Micro flats and crackdown on Uber in Hong Kong show monopolies win, while consumers suffer
Peter Guy says the government, by refusing to rein in property developers and taxi cartels, is tacitly shielding monopolies at the cost of Hong Kong residents
The venality of Hong Kong’s government-protected cartels recently reached a crescendo as government officials like Secretary for Transport and Housing Frank Chan Fan staunchly defended property developers and taxi licence owners from much needed reform.
Hong Kong has become the land that economic time forgot, where the outdated practices of monopoly-entrenched dinosaurs are defended by government officials. Dogmatic beliefs in a free market that are actually failed-and-rigged markets continue to tell the world that Hong Kong is an intellectually backward village, dominated by post-colonials with cosy back-room deals who cannot keep up with China’s economic and technological change.
Chan recently mounted a depressing defence of the city’s property developers, refusing to intervene in the private flat market where prices have not only continued to rise, but unregulated sizes continue to shrink to past the point of a parking space. According to a Post report, 691 micro flats – of 200 square feet or less – were offered in 2017, representing over eight times more than the 79 in 2015. Smaller flats between 215 and 430 sq ft jumped to 6,200 in 2017 from 2,056 in 2015.
Instead of acknowledging a trend that threatens the health, social and economic welfare of Hongkongers, Chan outright dismissed calls to regulate private developers’ supply of micro flats. He said flat buyers might not be able to afford larger homes if a minimum size was enforced. But, he fails to understand, or perhaps understands too well, that restricting flat sizes would lead to a fall in prices as developers would need to lower selling prices.
Failing to regulate property as a strategic public asset and allowing it to be freely used as raw material for speculation has made property developers into economic oligarchs staking out their own special economic zone in Hong Kong. The inability to muster up the courage to invoke policies such as expropriating developers’ land banks and restricting flat sales to Hong Kong residents only prolongs the litany of falsehood, fantasy and folly that rots our economy and standard of living.
Not to be outdone in his transport portfolio, Chan privately admonished Uber, according to another Post report, for its “ugly American” business practices and failing to obey the government’s outdated taxi licensing regulations. Stubbornly oblivious to the meaning of technological disintermediation wrought by ride-hailing, the government protects existing taxi licence holders as if they were an endangered species of prehistoric creatures – at the great expense of consumers.
Instead of changing the laws, facing down the taxi lobby and carving out a compromise, the government defends antiquated laws.
Despite his stand, economic behaviour bypasses the secretary’s intransigence. Uber’s technology cannot be purged from smartphones and user behaviour. Yet, the taxi lobby demands more police enforcement against Uber drivers. But consumers keep requesting service and drivers continue risking conviction.
Those who have used Uber abroad favour it for the efficiency of booking rides to the airport. Families enjoy the convenience of being able to book a luxurious van anytime, anywhere. Convenience and quality are economically more valuable than a lack of insurance coverage.
Police enforcement is next to impossible because no one can discern if a van is privately owned or an Uber booking unless they investigate. And limited police resources restrict the number of Uber “stings”. Police have enough problems dispensing traffic tickets to illegally parked vehicles.
The government outlaws Uber with the same ardour that the Holy See reserved during the Renaissance for investigating apparitions of the Virgin Mary. It has martyred Uber, much like the marijuana legalisation problem in the US and Canada. Criminalising a competitive, legitimate and beneficial social and economic activity only spawns an underground business that technology empowers indefinitely.
The government has proven itself unable to adapt to change, and staunchly ignores legitimate criticism. Its surrender to cartel hegemony in place of sound economic or public policies is turning Hong Kong into a corpse washed up on the shores of unfettered capitalism. Instead of genuine economic transformation and hope, we are trapped in a gauntlet of ever-contracting possibility.
Peter Guy is a financial writer and former international banker