting tensions through various policy measures and relief sweeteners. Unfortunately, income redistribution has not been taken as a viable solution, and nothing is mentioned in the budget.

Other than distribution of sweeteners, I believe the wealth disparity can be alleviated and improved by doing something both ways. One is bottom-up and another top-down. Our government has done something in the former such as minimum wage, transport subsidy and other relief measures, but it seems reluctant to do something in the latter.

The government should learn something from Warren Baffett, the world’s No 3 richest man who proposed to impose Buffett’s Tax on the rich with a progressively higher rate. Investment profit tax may also be introduced as a top-down measure. And concurrently, the government should provide an economic environment so that more value-added jobs can be created. By then, it will be certain that the difficult wealth gap situation will be narrowed as an embodiment of another success of the “One Country, Two Systems”.

The author is a current affairs commentator.