Toothless tabby likelier than cat among pigeons

PUBLISHED : Saturday, 05 March, 2005, 12:00am
UPDATED : Saturday, 05 March, 2005, 12:00am


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Whoever he is, the first thing Hong Kong's new chief executive will want to do on taking up the job is distance himself from his unpopular predecessor.

Sadly, any contrasts between the new regime and the old are likely to be differences of style rather than substance.

But if Hong Kong's new leader really wants to show his mettle, he should tackle the widespread perception of collusion between government and big business by introducing and enforcing a competition law.

Today Hong Kong stands out among the world's developed economies for its reluctance to ensure free and fair competition. Even Singapore, the home of modern state-capitalism, passed a competition law last year.

Here, the government pays lip service to a level playing field, but refuses to give its policy any legal force.

Business is still done the bad old way, with company bosses coming together to rig prices and conglomerates contracting openly with their own subsidiaries to the detriment of competitors and customers.

'Hong Kong is riddled with cartels and monopolies,' said Mark Williams, associate professor of law at the Hong Kong Polytechnic University's School of Accounting and Finance.

'The only way to deal with them is with a comprehensive, multi-sector, over-arching competition law modelled on the provisions of the telecoms ordinance.'

The benefits of such a law, rigorously enforced, are simple: more choice and lower prices. Anyone who doubts that - and there are plenty of business people in Hong Kong who do - need only look at the telecommunications sector.

Dominated until 12 years ago by an established monopoly charging some of the highest prices in the world, Hong Kong's market today comprises hundreds of licensees offering a multitude of services at famously cheap rates. That transformation took place because the Telecommunications Ordinance set up a regulator, the Office of the Telecommunications Authority, with the mission and power to enforce fair competition.

Telecommunications and broadcasting remain the exceptions. With no law ensuring fair competition across other business sectors, consumers and entrepreneurs remain hostage to entrenched cartels and conglomerates.

Take last year's spat over the Banyan Garden estate. There, residents of the Cheung Kong-built development found they were compelled to pay for broadband services provided by Cheung Kong-affiliate Hutchison Global Communications bundled in with the management fees paid to Cheung Kong-controlled Citybase Property Management.

Opponents of a law say enforcing fair competition in a small economy like Hong Kong would fragment the market, destroy the economies of scale enjoyed by dominant firms and boost prices.

The officials tasked with enforcing Singapore's new law disagree. From the beginning of next year they will be granted far-reaching powers to investigate and punish price-fixing agreements between competitors, predatory pricing, and the abuse of a dominant market position to exclude new entrants.

Singapore's law is based closely on Britain's competition legislation, but with allowances for the smaller market. Officials said businesses would not be penalised if their dominant position was the result of greater efficiency. They also insisted government-linked companies would be pursued with as much enthusiasm as private-sector offenders should they break the rules.

Hong Kong's new chief executive is unlikely to follow Singapore's lead any time soon.

With Legco heavily skewed towards big business by the composition of the functional constituencies, any proposed law would be fiercely opposed in the legislature.

That could prove embarrassing for Hong Kong. China is beginning to examine how it should draft its own competition policy.

'China will have a competition law before Hong Kong,' said Ian McEwin, a visiting professor of law at the National University of Singapore and expert on competition policy.