It's time for the happy debate on divvying up our government's big annual surplus.

In the past six years, the government dished out a total of HK$180 billion in "sweeteners" from its budget surplus, according to think tank SynergyNet. In the first nine months of fiscal 2013, ending March 31, the budget surplus is estimated to exceed HK$40 billion. Many economists predict that the surplus for the whole year will at least match the previous fiscal year's HK$67 billion.

Last year, the government returned some HK$80 billion to the public in the form of salaries tax rebates, an increase in basic allowances, and other subsidies that benefited about 2.5 million households. Many social activists are calling for an even more generous handout this year, citing an improved economic outlook that is based, at least partly, on clear signs of an uptake in exports and consumer expenditure on the mainland.

Citing a government source, a story in South China Morning Post noted that given the huge fiscal surplus expected for fiscal 2013, it would be politically unrealistic not to introduce measures such as waiver of public housing rents and property rates in the next budget. We are sure that Financial Secretary John Tsang Chun-wah has decided on his options at this time. And we don't expect that they will be very much different from those measures introduced in previous years.

Of course, we all appreciate such goodies as salaries tax rebates and, oh yes, cash handouts. These are benefits that render instant gratifications. But we have been constantly reminded by some politicians and economists that we must think in longer terms about Hong Kong's economic future at a time when the free market principle that has served us so well in the past is now brought into question by intensifying social discontent.

In the United States, more and more economists have been brought around to the view that prosperity should be built not on the virtual economy driven by financial services and property, but rather on the good old real economy that actually creates stable jobs and produces things for domestic consumption as well as export. The Hong Kong economy is even more dependent than the US on finance and property to provide the growth impetus. As such, the wealth gap between the minority rich and the rest of the population is seen to be much wider.

The Hong Kong government has tried to ease seething social discontent, especially among the neglected middle class, by proposing to build more affordable housing for sale to qualified buyers in the coming years. Some politicians and opinion leaders have called on the government to reduce whatever handouts it is considering and use the surplus funds to build even more affordable apartments.

To be sure, the high housing cost in Hong Kong has been a major issue that has driven a seemingly irreconcilable wedge between the minority rich and majority poor. But building more subsidized housing does not address the root of the problem that stems mainly from an imbalanced economy that is losing good jobs, which could give youths and the less affluent a chance to move up the economic and social ladder.

As a result, many economists in Hong Kong are calling on the government to spend greater resources on nurturing a high-value manufacturing industry; invest public funds in research and development, and share the results with qualified entrepreneurs who are willing to invest their own money in making products in Hong Kong.

The government has said that the return on investing public funds in nurturing new industrial output is far from assured. Of course, we know that. But the future risk of not doing anything is far greater.

The author is a current affairs commentator.

(HK Edition 02/26/2013 page1)