Quotation of the Day

18 December, 2008

Retreat, retreat and retreat...

The confusion characteristic of the Tsang administration is contagious and quickly spreading to infect Hongkong's corporate governance. First, there was the appointment and dismissal fiasco of the television broadcaster. Then came the 180-degree turnaround by the bus companies to reinstate the fare discounts to elderly citizens, which was withdrawn only a week ago.

Isn't this all too familiar? Does it remind you of government's change of mind over old-age financial assistance and chartering flights to Thailand? In each case, decisions seem haphazard and whimsical, made on poor foresight and then overturned at the earliest sight of opposition.

Is it because our corporate elites share the very same DNA with government bureaucrats? Let me make a bold hypothesis. Many of our business elites, like their counterparts in government, are still living in the good old days of 1970s (as I wrote in the previous essay). They are still too used to operating in the socially unsophisticated environment that's very benign to elite and business interests. They have not recognized the need to address the big changes to Hongkong in the last two decades.

The government and its allies like to put the blame on the advent of populism. Yet their out-dated elitism, with its characteristic arrogance of power, has been fuelling this populism. The problem is that they have neither the stomach for democracy nor the guts for autocracy. As a commander if you believe what you're doing is right, you simply stick to it. You don't change course in the middle. That's the worst to any leadership. Your successive retreats at the face of opposition will only bolden your enemies.

11 December, 2008

Suicidal magnanimity

On this day in 1792, King Louis XVI was tried for treason. Like many last emperor, he's unfortunate to have inherited an "ancien regime" that simply could not adapt to new situations. You might say it wasn't entirely his fault. True, many last emperors were punished for being kind and indecisive rather than cruel but ruthless.

Hongkong inherited a rich legacy from the British (or in Patten's words, the Cleopatra's dowry). But it also inherited an establishment that's not fully brought up to date to deal with the immense changes in the run-up to the change of sovereignty. Indeed, the tremendous socio-economic changes since 1980s alone are sufficient to render our administrative machinery obsolete. By any yardstick, Hongkong is the least politically developed amongst all modern metropolis of comparable economic achievement (worse than Singapore that has at least a quasi-elected legislature).

Yet many "royalists" in this City, like their predecessors in France, were trying hard to "turn the clock back", not to the 1990s, nor the 1980s, but to the good old days of 1970s when the damned curse of democracy was still a far cry. Thus you have the government re-introducing appointed district councillors to your local district boards. This is the biggest fallacy of all. To say that we cannot have universal suffrage for the chief executive or legislature overnight might be understandable. But to reduce the level of representation at the district level is plainly unforgivable (*there's no Basic Law restriction on universal suffrage for district board membership).

Belive me, there are many "royalists" in this City who still believe the old modus operandi of "administrative absorption of politics" will stall the call for democratization. Some brilliant minds in this government - let me assure you - still harbor the hope/illusion that appointing more "elites" to the hundreds of advisory boards and committees will save its dwindling reputation.

Isn't this laughable? The prime case of such hope/illusion is Donald Tsang's decision to appoint a DAB legislator to his cabinet (the executive council). Some have compared this to the examples of Abraham Lincoln and Barrack Obama as a manifestation of magnanimity. Excuse me, but I don't think Tsang can be comparable to these two men. And the most crucial point is that Lincoln and Obama had won their power through an open nation-wide contest. Their electoral victory earned them the legitimacy to silence their opposition. Any rivals they brought to the cabinets would be foolish to challenge or torpedo a popularly elected president.

But this isn't the situation with Hongkong's chief executive as you know well. Displaying magnanimity while you're weak is politically suicidal. And Tsang is already paying this price. (Could you imagine a cabinet member of Obama calling the US government as "shameful", as our DAB executive councillor did?) If Tsang really wants to build strong governance (too late anyway), he ought to learn from Louis XVI rather than Obama or Lincoln.

Let me close by quoting Winston Churchill's opening words in his memoir,

"In War, Resolution;
In Defeat, Defiance;
In Victory, Magnanimity;
In Peace, Goodwill"

Which phase do you think this government is in?

10 December, 2008

You'd better drive your own car than taking a bus

The cash-rich local bus companies just announced they would not extend the holiday discounts to the elderly because of rising operating costs. They would also cancel the same-day return discount to other passengers.

I would very much like to see how this government make a response that will demonstrate its avowed care for senior citizens, and how it shows its "strong governance".

But you bet most likely you won't see any response.

Hongkong's public transport is more expensive than most think. It's quickly becoming a folly that riding on a private car will be cheaper than riding on public transport on some routes, especially if you need to change buses. These days I find myself driving more and more as petrol prices are falling, whereas my bus and subway fares are fixed (with government approval of course).

Driving is a dispensable luxury for the middle-upper classes in Hongkong (truck drivers excepted). They could take the hit of oil price hike. But buses and subway are the daily necessity of the oridnary folks. When government cuts back even on taxi fares, isn't it rather humorous that the most underprivileged, the elderly in particular, are being ripped off by the bus companies? What is their philosophy, I wonder...

postscript: oh, by the way, if you read the statement made by your transport minister at the legislature, you might wonder if she's the spokesman for the bus companies. What a shame.

post-postscript: the government just says discount is ultimately a matter for the bus companies to decide because it is a free market. What a nonsense! Had the public transport sector ever been a free market, the government shouldn't have meddled with the fare increase applications every year. Had this been true, we could have stopped paying for the salary for the bunch of bureaucrats at the transport department (what are they for if not regulating the market??)

Would the government just stop such nonsense every now and then when it wants to cover up its own incompetence? You have insulted the sanctity of free market ideology and what's more, you've insulted our intelligence. (Remember what Al Pacino says in Godfather to his brother-in-law who's betrayed his clan? "Please don't say that you're innocent...You're insulting my intelligence.")

Why should you be paying for the retraining fees of somebody else?

"Why don't you just cut the crap and get to the point?", said my professor to a student.

The same should be said of our legislators and officials. There're some plainly simple issues that I fail to see why they got so entangled.

The levy on hiring foreign domestic helpers to retrain the local workforce is a classic example. Yes, this issue has been so controversial and confusing since inception. But you only need to ask yourself three questions -

1. Why the local workforce needs to be retrained in the first palce? Answer: they're the unfortunate who lost their jobs because of Hongkong's economic transition.

2. Who are being punished by this retraining levy? Answer: the middle class employers of domestic helpers and those helpers.

3. Are they responsible for the plight of those losing their jobs?

Well, I think the question answers itself. The retraining of those unfortunate is the responsibility of society and government as a whole. It's plainly unfair to single out and lay the burden on the middle class. If these people got the chance to elect their own government, I can ensure you our labor minister would need to be retrained first.

09 December, 2008


I happen to have come across a snapshot TV program on current affairs these two days. I only got to know from a friend that the host used to be a participant in beauty contest (this aroused my curiosity as such an intellectual disposition is extremely rare - if not totally non-existent, forgive me - amongst the local celebrities). She attempts to do a sweeping account of the fundamental reasons for the failures of the Hongkong administration (what a daring attempt within three minutes on air!). As it relates to the various posts I've been writing these days, allow me to recap her points here -

1. An unelected chief executive (or "elected", of some sort);

2. A cabinet loosely and hastily pulled together, totally lacking in esprit de corps;

3. A civil service that is capable of only execution and inexperienced in policy-making; and

4. A shark-like media that prides itself on paparazzi and feeds on scandals and rumors.

Any of these points deserves a doctoral thesis. But on the civil service, well, how many times have I heard the same being reiterated time and again when the government stumbles on something? So I feel compelled to dismiss this commonly held misconception (or hearsay) here.

If what you have in mind of the civil service is the day-to-day postal clerk or registrars manning the immigration counter, then I have nothing further to add. Afterall, they're paid to execute whatever policies decided by top leadership. So I guess most people are criticising the more elitist administrative officers (the AOs). Immediately after the handover, it was particularly fashionable to lay the blame on the AOs. They've become the fallen angels overnight after Chris Patten set on his cruise back home. It looked as if we'd all be better off once got rid of them.

But contrary to what most people think, AOs did have a lot of role to play in policy-making before 1997. If one ever bothers to read the government papers (e.g. the public consultation documents, LegCo Briefs or de-classified ExCo papers), they are all about policies. And they were all drafted and crafted by the AOs. Afterall, what were the AOs paid to do if not policy-making??

It is totally untrue to think that all policies were designed (or divined) by the brilliant think tanks in London. The British government simply had too much to bother itself. In fact, on various controversial policies/crises the local colonial administration went into conflicts against their masters at the Foreign and Commonwealth Office.

It's also untrue to think that the British are inherently smarter than local Chinese in policy thinking. There's some cultural difference in their working style but I would say it's a hundred times more difficult for a Chinese to get into the AO service back in 1960s or 1970s than an average Briton. Many of them were indeed talented.

So the real problem is actually a succession problem: the rapid localization starting 1980s meant a lot of middle-rank expatriate officers left. Gone with them was the valuable experience that took ten to twenty years for an officer to accumulate. That's a big loss to the institutional memory of the service and this middle layer, as anyone can tell from real experience, is really the backbone of the government. The vacuum was quickly filled up by many local junior officers who might not have been promoted that fast in the old days. They might be just as talented, but certainly not as experienced as their predecessors. So the problem is not that they're not British, but that they're not experienced enough.

If anything, the AOs' role in policy-making has only been greatly diminished (and increasingly so) AFTER 1997. The reasons? A more vocal legislature, the shark-like media and lack of political leadership are all candidates. When more and more political appointees are coming onstage, and when people with no credible credentials of public service are sitting on top of you, and when promotion is more and more based on favoritism and a yes-man culture, there's little serious policy to be made.

And thus begins the real decline of Hongkong.

05 December, 2008

Monkey bureau, monkey park; monkey city, monkey gov

Sometime ago I wrote about the monkey problem in Hongkong's country park (October 19). I had a number of exchanges with the agricultural & fisheries authority here.

They're taking a vaccination program to sterilise the monkeys which is expected to complete by 2012 (you may congratulate yourself that it'll be soooner than you can elect your chief executive). As usual, they said they're stepping up enforcement against illegal feeding by visitors (excuse me, I'd never seen an official in the country park doing this).

I pointed to the dire fact that those monkeys are reproducing at spectacular rate and getting more and more aggressive to humans (if the officials just bother to get out of their office and take a look at the field). It shows that whatever measures they've been taking are simply not working.

The reply I got was amusing. I was advised to, amongst other things,

(a) not to infuriate the monkeys by staring at them (well, would anyone be that stupid?);

(b) not to carry a plastic bag to invite attacks (I didn't, but I was threatened even with just a bottle of water in hand); and

(c) not to eat before monkeys.

On the last point I really burst into a laughter. Monkeys are intelligent creatures. They are staring at you from treetop when you think you're eating in private. But since the authority insists that culling is against animal rights, I'd suggest a more straightforward method to deal with the situation. Simply cover all BBQ stoves with concrete and turn the country parks into wild reserve closed to humans. I'm sure this will earn Donald Tsang wild applause from some environmentalists (although this is not enough for a Nobel Peace Prize). In any event, there's no other practical way to deal with the problem if we follow the logic of the authority.

So why am I talking about this apparently small issue? Not only because an old woman got attacked by monkeys last week. But because it's a classic example of how this government works -

1. Ignorance of problem (play ostrich tactics and believe there's nothing wrong; get my monthly paycheck and never bother to do the reality check of what's going on in the field);

2. Denial of problem (if someone complains or brings the problem to their attention, just cut and paste a standard answer; they think they can "write off" a problem in this way);

3. Denial of responsibility (if they'd really been tough on illegal feeding, the problem wouldn't have worsened to such extent and there wouldn't be need for sterilization or culling)

4. Impractical solutions (believes that something works on paper will work in reality)

5. Reluctance to take alternative suggestions (the mentality is that if I were to adopt your suggestion, it would be a loss of face to my authority)

That's why you've got all the fiascoes. It's a culture infesting the whole government machinery, just as the monkeys infesting our country park. Well, I suppose it's not a big deal to reserve our parks for monkeys when the city itself is run by a bunch of monkeys (well-clad and well fed). :)

04 December, 2008

More follies to come of this administration

I don't know when to call a bottom to the stock market but I can assure you that it is not yet the bottom to the falling credibility of the Donald Tsang administration. You can bet to see more follies to come, on even grander scale and in more unimaginable terms.

The essense of the Thai airlift incident is no more than a logistical problem. It's nothing like democratization or minimal wage that involves fundamental rift of interests between different social classes and deep-rooted ideological debate. Failure on such a problem signifies a fundamental weakness in this administration.

If I may, the latest statement by the Rt. Hon. Henry Tang can be reduced to three simple points -

1. Basically, we've done nothing wrong (well, this core message permeated all officials statements by the government so far)
2. All decisions are collective decisions
3. We're just following an established mechanism that's been effective all along

Now, mind these phrases - "established mechanism", "effective all along". I bet that if you look into the government archive for the last ten years, that's the most common "justification" for all policy or administrative blunders, big or small. Well, you can say the whole HKSAR government for the last ten years was an established mechanism of some sort (writ large). Has that been effective? I think my question answers itself.

And collective responsibility? Excuse me? That was the wisdom of the colonial administration, I recall. Suspected to be yet another political mine planted by the British, was it not already swept away by the SAR government six years ago? We were told in 2002, when the government wanted you to pay the extra millions for the politically appointed ministers, that "they would be accountable to the Chief Executive for the success or failure of matters falling within the portfolios assigned to them by the Chief Executive. They would accept total responsibility and they may have to step down for serious failures relating to their portfolios." (These undertakings are not my invention; see notes below)

So what's the reason for all this nonsense? If I may summarise in one phrase, it's the "arrogance of power" - the very same thing that I said back in 2003 which brought us all the dislocations and sufferings then. It seems our "leaders" of today have learnt nothing (of that lesson) and forgotten nothing (of their good old days' glory).

p.s. I just learnt that a bunch of local taxi drivers had obstructed the highway to the airport (probably inspired by the Thai) in protest against the review of taxi fares. The police promptly cleared the road on ground of obstruction to public traffic. Granted, but I can tell you a lot of people are causing more obstruction to public progress by their stupidities.

p.p.s. I don't know what has happened to the government's bilingual policy but there's not even a full english translation of the statement by the Rt. Hon. Henry Tang on the government website! Perhaps they don't want the overseas media know about this?

(Note: Taken ad verbatim from a Legislative Council Paper entitled "Accountability system for principal officials", submitted by the constitutional affairs bureau in April 2002.)

01 December, 2008

postcript to "Such lousy administration..."

Within an hour of my earlier post the Donald Tsang administration took a complete turnaround and said it would arrange for special flights to evacuate Hongkongers stranded in Thailand...

What does that mean? It means when they earlier said it's not effective/not necessary to arrange for chartered flight, they were either making a wrong judgment or blatantly - I have to emphasise this word - lying to you.

Such lousy administration...

When countries like China, France and Australia are sending special planes to evacuate their nationals, I fail to understand why the Hongkong government's officials can still resist public demand for government-chartered flight to fly out the stranded citizens in Thailand. Readers only need to ask the following questions -

1. Do you really believe (as the government would have you believe) that an airline manager will be more persuasive than our security minister in securing landing rights for our planes?

2. Do they know that Hongkong is the fifth largest importer of Thai goods and services? Hongkong extended a one-billion-US dollar loan to Thailand when the baht was hit by speculators in the 1997 financial turmoil. Does the Hongkong governmnet really have no leverage to press the Thai government?

3. Do they know there's a Thai Consulate-General in Hongkong? Do they know Hongkong keeps an economic and trade office in Singapore that works like a quasi-consulate covering the whole SE Asia? Why are you, as citizens, paying the bills for this office in peacetime? Aren't they supposed to build the rapport with local authorities that can be useful in emergency?

4. Where has your security minister gone? Where is his politically appointed assistant who - as you were told by Donald Tsang just six months ago - was paid the attractive salary to explain things to the public?

At the heart of the issue we see a government that is -

a. Seriously lagging behind events; reactive (badly) rather than proactive, with neither foresight for planning nor hindsight for correcting its own mistakes;

b. Appearing callous to people's needs in time of crisis and clumsy in articulating its solutions or actions to people;

c. Failing to understand the very nature of this issue: it is not a business matter for airlines to sort out for their customers, but a crisis endangering the public safety of your citizens abroad.

Lastly, I bet the government can make up thousands of defensive lines to take in response to my questions. Well, in that case and if you're a Hongkong citizen reading this blog, you only need to ask them one final quesition: If Macau can, why not you?

(p.s. If I were the Chief Executive, the first thing I would do is to put my security chief on the next flight to Thailand and tell him: either you get my people back or you're gonna stay there with them!)

28 November, 2008

What's wrong with our education?

I wrote earlier about the deteriorating standard (not academic standard, but really personal standard) of Hongkong's college students. A friend attributes this phenomenon to "species dilution". What a phrase! By this he means that the quantity of the bad breed has outgrown that of the good breed (a kind of reverse evolution).

At the risk of being labelled as a rightist or conservative, I think there's some truth in this. But the problem arguably goes deeper than sheer quantity. I put forth below a number of conjectures for readers' consideration -

Lack of stratification: it's definitely a good thing to have more people receiving higher education. Problems arise only when you do not properly stratify the students for fear of labelling losers and winners. This creates confusion because if you put a genius in a class of the mediocre; you do not raise the average of the mediocre but merely ruin the genius. I am not being elitist because I believe people have different strengths. You can be mediocre in mathematics but a genius say, of accounting (and there's no proof that an accountant contributes any less than a mathematician). In the 1990s, under the old British administration, we saw a huge and rapid increase of tertiary institutions called "universities" but not a correponding increase in the average quality of intakes. Why can't our government just acknowledge that some institutions are technical high schools or polytechnics? Why must all students go to traditional universities? In Germany, for example, there're a lot of institutions other than grammarian schools or universities that can be just as good as them. This worked well to support the manufacturing-based German economy.

Lack of discipline to reward and punish: This again stems from our reluctance to label winners and losers. In the old days it's very difficult to get a First Honor and even a Second Upper was already damn good. But nowadays, my friends teaching at universities would be a bit embarrassed not to give out more As because anything other than that is frowned upon. Strange. They call it "grade inflation", which at the end of the day, I presume, will be as disastrous on the credibility of our grading system as inflation is on that of our monetary system. Besides, you'd have a hard time if you discipline students - nay, they're really your clients to be respected.

All this I believe has something to do with the excessive American style of 360-degree assessment (which means your subordinate can assess your performance) (gosh! yet another example of the failure of American capitalism!) and sheer commercialization of tertiary education.

But none of the above strikes at the heart of our education malaise - something which I would call the general vulgarization of Hongkong, including that of our education, culture, politics, etc. A particular strand of this vulgarization is a vulgarized and mistaken form of egalitarianism. I would talk more about that in my next piece.

In the meantime, I had taken the trouble to write to the President of that university after seeing a guy playing hand-held video game at the library(!) Let's see what he would do.

21 November, 2008

Hongkong's university students - our future???

I hate saying this but I cannot help feeling puzzled, frustrated and at times annoyed by our university students. I hate saying this because I shan't be too far away from them in terms of age and outlook (or not? with all the widening generational gap?) But being a frequent visitor to one of the top universities in Hong Kong, I'm increasingly wondering whether there's something wrong with them or myself. Three phenomena strike me: -

1. On any day at any single hour there are someone talking in the library - aloud, unabashed and unashamed. Very often such conversation is conducted through state-of-the-art mobile phones equipped with the latest fancy ringtones. Well, surely in my times we talked in the library too. But acutely aware that we weren't doing something right, we usually did it discreetly and with some moderation. But today's students seem to have no such sense of remorse and decency. They ARE the standards. They just do whatever they like, without regards to others. The librarians won't take action - well, what more can you expect from them than our bureaucrats?

2. Maybe I've been a bit corrputed by English hypocrisy (or courtesy, whatever you like), but I do expect a return of some sort (be it a nod, a smile or even a gaze) when I do the hotel doorman's service to someone - for free. But today's students are usually expressionless when they see you holding/opening a door for them. So these days I tend to just open the door for myself. Still, some students could just stand in your way - their expressionless faces suggesting as if they aren't aware at all of your existence. They seem perfectly ignorant of the mutual frustration of this standstill. On several occasions they nearly try to go under my armpit.

3. A peculiar subculture resembling what you see on Japanese soap operas - an unsuccessful insurance agent having to chant aloud some morale-boosting slogans in a bustling street, with the supervisors looking on. Well, I have much respect for these people since they're more or less forced to do it. Above all, they have the courage to do it on his/her own. But at universities, a place supposedly to nurture free spirit and independent thinking, it's a scenic view to see students getting dressed in uniform, marching together like a gang and shouting/yelling/screaming (excuse me, but I can't possibly call it "speaking" without insulting this word, for you can hardly discern a syllable of their speech). Oftentimes this is for running for some cabinet posts in some associations/societies, which in itself is a very honorable endeavor, if only their electoral platform could be a little more substantive than these empty slogans. Perhaps I can't blame them too much since they're just learning from our honorable politicians. But the troubling fact is that if you ask anyone of them to speak out loud (and sensibly) in a class on his/her own, you'll usually find them mumbling, if not speechless. So they seem to be merely compensating for their lack of guts in individual presentation or rational discussion by mob politics. Ah, yes, they're again just imitating the politicians of the day.

If Hongkong's tertiary education is not failure, what is?

12 November, 2008

Cognitive inertia (and the danger of picking a stock market bottom now)

The school of behavioural economics has rightly pointed out our frailty as rational beings in our bounded rationality and limited self-control. To that, however, must be added a third element which may shed light on the current crisis and its aftermath -- cognitive inertia.

By this I am referring to our tendency of accepting any prevalent trend, model or methodology as permanently valid without questioning its underlying (often muted) assumptions. For that takes a lot of mental agony and often the courage to go against conventional wisdom.

Take for example many valuation tools analysts use to evaluate a security or stock. Whether they are called the discounted cash flow model or the discounted dividend model, a key component is the discount rate. Some people would merely use the long-term bond yield whereas more sophisticated analyses may employ a weighted average cost of capital that takes into account both the costs of debt and of equity financing. Without turning this into a slumberous technical finance paper, suffice it to say that if the discount rate goes up, the value of whatever you are measuring would be going down, ceteris paribus.

Unfortunately, this may be exactly what is coming to us and may become a new sustained trend rather than a short-term phenomenon exhibited by the scaringly high LIBOR rate lately. For one thing, the unlimited supply of treasuries to finance the bailouts or fiscal stimuli (now being called for globally) would eventually drive down long-term bond price and push up the yield. We are already seeing this with a steepening yield curve. Believe it or not, US 30-year bond yield has long been taken by finance students as the "risk-free rate", on which all the rest of valuation exercise depends. Secondly, with all the increased market volatility, the market risk premium demanded by investors will inevitably go up. That also negatively raises the cost of equity. All this will translate into a higher discount rate on whatever dividends or cash flow you expect to receive from whatever business endeavour.

If this is not yet convincing, take a look at the return on equity (ROE), which is often used by management to justify why they deserve a higher bonus. The ROE is a product of three components: i.e. profit margin, asset turnover and financial leverage. Throughout the past ten years of low-interest rate environment, managers were fond of gearing up the last element for that was the easiest thing to do (the other two requiring more hard work and ingenuity that may be wanting). Now, with the burst of the bubble and all this devilish deleveraging forcing even the most strongly capitalized banks to bow, you can imagine what level of ROE you will get on ordinary companies.

Investors are now busy picking a bottom by comparing the current cycle with previous cycles by superimposing one chart upon another or tabulating the historical P/E ratios through business cycles to evaluate whether stocks are fairly priced now. Yet we shan't forget to look at the more fundamental assumptions on which our previous cycle of boom is based and how we evaluate those stocks in the first place.

If you believe that the collapse of confidence, the power of deleveraging, the unprecedented nationalization of businesses and many other changes now taking place are going to structurally change the way we see things and inaugurate a new era, it may be too early to say where the bottom is. For what we are experiencing may be truly a "paradigm shift". Winston Churchill's words are best to conclude the turmoil in September and October, "now this is not the end...it is, perhaps, the end of the beginning."

08 November, 2008

The lost decade of Hong Kong?

When the Nikkei Index fell through its 2003 low this October, commentators woke up to the fact that the Japanese economy might still be in a secular bear market and Japan has hardly walked out of its "lost decade" since the bubble burst in 1990.

This prompts me to ask whether the same can be said of Hong Kong (I wish not). On the face of it, the Hang Seng Index is still way above its lows of 1998 and 2003. But in June 1997, the Index closed at 15,196. Today, it bearly holds above 14,200. What's more, even at this level the Index arguably reflects the strength of the mainland economy rather than that of Hong Kong, if one takes a comparison of the Index componenets in 1997 with those of 2008. (We shall ignore the property market for the moment; most residential properties have bid farewell to their 1997 level forever.)

In spite of this, the government is telling us that "it is difficult for us to get poor" on the back of a strong booming chinese economy. The official data would have you believe that your money in pocket, as measured by GDP per capita, has grown from HK$166,822 to HK$226,669 during 1997-2007, a 26% jump. But that doesn't seem to measure up to many people's actual feeling. In fact, if you look a bit deeper at the statistics provided by the government, it shows a different picture. The real wage indices for employees in different industries up to supervisory level grew from about 104 to 115 during the same period, or at an annualized rate of 0.9%. (So you may congratulate yourself this is better than the humiliating interest rate you earn on bank deposits.) Another index measuring the overall changes of average salaries of middle-level managerial or professional employees, arguably the cornerstone of Hong Kong's middle class, shows an increase from 103 to 120. All this has not yet taken into account the onslaught of the financial crisis now rampant everywhere.

Statistics is the biggest lie of all as one intellectual says. So we shan't labor too much on this. In fact numbers look less indicative of the actual situations than plain comparison in key policy areas. Ten years ago, the Government urged three quarters of publicly funded schools to switch to Chinese as the medium of instruction at junior secondary levels, in an effort to promote mother-tongue teaching. That policy was formed at a time when the government was talking about encouraging more autonomy at schools. A decade has passed but mother-tongue teaching has gained neither popularity nor respect amongst parents and students. This year, the education department finally admitted that it was necessary to "fine tune" this policy to give greater flexibility to schools.

Ten years ago, the Tung Chee-Hwa administration unveiled a bold plan to develop Hong Kong into a world-class hi-tech centre. The plan was as ambitious as it was unfortunate, for having coincided with the burst of the dot-com bubble. Ten years later, does anyone still care for the Science Park or the ASTRI (Applied Science and Technology Research Institute)? Where they stand (physically), they seem to have faded aptly into history in people's mind. The City (its top leaders included) prides itself on its traditional financial industries.

Ten years ago, Hong Kong had a world-class international airport opened at Chek Lap Kok. Since then, there has been considerable debates as to whether a third runway should be built on the airport to sustain its edge as an aviation hub. Like many other things such as the container terminal ten, that runway is still at the stage of feasibility or consultancy studies. Meanwhile, the site of the old Kai Tak Airport remains abandoned, having been considered for an array of feasibilities ranging from cruise terminal to watersports centre.

Ten years ago, the government commissioned a Harvard team of specialists to look into Hong Kong's need for medical reform. The team came up with a number of options for consultation with the public and legislators. No consensus was reached. The strategy? The government commissioned yet more specialists (usually overseas as they seemed to know more about the problems than the locals; this time from UC Berkeley) to come up with more consultancy reports. Discussion ensued. As late as March 2008, we learnt that the government again embarked on another round of consultation.

Readers may by now discern a common strategy for getting anything done (or undone, or redone, depending on how you see it) in this City. It is best encapsulated in this trilogy, i.e. consultancy, consultation and consultancy (again). In fact, the diligent Hong Kong government may soon become a world leading archive of consultation documents and Hong Kong itself may quickly overtake any other big economy as an importer of consultancy services. And the most widely used vocabulary by government in response to any public enquiry on any subjects, ranging from electronic road pricing to the pace of democratization, is likely to be one of those three words in this trilogy.

Blame the sluggish government machinery, some would say, esp. a group of conservatively-minded elites called administrative officers (or AOs) occupying top government jobs. Since 1997, this bunch of people have been accused of having caused or failed to have prevented anything ranging from the Asian financial turmoil to bird flu and SARS. (But the same bunch of people were also priased before 1997 as being a major pillar underlying Hongkong's success.) And curiously, after a decade of mistrust in civil servants, today the City's top posts - including the Chief Executive and the majority of the politically appointed ministers - were drawn from the AOs. Like in education and health care reform, history seems to have turned a full circle here.

Nonetheless, critics cannot deny that "change" - a word reinvented and now popularized by Mr. Obama - has been taking place. The government has successfully undercut the prestige and authority of AOs by inventing echelons of political appointees atop and alongside these traditional elites. Tens of millions of (your) dollars are spent each year to fill up these posts that require the sanctions of neither examinations nor elections. The people are told that these "trainee" positions are necessary to nurture the future political leaders. OPM, in politics as much as in finance, is what drives the world ahead.

Another discernible "change" is quite telling. In the election for the last colonial legislature in 1995, the average age of candidates competing for the geographical constituencies (Hong Kong's version of direct election by universal suffrage) was about 44. Now, more than ten years later, the average age of the newly formed Legislative Council stands at 55. You might indeed wonder if it's just the same bunch of people having gotten older by 11 years. For even a casual glance of the public faces on television or on the appointed lists of government's consultative bodies would suggest - as a local newspaper nicely dubs it - the same old bunch of people in a merry-go-round. Hopefully, we possibly do grow older and wiser.

As all this numerical or factual comparison looks quite gloomy, I am desperate to find some real breakthrough, which I did in an unlikely candidate. Being a keen hiker, I notice that the country parks at the heart of Kowloon have been increasingly colonized by feral monkeys for the last ten years. Biologists estimate that they have been growing at a pace of 10% per annum which, though shy of the phenomenal growth of the chinese economy, is a very remarkable achievement indeed. The success is partially attributable to the leniency of the agricultural and fisheries authority of the City, which believes that the animal rights of these wild creatures should be fully respected (so was I told, when pointing to the authorities the potential hazards posed by these aggressive animals).

Thus, in considering whether there has been a lost decade for Hong Kong, I find comfort in at least three critical statistics -

1. The budget for nurturing our political trainees has gone up exponentially as the US subprime mortgage-backed securities for the last ten years;

2. The age (and possibly wisdom) of our politicians has increased; and

3. The number of monkeys in Hong Kong have spiked sharply.

Last month when I was visiting the country park again, the monkeys snapped our food and howled at the visitors in anger. At the same time, our legislators were throwing bananas at the Chief Executive in the legislature with perhaps more frustration than anger over the latter's ambivalence over a HK$300 rise for monthly old-age benefits. (The government eventually agreed to, though reluctantly, lifting all restrictions on the benefits.) And thus when I look from monkeys to men, and from men to monkeys, and from monkeys to men again -- alas, it is already impossible to tell, who are the monkeys? Who are the men?

05 November, 2008

What an Obama Victory really means for the American Economy

Much has been dreaded of an Obama victory, as if the spectre of Big Government were now haunting free-enterprise America. Much has been said of the end of American financial supremacy since the demise of Lehman Brothers. Much has been anticipated of the emergence of China and others as soon complementing - if not substituting for - the western world in fueling global economic growth.

Yet, an Obama victory is perhaps more epoch-marking than the collapse of Wall Street when we look back at history in a hundred years' time. What eventually determines a nation's wealth, if not technology and demography, in particular the quantity, quality and unity of its peoples? Which country on earth has the biggest potential, the most favorable institutional and cultural milieu to attract the brightest minds in this globalized world and infuse a sense of cohesion amongst them? What can be more convincing to talents around the world (and promising to their future generations) than an African US president, that this is a country which truly believes in "la carriere ouverte aux talents"?

If we look at these fundamental questions, we know it is far too early to pronounce the death of American supremacy. Even a non-American cannot deny that this is a country with the ability to admit its own mistakes in history and eventually self-heal over its greatest social divide. Such open-mindedness and social inclusiveness are perhaps worth ten aircraft carriers or billions of dollars in projecting American power abroad.

Afterall, this is still quite inconceivable in other more ethnically homogeneous countries of Europe and Japan that are battling with negative population growth. Oil-exporting countries and China, though endowed with rich reserves and with a very proud history and culture, are arguably less inclusive of immigrants. For instance, it is very difficult for a foreigner to be "naturalized" as a Chinese citizen. On the other hand, many people in China still crave for US green cards. Whereas the US has crossed the great racial divide at least in election, the Chinese people have yet to bridge their political divide over the Taiwan Strait.

People often tend to amplify short-term events beyond proportion, losing sight of the more underlying currents shaping history. President Obama will face no small task in fixing the economy, which may not come around in his term. But his symbolic victory certainly speaks a lot when one ponders about the global power balance of 21st century.

04 November, 2008

Global co-ordination may be (much) harder than we think

With the contagion of the credit crisis spreading fast and deflationary talks taking up the front-pages of newspapers, your editorial yesterday was timely in calling upon the G20 to give the "marching orders" to get our world fixed. Yet some realistic pessimism (or pessimistic realism) must be sprayed to contain the expectations of both leaders and the public who are expecting a new Bretton Woods.

The difficulty is not just whether we have the time to frame such a system to restore confidence before the deflationary spiral seizes the world economy, but whether the world is structurally ready for such a system at all.

Taking a more long-term and macro historical perspective, the year 1944 was the apex of America's economic power when it accounted for more than half of the world's GDP. Neither the war-torn Europe nor defeated Japan was in a position to offer any alternative to what we now know as the Bretton Woods system that defines the post-WWII economic order.

Yet, as with any human institutional design, it became incongruent with the underlying fundamentals over time. Nixon's decision to close the gold exchange window in 1971 was the first blow to the credibility of such system. Now the bust of 2008 marked the second.

Still, the present institutional setup best serves the interests of the status quo power and never has any status quo power in history voluntarily given up its supremacy without a fight (economically or militarily). And for a new order to emerge, it is often by the virtue of a powerful undisputed leader rather than co-ordination of equals.

The patchwork we face now is an America that is both ideologically and financially discredited, as a result of not only the burst of the subprime bubble but accumulation of many excesses in the past decade or so. Meanwhile, with all the enthusiasm about China, it is far from ready in assuming global economic (let alone political or ideological) leadership, while at the same time too big to swallow any agenda dictated by Washington or Brussels.

The power shift of the last two decades has thus resulted in a world that resembles less a war-shattered 1944 but more a delirious 1924 - a world characterized by fallen old order, a British Empire on decline (much like America today), a Germany crippled by reparation and an isolated new power yet reluctant to take up global leadership. The result? The League of Nations - a classic example of global co-ordination without clear leadership.

Today, to the traditional western powers we must add all the emerging players who share still less in common in terms of cultural and ideological backgrounds. This would make co-ordination even harder. These emerging players have been schooled for decades in the free-market philosophy. They belong to the periphery of the globalized capitalist market but they are learning fast the success story of the core members in US and Europe. Some of them are now questioning why they have to pay the price, as the hard-working reserve-rich South Korean are now paying, for the lack of financial discipline at the core of the capitalist world order. They were taught that sustainable economic growth was premised on prudent management of one's fiscal and external deficits and yet the past decade of global imbalances seemingly benefited those borrowing and consuming heavily rather than those working hard and putting their savings in supposedly risk-free reserve currency.

We are fortunate that so far there is no competitive devaluation and import quotas as we saw in the heyday of the Great Depression. But one could argue whether the recent indiscriminate guaranty on bank deposits and loans, first introduced in Europe, is not a kind of unco-ordinated competitive financial tool that protects one's capital market at the expense of the less viable but innocent members at the periphery. Thus, at the coming G20, the western leaders must show to the world that their poorer cousins are invited not merely as a matter of courtesy and that those have enginneered this bubble must be more than willing to take up the leadership and even the costs in cleaning up the mess. After all, even after the financial tsunami, the high-income countries are still institutionally and technologically far more advanced than many of the upstarts at the periphery.

31 October, 2008

If Mr. Greenspan has been blinded by his ideology, who hasn't?

(Published as a Letter to Editor in Financial Times on 31 October, in response to the article, "Add 'financial stability' to the Fed's mandate" by Mr. Stephen Roach, CEO of Morgan Stanley Asia)

It is now fashionable to lay the blame on the doorsteps of every central banker, with Mr. Alan Greenspan coming out foremost. Still, it is a slight surprise to see that comes from Mr. Stephen Roach of Morgan Stanley, the reputable Wall Street bank that, together with its peers, benefited from, contributed to and eventually paid for the bubble.

Was Mr. Greenspan to blame for his blind ideological faith in the self-discipline of free-market capitalism? Yes, and indeed he helped to fuel, if not create, the housing and derivative bubble with excessively low interest rate. But was Mr. Greenspan the only one to have embraced this ideology? Certainly not.

To the list, we must add all the Wall Street bankers, analysts, commentators, ordinary stock and real estate investors/speculators (people like you and me), and legislators (of course) who had vehemently defended the deregulatory frenzy of the go-go era, and scornfully rejected many sound regulatory proposals as left-wing heresy.

This ideology assumes not only the automatic goodwill of CEOs, an boundlessly efficient market, but also growth to perpetuity. Take a look at any finance models of standard MBA textbooks that have nurtured a generation of business executives, you could hardly find a business case not appended with ten-year double-digit earning growth forecasts (and then perhaps a "slow" 8% perpetual growth until the Judgement Day). Anyone familiar with the decline-and-fall logic of human civilization would be astonished at first but soon realizes it is no more than an assumption. For if it were ever true, any such company would eventually have outgrown the entire universe. And as with any assumption, when it goes wrong the conclusion can be catastrophically wrong.

Mr. Roach suggests adding "financial stability" to the Fed's mandate. But isn't it already there? The Federal Reserve Act contains provisions on banking supervision and even the Fed itself acknowledges that part of its role is to provide the nation with a "more stable monetary and financial system". Indeed, the goals of "maximum employment" and "stable prices" in Mr. Roach's article cannot be maintained without financial stability.

The real difficulty and omission of the past decade is not congressional mandate but the moral courage to defy market expectation and greed and withstand the jester of Wall Street bankers or analysts, as much as Mr. Volcker did in 1980s when pricking the inflationary bubble. In fact, Mr. Greenspan mentioned "irrational exuberance" as early as December 1996. He only failed in standing by his words. Far from taking the "Greenspan-Bernanke reactive post-bubble clean up approach" as coined by Mr. Roach, he was from time to time hailed as the hero that helped to prolong the bull run with timely interest rate cuts (or "manipulation" in hindsight).

If anything, Mr. Greenspan erred on the "proactive" side of being too favorable to Wall Street expectation. After all, what we have just lived through was an era that even a 40% eps growth would disappoint the market if it fell short of analysts' consensus, and we all know senior executive pay is tied to the share price. What could be cheaper and faster to get a big bonus for myself than leveraging on low-interest loans, jerking up the return on equity and all that?

So let he/she who is without sin, cast the first stone.

26 October, 2008

Money Supply

(A friend posted me a question which I guess maybe of some general interest at this time:
It appears that the US government is financing the bailout and other fiscal stimulus by issuing Treasuries. They certainly have the option to just out right create new US dollars. Why are they borrowing instead of printing money? What are the effects/implications of each approach? Does it has anything to do with MV = PQ?)

Yes, the US Department of Treasury is issuing treasury securities (bills, notes and bonds) to finance the bailout. But I do not know whether the Federal Reserves is buying them. The theoretical difference, according to my rusty undergraduate macroeconomics, is as follows.

If the US government is selling those treasury securities to the public (inc. foreign investors), the total liability of US government increases but not the money stock of US dollars, because they simply change hand from private sectors to the government.

The Feds itself holds a large portfolio of treasury securities. If it is buying these new issues of securities, then the federal reserve balances is increased because the Feds needs to create new balances to the seller of these securities. This is what they call Open Market Operations. In this case, money supply is increased (but I'm not sure if the Feds literally prints new paper money; maybe this is a metaphorical way to put it.) In any event, total money supply as you know is not just the paper money or coins in your hand but an aggregate of many things including your bank balances through a complicated multiplier process. Suffice it to say here that the federal reserve balance is the very basis on which the multiplier effect depends.

In terms of effect, it is possible that the first approach may increase the money held by the government but at the expense of the private sectors. Such contraction limits the availability of funds to private sector and thus I guess is not what the US government is currently doing.

The second approach could be said to be creating liquidity out of nothing. It helps to provide new money for fiscal spending to stimulate the economy.

One would say that "printing" new money reduces the long-term value of money. This causes inflation. But even if you're just adopting the first approach, I think the long-term consequence is the same; a government putting on more and more debt will have its credibility called into question. Eventually, these debts need to be serviced, either by hard work of the next and next and next generations to repay them (in the form of taxations), or treachery (literally printing more money, or outright confiscation, commandeering or expropriation of your properties - like what the Argentinian governmnet is now doing). And owing to human weaknesses and the very nature of government, it's more likely that they would opt for the latter.

23 October, 2008

Subprime witch-hunting

With the subprime fallouts spreading across the globe, more and more once-admired financial celebrities and godfathers come under public spotlight. Today, the Hong Kong legislature is considering to probe into the Citic Pacific forex scandal to see if there is any contravention of law.

Meanwhile, regulators themselves are being scorched in the US with the once venerable Mr. Greenspan and Mr. Cox appearing before Senate. Whereas I have no personal liking for Mr. Greenspan, believing that he's the man who let loose the regulatory string, Senators seem to have forgotten again their complicity. After all, Congress passed the law that encouraged mortgage lending to those who hitherto would not have obtained credit on the ground of assisting the underprivileged. Congress also as lately as after 2000 legislated to pre-empt any future regulatory contraint that might have impeded growth in banking and financial industries.

Nonetheless, Mr. Greenspan, with his usual incomprehensible language, turned a question on his responsibility into a definitional debate on the role of individual ideology. Here is the man who was once so popular that he did not hesitate to comment on the policy of his successor and make a fortune on that (by public speaking engagement) after retirement. Here is the same man now widely perceived to be the culprit.

As Napoleon said after his defeat at Moscow, "there's only one small step from the sublime to the ridiculous."

A moral crisis that looms larger than a financial crisis...

Watching the testimony of the heads of America's top credit-rating agencies on Bloomberg, one cannot help feeling that what this country faces is far more than a financial crisis but a moral crisis.

These fallen angels have lost all their past aura of (perceived) objectivity and authority. When you could give the same BAA credit rating to loans with a 2% chance of default in 5 years and CDOs as high as 24%, you simply cannot explain yourself out of the absurdity with whatever modelling or analyses. As one of their own managers wrote, either they're incompetent or have sold their souls to devil.

But that doesn't mean I have much respect for those finger-pointing Congressmen now coming in as the saviors of the American Enterprise. It was widely reported even at this part of the globe that Americans had been taking out 100% mortgages (i.e. no upfront downpayment) without any equities of their own as early as 2006. Banks were lending to people without solid proof of jobs and incomes and they would not need to pay off on principals at the beginning.

If even we in Asia know about it, what excuses have these Congressmen not to know it? Shouldn't they, as representatives of the people, have stepped in earlier to avert a crisis when it's still at formative stage? Aren't they, as the elites of America, supposed to be more prescient in judgment? And now they're scrambling to emerge before the public (and election) as the guardians of the nation. If anything, they're no more vigilant and competent in guarding the interests of the voters as the rating agencies are of the investors.

America has some of the strongest institutional setup designed in anticipation of human weaknesses. But still it cannot fully countervail the weight of moral decadence of a people. Maybe this is the true plight that Obama should be looking into instead of merely the Republican legacy. For the moment, the rest of the world should simply give a laugh to those so-called ratings or "trailing" target prices that lash as fast as the stock prices. Just take a look at the latest scandal of Citic Pacific and you would know.

22 October, 2008

Hong Kong's positive intervention

(The following was published in the Letters to the Editor section of the the Wall Street Journal Asia on October 22, 2008)

In your Oct. 16 editorial "Free-Market Hong Kong," you criticized Donald Tsang's administration for stepping away from the time-tested success formula of "positive nonintervention."

Whereas the Tsang administration is becoming increasingly unpopular, it is hard to reconcile your critique of his "interventionism" with your acceptance, if reluctant, of the U.S. government's bailout of banks. It is perplexing to see two editorials of two divergent philosophical undertones appearing in the same day on your pages.

The Hong Kong "minibonds" incident actually reflects lax regulatory oversight allowing traditionally prudent high-street banks to sell derivative products of unknown risks to ordinary depositors. This should not have happened, had the banks been properly regulated. Even critics of the Tsang administration cannot deny the banks' remedial action as necessary to clean up their tarnished reputation.

You referred to three infrastructure projects that have been delayed for years as examples of overintervention. Indeed, they are widely perceived by the local population as signs of incompetent governance. But, many previous colonial administrations invested tremendously in infrastructure projects that laid the foundation for the very success of Hong Kong's prosperity. Not all "government pork projects" are harmful to economic development.

Similarly, when the Hong Kong government intervened in the stock market during the Asian financial turmoil, it was also heavily criticized for having abandoned its laissez- faire policy. Now, when politicians and people worldwide are pressing their governments to contain the subprime fallout, what happened ten years ago should perhaps be reviewed with a fresh eye.

Lik-king Shiu

Hong Kong

OFTA: PCCW's surrogate

After years of procrastination, the government finally pledged to introduce a general competition law (of some sort) to Hong Kong in this legislative year. I sincerely hope that this law will have some meat in it. That it will restrain the excessive market power of oligopolistic (and hereditary) business conglomerates that have unduly dominated the economy at the expense of newer and more vibrant enterprises.

It doesn't take an economics PhD to recognise that the local economy is not a level-playing field as the government would have us believe. At least not between big buisnesses and consumers. Yes, you can produce volumes of statistical studies disputing my notion but sometimes intuitive observation of an ordinary consumer is closer to truth (by ordinary I am naturally not referring to those who only shop at IFC or its likes).

Take the example of telecom service. Anyone that has the experience of signing up those long-term contracts will be frustrated by the many hidden bundled services. Consumers simply have no freedom to opt out. In Europe, such practices would be outright unlawful. But curiously in this international city aspiring to be on a par with New York and London, our telecom regulator - the Office of Telecommunication Authority (OFTA) - has no interest to look into it. Obviously, they're more concerned with suppressing the civil liberties of "unlawful" broadcasters than anything else.

Not long ago I got a "free" SIM card sent to me by PCCW. It's free for the first two months, after which I had to pay a minimum tunnel licence fee whether I use or not. PCCW claims that this card came as a bundled service of my broadband contract. In spite of my repeated calls for cancellation, this company kept sending me "reminders" of the money I owed them. What's more infuriating though is that when I complained to OFTA, they simply parroted the story made up by PCCW!

Sometimes I wonder whether these bureaucrats get their paychecks from PCCW instead of taxpayers like you and me!

19 October, 2008

Monkeys roaming around...

While we watch everyday "monkeys" roaming around on TV and radio programmes, Hongkong's beautiful countryside is being colonised by real monkeys. Even the most inattentive passers-by to the Shing Mun Reservoir or the Kowloon Reservoir in New Territories cannot fail to see that these creatures are just everywhere.

I know not where exactly they originally came from but their number has been multiplying by geometric progression for the last ten years - coinciding with the eras of the Tung and Tsang administrations and maybe yet another sign of this city's deteriorating governance in general.

There are signs everywhere in the country parks that feeding wild animals is an offence and liable to fines. The reality? Just like many other warnings put up by the government, they go unnoticed and unenforced.

Indeed, it's more likely that you'd see a monkey than human these days in those places. And it's more likely that you'd see a human than an official from the Agricultural, Fisheries and Conservation Department enforcing the law.

At a time when the government is so scared of bird flu and other infectious diseases, one simply cannot understand why the Department allows such thing to happen. The monkeys could well be a breeding ground of unknown diseases. They're now not only scavenging human wastes, but go straight away to snap your plastic bags at BBQ sites or when seeing you walking in small number unguarded. It's only one small step forward for them to attack humans, as researchers show that increased encounters between humans and wild animals can embolden the latter and invite an attack.

It is time for the government really to do something, lest the problem gets out of control. Maybe one reason why this problem has been tolerated with for so long has something to do with the locations of these country parks - far away from the rich and powerful Happy Valley or idyllic Island South, these parks are frequented not by expatriates living on the Peak but ordinary local folks from public housing estates.

Last, I would advise the Department not to quote any humanitarian reason for inaction when we're exterminating stray dogs on the street.

18 October, 2008

Lehman minibond

The Hong Kong Monetary Authority has finally referred to the Securities and Futures Commission a number of suspicious cases of alleged irregularities in selling Lehman minibonds for further investigation. (Don't ask me why the banking regulator is asking another regulator to look into banking irregularities - all I know is that they've been kicking the buck to and fro for awhile. It's often the case that when you have two agencies overlapping each other, you're paying twice the taxes but only for half of the job done, if at all).

A more meaningful moot point is a view I've heard again and again. That these minibond-holders should have looked carefully into the terms of their "investment". That the government has already done its job by issuing guidance notes to banks "at very high frequency", and that institutions have been asked to disclose the risks.

Allowing banks - which we believe are prudently regulated - to sell these products (which they probably don't understand themselves) to ordinary people on the street is like having dairy farms selling melamine-tainted milk products to you and me by putting a label, "these diary products may or may not contain harmful chemicals. Buyers should carefully consider the inherent risk involved and if necessary, consult a professional chemist and have the product tested at accredited laboratories before consumption". Then the companies walk away unabashed with this "risk disclosure" and the government can say, "stupid, they've warned you".
Yes, if everyone were a PhD in chemistry and had a testing laboratory, that's fine.

By the same token, it's fine if these investors were HBS graduates working at Goldman Sachs (just as an example). But these days what does the risk disclosure contain? First, there's the mumble-jumble prayer that "investment may rise or fall in value...etc. and etc." and then comes a bundle of documentation that I heard even lawyers can't understand.
The very purpose we have a government and paying for the regulators (yes, you pay for their salaries) is to ensure that these products are properly stratified and sold by the appropriate institutions to potential investors that can swallow the risks. There's no need to ban the use of melamine but the government needs to ensure that it's used by the right persons for the right purpose.

If all the private sector should left completely to its own devices (as some right-wing laissez faire politicians would have you believe), what do we need of this government?

17 October, 2008

further on the slip of tongue by deputy minister

I do not mean to be mean. But in times of crisis, a wrong choice of words can spell disaster. And why were they picked in the first place? Were they not supposed to be good in carrying the message of the government to the public? Were they not supposed to be good in public communication? Were these not essential qualities we look for in political appointees?

Well, if they were trainee AOs, it's fine (afterall, we're told that AOs are not supposed to handle political job?!). But they are politically appointed deputy ministers purportedly with sound political acumen and good at public speaking. They are the very people supposed to be doing the job.

If the government thinks they need more training, why doesn't it just spend the same money to train the AOs (recruited through examinations) or the legislators (elected)? It is difficult to understand why we should be so generous to these political trainees, paid as handsomely as US presidents, when the normal HK people have to struggle to secure their rice bowls in economic downturns.

13 October, 2008

bad chinese or freudian slip?

"財經事務及庫務局副局長梁鳳儀出席電台節目時指,本港有逾千億美元的外匯儲備用來穩定港元匯率,有必要時會用盡彈藥穩定金融市場。" (Mingpao online)

I cannot help but tremble over such a statement made in public. It sounds to me like a curse rather than a reassurance. So far I have not yet got an English transcript of this but I hope it wouldn't come up as "depleting" all our ammo to stabilize the financial market. If it were so, it clearly runs against the reassuring (or to be precise, self-reassuring) utterances made by other government officials in recent days.

Having to fight to the last bullet, though heroic in rhetoric, is pathetic in reality. It should never be said by a commander unless the battle is fought to the final showdown. If Ms Leung wished to reassure the public or ward off the speculators, she could simply have said, "the government is determined to mobilize all resources at hand to stabilize the market".

Heaven forbids, but if Hong Kong had to use up all the reserves (saved by decades of hard work of ordinary people like you and me), what sort of situation would it be? And more importantly, what else is the government left with to stabilize the economy after such a coup de grace?

I sincerely hope that this is simply bad chinese (not surprising these days, isn't it?) and not a Freudian slip reflecting the true assessment of government top officials. Otherwise we're all fooled.

(N.B.: this article was first published on facebook)