Hong Kong should fix its economy - but not by following Singapore
Philip Bowring says praise for how well others are doing in these hard times doesn't help us; the city has the solutions to its problems - what's lacking are the vision and will to act
Hong Kong's economy is at a difficult juncture, so the last thing it needs is the implication behind the mainland attack on Li Ka-shing that business in the city is subject to "patriotism" tests. Nothing is better calculated to drive away people and money, foreign and Chinese. The fact is that Hong Kong owes its existence mainly to the "unpatriotic" people who flooded here in the 1850s and 1860s, and then the 1950s and 1960s, to escape corruption, oppression and arbitrary government.
For sure, Li's property companies and utilities prospered on the back of Hong Kong people. But so did the other big developers, thanks largely to government policies. Li alone built a global business in ports, telecoms and power from that base while others focused on cosying up to government here and on the mainland.
The difficult juncture is not specific to Hong Kong. Unlike the 1997 Asian crisis and the 2008 global financial crisis, this is a slow-burning one. The finance sector has probably grown too big for stability. World trade growth, the lifeblood of Hong Kong, Singapore, Taiwan and other small developed economies, has slowed to a trickle. China's slowdown and debt burden is, of course, one reason, but another is the minimal growth to be expected in demand in ageing rich countries (their own included). Still other reasons are the impact on big developing countries such as Brazil and Indonesia of the collapse of commodity prices, and the dwindling impact of cheap money policies in the US, Japan and Europe on demand, and even on asset prices.
The harder times demand changes to make Hong Kong's economy more competitive and attractive. But is the government capable of initiatives other than infrastructure projects done more for show than returns and so ill-managed that they face vast delays and cost overruns? Between them, the Macau bridge, the high-speed rail to the heart of Kowloon and the Wan Chai-Central road tunnel will have wasted more than HK$150 billion. As government budgets come under pressure, the first cutbacks should be in such items. But one fears that more such schemes will be announced - an island in the middle of the Lamma channel?
Radical changes to land and housing policies are needed to redistribute wealth while reducing revenue dependence on this sector and taxing some consumption. The Mandatory Provident Fund needs a complete overhaul to make it a meaningful pension system, not a slush fund for mangers. The lack of competition in areas ranging from power to aviation and electronic media is an indictment of government. So, too, is the way Hong Kong has, despite its wealth, fallen so far behind other cities in environmental and transport policies.
Is this government capable of anything beyond incremental changes approved by the liaison office?
Last week, the chief executive sat woodenly on while influential mainland former top official Chen Zuoer praised the supposedly much better economic performances of Macau and Singapore. Much of this is a myth. Macau's was largely based on the dubiously legal flood of mainland gambling money, now in reverse. As for Singapore, its per capita productivity over the past five years has lagged behind that of Hong Kong. Its superior gross domestic product growth has been largely the result of an increase in its labour force, with three-fifths of the additional workers being low-paid non-residents.
Another part of Singapore's supposed out-performance was appreciation of its currency against the US dollar. That has now reversed. Meanwhile, just 37 per cent of spending was accounted for by private consumption, compared with 66 per cent in Hong Kong. Is Chen suggesting that Hong Kong boost its economy by bringing in a million temporary workers, or slashing private consumption to support the mother country by buying its bonds? Or abandoning the dollar peg in favour of a floating rate?
The above is not a criticism of Singapore, just a presentation of comparative facts. Things that Singapore has in its favour are: a government less beholden to vested commercial interests and hence with advanced policies on issues such as the environment; a leadership team which acts in what it perceives to be Singapore's interest; articulate, forward-thinking ministers - compare Finance Minister Tharman Shanmugaratnam with our friendly, woolly-minded John Tsang Chun-wah.
There is plenty of scope for Hong Kong to play catch-up with other cities, from Tokyo and Seoul to Copenhagen. Hong Kong could even take an East Asian lead in family-friendly policies. Hong Kong and Singapore (and Taiwan) suffer abysmal fertility rates. This is contrary to the instinct for the preservation of the species, but it is explicable by the high price of child-rearing in many rich societies.
It may be at least partly rooted in the male chauvinism built into Confucian-influenced societies, and China in particular.
Is it "unpatriotic" to reject this and suggest that there is much that can be learned from other societies to the east, west and south, which would sustain Hong Kong as a modern and open society in the face of global economic headwinds?
Philip Bowring is a Hong Kong-based journalist and commentator