Need for transparency apparent

Last week may have spelled the end of Hong Kong's traditional 'behind-the-scenes' deals between business and government.

The normally low-key Michael Kadoorie, chairman of the CLP Power company, stunned the city in a confrontational speech about the cost of electricity. Bills, he said, would be 'materially' higher in the next three years on the back of an expected 40 per cent increase in costs - costs, he intimated, that would be passed on to consumers.

The warning about higher bills was surprising enough. But more so was the unexpectedly blunt way the usually modest and courteous Kadoorie openly blasted the government for its dithering on policy issues and his warning that the new administration should refrain from meddling in the energy sector. Incoming chief executive Leung Chun-ying has made his views clear that his government will play a 'proactive' role in the market when needed.

Taking a broader view, Kadoorie's unusual outburst may also signal an end of the long-held political culture of 'behind the door' dealings between government and business. But if this is to be a new era of transparency, Leung and his team will be dealt the hot potato of trying to strike a better balance between the public interest and that of business.

Leo Goodstadt, a key political adviser to Hong Kong's last governor, Chris Patten, best described the relationship between business and government in Hong Kong as 'uneasy partners' in his insightful work of the same title published in 2005.

The foundations of British rule in Hong Kong, according to Goodstadt, were 'built on an alliance between the colonialism and the capitalism until almost the very end of the colonial era'. It was well understood that that was one major reason for the British to select many of the community's representatives to the government advisory bodies.

Negotiations between the private sector and government, no matter how tough they could be privately, were never disclosed. Both sides would appear in public to be co-operative, and they maintained a relationship that was, to a great extent, reward to each. This was the case even when colonial officials were prepared 'to abandon laissez-faire either out of administration convenience or political necessity', wrote Goodstadt.

After the handover, and with the change of the political ecology in Hong Kong over the past 15 years, the concept of government-business co-operation gradually soured into 'government-business collusion'. In some cases, government appeared eager to distance itself from business. The drama of CLP being forced to significantly cut its proposed 9.2 per cent tariff increase to 4.9 per cent in January is a good example. Theoretically, CLP had every right to increase, according to its scheme of control contract with the government.

Obviously, 'behind- the-scenes' negotiations no longer work in today's Hong Kong, and this may be especially so when Leung takes over on July 1. Unlike current Chief Executive Donald Tsang Yam-kuen, who governed when private talks with business were common, Leung, with a more populist approach, is determined to adopt a 'sunshine' model for policy-making. Kadoorie may simply be taking the lead in bringing conflicts with government into the light. The latest row between textbook publishers and the Education Bureau is but another example, and others may follow suit.

In the coming months and years, the businesses to confront government over policy are most likely to be major franchise operators like Towngas, the bus companies and, in addition to CLP, the other power supplier, Hongkong Electric.

As the days of a government-business alliance disappear, the new chief executive and his team will need more mature political skills in negotiations, especially with public utilities. Relying merely on public sentiment or bowing too easily to political pressure could backfire. Government's role in the free market will be a test of political wisdom for Leung.

Many public utilities are listed companies; but maximising profit no longer seems politically correct under the current political environment. The public expects these companies to care about their 'stakeholders', not just their 'shareholders'.

Since it is unlikely that government will spend huge amounts of tax payers' money to nationalise these utilities, both sides need to rethink how to work out an 'easy' partnership to avoid a lose-lose scenario.