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Introspection
time for Hong Kong
By Gary LaMoshi
HONG KONG - Before his investment bank's
spectacular bankruptcy, Peregrine chairman Philip Tose
delighted in spouting his opinion that democracy was bad
for business. The Philippines and India would never
catch China or other states under the thumb of a ruling
elite, Tose insisted.
Research has discredited
Tose's contention, and, ironically, a taxi company
associated with Indonesian dictator Suharto drove
Peregrine to bankruptcy. But you still don't see many
investors scrambling up the parapets to support
democracy. Except for the SRI - socially responsible
investing - fringe, most fund managers play purely for
profits (see CalPERS plays with investment fire,
March 5).
Similarly, this side of the thugs in
Myanmar, the biggest political consideration for
investors generally isn't the form of a government, but
its stability. All of the above makes it somewhat
surprising that Hong Kong's benchmark stock index has
been buoyant in the wake of anti-government
demonstrations and subsequent tensions with China,
though it fell at Thursday's opening after the
resignations of top Hong Kong officials. (Other Asian
markets fell similarly after a bad day on Wall Street.)
It remains to be seen whether the Hang Seng Index will
keep rising as the Beijing regime mounts its
counteroffensive against the Hong Kong protesters.
'Cool down'
The July 1 protest against
proposed national-security legislation known as Article
23 that drew 500,000 people led Tung Chee-hwa's Hong
Kong government to amend, then withdraw, the
controversial bill. Subsequent protests have urged
increased democracy in the former British colony and the
resignation of Chief Executive Tung Chee-hwa, who was
chosen by 800 electors appointed by Beijing.
Beijing's key people in Hong Kong, Tung and Gao
Shiren of the Central Government Liaison Office, let the
protests blindside Beijing. Last week, representatives
from Beijing came to Hong Kong to learn more first-hand.
Rumors of Tung's departure after a suitable interval
abound (in the Soviet Union, Tung probably would have
already been admitted to the hospital for medical
tests), but Beijing has given its short-run response.
An editorial in the English-language China Daily
offered this advice for Hong Kong: "It is high time for
the 'democrats' to cool down. The rule of the game is to
know where and when to stop." Wednesday night's
resignations of senior officials who embodied "the
government's mishandling of the issues" - Secretary for
Security Regina Ip, who ineptly pushed the Article 23
bill, and Financial Secretary Antony Leung, facing
possible corruption charges for importing a luxury car
before announcing a tax increase on imported luxury cars
- may be Beijing's stop sign.
The editorial also
stated its expectations of the Hong Kong people: "After
venting their pent-up feelings, they will come to
realize that the most pressing tasks at the moment are
post-SARS [severe acute respiratory syndrome]
reconstruction and economic revival, and that social and
political stability is the essential prerequisite."
'Let's all shut up and make
money'
That final phrase of the editorial is a
chilling reminder that it would take just a few thugs at
an otherwise peaceful demonstration to justify calling
in the Red Army to quell disorder. But the main message
echoes the title of blacklisted cartoonist Larry "World
of Lily Wong" Feign's chronicle of the 1997 handover:
Let's All Shut Up and Make Money!
Liaison
Office director Gao, whose recent shortcomings leave him
little room for freelancing, repeated the China Daily
theme. "Hong Kong is a city of business, not of
politics," Gao said on Tuesday. "If Hong Kong is
over-political, it will be unfavorable for its social
stability," he warned. "If society is stabilized, then
everybody can turn their efforts to developing and
reviving our economy." In other words: Let's all shut up
and make money.
The question remains whether
democracy will help Hong Kong make money. The Hang
Seng's rise suggests optimism, but the numbers may be
misleading. "The rally we have seen here is post-SARS
rally, not a hope-for-democracy rally," according to
Jonathan Coleman of Geomatrix, a hedge fund manager in
Hong Kong.
Relations with the mainland represent
a paradox for Hong Kong's political economy. Proximity
to China, geographically and otherwise, has been crucial
for Hong Kong's economy. Developments in China have made
it easier to eliminate Hong Kong as a middleman, and any
hint of discord - such as a half-million protesters in
the streets - may well speed that process.
At
the same time, it has been important for Hong Kong to
emphasize differences with mainland China such as the
free flow of information and its legal system,
differences that the Article 23 bills threatened to
erode. A Beijing-imposed solution to the current
political crisis, whatever its temporary palliative
effect, would undermine the key principal of "one
country, two systems" governing relations between Hong
Kong and the mainland since 1997.
'Competition for policymaking'
Making
money on the Hong Kong side of the system has been a
major problem since the handover. While China has logged
the world's leading growth numbers, Hong Kong's economy
has stubbornly resisted recovery from the regional
crisis that began in 1997. Perhaps democracy can help.
"Democracy is the competition for policymaking,"
former investment banker David Webb said, "and a
competitive process normally produces a more optimal
outcome." Webb edits Webb-site.com fighting for investor
rights in Hong Kong, and he sits on several panels
related to securities markets. He won his seat on the
board of directors of HKEx, owners of the Hong Kong
Stock Exchange, in a democratic election.
Webb
said that he believes "a democratically elected
government is more likely to implement a law against
anti-competitive practices, which will have the effect
of breaking cartels and lowering the barriers to entry,
encouraging investment in our economy". Those vested
interests have been nurtured and protected by Hong
Kong's undemocratic governments chosen by London and
Beijing (see Article 23 protesters take aim at Hong
Kong elite, July 1). Webb sees an honest business
climate, a pleasant environment for international
professionals, and tourism as potential competitive
advantages to reignite Hong Kong's growth.
That's a far better-reasoned and developed
program for economic recovery than Tung's government or
its opponents have articulated so far. Beijing may be
correct that Hong Kong people are more interested in
making money than political waves. However, Tung's
government has given them little opportunity for the
former but ample reason for the latter.
(Copyright 2003 Asia Times Online Co, Ltd. All
rights reserved. Please contact content@atimes.com
for information on our sales and syndication policies.)
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