WHEN overseas economists talk about perfect competition, they often cite the example of Hongkong. In that, they are misinformed because Hongkong is the perfect example of the entrepreneurial spirit not the competitive spirit. There are far too many vested interests and restrictive practices at work to satisfy a true free marketeer. One has to look no further than the banking cartel which restricts the level of competition on interest rates and rewards the bankers with fat margins. Governor Chris Patten seemed prepared to shake up some of the restrictive practices - though probably not the cosy arrangement of the entrenched bankers - when he stressed the issues of competition and efficiency in his Next Five Years policy address last October. ''The public has already begun to voice alarm at the use of market power by suppliers in areas of special importance to the ordinary family's well-being . . . the Government will seek to join forces with the Consumer Council and members of the Legislative Council to defend free markets and to give consumers the full redress against unscrupulous business practises,'' said Mr Patten. Strong stuff, but, regrettably, words have yet to be matched by deeds. In Britain, Mr Patten was part of a government that saw through sweeping reforms, including the deregulations of telecommunications which turned a hitherto moribund industry into one of the most liberal in the world, and the setting up of a consumers' charter. His commitment to the free market cannot be doubted. But throwing the issue to the Governor's Business Council was probably not the wisest of moves. Council members are the most prominent in the territory and, as such, are well-positioned to advise Hongkong's chief executive on business and economic strategy. However, as representatives of most of the biggest corporations in the territory, they couldhardly be expected to champion free markets that would allow in competitors. The other organisation that the Governor called upon to police the markets, the Consumer Council is a well-meaning body, but it lacks teeth and does not even have the power to force the closure of, say, an electrical shop selling dangerous goods. The Business Council has given the Consumer Council $800,000 to conduct a study on competition. Commissioning a report is the usual civil servants' way of putting off dealing with a problem, and it is not good enough. Legislative Councillors, such as Fred Li Wah-ming and Christine Loh, have been vociferous in their support for deregulation and the rights of the consumer. And, in the legislators' enthusiasm for the cause lies, perhaps, the best course of action. The most expedient way for the Governor to get things moving quickly would be to set up a Legislative Council Commission on competition and fair trade. Legislators should have the power to question executives of leading companies publicly and to call for action on restrictive practices.