YESTERDAY WAS A day of considerable chatter in this newspaper on competition policy with three opinion pieces on our Insight page plus a long letter to the editor, all on a subject that has otherwise drawn little public attention. Let us define this more closely. If the questions involved are lumped together under the term 'competition policy' you may indeed yawn, but when they hit you while making monthly bill payments they are more likely to provoke a curse than a yawn. Why are so many things in Hong Kong so expensive? Hong Kong is supposed to be a bastion of free enterprise, a model for the world on how open competition delivers consumers the goods and services they want at the lowest possible prices. It is true enough in our external arrangements. Our exporters operate in a very open market and offer buyers abroad truly competitive prices. But we who live in Hong Kong do not always find it as true in our domestic arrangements. Take the obvious example of property with high rents, high prices and high fees paid to property managers who do very little for it (one of my pet peeves). Take the basic groceries that cost more here than in Shenzhen. Take a long line of everyday necessities. Why do we pay so much more than people do in other places? Ask officialdom and you may be pointed to telecommunications, the costs of which are now truly competitive. Yes, thank you, sirs. Not too long ago, Hongkong Telecom (now PCCW) still had a complete monopoly and, not surprisingly, was for many years the biggest stock on our stock market, bigger even than HSBC. Good to know that these days are over but this is only one sector. What about so many others that still show evidence of ahem ... administered ... pricing? And this gets to the heart of the letter from the secretary of the government's Competition Policy Advisory Group, Alex Wong, who writes that the government actually does have policies to promote competition and that they are 'comprehensive and effective'. The difficulty, however, is that they are also what Mr Wong describes as 'sector specific', in other words different rules for different industries and not just rules but conditions, provisions, codes of practice and administrative means, this last essentially meaning the whim of bureaucrats. A better word for it all might be 'confusion'. Even Mr Wong concedes that the approach 'may not be fully appreciated by all parties' and that the World Trade Organisation questioned its effectiveness last year. This WTO finding sent our government publicity machine into action and now, says Mr Wong, the WTO is happier with Hong Kong. Well, yes, we are second around the world only to Singapore in being able to pull the wool over the eyes of foreign consultants who conduct shallow studies of market freedoms. Of more interest to me is that fact that I saw no mention in Mr Wong's letter of public consultations but I did see several references to involving the business sector. By all means involve the business sector, Mr Wong, but in the dock, please, and the consumer in the witness stand. This complaint is addressed at the business sector. The witnesses for the plaintiff should have their say here as well as the defendant. This may still not be enough, however. Business cartels may differ in their details but are the same in their essential characteristics and our economy allows plenty of breeding ground for them in energy, transportation, housing, ports and many domestic service industries. We call such businesses natural network monopolies and the one thing we do not have in dealing with them is a consistent policy on what we will allow their shareholders to take from what are really public concessions that we grant them. In the transportation sector alone, for instance, Kowloon Motor Bus enjoyed a 35.9 per cent return on shareholders' equity last year, while our airport was held down to only 0.5 per cent and the Mass Transit Railway Corp lost money on railway operations. We will certainly never be able to deal with our fiscal deficit through privatisations if private corporations can rake in the loot but government ones cannot. For the sake of both consumers and investors, whom we need to fund big infrastructure projects, we need an overall competition policy that establishes formal guidelines on financial returns in such natural network monopolies. Think general now, Mr Wong, not specific. IN YESTERDAY'S COLUMN, I incorrectly criticised Dr John Bacon-Shone, head of the Social Sciences Research Centre at the University of Hong Kong, for not revealing in a letter to the editor that he is a full-time member of the government's Central Policy Unit (CPU). Dr Bacon-Shone is a no longer a full-time member of the CPU. He is now a part-time member, listed on the government's Web site as member of the CPU's special panel. He stepped down as a full-time member in October 2001.
