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Exposing the stupidity of bureaucrats is an endless task but it’s a job that needs doing. Sometimes this stupidity is relatively harmless but still profoundly annoying. Take the recent case of officials from the Food and Environmental Health Department (FEHD) removing a public bookcase from Third Street in Sai Ying Pun.

The bookcase was put there for local residents to offer used books to other residents at no cost. This is a form of recycling, much advocated by the government, however the public hygiene officers saw it as a health hazard.

The FEHD is in the forefront of bureaucratic stupidity because its clipboard-wielding officials just love to march around the streets identifying non-existent problems and ‘fixing’ them. They seem to be happiest when clamping down on people enjoying themselves.

Living in Sai Kung, I have the dubious pleasure of watching dour-faced bureaucrats descending on this town in droves. Sai Kung residents, and the many other Hongkongers who visit this place for relaxation, are guilty of the cardinal offense of enjoying themselves. This is manifest in a number of truly shocking ways, for example they just love eating al fresco, and because this is a rural area, they often come along with their dogs.

This has propelled the good folk at the FEHD into a frenzy of activity because they have discovered chairs and tables in areas where they should not be and, as for pets, well they should not be anywhere. The beauty of Sai Kung is its relaxed atmosphere where adults, children and pets mingle amicably making good use of outside spaces.

However it is very, very hard to obtain a license for outside seating. I know of one company that has been waiting for three years with no sign of progress. Thus it is indeed true that customer demand tempts restaurant owners to place seating outside.

Recently no less than twelve officers were dispatched to one tiny outlet that literally had no more than a couple of outside tables, of course the owners were fined and passers-by were treated to a display of what looked like a major criminal crackdown.

Strangely, however, on the sea front where the traditional Chinese seafood restaurants are run by politically connected bosses, FEHD officials keep away and turn a blind eye to infringements of their own barmy rules.

In some ways this is all quite amusing but occasionally the bureaucratic mind produces serious and damaging outcomes. The prime example here is the Hong Kong-Zuhai-Macau bridge, which is becoming notorious for fatalities;  so the Commissioner for Labor Carson Chan was summoned to Legco to explain what the government was doing to ensure worker safety.

Chan left legislators open-mouthed when he produced fatality and injury figures that were well below those in media reports. Not only had his department failed to update figures beyond the third quarter of last year, but he managed to minimize the problem by arguing that his department was only responsible for injuries on the bridge or on land, other injuries occurring in the sea were the responsibility of another bunch of bureaucrats. Not only is this heartless, but it provides an insight into the bureaucratic compartmentalization that allows officials to avoid taking the blame for more or less everything.

Idiot bureaucrats are an easy target for ridicule and we, the public, can get wooed into a sense of fatalism over bureaucratic stupidity but it comes with real costs, not just those of keeping these people in jobs but sometimes it costs lives, sometimes the costs are more mundane.

The bottom line is that Hong Kong has too many bureaucrats performing totally unnecessary tasks. The FEHD is a standout in this respect but consider, for example, the scandal of the number of paper shufflers in the Social Welfare Department compared to those actually doing something useful in an area where this work is much needed.

Caption:Identifying non-existent problems and ‘fixing’ them.

It may come as a surprise, but there is quite a lot of trawling of websites for official papers and statistics that goes into writing a column such as this, as it cannot solely be based on mere opinion and reflect my inherent biases - at least without some justification.

I am, as such, an experienced user of our administration’s internet sites and have learnt, through sheer determination and hard work, to get some sense out of them.

However, using completely outdated technology, they are clumsy, unattractive and lack any intuitive feel. It would appear that they have never been refreshed in terms of the user experience since the earliest days of the web, when I used to play around with the first Microsoft web-page software, some 20 years ago. What any self-respecting website uses today is a computer coding language called HTML5, which has spawned the stunning, colorful, corporate websites you see today.

Try the Census and Statistics website and you will certainly find it easier to buy their printed monthly digest, if you can find it any more; while the Planning Department website, which could be a fantastic dynamic celebration of the great city - for all its faults - is not worse than those that my children were producing before the turn of the millennium.

Well, a long diatribe on the poor quality of our beloved administration’s websites may seem to be a rather futile exercise, but this poor quality says it all about the administration’s own lack of vitality and insight when it comes to technology.

It really is not sufficient just to have John Tsang throw a few token paragraphs about cloud computing, along with a few tech buzzwords, into his budget speech, or to have the incoming Chief Executive say that the best use of an island in the middle of the Shenzhen River will be as some ill defined “tech park”.

I may be almost as old as Tsang, but with two children and a daughter-in-law in their twenties who earn a decent living in “big data”, “fintech”, and “social media”, respectively, and live in Brooklyn and Shoreditch, I think I have more than a mere theoretical understanding of the dynamism of this market.

For all the rhetoric and buzzwords, what has driven us forward in the practical application of technology is the progress that we have made in being able to bring massive computing power online at almost no marginal cost.

This underpins all the applications out there, whether it be on your phone, or in being able to process massive amounts of data in science, or in the latest developments in machine learning.

Of the three members of my family involved in these areas, not one of them has ever worked in a “Science Park” or received a subsidy for their business from government. The idea of a “Science Park”, for them, is as outdated as using semaphore flags to send a message. What they have seen, and what their industries have benefited from, is the massive outsourcing of IT systems and design from public sector bodies that wish to lower costs and massively improve their customer satisfaction, while also gaining new insights to improve services through the data they collect.

While our government has dithered and dallied and made almost no progress in this area, whole chunks of services in the UK, such as vehicle licensing and medical record storage, have migrated to the cloud under the UK government’s formal Cloud First policy, which is now four years old.

CY Leung wanted to transform Hong Kong into a “smart city”. Our government can start doing that by moving all its activities with the public onto the cloud. Just moving all customer interactions and record keeping for the Housing Authority, the Hospital Authority, and the Welfare Department would give a huge boost to innovation in Hong Kong, and the benefit would be enormous, as it has been elsewhere in the world.

We don't need subsidies, we don't need more concrete. We merely need innovative thinking in the administration.

Caption:All subsidies, all concrete, but no innovative thinking.

In an earlier column I mentioned the MPF as an example of the risk of a complacent government. The diligent team at the MPF Authority wrote back, objecting to that characterization and citing the default investment scheme (DIS) as a desirable reform. This is an edited version of my response.

Don't think that by talking about complacency and the MPF, I was suggesting that the MPFA has not been active. On the contrary, the MPFA has vigorously sought to extend its role and influence. The complacency that I was talking about was the unwillingness to consider root-and-branch changes to a system that was basically misconceived.

Firstly, why is a mandatory retirement system needed at all?  Hong Kong people have long proved capable of supporting themselves and their families through prudent financial management. They understand their risk appetite like no centralized scheme can. They jealously guard their returns. Only individuals can decide for themselves when it is time to save for a downpayment on a house, when to put aside separate money for retirement, and when it is prudent to shift asset allocation conservatively.

The MPF has hindered the development of private services advising on retirement. It has largely eliminated companies using attractive private pension schemes as an employment benefit. It has bred complacency. Contributions to the MPF will not be adequate to build an endowment that anyone can live off in retirement. Yet because the MFP is in place and the government has thereby assumed responsibility for retirement income, too many people stop thinking about retirement except in terms of what is mandatory.

Secondly, the DIS was a distraction. The focus should have been a real and easily implementable choice and control over your own retirement savings, not a "default" option. The system creates captive single providers to each employer, and in turn provides individuals with a menu of options so restricted, so difficult to change, and so costly to operate that good performance is almost impossible.

An alternative would be a US 401K style of system where individuals control their own money and make their own investment choices. Why not allow 100% of the money to be in bank deposits? Why not allow extensive use of ETF's with low fees? Why not allow "self managed" funds like those available in Australia? Why not allow individuals to choose their own provider that stays with them, no matter who the employer might be?

Thirdly, the rules that the MPFA has put in place create bureaucratic requirements for all providers and employers that drive up costs. Existing providers are within their rights to charge what the market will bear, but the MPF scheme has created many barriers to entry and left many providers without economies-of-scale, and the changes in recent years have added hugely to operating costs, with little offset for those making the investment. DIS simply makes it even harder for anyone to make money by helping Hong Kong people invest and prepare for retirement. Whilst the DIS fees are lower, they are not low! The 0.75% default compares unfavorably with the 0.15% for low-cost corporate bond ETFs in the United States.

Fourthly, the DIS has been established at the peak of a 30-year bull market in bonds. At that peak, the default scheme imposes more investment in bonds that will grow with age to 80% of the funds for those over 65. That would have been very prudent and low-risk for the last 30 years, but could well be disastrous over the next 30, if interest rates rise. DIS is not necessarily a low-risk option. Risk depends not just on the allocation to equities, but also on the duration of the bonds.

The MPFA should think very carefully about how to introduce more competition and real choice, and make individual investors central in the system. Recent "reforms" have only strengthened the case for restoring investment freedom and eliminating the MPF.

Caption:Exhibit A of a complacent government.

Okay, we get it. China is big. China is powerful. Not gonna argue with Beijing’s propaganda machine about China leading the world in nearly every worthy pursuit there is, be it education, industry, trade, or cold cash.

Yet being big isn't being great, and greatness is never measured in numbers alone, nor ordained by raw military power, or achieved by propaganda.  A nation’s place in the league of greatness is earned by its moral stature in the world as much as it is by its economic and military might.  Unfortunately, with a client state like North Korea, China is not seen before the world’s eyes as a leader among nations, but rather a towering giant abdicating its duties.

Xi Jinping is not seen at the negotiation table working to resolve the North Korean problem, but rather sitting on his hands waiting for an acceptable outcome to be hammered out by other leaders. He is not even leading from behind.

It's not 1953, US Marines are not at the Yalu River. So instead of being a buffer against a hegemonic power, North Korea has turned into a decrepit fence imprisoning China in the past. Worse yet, behind that fence is President Trump's "Smart Cookie" that China backs, who is building missiles for nuclear warheads meant to engage not only Japan or South Korea, but the US and Europe.

It would be nice to demand that China must have democracy and free expression before it can be accepted on the world stage. Thanks to western appeasement bought by its massive market and investments, China has long climbed over that bar.

Being on the world stage is however not the same as being a key player setting that stage. After all, Putin too gets a photo op at APEC meetings. Does a proud emerging China want to be seen as Putin's Russia?

North Korea is at once the albatross on China’s neck and a client state that brings nothing but humiliation: Can the world take seriously China’s ascent to be a global power if it is impotent in taming an infantile despot?

Imagine the peace dividend that solving the North Korean problem can bring to Asia: Markets will not be roiled by sabre rattling, China's banks will not be hampered by EU and US scrutiny, Japan and South Korea will not be re-arming or developing their own nuclear weapons. Yes, China will reap the largest chunk of this peace dividend if it can solve the North Korean problem by taking nuclear weapons off the hands of that reckless brat.

All this brings us back to China's quest for greatness, an obsession that is on display in every Belt & Road show that China puts on. Yet with any rise to power there is an internal rot, and the failure to tackle resolutely this great flaw holds a nation back from leaping to greatness.  For China, that rot is a nuclear and belligerent North Korea.

Great nations do not have murderous client states.

It is tempting for President Xi to leave well enough alone and count on the West to once again cave in on North Korea.  That's a dangerous bet with President Trump as well as Prime Minister Abe.  North Korea has nuclear and chemical weapons.  Unchecked, it will eventually shoot off a missile that is capable of reaching US soil.

The US will not allow a nuclear capable Intercontinental Ballistic Missile in the hands of a juvenile despot. Neither can China allow such instability in Asia.

When flight patterns become precarious over North Korea, that undermines all commerce and makes harder Hong Kong’s task to persuade US financial giants to relocate here from an uncompetitive Wall Street. If war is imminent on China’s Northeastern front,  where air and land are being polluted by North Korean nuclear tests, hi-tech factories are not going to be built there.

Time and circumstances dictate that President Xi is the Chinese leader who must act to bring a resolution to the North Korean impasse. The time to act is now.

Caption:A good bye long over due.

For once, it seems that the government has actually had a good idea; but it is not half as good as it should be and raises some very troubling questions over the mentality of the officials who dreamt this up.

The idea comes in the form of a new annuity scheme for retirees, scheduled for implementation next year. It offers those over the age of 65 a way of investing in return for a guaranteed income, with flexible arrangements for both getting out of the scheme and passing residual funds to inheritors.

The catch, and it is a very big one, is that to get anything approaching a decent monthly payment from this scheme – in the region of HK$5,000 - requires an investment of HK$1m. And, by the way, women will get a smaller return because they tend to live longer – that doesn’t look too good either.

So, beneficiaries of this scheme will need a substantial sum of cash at hand. That will not be a problem for many middle-class families, but it is way beyond the means of a great many people who can only dream of having HK$1m in the bank.

Therefore elderly people most in need of retirement support will be left out of this scheme. Aside from senior citizens of modest means, others are in a far worse situation, one in three elderly people are living below the poverty line.

The government approaches this dilemma with one-off handouts and a variety of puny schemes that just about keep the elderly poor on the rails but fails to address the fundamental problem. The bureaucrats shy away from getting to grips with elderly poverty and resist the notion of a universal pension system.

They argue that there is no point in using public funds to support both the well off and the needy – an argument that is so thoroughly flawed as to be almost laughable.

As anyone with half a brain understands, the whole concept of a universal pension is that everyone has a stake in it and so everyone contributes to its funding but the well-off make higher contributions than those with less money. This is how all national pension schemes work.  Although they are far from perfect, they ensure that the specter of extreme poverty does not cast a shadow over the lives of the elderly, and indeed the thoughts of younger people, who live in fear of old age poverty, becoming burden on their families.

It’s not as if our government is short of funds to help the elderly; there is always enough money for vastly expensive cross border projects, there is also plenty of cash to be frittered away on things like the pending 20th HKSAR anniversary celebrations, and then there are the repetitive handouts for the better off, such as waving Business Registration fees and the like.

The money being ‘given away’ is, of course, the public’s own money and, as ever, the question of how it should be disbursed is a question of priorities. When you have - and that is what we have - a non-elected government, the pressure to distribute money to ordinary people is much reduced and accompanied by pompous declarations of not wanting to create a dependency culture.

However, as the new annuity scheme demonstrates, there is a way of using the public’s savings to provide a degree of comfort in old age and it could well be the basis for a truly universal scheme that works for everyone.

As matters stand, the only people who are guaranteed a comfortable retirement out of the public purse are the bureaucrats who administer that purse. They are secure while the streets are dotted with elderly people limping around collecting litter for recycling so that they can be sure of eating. Maybe this state of affairs is part of a cunning plan to revive enthusiasm for Marxism!

Caption:Should have gone into civil service.

Some translations of the Old Testament book of Deuteronomy say that complacency leads to idolatry and brings destruction on the land. We are becoming complacent.

As the seasons turn, we move through the last of the spring festivals and more people get ill.  The rhythm of the seasons heralds change, and in Hong Kong, the changes have often been harsh. We have pleasant, dry winters, but with spring, temperatures rise and we move toward summer's stifling humidity and risks from violent typhoons.  Living in Hong Kong has for long required an appetite for risk.

Complacency has not been an option. Protection from diseases requires an extra degree of cleanliness. Heat requires diligence in preparing food. The dramatic terrain and turbulent weather have required us to build with pathbreaking construction techniques that stretch human ingenuity.  We have attracted risk takers from China and around the world, with a historic “touch base” policy that allowed those risking their lives to come here to make their fortunes.

This lack of complacency has also driven our prosperity. We have economically changed from a haven for the opium trade, to an entrepôt, a light manufacturing hub, then a service center for a modernizing China, and now a world-class financial center. Each of these phases of development has required adaptation and the development of new skills. Each has seen new individuals and companies rise to wealth and prominence. Our history is a history of incessant waves of Schumpeterian creative destruction.

However, as successive generations have mastered the risks of the physical environment, fear of the power of nature in typhoons has given way to frustration about occasional inconvenience and relish for an unofficial public holiday. The problems of intense heat and humidity have given way to niggling concerns about the cost of electricity to run air conditioners. Challenges of food and nutrition are supplanted by a plethora of choice from every corner of the planet. Lives are long and our worries are that we have a lowly rank on measures of happiness.

This challenge of “The Complacent Class” is captured in a book of that name by US economist Tyler Cowen. It could not be more relevant for Hong Kong.

There is a paradox that all our efforts to reduce risk might leave the economy more complacent, with less comfort taking the risks needed for success in a competitive world. In seeking to reduce risk, our planning processes become drawn-out. Projects become more expensive. Less is done to improve our built environment. Business licensing and approvals become more difficult. Employment and entrepreneurial opportunities dry up.  We question the waste, messiness, and experimentation of private business, opting too often for the planned certainty of government projects.

The “food trucks” fiasco is a perfect example, lampooned in the New York Times, of all places, for onerous regulations that make them beautiful, clean, safe and uneconomic.

Recent MPF changes do little to enhance choice and nothing to increase returns, but they do offer a safer default – hardly an attractive alternative to managing your own money.

We condemn property developers as rich oligarchs, but tying them in knots creates a stultifying stasis. Rather, we should look to developers for more innovation, more improvements in buildings, and better space to live, work and for leisure. If they don’t deliver, we should have an opportunity to take a risk and do better ourselves. Innovations in small space living should help lower costs, but huge land premiums paid to the government and rules creating sameness deny that opportunity.

More public housing is a complacent answer that gives up on the idea that we should have a private economy that is dynamic enough to provide affordable housing for all who want it.

Less risk taking means less social mobility, less opportunity, less prosperity, and ironically in the long run, less prospect of stability.

Caption:A fiasco of onerous regulations. (Apple Daily photo)

For the last few years, our government has been unable to provide any real leadership, largely on account of it being influenced by a clique of civil servants who are more focused on stifling change than embracing it.

Hopefully, with our incoming Chief Executive Carrie Lam having built a reputation, at least with my contacts in government, for actually questioning the status quo, this may change.

It is all well and good to complain, as some of our previous chief executives seem to have done, about how divisive society is, but leaders who feel that their best-laid plans have been sabotaged should look themselves in the mirror first.

Societies need strong and respected leaders and, in their absence, the vacuum will always be filled by disaffected groups shouting before thinking. This is no different from how a class of children behave at school. A weak teacher, who has earned no respect from them, will have a more difficult job in controlling them than someone who has empathy with the group and is respected. People respond to leadership. To lead is to provide a strong vision of how a society is to develop and how people can fit in the total scheme of things.

For Carrie Lam, vision has to go beyond constructing more subsidized buildings and railways. It has to rise above physical things such as a Palace Museum or the Lok Ma Chau Loop – it has to set out the key values that our society holds dear and point out the way to build an exciting future for all who live here.

This is not to be accomplished by by putting out weak-kneed public consultations, the results of which are often rigged in order to get the agenda hidden behind them implemented. Leaders have to point out clearly where they want to go and convince the key constituents that they are right.

Carrie Lam has a narrow window to set the tone for what could be a ten-year period in which she leads Hong Kong toward 2047. She needs to reinvigorate the administration and implement fundamental changes immediately relevant to people’s lives.

Housing, welfare, and education are probably the three key things that every government needs to address if it wants to create a fair and dynamic society. We can afford to implement a radical reform program, changing the way people view their future and their roles in society.

First off, we need to make sure that government expenditure is for the benefit of bona fide Hong Kong residents rather than those living overseas who feed off a permanent Hong Kong ID card. So, we need to announce that access to public healthcare, housing, and education is not on the basis of having acquired an ID card, but has to be earned additionally through actual residency.

Secondly, it is a reality that 95 per cent of our people live in their own homes or homes heavily subsidized by government through the Housing Authority. With 1.2 million units under its control, the bloated Housing Authority needs to be downsized dramatically.  Give those units to incumbent tenants for a nominal sum and free up the housing market.

On education, we need to ensure that all children have access to free education, apprenticeships, or vocational training until they are 18; while the system needs to become much more inclusive with a dynamic and relevant syllabus which de-emphasizes testing.

And, finally, if Lam wants to really give people hope, she should announce that she intends to introduce a 40-hour week and that the minimum wage will be doubled over 5 years with a view to moving it to the level of countries with similar per capita levels of GDP.

Not only would it be fun to hear the howls of protest at such proposals, we may even get some research and development expenditure and some focus on technology if we gave our workforce some dignity and paid them properly.

 

caption : Has a narrow window to lead. (Apple Daily photo)

When Carrie Lam was crowned as Hong Kong’s fourth Chief Executive no one was in the slightest bit surprised. After all, the outcome of this selection process, absurdly described as an election, had been decided in Beijing some three months ago.

Yet most of Hong Kong’s media has covered this event as if it were an election, which is precisely what the Chinese Communist Party wants them to do.

In other respects, however, the Hong Kong election system remains something of a problem for the rulers in Beijing; who sort of had it foisted upon them and have since been struggling with the incompatible aims of neutralizing the system while giving it a level of credibility.

Elections were simpler in the 'good old days' of the Soviet Union when citizens were dragged to the polls to deliver a 99.9 per cent vote for whichever candidate was chosen by the Communist Party. The Democratic People's Republic of Korea keeps up this farcical tradition today.

While other Communist dictatorships used the electoral process as a key element in their propaganda armory, China’s Communist Party makes little effort to disguise contempt for elections.

This is why the Mainland election system shuns nationwide polls and merely allows the general public to vote for members of local people’s congresses who, in turn ‘elect’ national leaders. Candidates are vetted at local level, ensuring that only those acceptable to the party can stand.

This rigid attitude towards election control provides a key to understanding how the Mainland authorities approach the two places in the nation (the other being Macau) where citizens are given a vote and can even freely elect councilors and legislators. The approach is one of extreme suspicion; coupled with a determination to ensure that elections are confined to party approved candidates.

When the prospect of reforming Hong Kong’s electoral system was on the table in 2014, the bosses in Beijing simply reached for a version of the mainland election system and declared that local people could only vote for candidates they approved of. Understandably this proposal was widely shunned in Hong Kong.

In many ways therefore Beijing was quite happy when its proposals were rejected and the existing system was maintained. Thus the ‘election’ for the Chief Executive can be pretty much controlled by confining the vote to a tiny election committee, consisting of 0.03 per cent of the population, with a built-in majority of Beijing loyalists.

However, even now the gray men who control Hong Kong from Beijing are worried about the SAR’s election system and wonder why it has failed to work.

They could have opted for making the post of Chief Executive largely powerless, but even hardliners acknowledged the dangers of pursuing this policy. On the other hand it was felt necessary to install a figurehead with some semblance of support in an elective process. This process however was never going to be genuinely free or fair.

So they have stuck with a system that has now installed an overwhelmingly unpopular leader even before she takes office. Lam therefore has every prospect of following in the footsteps of her three failed predecessors: the public forced the first incumbent to resign, the second is in jail and the third became so toxic in public opinion that it was considered better to ‘elevate’ him into a national role before he did any more damage as Chief Executive.

In selecting Carrie Lam as Hong Kong’s fourth CE the Party has learned absolutely nothing from past experience. The frantic way that Beijing officials were forced to campaign for her only succeeded in further alienating an already alienated Hong Kong public.

It almost beggars belief that some people outside the tight circle of Communist Party cheerleaders actually believe that somehow Lam will be able to succeed. They must be the same people who maintain that CY was a highly successful leader.



caption : Of the people? By the people? For the people? None of the above.(Apple Daily photo)

Through the campaigns for Chief Executive, candidates rolled out their plans, policies and visions for the future. They talk about livelihood, the economy, youth and public services. Yet we know and indeed hope that little of this will matter for the future or Hong Kong or our own future as citizens.

A successful society is one where government leadership does not matter very much. People are self reliant and have the freedom and capacity to deal with their own problems. In truth, it is not the plans of the government, but instead our own plans, that matter for our livelihoods.

Problems and challenges emerge, we lose jobs, health has ups and downs, personal relations change and businesses have to adapt. Mostly, dealing with these challenges is a personal responsibility. We are better able to meet those challenges in an environment rich of opportunities, of businesses delivering services efficiently and those we choose to cooperate with are our friends, family or commercial partners.

Societies start to break down when people believe that they are not in control of their own destiny for the things that matter to them. When people are reliant for their livelihood on an external force or power, then control of that power, rather than cooperation on individual goals, becomes essential to survival.  Conflict, rather than progress is the result. More government spending and a looser public purse mean more conflict, not less.

The magic of Hong Kong has been that, from its founding, it was not the center of visionary leadership or a center of political power. It was long incidental to the colonial ambitions of the United Kingdom, nor important to the imperial dominions that it was separated from.  It has been a place that people have chosen to come to to pursue their own goals, because it is more free, choices are many, the touch of government is light and there has been no obligation to sign on to some grand vision or ideology.

This does not mean a lack of ambition or vision; there are plenty but they are individually based and often in competition with each other. They have been able to peacefully coexist through a rule of law that adjudicates disputes and a culture that studiously leaves people and families to their own devices.

The French call this laissez faire and it has allowed us to become a remarkably outward looking global city. People come here from around the world, because we are one of the best places in the world to do business. Despite its recent phenomenal economic growth, people from other parts of China still prefer to come here to live. Some of those who have emigrated have returned seeing there are more opportunities here, meanwhile some also leave, but they all keep their local ties. This constant flow of people has spawned global businesses and influenced global culture.

We have been open to new ideas, whilst leading in others. Octopus was a pioneering payments system. It is now old hat and needs to adapt. New waves of innovation like Uber and Tesla have found success here, but unfortunately now find resistance. While being uniquely open to the world, we leave people alone to pursue their own distinctive visions; this has made us far more resilient than most places.

Our new Chief Executive will succeed or fail not on the effective implementation of carefully laid out plans, or on how successfully they deal with the unexpected - and inevitable - crisis. Rather, it is on his or her governing instinct when the crunch time comes.

In the past, the colonial government’s instinct was to count on the resilience of the Hong Kong people, i.e. Sir Philip Haddon-Cave’s “automatic adjustment mechanism” of a highly flexible, adaptable and open economy, maintenance of the rule of law, fiscal prudence and stable money.

This instinct has put us on the map. May our new CE keep faith with it so our people’s resilience, aka the “automatic adjustment mechanism”, can work its magic – unhindered.

Caption:Keep faith with the resilience of our people. (Apple Daily photo)

Diversity is one of the great battle cries of the corporate world in recent decades. Generally, this means taking more women and individuals from minority groups onto company boards, which, presumingly, will result in better decisions hence better companies.

Typically, the most vocal and best organized groups pushing this agenda are those headed by people with backgrounds, aspirations, and levels of educational attainment very similar to those of the powerful incumbents whose cake they wish to share. And those that get their voices heard tend to be of a certain age and maturity - whereas, particularly in this fast evolving world, the occasional insight from a younger generation may be no bad thing.

Thus most companies and organizations have, in practice, merely ended up paying lip service to the concept of diversity by appointing females and a deliberately ethnically diverse group of people, all of whom actually tend to have very similar qualifications and views of the world, and are of a similar generation.

It really does not matter where one was born, or what color one’s skin is, if one’s views and opinions have been melded by the same global middle-class values, which have been frequently overlaid and polished by a year or two of being indoctrinated in western corporate guff at international business schools.

Of course, in the real world, shareholders can choose whether this type of diversity is of any value and vote directors in and out of the companies which they own shares in. In any case, one should not belittle the companies that are trying to make efforts in this area, even if they often look merely cosmetic.

Diversity matters not just at the top. In fact, it ought to be the key at the entry point to an organization as it is the emerging middle managers who really run companies day to day, and who will be the next leaders.

In this context, it is encouraging that major companies in the West are tearing up their traditional hiring practices, ignoring degrees, and trying to identify candidates who are suited to the role and who have potential. Recent research seems to indicate that supposedly moderate performers, those who did not go to university and whose backgrounds are not revealed by the questions asked, are readily holding their own in professional firms when compared with the graduate intake.

And, after watching a couple of weeks our former civil servants trying to inspire new ideas and initiatives as they seek the Chief Executive position, it surely is time to look at the whole process of civil service recruitment and employment.

An elitist process established by the hierarchy to perpetuate its sense of innate superiority is simply not producing people who have the dash and drive required by our oddly structured executive-led government, in which the civil service establishment plays such a vital role.

The resistance will be enormous, but if we wish to develop a civil service that has real connections to the community, the exams required to be taken for civil service entrance should be reviewed and made accessible to not only the supposedly most gifted local graduates.

In addition, one of the biggest complaints we hear today from frustrated ministers is that senior civil servants know they may not last more than five years and no sooner have they established themselves in their posts than it is time to be out of government. This means that senior civil servants in various departments can often be rather obdurate, knowing that their agenda rather than that of the ministers is the one that has real durability.

So, why can’t we move people from other avenues of endeavor in and out of the civil service on secondment for a number of years, and vice versa? Or maybe it is time we started thinking the unthinkable and get some the best and brightest from the mainland to come down - that would rattle a few of the gilded cages.

Caption:Gilded cages.

If they are gonna take you out, you might as well go out beating your chest.  Make no mistake, Beijing is determined to take John Tsang out of contention in the so-called  Chief Executive election.  As such, he has a choice: Go out as a meek also-ran or plant a stake on the political landscape that will resonate for years.

Intimidation against the 1200 electors has reached the point where they are being threatened to have their fingerprints on ballots checked to determine how they vote. Furthermore, they are required to take cell phone pictures of the ballots to prove that they heel the party line.  The Liaison Office is said to be making daily calls to electors making certain Carrie Lam is Hong Kong’s next unelected leader;  the fix is in more than ever before.

Yet with just about 3 weeks to go, and within the system he so cherishes, John Tsang can leave a marker in public that will continue on in economic and political discussions for years. He doesn't need to call for independence or throw a fit over a rigged system.  He can go one better -- calling into question the legitimacy of an unelected government with overflowing coffers to collect a salaries tax. Political enlightenment can come at all stages in life, and there is no reason why Tsang can't wake up in these final weeks to the fact that there is no legitimate need to tax the labors of our people.

No taxation without representation is a great political battle cry for Hong Kong, but in our sensible city a more convincing argument may be that a salaries tax is simply not needed. Government taking our money to build white elephant projects for favored groups is de facto corruption. It robs our people of their cash, and our city of an efficient administration. Officials with overflowing coffers are as motivated to seek value for public money as a fat guy is to leave a cake shop.

Oh, and did I mention we are loaded.  We are simply rolling in financial reserves and we could have dumped the salaries tax long ago and yet have reserves that the world would envy. As the accompanied chart shows, we have had cumulated surpluses of approximately $490 billion since 2010, but at same time collected about $390 billion in salaries taxes.  In other words, we could have dumped the salaries tax and still have $100 billion surplus for the 7-year period.

In fact, go back twenty years, we were still creating more in surpluses than we collected in salaries tax.  And with nearly $980,000,000,000 in current fiscal reserves we have all the cushion we need for any rough times. Abolishing the salaries tax is not fiscally reckless. Instead, it will deny funds for ill conceived reckless spending.

While advocating the abolition of the salaries tax will not, sadly, affirm Hong Kong as a city by the people, Tsang will be proclaiming to the world that we are a city for the people.  He will be putting the Hong Konger ahead of  the government, and instead of advantaging cronies, by abolishing the salaries tax,  his administration  will make Hong Kong ever more competitive with our people reaping the benefits..

We are a rock and a floodplain that couldn't grow enough rice to handle lunch for a day in our city.  We earn because people come to our city as they can earn.  We live in a competitive world and after common defense and public safety there is no higher duty for government than to make us an economically competitive city.

Abolishing the salaries tax is a message of hope versus Carrie Liam's message of order.  It is a message of a fighter, not that of a Beijing puppet. John Tsang may not win the “election”, but he can score a win for the Hong Kong people if he is willing to brave the fire, stand up,and beat his chest as he changes the economic conversation of our city by calling for the abolition of  the salaries tax.

Being an optimist over the future of the rule of law in Hong Kong is challenging these days, but in recent weeks there have been reasons for optimism; however  good news in these matters rarely comes without qualification, and indeed a sting in the tail that may prove lethal.

But let’s begin with the positives. The conviction of Donald Tsang, the former Chief Executive, demonstrated that even the most powerful people are not exempt from justice. Likewise the conviction of seven policemen on assault charges arising out of the Occupy demonstrations showed that law enforcers are also not above the law. However both of these developments also raise worrying questions.

The decision to prosecute Sir Donald for misconduct in office, and corruption involved relatively small sums of money, but nevertheless showed that even the most senior officials can expect to face the full force of law should they step out of line.

Unexplained is why the investigation into the affairs of the current Chief Executive, Leung Chung-yin has been dragging on for almost three years without any hint of a conclusion. The sums involved here, HK$50m, are far larger than the amount of money in the Tsang case but the accusation of non-disclosure of payments to the Executive Council is rather similar.

Much about the Leung case remains unknown, however we know that Rebecca Li, the person who was leading this investigation for the Independent Commission Against Corruption was effectively demoted and forced to resign. Mystery continues to surround her situation.

At the very least, a definitive conclusion to this investigation needs to be reached. Otherwise the impression of selective prosecution will linger.

Meanwhile both Ken Tsang and the seven policemen who assaulted him during the Occupy protests have been convicted. The convictions of the policemen on more serious charges, have sparked outrage in the pro-Beijing camp and provoked some very nasty attacks on the judiciary.

An offer has been made to pay RMB10,000 to anyone who assaults Judge Peter Dufton. The rabid Beijing-based Global Times newspaper writes of him having a ‘white skin and yellow heart’, thus neatly combining racism with unfounded accusations of political bias. The yellow heart alleges an association with the Umbrella movement, a claim that is entirely without foundation.

It might be imagined that these assaults on the judiciary would have elicited a firm response from the government. Leung has said nothing to defend the judiciary while his Justice Secretary Rimsky Yuen has made one low profile mealy-mouthed comment referring, in general terms, to the possibility of prosecuting those who insult the judiciary.

The mass rally of police officers on February 22 reflects a high level of anger in the force, yet many officers are uneasy over the suggestion that law enforcers can somehow stand above the law.

This situation is very challenging for police chief Stephen Lo, who is understandably sensitive to the feelings of the people he leads, but needs to be mindful of the lines that law enforcers should not cross. He appears to have been more swayed by sentiment in the force. However, leadership is not a matter of following the led. It is significant that his comments over the convictions did not once mention the need to uphold the rule of law, but he did speak of his ‘regret’ over the trial, and implicitly cast doubt on its outcome by mentioning the possibility of an appeal. Unfortunately the police force has become increasingly politicized, largely as a result of government reliance on policing as the sole means of dealing with protest.

This leaves Hong Kong in a bad place as political expedience triumphs over the rule of law. The problem is that, once rule of law slips - and its implementation becomes selective - it presages a slide into a very bad place; go visit a court on the Mainland to get some idea how that looks.

 

caption : The Goddess of Justice is still standing, but for how long? (Apple Daily photo)

American journalist and essayist HL Mencken described how candidates for office go about their task – they “search out groups who pant and pine for something that they can’t get, and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time it is made by looting ‘A’ to satisfy ‘B’. In other words, government is a broker in pillage, and every election is a sort of advance auction on stolen goods.”

That seems an apt description of the current CE election.  Despite the sincere recognition of candidates that we have problems, most of the solutions offered rely on spending taxpayers money. Education, healthcare and mass housing are areas of growing need, but the presumption of candidates is largely that these are needs the “government” should meet from taxation. The challenges of an ageing population increase the demands for government spending.

The truth is that these needs can only be met by increasing the wealth and productive potential of our people. Let me suggest a proposal that could both improve that productive potential, directly support the needs of the elderly and recognize the contribution that as past taxpayers they have made to what is great about Hong Kong today.

The government holds in trust for our people substantial commercial assets. It owns 100% of the airport,  Kai Tak Cruise Terminal, the Cross-Harbour Tunnel, Cyberport, Science Park, the Hong Kong Mortgage Corporation, the Hong Kong Trade Development Council’s Convention and Exhibition Centre, 76% of MTR Corporation, 53% of Hong Kong Disneyland, 5.45% of Hong Kong Stock Exchange and numerous other assets that either are, or could easily be commercially viable. Why not distribute these assets to our senior citizens to secure their retirement and healthcare needs?

These assets have been built up from the patronage, taxation and enterprise of the postwar generation that has or will soon retire.  Ownership of these assets could be separated from the government in a trust, with the units of the trust distributed to the people who ultimately created them. The proceeds from sale of units in the trust could in part provide for the livelihood of senior citizens and potentially be converted into individual health savings accounts or annuities for pensions. For the disciplines of this proposal to work, it is crucial for the assets to be tradable and individually owned.

Although privatization has worked very well in Hong Kong, when tried, it has become politically unpopular. This proposal would allow assets to be commercially managed, but keep broad public ownership. The trustees would be obliged to owners to maximize the value from assets and would restructure, reinvest, sell or hold those assets recognising that the commercial realities change. This would significantly increase the return on lazy assets, improve accountability and depoliticize management.

The scheme would reduce inter-generational conflict, giving the older generation recognition from their effort and the potential to better stand on their own two feet.  It would not be a panacea,  depending on where lines are drawn, a rough estimate of the market value of the assets today suggests that most retirees would still need to make further provision for their own retirement.

It would require fiscal discipline from the government going forward. The assets would not be available in the same way for future generations, but younger people have time now to make private provision for themselves. Alternative schemes for pensions come with a large fiscal burden, but no efficiency benefits and they erode prudence and individual responsibility.

Sir John Cowperthwaite taught us that money should be left to  “fructify in the pockets of the taxpayer.” A threat to our potential growth is the high and rising role of the government in the economy. If we can better manage the commercial assets held by the government, it can transform productivity. If individuals can build up more capital and use it productively, higher growth makes current problems more manageable.

 

caption:Give them back what they created.

Amidst all their calls for unity, it is the Chief Executive candidates themselves who are causing, and will continue to cause, even greater divisions within our society.

Now that Carrie Lam has the clear backing of Beijing, John Tsang’s candidature is merely a personal ego trip, one that serves as the  focal point for the public to express their unhappiness with The System.

Tsang should be under no illusion that his gaining popularity is a sign of any personal credibility. He should realise that his candidature serves no purpose other than to provide a conduit for the protest “vote”. Let’s hope he understands this and remains humble as, having written his turgid, vague and generic 73-page election manifesto, he certainly has a lot to be humble about.

This so-called manifesto is but a collection of incoherent paragraphs outlining random ideas. For instance, those about small company tax rates and negative income taxes, which given the complete absence of any quantitative analysis, are merely shiny trinkets which are, in a Hong Kong context, unworkable.

For example, as we do not tax offshore income or investment income, we have no idea of people’s global income. As such, even to contemplate a negative income tax is laughable, especially as every business owner here lives by remunerating themselves in dividends in lieu of a salary, and would presumably be entitled to the full benefit.

Moreover, these are a bureaucratic nightmare. After his decade-long tenure as our Financial Secretary, maybe Tsang has not realized that the strength of our tax system is that it allows us to spend time making the money to be taxed on rather than wasting effort on establishing sophisticated tax avoidance schemes.

And Tsang has apparently dreamed up the reckless and vacuous aspiration of providing public housing to 60 per cent of the population - note that he did not say 60 per cent of the households. Where did this big idea spring from?

Just so he understands, let’s quickly go through some numbers. There are 2.5 million households in Hong Kong, evenly split between the public and private sector, housing around 7.3 million people.

However, there are fewer people living in public housing than private, as the number of people per public-sector household has fallen sharply in recent years. Increased supply of subsidized housing will itself create demand by causing the “splitting” of eligible households.

Given that anyone over 18 with a Hong Kong ID card is eligible for public housing, students and others, who are at the start of their earnings capability, are rushing to bloat the waiting list. This trend has then been further exacerbated by the administrative incentives for older people to divorce, as single people over 58 qualify to jump to the top of the waiting list.

Now, it would be well and good if all this nonsense were coming from a populist businessman turned politician like Donald Trump, but it takes some sober reflection to realize that it is from one who has been running our finances for a decade.

So, while it may be good fun to support Tsang whenever the opinion pollsters call, don't think for one moment that he is capable of doing a decent job.

Beijing has cause to oppose Tsang. This opposition is probably based, at least in part, on his absurd hoarding of money, which may be seen as the cause of some of the social disharmony. In addition, his opposite numbers in Beijing, who hold vastly more senior roles, are likely to be aghast at his continued ability to hide his intellectual credentials, so convincingly, for so long.

As some others around the world are discovering, protest votes for the mere sake of protesting may seem to be innocuous, but they are very dangerous if it gives credibility to shoddy ideas.

It is time for Hong Kong to start to realize that the candidates are best assessed by their capabilities and policies, as well as their desire to change the way Hong Kong is run, rather than by who their sponsors are.

 

 

caption: Mouthing his turgid and vague ideas. (Apple Daily photo)

There's a saying about a fixed race: Make it close and people still watch.  We are falling into that trap when we discuss the candidates for Chief Executive as if  this fake election matters.  We pretend John Tsang's financial plan offers stability or Carrie Lam’s ties to Beijing can afford us greater elbow room.

Truth be told, none of it matters, only we the people do. The freedoms we are to be granted in 2047 have no connection with who is our CE in 2017, or for that matter in 2027. Our struggle with Beijing will determine that. We are the masters of our own destiny, and we should accept it as clearly as Beijing already does.

Was 689 ever more than an agent of Beijing? CH Tung any more than an errand boy?  Will John Tsang stand up for us?  Does Beijing really care what messages our CE brings to them?

Owning up to our destiny  is not surrender or arrogance, it is simply the reality.  I never really could muster much emotion about any of our CEs.  After all, yelling at them is like complaining to the butler who will not let you in the house.  Hired hands following their master’s orders are not our problem, their master is our problem.  The CE election is a game of charades designed to distract us from our struggle with Beijing.

Yes, it is a struggle. Not a fight or a flare up, but a struggle as certain as civil rights was a struggle in the United States or democracy a struggle in Taiwan and South Korea.

A long struggle takes a strong base and the outcome of our struggle will be determined by how well we defend our greatest strengths. First and  foremost we must hold our veto in Legco, all the while expanding our reach into functional constituencies.  We can't hope to run government, but we can stop it from running over us.

Second, we must keep our markets open, trade free, and government at bay. It's leverage over our financial lives that government seeks, and to surrender any economic power to them is to take a step away freedom. Free trade, low taxes, light regulation, and the rule of law is the mix of economic independence that can secure our personal and political freedoms.

Meanwhile, we must be wise about  throwing our lot in with localist radicals who, by provoking Beijing into direct intervention, can end us as China’s freest city overnight.  It's romantic to stand at the barricade, but it never ends well.

Similarly, some of our democratic leaders who seek to find a fix, a quick solution, to all of this are none the wiser. By reaching out to Beijing, Ronny Tong is well meaning, but what cards do we have to play against a regime that insists on absolute control?  And when has Beijing offered anything near reasonable?

No, it is best that we understand our journey is long and there will be inevitable setbacks along the way. Most of these will be out of our control, such as trouble China may have in Asia or confrontation with the United States.  But good things await us as well.  Yes, China under Xi is a darker place than in past decades, but Xi will not be there forever; and a more open China will mean more freedom for us.

Since 1997 all our Beijing appointed CEs have failed us. No doubt they will continue to fail. But so what? Article 23, National Education and the Umbrella Movement have begotten Legco wins, demonstrating it is the people of Hong Kong who have done the deals with Beijing. We the people, not Beijing’s hired hands, have done it at the ballot box and on the streets.  We the people have protected our rights and our livelihoods.

I don't care who becomes the next CE. But I know Beijing cares what we the people think and more importantly how we act.  We make the deals with Beijing, and Beijing knows it.

 

caption:We the people doing it on the streets.(Apple Daily photo)

Racism is an ugly word for a devastating reality, it is all the more repulsive when senior government officials instinctively reach into the racist cesspool without thinking.

Any self respecting society requires its leaders not to express racist attitudes or  to institutionalize racial discrimination. Yet here in Hong Kong the chill winds of intense nationalism blowing from the North seem to have encouraged a flutter of racism. That flutter reached Carrie Lam, Beijing’s favored candidate to become the next Chief Executive, who presided over plans for the Hong Kong Palace Museum which originally stipulated that only ‘local Chinese’ architects would be considered to design the museum.

After it was pointed out that even Hong Kong’s puny anti-discrimination laws could be breached by this requirement, Ms Lam’s committee amended its restriction to just ‘local’ architects.

So, am I making a mountain out of molehill by writing about this matter? I think not, because what we saw here was the kind of rather unthinking racism that might well have been prompted by the excessive zeal of those currying the favor of Beijing.

In other words this was something of a reflex action, but when the reflexes are so worrying they need to be called out. The idea that only a person of Chinese ethnicity could be capable of designing a museum of Chinese culture is primitive thinking in the extreme.

The idea is even more absurd in the case of architecture which has a special place in the international cultural exchange system where ethnicity is irrelevant to intelligent people who value creativity and skill over race. The stipulation of a racial qualification for architects  is something that has not really been seen since the Nazi regime in Germany. If this comparison seems uncomfortable, ask Ms Lam to explain her reasons for harking back to this dark period.

Fortunately, elsewhere in Hong Kong, both the private and public sectors have eschewed racism in selecting renowned architects for major projects; Poly University has an iconic building designed by the Palestinian British architect Zaha Hadid, one of the most interesting new residential developments on the Peak came from Frank Gehry, Norman Foster was brought in both to design the airport and the HSBC headquarters in Hong Kong and then there’s the buildings of IM Pei, the renowned Chinese American architect, who in his person defies ethnic stereotypes.

Yet Hong Kong has also experienced a kind of reverse racism where it was considered more prestigious to employ a foreign architect in preference to a local one. This in turn reflects Hong Kong’s ambiguity about things foreign and indeed foreigners.

On the one hand foreigners, especially those with white skins, are accorded privileges and deference that is entirely inappropriate; while on the other they face subtle forms of racism that can be both bizarre and unsettling.

A friend of mine, a very fluent Cantonese speaker, sometimes finds that people will ignore what he says because they believe that someone with a white face cannot possibly be speaking their language. More unsettling is the routine discrimination faced by Hongkongers of South Asian origin, many of whom have relatives who have lived here much longer than ‘local Chinese’ families.

Expunging racism altogether and getting rid of some of its more absurd aspects is probably impossible but it should, at the very least, be possible to ensure that racism does not become institutionalized and reflected in official thinking.

The reason this matters is that the well being of societies is not judged by how well they cope at their strongest points but how well they manage at their weakest points. Lamentably, issues of race and ethnicity often become these weak points.

With this in mind it is not at all comforting to think that Hong Kong’s next Chief Executive may well be someone who seemed blissfully unaware of racism rearing its ugly head in her pet project.

 

 

caption: Talking about harmony but promotes racist thinking (Apple Daily photo)