Panama Papers: Hong Kong’s universities must be transparent about their offshore companies
There’s no suggestion of wrongdoing, but public perception matters and clear explanations are needed
The ramifications of the Panama Papers controversy have gone beyond the business and political circles in Hong Kong. Last week, the South China Morning Post revealed that the Polytechnic University had also set up companies in an offshore haven, raising questions over compliance and accountability among tertiary education institutions. According to leaked documents and an investigation by this paper, the university established two firms in British Virgin Islands in 2012 and 2013. Records showed that one company had transferred most of its shares to another company held by a pro-Beijing businessman. The decisions to set up offshore companies involved the then vice-president Nicholas Yang Wei-hsiung, who is now the city’s innovation and technology minister.
The preference for business registration overseas is also found among other institutions. Following the revelation of the PolyU case, the University of Hong Kong and the Chinese University also admitted that they have five and one offshore companies respectively, all now dormant technology firms except for two HKU medical services companies. PolyU said the BVI companies were set up to hold the university’s company investments that were no longer active. It said that such an arrangement was more cost-effective and had not breached any rules. The University Grants Committee, which oversees academic funding, also said there was no rule requiring universities to declare offshore companies.
But public perception is another matter. Even though offshore companies are not illegal in Hong Kong and some jurisdictions, they are tools to dodge tax and to get around scrutiny. Although PolyU maintained that no public funding was involved, it has to be asked whether it is appropriate for academic institutions to engage in such practices. This is further compounded by the fact that the university did not have a glowing record in business development. It was heavily criticised as lacking business planning and exit strategies in an internal probe six years ago.
Joint ventures between universities and private companies are not uncommon. They facilitate the transfer of academic research into start-ups and, ultimately, commercially viable enterprises. Sound management and development strategies aside, there should also be high transparency and accountability. Some top overseas universities have clear policies on joint business ventures. The public expect local institutions to do the same and open their companies to public scrutiny.