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Jake Van Der Kamp

'It's a very competitive market and it is difficult to get your goods on the shelves of a supermarket.'

Unnamed source in supermarket investigation

THIS WAS OBVIOUSLY meant to be an excuse for the food suppliers who, according to the Independent Commission Against Corruption, bribed supermarket staff to give their products preferential treatment on supermarket shelves.

I can sympathise. If everyone is doing it, you had better do so, too, or you will not find any supermarket purchasers ordering your wares. It is even truer of bribery than it is of money in general that bad coin drives out good.

But one supplier apparently became so frustrated with the greediness of the purchasers - bribes of more than $100,000 a month reportedly - that he gave the game away to the ICAC, which is now trying to determine how longstanding and widespread this caper has been. My guess - since creation and across creation.

It is inevitable and there is a simple rule in these matters. When A buys from B on C's credit, B gives a token (or more) of appreciation to A and neither of them tells C.

I am sure it operates in more than the supermarket business.  Try construction. Try the stock market.

But the one thing it proves, contrary to what this source believes, is that the supply of foodstuffs in Hong Kong does not operate in a competitive market.

In competitive markets, there is no room for corruption. The only competitive market in this case was the bribe market.

In a truly competitive market, the rule that B gives a token to A may still apply, but it is no more than the cup of tea by which this form of corruption gets its Cantonese name, cha chin. The token does not then come to $100,000 a toss.

Let me put a statistical framework on this. Although that international corruption watchdog, Transparency International, has lamentably not updated its most crucial bribery index since 2002, this 2002 survey still sets the propensity to corruption in its best perspective.

Interviewees across the world were asked to pick the two industrial sectors from  a list of 17 in which they thought the biggest bribes were likely to be paid. The table shows the results of their choices.

At the top comes public works and construction. Almost half of the interviewees picked it as one of their two choices.

Corruption is very notably a public sector phenomenon. There is plenty of other people's money to pass around in public works and not much in the way of tight controls on how it is spent.

The word 'competitive' is one that few people would use to describe this sector.

At the bottom of the list, we have light goods manufacturing. Only  1 per cent of the interviewees picked it as one of their two choices and I shall say right here that they obviously had little understanding of it.

There is no room for bribes in light goods manufacturing. It is a classic private-sector business and a highly competitive one.

Margins are tight and the cost of bribery would quickly force prices out of the market range.

I cannot tell you exactly where the supermarket business in Hong Kong would fit in this table, but, judging by the size of the reported bribes, probably fairly high up  along with most consumer supply businesses in our town.

This would, of course, seem unusual. These are private-sector businesses and should really rate near the bottom of the table.

The trouble, however, is that most of them operate in cartels in Hong Kong, either outright ones or quasi ones, which means that we have distorted markets in them and an absence of true competitive pricing. It is an environment custom-made to foster corruption.

There is a lesson to be drawn from this. Our government is hesitant to set up a competition commission, and with some good reasons in my view, given that we are likely to get just another bloated government department that really does not achieve much.

But I really do not see much alternative if our bureaucrats cannot find another way of dismantling the cartels that keep prices for everyday goods higher than they need be.

A competition commission it will have to be then, much as we may shudder at the prospect.

Just remember what is indicated by the level of those supermarket bribes under investigation by the ICAC. They tell you that you are seriously overcharged for groceries.



Hefty bribes mean cartels keep our groceries seriously overpriced