If Guangdong misses out to Shanghai, don't blame Hong Kong

The southern province's unrealised dreams of free-trade zones is more due to its structural problems than city's supposed errant ways

PUBLISHED : Friday, 15 November, 2013, 11:30pm
UPDATED : Saturday, 16 November, 2013, 4:36am

Recently, a mainland researcher at a Guangdong institution, knowing I came from Hong Kong, posed a question that demanded a serious answer: Why is Hong Kong so disobedient [to the central government]?

Why didn't Hong Kong just keep its head down and focus on development by following Beijing, he continued.

As long as red tape and other barriers remain entrenched, Cepa will remain a pipe dream

"There were plenty of beneficial policies that could have come our way but were given to Shanghai instead," he said, resentfully.

"Guangdong is missing out on these sweeteners because of the way Hong Kong has been behaving..."

What answer was he looking for, I thought. What could I possibly tell him that he didn't already know?

The fact that Hong Kong upholds universal values such as the rule of law, free speech and democracy? Or that Hong Kong people have learnt to appreciate other music than to blindly following the magic flute?

There were many answers to this man's question, but it was hard to take him seriously.

The palpable anxiety transcending through his question hinted that Guangdong was desperately trying to play catch up after Shanghai was granted with a free-trade zone from Beijing.

Guangdong proposed a free-trade zone covering Hong Kong, Macau, Qianhai in Shenzhen, Hengqin in Zhuhai and Nansha further up the Pearl River. If approved, it would dwarf Shanghai's 28.8 square kilometre free-trade zone.

There is no shortage of enthusiasm in Guangdong to convince the central government to grant them the same status.

However, the fact that Shanghai, not Guangdong, was handed the free-trade zone crown jewel had nothing to do with Hong Kong "disobedience" - real or imagined. The territory has a miniscule say in such influential policies.

It's immature to take it out on Hong Kong and it only exposes a certain blindness to one's own short-comings.

The Closer Economic Partnership Arrangement (Cepa) promised freer market access to Hong Kong businesses and professionals when it was launched more than a decade ago, but look at what has happened - or, to be precise, has not happened.

It's been nothing but a disappointment as mainland regulators simply refuse to cut the red tape for Hong Kong, making cross-border integration an even slower and more painful labour.

For now, how will Guangdong convince the central government to grant it free-trade zone status when it failed to capitalise on Cepa's opportunities to show Beijing how well it could make use of Hong Kong's experience to liberalise trade on the mainland?

Guangdong academics have called for an in-depth study of Cepa's failure, to identify whether the reasons lie with institutional problems or Cepa's inherent flaws.

Launched in 2003, Cepa was intended to boost Hong Kong's flagging economy in the wake of the Asian financial crisis and the Sars epidemic.

Many cross-border, free-trade-pact measures were announced over the past decade to offer preferential access to the city's banking, retail and film sectors to mainland market.

But, to date, very few Hong Kong firms have been allowed to enter through Cepa, due to the complexities of obtaining mainland regulatory approval.

As Lam Wai-chi, chairman of the Hong Kong Chamber of Commerce in Guangdong, puts it, Hong Kong businessmen are still treated as foreigners when it comes to company registration.

The mainland's unrelenting tight grip makes it an extremely complicated and painful process.

Professionals such as brokers, bankers, accountants and doctors all describe, with anguish, the lengthy process to obtain approval to gain access to the mainland market.

As long as red tape and other barriers of local protectionism remain entrenched in Guangdong's government departments and industries, Cepa will continue to remain a pipe dream.

The Guangdong-Hong Kong-Macau free-trade zone will be hard to sell if the province cannot demonstrate how it can provide effective cross-border integration.

If a future Guangdong-Hong Kong-Macau free-trade zone is to have any chance of success, Guangdong must strive to reduce red tape and loosen its iron-like grip on Hong Kong businesses.

Judging from recent history, it will be a long, drawn-out affair.