Investment promises conveniently forgotten as losses take off

PUBLISHED : Tuesday, 30 May, 2006, 12:00am
UPDATED : Tuesday, 30 May, 2006, 12:00am

'Mainland consumer appetite sucks in foreign investors'

SCMP headline,

May 29

I HAVE MY reservations about the use of the word 'suck' to describe investment flows. Did we mean, boss, that these foreign investors were fooled? That was certainly my first impression.

It reminds me of the time back in my stockbroking days that our economist wanted to tell the world how three balance of payments factors that were pulling money out of China would soon stop doing so.

He cast about for a synonym for 'pull' and decided that the word 'suck' fit the bill. Our research editor, who had come straight from one of the Manila newspapers, also thought it apropos and slapped on a headline - 'Three Big Suckers To Go'.

But my real reservations here have not so much to do with the wording of the headline as the impression some people may get that foreign direct investment (FDI) inflows to the mainland are rising. The story dealt exclusively with private equity inflows and these do indeed appear to be up. They also constitute only a very small proportion of total FDI inflows and the larger picture suggests that foreign investors are increasingly less ready to follow up their money talk with money itself.

The first chart tells you the story. The red line shows the amount of FDI contracted over the last 10 years and the blue line the amount of FDI actually utilised. The two were about the same in 1999 but in 2005 the utilised was less than a third of the contracted FDI and, in fact, slightly down from 2004. Relative to the size of the mainland economy, utilised FDI is barely half of what it was 10 years ago.

Look also at the green line. Private equity inflows more than doubled in 2005 but still amounted to barely 5 per cent of utilised FDI, leave alone what they were relative to contracted FDI.

And why may foreign investors now be showing greater reservations about backing up their investment promises with investment capital?

I find one clue tantalising. A data series in mainland statistics aggregates the losses of loss-making enterprises. The second chart shows you this data on an annual basis for foreign-invested enterprises including Taiwan, Hong Kong and Macau ones.

Ouch indeed. These losses have doubled in the last two years. Perhaps my first impression of that 'sucks in' of our headline was right after all.

AND NOW OFF the beaten track or, rather, on to it. My beat may be money matters on weekdays but on weekends it is the hillside trails of our country parks and on Sunday we published a lament about the extent to which they are being concreted.

I don't like concreting of trails on level ground, I don't like pointless railings erected on such trails and I don't like the way that this work so often includes the needless hacking down of wide swathes of foliage on either side.

But have you tried climbing Sharp Peak recently? I went last year and the trail up the side of the mountain had become a wide erosion gully of easily dislodged stones that I had to shout at people behind me to avoid. So many people go up these days that that trail needs concrete steps put in. I hate to say so but it does.

Many other good trails also do, the Dragon's Back Trail above Shek O, for instance, and the southern section of the trail around Plover Cove. On the MacLehose Trail, far too many participants in the annual Trailwalker cut through switchbacks on the trail, creating big erosion scrabbles that grow deeper with every summer's rainfall.

But if you walk the section of the Wilson Trail immediately up Violet Hill from the Repulse Bay Gap you may see what was once a similar erosion scrabble. Concrete steps were then built and the bush is now growing in beautifully around them.

By all means let us have done with pointless railing and concreting contracts that are let only because they are in the budget and someone stands to make money.

But let us also face facts. More and more people enjoy a weekend stroll along our hillside trails and there is a price we must pay for this. Concrete steps where needed can enhance the safety and enjoyment of the growing number of people who delight in our country parks. The more who delight in them the greater will be their voice for preserving them.