In Hong Kong, more is less

SCMP March 21 2005

The government claims that it is concerned about poverty in Hong Kong and intends to do something. But what? Where should it look for the reasons why incomes for a large minority of people provide for such a meagre living standard, and why the median household income accounts for - by international standards - such a relatively small part of gross domestic product?

One place to start is not with the poor, but with the very rich. Who are they and how did they get there? There is nothing wrong with being a billionaire. For some societies, it is a mark of success. But the "who" and "how" questions do say quite a lot about the nature and priorities of society.

Turn to the annual billionaires' league table published by Forbes magazine. The US naturally dominates the upper reaches. Most prominent are the names of the entrepreneurs of the IT revolution, with Microsoft's Bill Gates at the top. Investment guru Warren Buffet is second, and the heirs of retailing revolutionary Sam Walton make the top 10.

Even India scores quite well in the mega-rich entrepreneurs - Lakshmi Mittal and Azim Premji are both billionaires by virtue of their global impact on steel and software respectively.

But what of Hong Kong, a city whose businesses should have international reach? According to Forbes, three of the world's 40 richest are from the city, and all derive their fortunes from property. Further down the list there are several more who owe their presence to property, or to being past or present holders of lucrative local monopolies.

The list is, of course, headed by Li Ka-shing who has also made a mark internationally through telecoms and ports. But these have been, to a significant degree, financed by the very high return from property and ports in Hong Kong. Mr Li was followed by the Kwok brothers - Walter, Thomas and Raymond - the controlling shareholders of Sun Hung Kai Properties, and Henderson Land Development chairman Lee Shau-kee. Further down are the likes of Chinachem's Nina Wang Kung Yu-sum, Peter Woo Kwong-ching, the Wharf Holdings chairman, and Nan Fung Development chairman Chen Din-hwa. There are just two names whose wealth is owed to recent entrepreneurship in international business - the Wangs of Johnson Electric and Michael Ying Lee-yuen of Esprit Holdings.

In other words, the road to mega riches in Hong Kong has not been wealth creation but wealth diversion from households and small businesses into these few pockets - and those of the government which manipulates the property market and provides an anti-competitive environment for utilities and retailers.

Note how property barons diversified into power generation, gas distribution, supermarkets and bus services, all areas where their political clout could be brought to bear to smooth the path to profits, and to ward off competition legislation. It was not always thus. The richest people in Hong Kong used to be the textile tycoons and ship owners, businessmen who had to compete on international markets.

Contrast Hong Kong's 16 listed billionaires with South Korea and Taiwan. Taiwan has just six, and South Korea only three. Their entrepreneurs' huge contributions to global advances in manufacturing and technology have been more widely shared with their compatriots.

Hong Kong's political system has been failing to reflect the interests of the business community as a whole. Manufacturers, and now some services, have been able to escape local costs by moving across the border. This holds down wages in Hong Kong and helps explain why unemployment has become structural. Property and monopoly costs deter new business.

So, if acting Chief Executive Donald Tsang Yam-kuen and financial chief Henry Tang Ying-yen want to do something about poverty, they should look at that Forbes list and then at the policies that created those billionaires.





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