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CONFIDENTIAL
(d)
(e)
a compulsory scheme would avoid the risk of
discriminatory employment practices by employers
and by providing full transferability,
preserve labour mobility; and
should
it would be much better, if a compulsory scheme
is contemplated at all, to start off on that
basis rather than seek to convert a voluntary
scheme to a compulsory scheme at a later stage.
Financial Implications
17.
The Green Paper proposal for a semi-voluntary
contributory scheme envisaged the administrative costs
being met from General Revenue. In the absence of any
experience with schemes of this kind in Hong Kong, it is
impossible to estimate the financial commitment involved.
Experience in Malaysia and Singapore indicates that about
4% of gross contributions is required to administer their
well-established compulsory Provident Fund Schemes (which
do not receive any financial assistance from the
governments concerned). The initial costs of any scheme
are bound to be high, while a semi-voluntary scheme with modest
levels of contribution would inevitably continue to consume
a much larger proportion of gross contributions because of
the administrative complexities and the relatively poor
cash flow. However, a compulsory scheme would produce
a much healthier cash flow and should be easier and less
costly to administer. And if the contributions are pitched
at 2% from the employee and 2% from the employer, as
envisaged in the Green Paper, the scheme could probably be
self-supporting, other than Government meeting the
administrative costs. The administrative costs of a
CONFIDENTIAL
/scheme
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