Identity sold for a quick profit

SCMP March 18

A sense of identity rooted in history is an essential element in any institution's or country's long-term success. The great crime of the Communist Party, notably but not exclusively during the Cultural Revolution, was to create a huge chasm between China and its past. So it is encouraging to find that, in Hong Kong, the roots of identity as part of China but with a very unique history may be strengthening - even if some of its cruder manifestations towards mainlanders are deplorable.

Interest in buildings that express that continuity, and in the use of Cantonese and traditional Chinese script, are all part of identity. So it is doubly disappointing to see the lack of a sense of long-term identity on display recently, as well as the government's disgraceful refusal to enact a law to protect its archives.

We have the case of Ho Tung Gardens, in which the third-generation inheritor of the wealth of comprador extraordinaire Sir Robert Hotung attempts to hold the community to ransom, by threatening to pull down her mansion unless rewarded with billions in compensation, to enable the family to continue its rich rentier lifestyle for the next few generations. Quite extraordinarily, the government baulks from taking a tough line with this evidence of greed.

We are told that it is her house and her land, and therefore she must be offered vast compensation. Why? For a start, no one actually owns land in Hong Kong. All of it is leased. Second, the government can and frequently does change zoning, height limits, building codes and the like, all of which directly affect the value of land and existing buildings.

It also has powers of compulsory acquisition with compensation based on existing use, not development potential, when required for public purposes. Heritage conservation is as much public purpose as road building. In other jurisdictions, inheritors of historic buildings are expected to be their guardians; indeed, they are usually proud to be and often forego luxuries in order to preserve them and pass them - not overstuffed bank accounts fed from the public purse - to their heirs.

Secretary for Development Carrie Lam Cheng Yuet-ngor is surely tough enough to tell Ho Min-kwan that the Buildings Department will never give permission for demolition and, if necessary, the land will be rezoned in such a way that nothing new can be built there. This case has little to do with private property rights and a lot to do with the arrogance of Hong Kong's would-be aristocracy.

Loss of identity in a different sphere is provided by HSBC. Hard on the heels of announcing the closure of its retail banking business in Thailand, where it used to boast of being the first bank in that kingdom, comes news of a possible withdrawal from Macau, Brunei and the Philippines, as well as a lower profile in Japan and Korea. Others may follow.

In other words, the idea of having a network serving regional retail as well as trade interests, the basis on which HSBC first moved into Thailand a century or more ago, is being sacrificed on the altar of short-term profits. The operations facing the axe may have recorded some recent losses but they are miniscule compared with the losses racked up by madcap lunges into unconnected markets, notably the US subprime lender Household International (I have to declare an interest here: I had a short position in Household shares when HSBC bought it).

Indeed, HSBC's retail operations, big and small, but particularly in Hong Kong, have sustained it through all kinds of failed efforts at expansion, whether into Household or investment banking and broking. HSBC's strength has always been its sense of permanence, its attraction as a solid bank which linked Asia to the West and provided a network for the rich but widely dispersed ethnic Chinese communities in Southeast Asia. For sure, it then used the profits from that business to buy into the US, Britain and elsewhere but this East and Southeast Asian part of the world has been its bedrock and where it has played a unique role.

As it expands in China, it surely needs to sustain those connections to neighbours, particularly those (which include Thailand and the Philippines) where ethnic Chinese communities are very large. Sure, for now, it likes Indonesia and Vietnam, but where would it be in those countries if 20 years ago it had dismissed them, as it now does Thailand and the Philippines?

HSBC attempted to become 'The World's Local Bank' but, forgetting its base, that slogan is now hollow to the point of embarrassment. So what is going on? Simply, in the case of HSBC, and many others, the long-term interests of companies and their shareholders are being sacrificed to short-term profitability, which is also the basis for the remuneration of top management.

A recent report in Britain into the role of the stock market put the problem neatly. There was a 'mismatch between the business models of asset managers and the interests of companies and beneficiaries'. Most investors want to be in a company for the long haul. But the intermediaries are judged and rewarded on the basis of yearly performance. If the top executives' interests are aligned with those of the asset managers, as often seems the case, the result will surely be that identity, and longer-term focus, is forgotten.

Although HSBC is headquartered in London, chief executive Stuart Gulliver says its heartland is Asia, the source of its 'history and heritage'. It's time to read up on your history, Mr Gulliver.



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