LRI Chairman is Bill Stacey (left in this photo), an Australian banker who has been living in HK for more than a decade now. Co-founders of LRI Simon Lee (middle) and Andrew Work (right), a Canadian married to a HK lady and was LRI's first Executive Director. Picture taken during the LRI Reading Salon, October 19, 2013 of which I was one of the foreign participants.
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Next Magazine (Second opinion A002, 2013.03.14)
Even people who favor free markets will often describe
Hong Kong as a city with a business landscape dominated by property developers
and their associated conglomerate monopolies. Countless articles seek to
“de-bunk” the purported myth that Hong Kong is the freest economy in the world.
Such cynicism makes it easier to justify more interventions that chip away at
the freedoms we have.
Is the property sector really the most important feature
of business in Hong Kong?
Our city is also the home to many companies, large and
small, that are highly competitive internationally. They get on with their
businesses with little attention or support from the government – a good thing.
Understanding what Hong Kong companies need to be internationally competitive
must guide public policy.
Compared to many cities, Hong Kong is well endowed with
companies founded locally that have grown well beyond our shores and
hinterland. It has long been a haven for entrepreneurs grown locally and those
who come to Hong Kong from around the world.
Take some well-known examples. VTech produces educational
toys found everywhere that are renowned for quality at an affordable price.
Johnson Electric is a global leader in small electric motors. Techtronic
Industries makes household name power tools. These companies compete more than
on cost; they manufacture around the world and have invested heavily in their
brands.
Hong Kong shipping companies and ports operators operate
in highly competitive markets with efficiency and profitability that reflects
the disciplines honed in competitive Hong Kong markets. Commodities traders
(say Noble) rise and fall in Hong Kong. We are the home to a growing suite of
leading hotel brands that start with the iconic Mandarin Oriental and
Peninsula, but have aspiring additions.
Even maligned Hong Kong utilities like CLP and the
various Hutchison infrastructure companies have managed competitive
international expansion. Hutchison itself has managed to win internationally in
retail, ports and telecommunications. The Swire and Jardines groups have
rejuvenated conglomerates grown well beyond their local origins.
Our city remains one of the best places in the world to
establish new financial services businesses. In education, the Kid’s Gallery
franchise is a small and innovative business that shows an economy that is
broadening. This journal is a reminder of our vibrant publishing industry.
Remember Hong Kong is just a city, with 7.1 million people. However, it has
fostered companies with much broader horizons.There are characteristics of
these businesses that are intimately tied with corporate origins in Hong Kong.
They have an international orientation. Many draw management from all over the
world, but have a core of efficient Hong Kong born and educated administration
that is in a class of its own. There can be no place in the world with better
secretarial support. The Hong Kong diaspora means you can hire people here with
connections to every corner of the earth and willingness to be mobile.
Efficiency is characteristic of Hong Kong. It is easier to get things done here
than most so-called international cities. The rule of law abides in commerce
and contracts written here garner confidence as much as those in London or New
York. Open borders, free trade, the rule of law, fiscal prudence allowing low
taxes, a lean government, well defined property rights and a regulatory burden
that remains less onerous than most developed markets all make Hong Kong
commerce vibrant and create opportunities for entrepreneurs.Few of these
strengths rely exclusively on China for their competitive edge. Being globally
competitive is usually the best foundation for success in China.Hong Kong is
not unique in struggling to develop competitive property markets. Arguably
limited and expensive land has encouraged us to economize on its use, finding a
competitive edge elsewhere.Hong Kong's traditional city state rivals all have
their merits, but none have grown the depth of business or have had the
economic freedom that has allowed Hong Kong to thrive -- and must be preserved
-- if Hong Kong is to continue its success. A focus on the positives of a free
Hong Kong is as important as addressing the negatives that we are all too well
aware of.
Next Magazine (Second opinion A002, 2012.3.15)
The people of Hong Kong look at their government and many
see slippage of standards and question whether the civil service and officials
any longer share their values.
The crescendo of allegations about building code
violations, conflicts of interest on committees, travel and accommodation and
the connections of officials may have varying merits, but all undermine the
confidence of the people in a government that they see less as their own. Yet
by focusing on the drama of punch and counterpunch, we risk missing the broader
point of the show that the puppets are playing a role that is inevitable. This
is a drama where the constantly expanding role of government in Hong Kong
inherently produces growing conflicts of interest and old rules of conduct from
an age of constrained government will often be found lacking. Think back to a
time in Hong Kong where government had little involvement in business, a meagre
budget and no more than a prudent buffer of reserves. Then there would have
been few reasons to worry about the close connections between officials and
businessmen at club, alter, lodge and racetrack because there would have been
little advantage from those links. Due process meant that government could do
little that was not specifically outlined in laws and legislation that were
slim volumes transparently available to scrutiny by all.
It is our institutions that are now failing us, more than
the people holding office. As government spending is set next year to have
increased by 70% from 2007-8 to 21.4% of GDP, the advantages to be gained from
grabbling a share of that money have expanded enormously. Administrative
discretion from laws conferring more power on statutory authorities and
officials creates more incentive to lobby for decisions to go your way. New
legislation like the competition law proposes unprecedented discretion to
investigate, penalize and reshape businesses in competitive markets. Government
now determines the minimum price for labor and mandates savings by employees.
It gives little choice about who will manage the money. These imposts are a
burden on the poorest and risk unemployment to the advantage of more organized
labor. Growing business subsidies through concessional access to land,
government financing guarantees, specific industry grants, labor market support
programs and massive infrastructure spending provide more incentives for
business to get close to government. Direct involvement of government in
business as the owner of interests in our airport, the MTR, the largest
property developer (MTRC, URA), exhibition companies, mortgage insurance and
securitization, the stock exchange, education, health care and some utilities
all go to make government one of the biggest suppliers and consumers of goods
and services in Hong Kong, thus turning the government into the dispenser of
potentially lucrative jobs and board positions.
The government's infrastructure investments have become
far bigger than any private developments and initiatives in the SAR. The
government thus in effect sets the price for and becomes the first call on the
capabilities of the major contractors and professionals in the construction
industry. As government stretches its role more, businesses and vested
interests increasingly spend more time and resources trying to manage and
influence the decisions of the government. In a small town, this creates
potential conflicts of interest and corruption. Perhaps we have reached a point
where our government has become so pervasive that conflicts of interest are
unavoidable, the perception of favor is inherent in every government decision
and along with it a growing risk of real corruption. The answer is not more honest people. People of
integrity are likely equally prevalent in every generation. The answer is much
leaner government and a program of reform that takes our government out of
involvement in business, returns the largest projects to the private sector and
leaves more money in the hands of taxpayers. Only then will we see impartial
decision making with equal treatment of all before a government driven by laws
not men. We have created a system where government does so much that even an
honest official will struggle to show that he has favored no one and given no
undue advantage. Choosing the Chief Executive is less important than reforming
our institutions, reducing regulation, shrinking excessive government ambition and
returning money to the taxpayers of Hong Kong.
Next Magazine (Second opinion A002, 2012.5.3)
As an employer in Hong Kong, every week I see resumes
from people around the world who are looking to work here. As frequently there
are businesses looking to establish themselves here in many industries, artists
looking to establish a name in Asia and sporting codes looking for a profile.
Universities are attracting more international students. Interest in Hong Kong
is as great from people and businesses in other parts of China.
Hong Kong today is like the London or New York of an
earlier era, when young and driven people from around the world come in hope of
greater opportunity. Not everyone makes it, but most would think they had a
fair chance. Contrast this world of opportunity with the popular view in the
print, electronic and social media that opportunity and upward mobility in Hong
Kong is fading, schooling is in crisis and pollution is driving people away.Why
the disconnect?Perhaps we are concerned about the competition from new
migrants, both international and from other parts of China. Singapore is
currently having a debate about the rate of immigration and the impact on jobs
for those born there. In Europe the essential idea of open borders that was
core to founding of the EU is now being questioned. Debates about cross border
driving licenses and maternity in Hong Kong suggest similar fears.Perhaps the
relative attractions of Hong Kong compared to other cities remain great, but
the absolute level of opportunity for people living here has diminished. Higher
costs of living, steadily accumulating bureaucracy in fields like financial
services, Hong Kong’s version of a licensing Raj limiting entry in many fields,
threats of new legislation and barriers to entry in established businesses all
make establishing new businesses more difficult than it once was.The rise of
politics in Hong Kong also contributes. There is a belief that policy solutions
can be found to most issues and problems. As a result failure can be blamed on
political failures as well. Moreover, key political decisions are often remote,
opaque or populist with weak checks and balances from the ballot or
constitution. This reduces an individual sense of responsibility for one’s
fate.
What do those looking to Hong Kong for opportunity see?
First, they see a highly efficient airport, and a transport system and physical
infrastructure that makes Hong Kong wear its dense population more lightly than
most large cities. They also see tax rates that allow them to keep most of the
fruits of their labor and the gains from their investments. People experience
superior service, where tradesmen turn up on time and the myriad of support
services for business work well. The legal system quickly facilitates large
transactions and effectively arbitrates commercial disputes. The streets are
safe and corruption is contained. Hong Kong has become a meeting place for
people across the world, i.e. a city that is tightly integrated with global
businesses.Contrast this with much of Europe, where the cities are more
physically attractive, but so many young people are eager to leave. High
minimum wages create extremely high unemployment even in the richest countries
(10.8% for the Eurozone). Few European cities of any size are as safe as the
streets of Hong Kong. The burden of pensions and transfer payments is crushing
for budgets and leaves large parts of the population dependent on government
support. Tax rates reduce the incentive to work and encourage the most
successful people to leave. The cost of living remains high, with less of the
“value” options that still exist in Hong Kong. Education and health care
outcomes are not as good as they once were. There is little for Hong Kong to
copy in Europe.Hong Kong might have pollution, but the environment is nicer
than much of China; and with effort, has every prospect of improving. Access to
international education may be tight, but likely no worse than New York and the
increasingly competitive market provides alternatives of quality. Hong Kong is
different. It is an Asian city, yet racier than European cities and works
better with more people. People in Hong Kong and their families take
responsibility for their own future. Our challenge is to remain different,
preserving our freedoms and our free commerce.
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See also
Lion Rock 8: On Opposition, Factions and James Madison, October 01, 2013
Lion Rock 9: Federalism, Decentralization and George Clinton, October 07, 2013
Lion Rock 10: On Having Centralized or Self-Government, October 17, 2013
Lion Rock 11: Barun Mitra on Democracy, Reading Salon 2013, October 28, 2013
John Cowperthwaite, Statistics and Central Planning, January 23, 2014
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