Can worn-out themes solve Hong Kong’s real economic woes?
Perhaps the architects of Hong Kong’s government and bureaucracy are themselves the problem, instead of the solution, to the city’s economic malaise
You can’t fault chief executive candidate Regina Ip Lau Suk-yee for ignoring the symptoms, misdiagnosing the malady and shying away from the treatment for what plagues Hong Kong’s economy.
As a former government official and current Legislative Council representative, she offers the unique and frank insight of both an insider and outsider.
It increasingly appears that the mission of Hong Kong’s future chief executive is to manage the expectations of a diminishing economy.
Or perhaps the architects of Hong Kong’s government and bureaucracy are themselves the problem, not the solution to the economic conundrum, that nothing about Hong Kong should change.
The source of Hong Kong’s economic problems is the sense of complacency that hamstrings the city’s ability to find a new role for itself, while China engages the world on its own terms, Ip said in a conversation in her Wanchai campaign office.
She confirmed what I have thought about Hong Kong government officials - that they are more interested in promoting worn out advertising themes than solving the city’s real problems.
“Officials boast about Hong Kong’s economic freedom or its laissez faire economy. But, to thrive in the real world economy you need to do more than achieve economic freedom,” she said.
Hong Kong needs from its chief executive candidates more realistic and aggressive assessments of the economy to deal with its entrenched problems. Ill conceived, opportunistic thinking has dominated each of the city’s administrations since 1997.
Her goal to identify where Hong Kong’s competitive and comparative advantages lie, and how that fits into regional, national and global frameworks, sounds like the exercise bureaucrats should have done long ago.
Ip is especially critical of the Hong Kong government’s lack of strategic planning over the years. “Our government and successive administrations have failed to advance a convincing, forward looking narrative on where Hong Kong stands in the world and China,” she said.
Her vision of an industrial policy doesn’t mean jettisoning pillar industries and important employers in Hong Kong, such as financial services, trade, logistics, tourism, retail and professional services.
She pointed out that traditional services need to improve through innovation, but offers no solutions to achieve higher standards.
Hong Kong’s financial regulators and executives have been too slow and stubborn to adopt to fintech, Ip said. She cited how China is far ahead of Hong Kong in electronic payments and how our economic development is hurt by resistance to change and a lack of vision.
She fell short of suggesting how to get the right kind of people in place to reverse the slide.
Yet, Hong Kong’s financial development is complicated by China’s own growing markets. Many bankers and asset managers complain to her that the Hong Kong’s government is not doing enough to promote market development. However, she pointed out that the development of the yuan settlement market is not monopolised or dominated by Hong Kong.
She quickly dismissed any idea where the government assumes a direct role in venture capital, where it invests in startups.
Civil servants don’t want direct interface with entrepreneurs, she said. They prefer to match funding, alongside private sector investors. Bureaucrats fear financial losses and the investigations that usually follow; they don’t like assuming that level of risk.
Instead, she offered the flawed alternative of having a third board on the Hong Kong Stock Exchange to accommodate technology companies that demand dual-class shares.
Lowering listing standards to overcome what she characterises as “rigid and conservative stock market development” is a path to weak corporate governance and abuse of minority shareholders.
Rejection and scepticism of technology by entire sectors is a common affliction here.
Hong Kong’s tourism industry still sustains small travel agencies who book hotels and tours. Their business models have been made obsolete by internet travel sites, so they desperately need to find a way to add value to what they offer travellers. Instead, the local tourism industry wants to reinstate individual tours by mainland China tourists, she said. That’s not a sustainable, long term solution or policy, she said.
Hong Kong’s expensive real estate appears to have no resolution other than the status quo.
“Land policy reforms have been discussed for years. But the bureaucrats and civil servants do not have the guts to do it. I don’t think a civil servant or bureaucrat-turned-leader will dare do it,” she said.
There is cause for optimism though. “I don’t think we need a revolutionary approach to land policy,” she said.
Could Hong Kong follow Singapore’s land policies?
Singapore started from “a historically clean slate that makes it fundamentally different from Hong Kong,” she said. “But there are still policies we can execute to improve living standards.”
Peter Guy is a financial writer and former international banker