Heritage shuts shop

'Nothing . . . would make us feel we could not operate in Hong Kong' WHEN THE HERITAGE Foundation, a conservative American think tank with a low-profile office in Hong Kong, held a black-tie dinner at the Ritz-Carlton Hotel, some guests were left scratching their heads. There was a video propounding the organisation's right-wing agenda. And the after-dinner speaker, Edwin Meese, the attorney-general in former president Ronald Reagan's administration, waxed lyrical about historical and philosophical elements of freedom in the United States. At least one guest at the 1999 function described it as an 'astonishingly ill-placed event' to be held in Hong Kong. 'It looked like a video for public relations and fund raising designed to appeal to the US right wing,' he said, adding there was a segment on defending the right to carry firearms. 'The audience were looking like 'what planet are these people from?', ' said the guest, who spoke on condition of anonymity. The Heritage Foundation appears anachronistic in Hong Kong, a conservative grouping from the US operating in an SAR of one of the world's few remaining communist states. Surprisingly, the foundation enjoys a cosy relationship with the SAR Government. Its annual surveys of economic freedom consistently rank Hong Kong as the freest economy in the world, a result bandied about by officials from Chief Executive Tung Chee-hwa on down. The foundation not only has a high regard for Hong Kong's economic policies. It apparently values highly the millions of dollars in donations it receives from the city's tycoons. Despite its high regard for Hong Kong, the foundation is now closing its SAR office, which has acted as its regional headquarters. It will, however, keep a representative here. The news will come as a surprise to many. Although the Heritage Foundation is prominently identified with the annual economic-freedom survey, few people in Hong Kong seem aware the organisation has been running an office here for the past five years. In part, the low profile maintained by staff at the local office might be explained by the group's fund-raising activities and by sensitivities about the presence of foreign political organisations in Hong Kong under Chinese rule. The Washington-based think tank's fund raising has targeted tycoons in Hong Kong and around the region, and money raised is said to come mostly from a number of pro-China figures and property developers. The SAR office admits raising 'several million US dollars' for the foundation. The revelation that money is being funnelled from Hong Kong to Washington is likely to cause concern among Heritage Foundation supporters. 'I think traditional conservatives in the US would be interested to know how much money would be perceived as pro-China money,' said Mark Simon, Apple Daily's corporate-accounts director, who is active in conservative circles. The fund raising could raise hackles in Hong Kong, too. Article23 of the Basic Law calls on the SAR to enact laws prohibiting foreign groups from conducting political activities in Hong Kong. The SAR has not yet enacted such laws, and nobody knows how widely or loosely they will be interpreted once implemented. In Washington, the Heritage Foundation has recently come under scrutiny following accusations in a centre-left magazine, The New Republic, that the group had become soft on China. The magazine's claims focused on the organisation's attitude towards Beijing following the 1996 appointment of Elaine Chao, a Chinese-American said to enjoy strong family connections on the mainland, as a senior Asia-research fellow. The April article was given currency by the recent appointment of Ms Chao, whose father went to school in Shanghai with President Jiang Zemin and later worked for Mr Tung's family-run shipping company, as George W. Bush's Labour Secretary. An interesting element arising from the The New Republic's allegations - which were rebuffed by the Heritage Foundation, although foundation President Edwin Feulner did admit to having 'toned down our rhetoric over the years' - was the existence of a foundation office in Hong Kong. Although many local and foreign journalists said they had not been aware the Heritage Foundation had a representative office in the SAR, several American figures in Hong Kong said they had known about the office but did not know what it did. 'It surprised a lot of people that they have an office here,' said Arnold Zeitlin, the director of the America-based Freedom Forum, an international organisation promoting media freedom. Frontier legislator Emily Lau Wai-hing, said although she received frequent invitations from the Freedom Forum, she had barely heard from the Heritage Foundation. The foundation's contacts with members of the Democratic Party appear to have declined markedly since the handover. A spokeswoman for Democrat chairman Martin Lee Chu-ming said members of the party believed this reflected a post-handover shift in the Hong Kong power base from legislators and the colonial government to the administration surrounding the Chief Executive. 'This is kind of a natural change. They [visiting delegations] always want to meet people in power,' the spokeswoman said. The trend parallels allegations in The New Republic that the foundation's executives are eager to meet Mr Tung but not so interested in Mr Lee. A source said there was a furore when the foundation barred Hong Kong reporters from covering a speech by Mr Tung at a function it held in Washington. The journalists responded by asking other reporters to record the meeting for them. The Hong Kong office was opened in 1996 by Kenneth Sheffer, a political operative who worked on Mr Reagan's presidential campaign in 1980 and later on the staff of the National Security Council. In addition to being the director of the Hong Kong office, Mr Sheffer also carries the title of 'counsellor for Asia policy' to the foundation president, Mr Feulner. Mr Sheffer, in written replies to questions from the South China Morning Post, said the office was initially opened to monitor Hong Kong's transition and now provides information and advice to the foundation on political and economic developments in Asia. It has also been involved in raising 'several million US dollars' for the foundation, he said. Although the piece in The New Republic, and articles on the conservatively inclined Web site WorldNetDaily.com, emphasise the fund-raising role of the Hong Kong office, Mr Sheffer appeared to downplay it. He listed the money-raising element last when outlining the office's functions and emphasised that its role was to 'assist' the foundation in fund-raising activities. Mr Sheffer denied allegations on WorldNetDaily.com that the office was involved in opening doors for donors on the mainland. He said the dinner at which Mr Meese spoke in March 1999 was not a fund-raising dinner and that the foundation covered all costs of the function. 'We were proud to offer this event to the people of Hong Kong. At the beginning of the dinner, a promotional video about the foundation was shown to describe Heritage and what we believe in,' said Mr Sheffer. According to its mission statement, the Heritage Foundation aims to 'formulate and promote conservative public policies based on free enterprise, limited government, individual freedom, traditional American values and a strong national defence'. The think tank is close to Republican administrations. Its research on White House operations, policies and budgets was used in the early days of the current Bush administration, after wrangling over the outcome of the presidential election, according to the foundation's annual report. It also enjoys good relations with the Tung administration. The Heritage Foundation has held banquets in honour of Mr Tung, and Mr Feulner has held meetings with the Chief Executive in Hong Kong, according to the The New Republic. Mr Tung's information co-ordinator, Stephen Lam Sui-lung, said it was not the Government's practice to confirm meetings between the Chief Executive and individual visitors. Indeed, the think tank and the SAR Government seem to have cosy relations. The foundation, in an index compiled with The Wall Street Journal, named Hong Kong as the world's freest economy for seven consecutive years, prompting Mr Tung to issue press releases welcoming the award. Last year, then-chief secretary for administration Anson Chan Fang On-sang even turned up at a Heritage Foundation press conference. Some observers believe that in placing so much emphasis on an award that would receive little attention elsewhere, senior SAR officials have betrayed a desperate pursuit to foster international credibility. The Government had a fit of pique in 1998 when index organisers warned Hong Kong was at risk of being overtaken by regional rival Singapore following the Government's intervention in the SAR's stock market. Mr Feulner was subsequently taken to task at a breakfast meeting with Mrs Chan and her eventual successor, then-financial secretary Donald Tsang Yam-kuen. Interestingly, the think tank backed down and again awarded the prize to the SAR in 1999, with Mr Feulner claiming fuzzily that the methodology was 'imperfect' and had been changed to take account of the Singapore Government's substantial stock-market holdings through an investment company. The index has its critics, too. William Overholt, Nomura International's head of Asian strategy and economics, said he believed the accompanying publication's title, Index of Economic Freedom, was misleading. The index reflected US trading interests, he said. 'It's a useful document in ranking countries according to their openness to free trade and investment. It is actually not what it says,' Mr Overholt said. Mr Sheffer, asked in further questions to respond to criticisms of the index, failed to reply. The think tank is closing down its Hong Kong office, which currently has three support staff, but Mr Sheffer said he would remain in the SAR as counsellor to Mr Feulner. Mr Sheffer said the foundation wanted to use the money it would save on projects in now-Republican Washington. 'The downsizing is ongoing but is not a full closing,' he said. 'We decided on this course of action because of all the exciting opportunities we now have in Washington DC . . . However, our commitment to Asia and to a high-level presence in Hong Kong is unchanged.' Asked whether the office was closing in anticipation of some problems with fund raising or out of concern that the think tank would not be able to continue operating in the SAR once the ordinances required under Article23 of the Basic Law were in place, Mr Sheffer said there were no concerns about these issues. Article23, apart from requiring the Government to introduce laws against subversion, also calls for prohibitions on 'foreign political organisations or bodies from conducting political activities in the Region'. Mr Sheffer said: 'Nothing in the present or future of Hong Kong, as we see it now, would make us feel we could not operate in Hong Kong. And we are hopeful and optimistic that won't change.' Political commentator Lau Siu-kai, a sociologist at the Chinese University of Hong Kong, said he believed foreign think tanks and academic bodies were unlikely to be targeted under any laws implemented to give force to Article23. 'On the surface, I don't think these organisations are the political organisations envisaged by the drafters of the Basic Law,' he said. Political parties, subversive groups and bodies promoting the independence of Taiwan or Tibet were more likely to be the types of organisations to be outlawed, Professor Lau said. Glenn Schloss (schloss@scmp.com) is a staff writer for the Post's Editorial Pages