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Then chief secretary Carrie Lam attends a forum on private pensions in Tsim Sha Tsui in November 2016. In a private conversation, Lam had said that Hong Kong’s pension system, its rail network and the Link Reit were “mountains” to be tackled. Photo: Xiaomei Chen
Opinion
Richard Harris
Richard Harris

Hong Kong’s three ‘mountains’ — the MTR, MPF and Link Reit – are now the foothills of an Everest of public discontent that Carrie Lam must climb

  • The three contentious areas that Lam identified when she was chief secretary continue to be sources of public anger. The government is no closer to reforming the MPF, curbing MTR fare hikes and addressing Link Reit’s management of properties in public estates
Richard Harris
Richard Harris
Why you can trust SCMP
When she was chief secretary, Carrie Lam Cheng Yuet-ngor, now Hong Kong’s chief executive, caused a great deal of surprise by saying that the government had three “mountains” or contentious issues to conquer: the Mandatory Provident Fund, the MTR and the Link Reit. Over three years later, those mountains appear like foothills at the base of Everest.
The MPF was designed in a rush as the colonial government exited and is unfit for purpose. Among its many deficiencies, the offset mechanism allows employers to use workers’ pensions to pay for their own redundancy. The government was to repeal that in 2020 – well, good luck with that.
Then, chief secretary Lam worried about the MTR’s habit of raising fares. In April, I wrote that the MTR’s latest annual report revealed that the four top MTR officials were paid a total of HK$31.1 million, with the chief executive getting HK$11.8 million – in a difficult year. Clearly the MTR is transit for the masses, gold for the few.
Why does a public service like the MTR, owned by a government that made a HK$138 billion surplus last financial year, need to earn HK$18 billion a year? The company was established for the benefit of the people of Hong Kong and should not be making a profit. The commercial property arm of the business should support the rail business. The government has the power to immediately cut MTR fares by 20 per cent.
Now imagine the MTR peering into one of those joke mirrors that makes you look very fat; that’s the Link Reit. Formerly a government entity, which owned and managed public housing retail units serving the very poorest, it was privatised in 2005. The local residents are often elderly or people with disabilities, who need services like cha chaan tengs, wet markets, welfare centres and cornerstone hardware shops.

Since privatisation, the worst fears of those who cried out against the move have come to pass. In 2017, three-year shop leases rose 26.8 per cent while, according to the Rating and Valuation Department, market rents fell between 4 and 12.78 per cent. This drove out cheap family-run shops, reduced business opportunities for lower-income people, and increased the cost of living by gentrifying the area with chain stores and hairdressers.

Not surprisingly, housing estate residents call Link Reit a “bloodsucker”; it has also been described as a “corporate monster” and “the ugly face of capitalism”. Link Reit’s response has been to sell off shopping centres to buyers who have no residual responsibility.
People shop for groceries at a wet market, managed by Link Reit, in Lok Fu in October 2017. Photo: Sam Tsang
Link Reit’s strategy has been very “business school”; it has successfully used the cash flow from the housing estates to go into commercial property development inside and outside Hong Kong. You could not fail. Despite that, the stock price has not substantially outperformed the Hang Seng Index, except for a year from mid-2018 when it did very well.

However, it has given most of that back since the protests began – revealing the company’s Achilles’ heel in relying on that formerly stable cash flow from poor people.

CEO and executive director of Link Reit George Hongchoy Kwok-lung was paid HK$10 million last year, pretty much in line with his counterpart at Swire Properties, whose portfolio is double the size.

But, in addition to pocketing a HK$28 million cash bonus, the addition of various “incentive schemes” pushed his total compensation over HK$66 million. Hongchoy’s total compensation was HK$52 million in 2017, HK$35 million in 2016, before HK$40.4 million in 2015. He has an interest in Link Reit shares worth some HK$250 million.

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The Hong Kong gravy train has been good to him; it’s not been so good to the ordinary people of Lok Fu Estate, which I go through often. You can’t mistake the Lok Fu shopping centre for Swire’s Pacific Place.

Hongchoy is just a manager, employed by a board of directors, and working for the shareholders. He is not an entrepreneur or a rainmaker, but he is paid like a global superstar. But he and they are blameless for taking advantage of the situation. Link Reit is a private company and only has to obey the law, not be nice to poor people.

Link Reit CEO George Hongchoy Kwok-lung. Photo: Tory Ho

The government should never, against much public resistance, have sold such an essential public asset without safeguards. It is not as if it needed the money. It remains to be seen whether the shareholders will be pleased if Hongchoy gets a bonus this year.

In 2016, chief secretary Lam was contemplating leading a legal battle against Link Reit, but in 2019, Chief Executive Lam has an Everest of discontent to deal with. These mountains won’t be conquered any time soon. When our current chief secretary, Matthew Cheung Kin-chung, says that he needs data to ascertain why people in Hong Kong are angry, he only has to look at what happened after the government sold the people’s assets to Link Reit.

Richard Harris is chief executive of Port Shelter Investment and a veteran investment manager, banker, writer and broadcaster and financial expert witness

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