Hongkong: Two years after the handover Hongkong has lost its bearings. Beijing is not to blame. Instead  opportunism, cronyism, muddle-thinking, and arbitrary government are undermining its strengths. 

by Philip Bowring

Hongkong: Two years on from the handover, Hongkong seems to
have lost its bearings. Opportunism and cronyism have emerged
as a bigger threat than Chinese centralism to the One Country
Two Systems concept. Beijing is content to see erosion of the
Hongkong part of the Two Systems because it naturally regards
One Country as the more important principle. Hongkong's drift 
towards government by arbitrary fiat is also in keeping with
the mainland. But make no mistake: Hongkong's loss of
direction is home-grown, and particularly the responsibility
of its muddle-headed Chief Executive, Tung Chee-hwa.

The most serious challenge to Two Systems has been made by the
Hongkong government itself. It ran off to Beijing to get the
National Peoples Congress Standing Committee to overturn a
decision of Hongkong's Court of Final Appeal giving right of
abode to all children of permananet residents, which it found
administratively inconvenient. Beijing responded by telling
the Court it was wrong but declined to present any legal
arguments. Meanwhile Hongkong's own chief legal officer, Elsie
Leung, a family lawyer better known for her political
loyalties than constitutional affairs prowess, suggests that
the NPC is an independent judicial body rather than a cog in
the mainland's Leninist political system.

To Hongkong self-styled "executive-led" government the Court
of Final Appeal ruling had been a challenge both to Tung and
to a highly paid civil service bureaucracy. Their proclivity
for arbitrary decision-making can be seen in important cases
which have undermined Hongkong's reputation for being an open,
competitive economy.

These in part have been knee-jerk responses to the Asian
economic crisis, but they have become too frequent to be
dismissed as abberrations. The most obvious was the use of
US$14 billion of public money to prop up the stock market. It
may have been partly justified by the need to defend the
currency from speculation. But it was a huge departure from
Hongkong's assumed norm.

It was not as dangerous however as the creep of cronyism in
the award of billion dollar projects without competitive
bidding. The most conspicuous was that for a "Cyberport"
project to a son of Li Ka-shing, the most prominent local
developer. This is a property project dressed up as Hongkong's
leap into the cyber age. There have been several smaller cases
of special deals for the well-connected. Tung cannot escape
direct criticism because his family companies are business
partners of Li, including in a controversial project in
Beijing. Tung himself knows the benefits of guanxi
(connections), having been rescued from near bankruptcy by
China in the mid-1980s.

The property tycoons' influence is even more obvious than
under the British. It is being further strengthened by the
appointment of Leung Chun-ying, a leading real estate agent,
to head the policy-making Executive Council.

Nor is the "special deals" mentality confined to local
interests. Hongkong is currently negotiating with Disney for a
theme park which would take up billions of dollars worth of
public land. The lack of open tendering for a theme park or
other use of the land illustrates the new government's
attachment to non-market mechanisms. It is not edifying
particularly at a time when Hongkong needs new, entrepreneur-
driven stimulus not government subsidised mega projects. Its
recession may have been less severe than some neighbours, but
it will last the longest as the government puts support of
asset prices before the real economy. Even Indonesia's economy
is now doing better than Hongkong.

These departures from principles have not gone uncriticised.
The media is no less free than before, people are perhaps even
more willing to speak out or demonstrate. But the executive-
led government can brush aside criticism knowing that the
partially-elected legislature will do its bidding and the
courts are now being brought to heel. There are no plans to
extend the franchise, and local government has become less

The public has played a role itself. Selfish, short-term
public attitudes have helped the administration get away with
much. The abuse of public funds to boost certain stocks has
been popular -- at least so long as it appears successful.
Public opinion succumbed to government scare tactics that the
Court decision on right of abode would lead to a flood of
immigrants -- as though Hongkong were not built on refugee
influxes vastly greater than any that might flow from that
decision. Hongkong's rejection of its own offspring has won it
no sympathy overseas.

Hongkong did not elect this government any more than it chose
it colonial predecessor. But it is still an open question
whether it getting the government it deserves, or one more in
Beijing's self-image than its own.





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