In thinking of its future, Hongkong
must think internationally, not be seduced by illusions about
the Pearl River delta. SCMP
What does Hongkong want to be? Global City. Gateway to China."Dragon
Head" of the Pearl River delta? Home from Home for Overseas Chinese?
All of the above, you might say. But Hongkong cannot be all things to
all people. It is faced with challenges which should be making its think
harder about its role.
For sure, an open city-state economy cannot devise a precise blueprint
for itself. To a large extent it can only prosper by taking advantage
of opportunities as they arise. Nonetheless, government policy can give
direction.. More open discussion is needed of the challenges facing
the territory and the costs and benefits of different policies. Let
us start with the issue of Taiwan. I was agreeably surprised to read
James Tien's column in these pages (January 9) about the challenge which
may soon be posed by direct Taiwan-Mainland air, shipping and banking
Hongkong mouths platitudes about the desirability of progress towards
national reunification that direct links would represent, but is loath
to consider a response to the economic consequences. I was in Taiwan
at the time of the establishment of the mini-links and am not convinced
that the major direct links are imminent. Political obstacles still
outweigh the economic benefits. However prospects for links are greater
than at time since 1995, and there is a 20% possibility of them happening
within twelve months.
One should not exaggerate their short term impact. Though direct links
would mean a loss of transit air traffic and Taiwanese tourism, much
of that now goes via Macao anyway. The impact on shipping and manufacturing
support for Pearl delta industries would not be significantly affected.
Taiwanese firms are not going to move their factories from Dongguan
to Xiamen. They will fly direct from Taiwan to Shenzhen rather than
via Hongkong. But already Taiwanese companies are focussing more of
their attention on the Shanghai region.
With links there would be direct connection between the financial markets
of Shanghai and Taipei. Taiwan's capital surplus and active stockmarket
are attractive to mainland firms, and many in Taiwan want opportunities
for mainland portfolio investments. China's banks would like a presence
in Taipei, and the island's free atmosphere makes it attractive for
rich mainlanders. The way for Hongkong to respond to challenges from
Shanghai, and a direct cross straits links, is surely to emphasise its
uniquely international qualities rather than take refuge in being the
biggest fish in the south China pond.
A lot of nonsense is being talked about the need to integrate Hongkong
with the fast growing Pearl delta. Officials blithely suggest that this
is an inevitable and patriotically desirable result of the return of
sovereignty. Self-serving consultants make silly comparisons with the
New York, Rotterdam or London conurbations, as though there could as
easily be free movement of people and capital between Dongguan and Tsimshatsui
as between Westchester and Manhattan. Lip service is paid to easing
border restrictions and improving cooperation with authorities across
the border. But the reality is that Hongkong's economic interests, as
determined by income per head and asset prices, cannot be served by
rapid integration with a region with vastly lower income, education
and asset price levels.
Hongkong's advantage lies in providing high value added services to
the delta, as to other parts of China and Asia, not in integration.
It is amazing that the same people who talk about the desirability of
integration are the same as those who most admire the Singapore example.
Do they ever suggest that Singapore should "integrate" with Johore and
In practice of course people here do realize the dangers of Hongkong
not keeping control of its borders. Retailers are worried about loss
of business to Shenzhen, property developers about the impact on prices,
especially in the northern New Territories, people about their jobs.
As a result, while efforts are made to speed the movement of merchandise
trade across the border, movement of people, such as necessary if Hongkongers
are to commute across the border remains slow.
There are practical issues from water pollution to road planning where
cooperation with the diverse authorities - SEZ, province, city etc -
is desirable, in the same way that Singapore cooperates with Malaysia
on such things But never forget that a city state has very singular
needs, and that Hongkong's advantages of free trade, free speech, free
movement of capital and easy access for foreigners cannot be replicated
on the mainland for the foreseeable future. It is those advantages more
than its geographical position at the Pearl estuary, which makes it
a Gateway to China.
Sure, geography helps Hongkong capture the South China trade in particular.
But any policy which gives precedence to the Guangdong connection will
not only diminish Hongkong's wider advantages but probably imply increased
overcrowding and pollution, increasing population rather than raising
income per head and the quality of life.
Providing the highest value added services, whether to China or the
region or the world, implies allowing full competition for those services,
just as Hongkong once prospered from a manufacturing industry ready
to take on the world, and has always benefited from freedom of foreign
exchange. But is it moving to build on those strengths so that it can
always offer advantages that Shanghai or Taipei cannot? Is it competing
adequately in areas such as aviation where it should be gaining ground
rather than trying to keep up with mainland ports in low-value added
(and polluting) container trans-shipment?
There has been some progress, notably in opening up the telecoms sector
- albeit more the result of technological change and US pressure than
because the government wanted to stop protecting vested interests. However,
lots more needs to be done to bring more business to Hongkong by breaking
cartels. Landing rights is an easy and obvious one. The medical profession
is another. People ought to come to Hongkong for treatment. At present
many go overseas to avoid the local medical mafia. Education is another
area where Hongkong ought to be a seller not a buyer of services but
is hobbled by an overpaid tertiary teaching profession, and government
Even financial services has been held back by vested interests, especially
the stockbrokers. Information technology services are a bright hope.
But the government does not seem to understand the implications of the
cyber age which it purports to want to promote. It is now dreaming up
desperate measures to thwart the internet to defend the revenue it collects
from the often sleazy horse-racing business and to protect the monopoly
of that citadel of monied snobbery, the Jockey Club.
Now the government is to legislate to prevent people from betting
on races in Macao, and indeed from betting anywhere via the internet.
This is the thin end of a huge wedge, infringing local liberties and
introducing extra-territoriality, making it illegal to so something
overseas which is legal here. Imagine if the US decided to disallow
its citizens to deposit in Hongkong banks because of their reputation
for drug money laundering! What is the difference from sending money
and investment instructions from Hongkong to a bookmaker in Gibraltar
from sending them to a bank in Bermuda?
The proposal is contrary to articles 112 and 115 of the Basic Law.
If the legislature is dumb enough to pass it, let us hope that it is
challenged in the courts. Are our officials too stupid to see the implications
for Hongkong's freedoms and reputation? Or are they, as members of the
Jockey Club, beneficiaries of its monopoly?. Whatever the case, instead
of infringing on freedom of exchange and investment, why not open up
the local gambling industry to competition? Why not allow other local
outlets for local gamblers, and attract foreign gamblers to Hongkong
Let the Jockey Club and others offer betting on football, elections,
on everything including the winner of "the worst dressed bureaucrat"
contest. Ending the monopoly and cutting betting taxes would increase
turnover, and undercut illegal gambling and organized crime. The way
ahead for Hongkong is to sweep aside vested interests so that all comers,
be they from Beijing, Guangzhou, Tokyo, Frankfurt, New York, and Hongkong
itself, will want to use its globally competitive, state-of-the-art
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