The View

A year after Occupy, Hong Kong government struggles to respond

Hollow futureInability to confront an unsustainable political system must eventually impact city's international business standing and lead to hollowing out

PUBLISHED : Sunday, 04 October, 2015, 4:47pm
UPDATED : Sunday, 04 October, 2015, 4:56pm

During this anniversary of Occupy if you want to understand what is happening in Hong Kong right now, to perceive its shifting value system, its calcifying frustrations, its deep seated demand for change, you need only look around at signs of disappointment in the political system and its falsehoods and failures.

How the government succeeds or fails to resolve these serious challenges will profoundly alter the basis of our entire economy.

A year later no one seems to be able to agree on what Occupy was really about. Was it a spurious student protest of young people who were brainwashed by the internet, foreign propaganda and fanciful, but ill defined notions of democracy? Or does it represent a lasting and provocative popular movement?

Its most excoriating critics have trivialised the entire affair and denounced it as the petulant act of spoiled young people. The absence of any resolution leaves much uncertainty for the international business and financial communities who depend on a stable, civil society as a basis for operating in Hong Kong.

So far, the government's policy solution is to fund programmes to teach them how to become entrepreneurs. Such a strange response can only be understood in the context that fundamental economic reforms in Hong Kong's property market and other cartelised industries are too difficult to champion against entrenched business interests.

Occupy students in their 20s could easily become radical adult protesters in their 30s. And a new crop of student agitators could emerge each year. Perhaps the government is right - that salvation resides in a reasonably priced flat. But if they are wrong, then no amount of cheap flats can quench the desire for a democratically elected government and social justice.

Indeed, protesters now show up at Hutchison's or Cheung Kong's corporate events demanding that Li Ka-shing lead changes to promote income equality. Hong Kong people now understand that they need the power to change the political system in their favour and are willing to confront business interests to achieve their goals. People believe the city's wealthy elite need to recognise the larger role and obligation they play in society beyond making money.

Rather than trying to sustain a self-serving public relations campaign, Hong Kong's establishment has to realise that the Basic Law has painted Hong Kong into an impossible political and historical corner: it is the only city in history with civic freedoms, but governed without democracy.

This is an illogical and unreconcilable situation that can only lead to an authoritarian rule where all dissent must be oppressed (not an attractive environment for financial, innovative or creative international people) or enough democracy to elect its own leaders (unattractive to the ruling elite). Any compromise in between those poles becomes harder to reach each passing year.

Foreign businesses in Hong Kong need to determine if it will descend into the kind of student unrest seen in South Korea during the 70s and 80s. Expatriate talent in skill intensive sectors like information technology and finance comprise well paid senior people who want their families to live in safe, stable and vibrant cities free from riots and oppression.

Rule of law is often touted as Hong Kong's sustainable competitive edge against China. But, today's technology makes it an over rated reason for staying in Hong Kong. Opponents of democracy point out that democracy in countries like the Philippines has not delivered economic success. But, rule of law by itself is also not enough as the Philippines has that too.

Finance and banking is one sector that can leave Hong Kong without actually departing. Cloud technology, data centres and global trade processing systems allow banks to move their operations and staff to virtually any location. A derivatives trader can work with his sales team and mainland clients from Singapore instead of Hong Kong.

However, it is next to impossible to use mainland laws as the legal jurisdiction for derivative trades. So banks will give up floors of space and retain a minimum legal and compliance team presence to process business under Hong Kong law. Thus, the city's financial sector can easily become hollowed out.

The Hong Kong government's inability to confront an unsustainable political system must eventually impact its international business standing. The government has become a bovine clerisy of civil servants and appointees on life support from a benevolent Beijing, where its importance to China is increasingly a romantic delusion.

Peter Guy is a financial writer and former international banker