It is not entirely clear from his latest published thoughts on the matter what distinction Hong Kong Monetary Authority chief Joseph Yam Chi-kwong makes between independence and accountability. In his latest weekly column on the authority's Web site, in which he rails at legislators for trying to have a say in whether he can take HK$4 billion out of the Exchange Fund to buy new offices for the HKMA, he is certainly loud for the independence of the HKMA. 'There is one essential point, however, which has to be made crystal clear, in the best interests of Hong Kong,' he writes. 'This is to make sure that there is no scope for political interference in the work of the HKMA. 'The experience of the great majority of central-banking institutions in other parts of the world points unambiguously to the fact that success in monetary management and the credibility of monetary policy depend crucially on the independence of central banks in discharging their responsibilities.' But then he goes on to agree that the HKMA should be held accountable for its management of the Exchange Fund. What is it to be? Do legislators have the right to demand answers to nasty questions about why he wants to spend so much or is this 'political interference'? Does he mean that he is accountable when he spends Exchange Fund money but independent when he deals with monetary matters? It is not as clear as it should be. So let us make another thing crystal clear. The independence of central banks from political interference is all very well in theory, but nowhere near so clean in practice. When governments in most of Asia pay lip service to central-bank independence they mean where they put their thumbs after sticking them in central-bank pies. That is one reason why we had an Asian financial crisis in 1997. Even those two paragons of central-bank independence, the United States and Britain, do not escape political interference. Alan Greenspan of the US Federal Reserve has achieved such status that politicians generally leave him alone, but he is still appointed by politicians and required by law to report to them regularly. And in Britain the Bank of England was really given a measure of independence from politicians only by the latest Chancellor of the Exchequer, Gordon Brown. They previously felt themselves free to interfere in every interest-rate decision and arguably still do. Nor, you could well argue, should Mr Yam presume to speak too much about the HKMA's independence when this was effectively surrendered to the Fed in 1983 with the adoption of a currency link to the US dollar. So what does independence mean? If he is accountable, can he really consider himself independent? More to the point, do we really want our monetary authority to be independent? There is something to be said in a healthy society for making everyone directly responsible to someone else. There are certainly good grounds for asking questions about those new HKMA premises. Here we have an office project for which one arm of government got about HK$1,300 per square foot in land premiums and another arm then proposes to purchase at about HK$12,000 per square foot. Make your adjustments for construction and fitting-out costs, but it still turns out that some private entity in the middle walks away with up to HK$9,000 per square foot in profits, which is not a bad turn. Why did we give it away? The immediate question here is not one of the HKMA's independence or accountability but whether either of these two mean that one arm of government does not deign to speak to another. As one departing senior bureaucrat might have put it, let's have some joined-up government here, folks.
