High voltage

PUBLISHED : Friday, 03 February, 2012, 12:00am
UPDATED : Friday, 03 February, 2012, 12:00am


The Legislative Council is split again, with a non-business cohort criticising the government, Hong Kong power companies, new energy tariffs and the tariff review process, claiming a lack of transparency. This has created a situation in which lawmakers, under Legco's Powers and Privileges Ordinance, are demanding that both power companies disclose confidential information to determine if their tariff increase is reasonable.

This is a request that all pro-business legislators, Hong Kong businesses and, more importantly, the government, should resist, as once Legco has received this information, past precedents suggest it is only a matter of time before it makes its way into the hands of the public. Thus, it carries the risk of backfiring and threatening Hong Kong's reputation as a trusted place to do business, and increasing prices for Hong Kong goods and services.

One must critically question whether it is really in the public interest to use the 'in extremis' ordinance in all situations.

All Hong Kong businesses should be concerned that the ordinance could become a de facto 'reveal all' tool when Legco does not like what it sees in the government's contracts, a scenario that could give both existing and prospective business partners of the government cause for concern.

Consider a scenario where either power company seeks cleaner fuels to meet stricter air pollution standards. If it becomes known, via the ordinance, that there are few suppliers of suitably clean fuel, both power companies would lose key bargaining tools that assist in keeping tariffs down. Suppliers, knowing the companies have no other fuel options, could potentially raise their prices, with the increases passed on to consumers.

It is crucial for all Hong Kong businesses to understand that this scenario could potentially play out across all industries, with serious implications for Hong Kong Inc - and, worse, local consumers. If the ordinance were to be commonly used to disclose sensitive information, not anticipated at the signing of a business contract, Hong Kong's international reputation could be affected.

So, if Legco votes not to exercise its power under the ordinance, what else should it call upon to ask businesses to furnish information that is squarely in the public interest?

The ordinance is appropriate in extreme circumstances, such as in 2008, when banks were investigated for selling risky minibonds to unqualified investors. However, in a non-extreme case, such as the tariff review, the appropriate mechanism is the disclosure provisions in contracts between the government and its business partners; in the tariff case, the scheme of control agreement.

Government, pro-business legislators and Hong Kong business need to stand shoulder to shoulder to protect Hong Kong Inc's reputation.

Such a stance would support Hong Kong as a trusted business partner, a reputation worth protecting. Setting a precedent for wider use of the ordinance has the potential to weaken Hong Kong's future business health and investors' appetite.

Timothy J. Peirson-Smith is managing director of Executive Counsel Limited, a sustainability-focused public affairs and strategic communication consultancy based in Hong Kong. He is also chairman of the Business Policy Unit of the British Chamber of Commerce, Hong Kong