A competition regulator is the only hope for Hong Kong
An antitrust commission would restrict cartels, drive economic growth, create jobs, ease property prices and increase the standard of living
One balmy summer’s day in 1973, a taxi drew up at the west gate of Kai Tak airport and a senior police officer climbed out, adorned with the brass of rank and coloured bravery ribbons.
The gate constable recoiled at his airside pass and waved him through to a quiet retirement in London. It was not to be. Chief superintendent Peter Godber was soon extradited following a tidal wave of public disgust at corruption. In the 10 years before, the triads and the police together were estimated to have taken HK$10 billion in “tea money” – more than three times the profits of HSBC Holdings at the time.
It took the strong leadership of governor Sir Murray MacLehose to establish the Independent Commission Against Corruption with draconian powers to root out and punish corrupt persons. The ICAC and indeed the Securities and Futures Commission were all established as solutions to a crisis. Again we are in crisis – this time it is a crisis of social justice.
Carrie Lam Cheng Yuet-ngor has had more good advice in the past few days to last her whole term. She could become Hong Kong’s greatest chief executive ever. Her honeymoon will be short. There is not much time.
Again, there is a simple administrative solution to crisis – establish a competition commission. Hands up those who knew we have one already? No. Thought not. It has just brought its first case against five tenderers to install a server for the Young Women’s Christian Association. The case will cost more than any likely penalties and will deter no one. Who cares about a server in a cartel city like Hong Kong? This is a case of fiddling while Rome burns. Get serious.
Its fetish with a pathetic little server shows the Competition Commission needs teeth and stature to break up the rampant abuse of anti-competitive positions and price fixing by cartels in Hong Kong. It would have strict statutory powers over company directors to abide by antitrust legislation with similar penalties to those dished out by the ICAC or the SFC. It will have to be feared for doing the right thing. The commission would also be politically connected and well-financed.
Hong Kong was once lauded as the world’s freest market – but no more. Instead of the dead hand of government, we have the constriction of cartels, squeezing every cent of hope from our citizens. Breaking up major monopolistic economic interests is the magic dust, the silver bullet, the Holy Grail that can bring hope, opportunity and a future to our city.
MacLehose appointed Sir Jack Cater, incorruptible and capable in equal measure, as the first commissioner of the ICAC. For Cater, who arrived in Hong Kong in 1945, the city was “we” and Britain “you”. I met him once. “Young man,” he said, for I was, “bet on Hong Kong; it will never let you down.”
Would it were so. Hong Kong’s record-breaking problems are rehearsed daily. We are the most expensive city for property and the second-most for cost of living (though the leader, Singapore, seems cheap). It is not much fun being a JAM (just about managing), barely able to make ends meet.
A grown-up antitrust commission would relax the strangulation that the cartels have on critical economic sectors.
Property cartels keep prices high so that old people live in cages and young families in illegal subdivided flats with no windows.
Retail cartels push up food prices in supermarkets and crush competition. It took a day for my local oligopolist, ParknShop, to rebrand to Fusion and jack up prices by 20 per cent – on the same shelves, in the same place with the same staff. Discount supermarkets are driven out of business if they threaten to undercut the big boys on price. Utility bills are too high and distribution costs are exorbitant.
An antitrust law will drive economic growth, create jobs, improve service, ease property prices in a stable manner, increase the standard of living, lower costs and raise the mood of the city.
Competition drives out uncompetitive, lazy, fat-cat rent seekers who are fundamentally unproductive. They might even be pleased to get out before the next stock market crash with money to invest into new projects.
The antitrust breakup in 1984 of US phone company AT&T by listing on the stock market drove the digital age by spawning bright young technology engineers to develop Silicon Valley.
The Competition Commission will enable us again to “bet on Hong Kong”. The only downside is in dealing with the question “Why is there only one Competition Commission?”
Richard Harris is a veteran investment manager, banker, writer, broadcaster and financial expert witness