which do not lie
We are all know that statistics often lie. However, there's
another old newspaper adage: "Never let the facts get in the way of
a good story". So let us bring some facts to bear on some notions being
peddled around Hongkong.
There has been lots of talk recently to the effect that
one reason for rising unemployment is that families can make more money
living off social security than by doing a full day's work. The taxpayer,
we are being told, is supporting lots of layabouts, particularly unskilled
new arrivals from the mainland.
It is particularly nauseating to hear these sentiments
from the mouths of Hongkong's overpaid, under-challenged, jobs-for-life
senior bureaucrats. Director of Social Welfare Carrie Lam Cheng Yuet-ngor
suggests that it may be time to cut back payments because a family of
four gets $10,010, including rent allowance, which, her department tells
us, is 1.4 times the average wage of an unskilled worker. Back to that
in a moment.
But firstly, let us look at the actual data for CSSA spending
and see how it matches unemployment. If bludging on the dole was a significant
phenomenon, and was pushing up the unemployment rate one would expect
that payments would be rising as fast or faster than unemployment. But
what do the government statistics tell us? Firstly, that as of April
this year - the latest month for which figures are available - the total
number of CSSA recipients of all kinds was 250,000. But of these, 174,000
were the old and disabled. The number of unemployment recipients was
33,100, or only 13% of the total, despite having risen by 40% since
a year previously.
Secondly, although the number of unemployment recipients
rose dramatically in percentage terms, the total monthly CSSA payout
rose only 14%. This was faster than the 8% increase in total recipients,
but one would expect the unemployed, who mostly have families, to get
higher benefits than the old. Even now, unemployment payments represent
only a small proportion of CSSA spending.
Thirdly, only a small minority of the unemployed get
this CSSA benefit. The 31,000 in April compares with unemployment during
the February-April of 245,000. The ratio of benefit recipients to total
unemployment fell from 15% to 12%. Clearly, CSSA is used as a last resort.
As for the claim that recipients get more than the employed, that is
also absurd. The average household of four has two income earners. The
median wage is HK$10,000 a month, the median household income HK$17,000
and average household size 3.2. Thus the CSSA "excessive" support level
per head ($2,502) is less than half the median household income per
head ($5,300) and puts them (at best) in the same income bracket as
the lowest paid 10% of workers.
Perhaps Ms Lam should take (unpaid) leave to study the
government's own data. Alternatively it is alarming to see someone in
her position manipulate the figures to suggest that the unemployed are
getting too much and have become an excessive burden on the government.
As it is, the old and infirm remain the major recipients of a CSSA budget
which is anyway only 8% of total government spending. But clearly the
government now wants to cut back payments to the most disadvantaged
to help pay for such "essentials" as its latest subsidy to a private
company, Disney, via the MTRC , the inflated salaries of new "ministers",
or the new subsidies that the government now wants to hand out to favoured
Another notion doing the rounds - helped along by official
mainland publications -- is that Li Ka-shing is a very patriotic investor,
particularly devoted to investing in Hongkong. He himself, we remember,
has suggested that if people in Hongkong didn't stop criticising him
he might not invest so much here in future and move to friendlier climes.
So where has he been investing?
I have no idea where Mr Li personally has been investing
the cash flow from his existing fortune. Nor indeed do I know what his
son Richard did with the HK$3 billion he collected from his timely sale
of PCCW shares at $15 in 2000. But one can certainly check the geographical
direction of investment of the elder Li's major listed and interrelated
companies, Cheung Kong Holdings, Hutchison Whampoa, CK Infrastructure
and Hongkong Electric.
Near the bottom of the Li corporate tree is Hongkong
Electric, a great generator of cash as well as power, paying dividends
last year of HK$3.4 bn and with depreciation covering around 40% of
local capital expenditure. Last week HK Electric and CK Infrastructure
announced that they were paying A$1.4 bn (HK$6.2 bn) for another Australian
power venture. This is their third Australian purchase and will mean
that about a third of Electric's assets (and also of debts) will be
in Australia, compared to nil in 1997. Given the relatively slow growth
of local power demand it may make sense to use the cash from the generous
rates of return offered by the scheme of control to diversify overseas,
even to other slowish-growing markets.
Cash from Electric feeds into CK Infrastructure, whose
principal asset this is. Electric represented 61% of its 2001 profit.
Most of the other assets of CKI, which was floated off in 1996, are
interests in various roads, bridges and power stations on the mainland,
though it still also has long established cement and materials businesses
in Hongkong. CKI says it now has HK$8bn invested in the mainland and
$12 bn in the Australian power entities.
CKI is a subsidiary of Hutchison, which has been Li's
main vehicle for overseas investment. The expansion of Hutchison's ports
business has been especially far reaching. In addition to the low cost,
nearby mainland ports - which some view as competition for Hongkong,
others as complementary - last year alone Hutchison acquired eight port
operations in six countries. Telecoms, for Hutchison, began in Hongkong
but is now primarily a Europe, and elsewhere, story. Even the likes
of Park n Shop and Watsons see more growth in southern China than in
Hutchison is also the largest shareholder in Tom.com,
which went public with an IPO during the dotcom craze but has spent
its cash mainly on old economy media assets on the mainland and Taiwan.
Not surprisingly then, Hongkong's contribution to Hutchison's
turnover has fallen from 61% in 1997 to 47% in 2001 and contribution
to earnings (before interest and tax) from 69% to 45%. Top-of-the-Li-tree
Cheung Kong is both a holding company for the above assets (plus recently
listed CK Life Sciences) and a major property development company in
its own right.
The gargantuan profit margins that Cheung Kong used to
generate on property development in the age of inflation and artificial
land shortages have withered. It will remain a major player, and one
ever eager to influence government policy. Private developers will assume
a larger role in housing production, but it seems unlikely that there
will be a return to yesterday's margins. Cheung Kong at least seems
to have few illusions and compared with 1997 now has an increased focus
on the mainland, and elsewhere. This year roughly 50% of its development
completions (by floor area) will be outside Hongkong.
All in all, the Li public empire appears markedly less
focussed on Hongkong than it was in 1997. I am not suggesting there
is anything wrong with this. Quite the opposite. Major overseas investments
such as Husky Oil go back to the 1980s. Mr Li and his managers have
shown great skill in building up a global ports business using, inter
alia, cash generated in Hongkong. They have taken advantage of power
privatisations in Australia. They have skilfully played the treacherous
global telecoms market while others have been losing their shirts, or
their lives. This should all be to the good of outside investors, particularly
those higher up the group structure. But let us get the facts straight
about how much investment has gone into Hongkong compared to how much
has gone elsewhere. ends