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Teresa Cheng

Hong Kong’s rule of law is riddled with loopholes and arbitrary application

Philip Bowring says the controversy surrounding Secretary for Justice Teresa Cheng points to the underlying bias in the drafting and application of regulations that bolsters the interests of the rich and powerful in Hong Kong

PUBLISHED : Saturday, 10 February, 2018, 9:32am
UPDATED : Saturday, 10 February, 2018, 9:53pm

Whatever the specific rights and wrongs, Secretary for Justice Teresa Cheng Yeuk-wah’s issues over property and stamp duty are a pointer to fundamental problems with Hong Kong’s administration and its sense of justice.

Firstly, it is a reminder that application of the Buildings Ordinance in relation to so-called illegal structures is arbitrary, selective, and open to corruption.

Most glaringly, failure to implement the law is almost the norm in the New Territories. The New Territories are also the subject of widespread illegal land use which apparently does not trouble the Lands Department.

Meanwhile, in the urban areas, there appears to be wide variations in application. Many obvious rooftop structures and enclosed balconies are in plain sight but there is a grey area between what is deemed illegal and what is simply a change of use.

At the same time, many flat owners suffer from very petty demands to remove small structures which are neither dangerous nor interfere with neighbours. A few years ago, my flat was subject to a demand to replace an air conditioner frame in place for a dozen or more years, which was deemed a few centimetres larger than what was then allowed.

Selective law enforcement necessarily brings the law generally into disrepute. In the case of the New Territories, this is quite clearly politically driven, another appeasement of the Heung Yee Kuk. All this is, of course, well known to Chief Executive Carrie Lam Cheng Yuet-ngor from her five years as secretary for development. So one can only grit one’s teeth when one hears her going on about the need to obey the law and applauding exemplary sentences for youngsters demonstrating more energetically than the law allows.

One would hope that the Cheng affair would prompt government recognition of the reality of the situation and the design of a coherent, consistent policy for the future.

The avoidance of punitive stamp duties by declaring a residence as a first purchase raises two questions. If it was the intent of the government to confine this to genuine single homeowners, why did it not frame it that way rather than leave a very obvious loophole of which many have taken advantage? Was the government simply naive or does it deliberately leave these loopholes because accumulating properties is a cardinal principle of Hong Kong elites?

That in part explains the high prices. Surplus cash backed by a mortgage is funnelled into new acquisitions, adding to the desire of top government officials and much of the private sector for ever higher prices.

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No wonder new or would-be businesses complain about access to capital, and the government bemoans the lack of hi-tech industries.

The punitive stamp duties are anyway ineffective. With no exchange control and a fixed exchange rate, money will always find its way in via friends or relatives. Flight money from the mainland or overseas is not deterred by such additional costs, while genuine businesses wanting housing for an employee have to pay up.

Was the government simply naive or does it deliberately leave these loopholes because accumulating properties is a cardinal principle of Hong Kong elites?

Yet another related exercise in futility is the training of a pack of dogs to intercept large cash transfers, yet another measure supposed to reduce money laundering.

Hong Kong’s claims of attacking money laundering are a joke when daily huge sums are moved around under cover of trade transactions, a giant loophole which can never be plugged while Hong Kong remains a free port with no exchange controls. This is an attempt to appease the mainland but again brings the law into disrespect by being so obviously partial and aimed at individuals and small businesses, not the major players.

It is also part of the illusion that Hong Kong’s economy is as free as institutions such as the US-based Heritage Foundation like us to believe. It is not just that the utilities are lightly regulated, highly profitable monopolies. Nor that the taxi and minibus fleets and non-franchised bus and hire-car fleets are controlled by a small number of firms, some believed to be close to past or present legislators, whose licences increase in value thanks to the lack of new ones. The young cannot respect an uncompetitive system rigged in favour of an influential few.

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Meanwhile, the advance of government-owned or controlled bodies into space which should belong to the private sector continues. This week we learned that the Hong Kong Mortgage Corporation, a civil servant boondoggle, is to sell annuities in competition with existing private providers, marking another invasion by a quasi-public body of a financial sector already well served.

The government demands respect, yet at a time when hospital and health needs of an ageing population require more spending, there is no limit to waste on politically driven, non-economic projects such as the high-speed rail into the centre of Kowloon, the bridge to Macau and Zhuhai and related works, and the Wan Chai-Central road tunnel. It is not a coincidence that these are all massively over budget.

The credibility of this government is revealed not so much by Teresa Cheng’s house problem as by a minister who can say one day that the railway will be profitable in about 50 years and almost immediately change that to eight years, with neither assertion backed by any serious data.

Philip Bowring is a Hong Kong-based journalist and commentator