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A Competition Regulator Is The Only Hope For Hong Kong

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A Competition Regulator Is The Only Hope For Hong Kong

One balmy summer’s day in June 1973, a taxi drew up at the west gate of Kai Tak airport and out climbed a senior police officer in the full brass of rank, his uniform adorned with bravery ribbons.

The gate constable recoiled at his airside pass and waved him through to a quiet retirement in London. It was not to be. Chief Superintendent Peter Godber was soon extradited following a tidal wave of public disgust at corruption in society. In the 10 years before, the triads and the police together were estimated to have taken HK$10 billion in “tea money” – more than three times the profits of HSBC at the time.

It took the strong leadership of governor Sir Murray Maclehose to establish the Independent Commission Against Corruption (ICAC), with its draconian powers to root out and punish corrupt persons. The incorruptible and capable Sir Jack Cater, who had been in Hong Kong since 1945, was the first commissioner. For him, Hong Kong was “we” and Britain “you”. I met him once. “Young man,” he said, for I was, “bet on Hong Kong; it will never let you down”.

Eyebrows might leap at such a comment today; for again we are in crisis. A crisis of social justice. In Cater’s day, Hong Kong people had real hope in the future. After three failed chief executives, they now have little hope in opportunity. The ICAC and indeed the Securities and Futures Commission (SFC) were all established as solutions to a crisis.

Carrie Lam Cheng Yuet-ngor has had more good advice in the past few days to last her whole term. So I’m going to be positive: she could become Hong Kong’s greatest chief executive ever – if she chooses to exercise her great powers well, like Sir Murray did. Her honeymoon will be short. There is not much time.

Again there is a simple administrative solution – establish a competition commission. This would promote competition for the benefit of Hong Kong consumers, remove the abuse of dominant anti-competitive positions and eliminate cartel price fixing. This is the magic dust, the silver bullet, the Holy Grail that can bring hope, opportunity and a future to our city.

Hong Kong’s record-breaking problems are rehearsed daily. We are the most expensive city for property and the second-most for cost of living (though the leader, Singapore, seems cheap to me). It is not much fun being a JAM (just about managing), barely able to make ends meet no matter how educated or industrious. The solution has to come from Hong Kong. No amount of Beijing pressure is going to make that better.

An antitrust commission would relax the strangulation that the cartels have on critical economic sectors. Property cartels keep prices high so that old people live in cages and young families in illegal subdivided flats with no windows. Retail cartels push up food prices in supermarkets and crush competition. Utility bills are high, distribution costs exorbitant, and even leaving the airport is more expensive than other gateways.

Hong Kong was once lauded as the world’s freest market – but no more. Instead of the dead hand of government, we have the constriction of cartels, squeezing every cent of hope from our citizens. A competition commission with teeth would have strict statutory powers over the directors of companies to abide by antitrust legislation, with similar penalties to those dished out by the ICAC or the SFC, and working hand-in-hand with them. It will have to be feared for doing the right thing.

An antitrust law would drive economic growth, create jobs, ease property prices, increase the standard of living, and lower costs. The economy and mood of the city would lift dramatically. Prices would ease in a stable manner to where they should be, housing would become more affordable, food would be cheaper, and travelling simpler.

The competition commission would be politically connected and well financed – but not ignorant of the needs of business. No one need lose out. Antitrust law was first enacted in the US in 1890. The 1984 breakup of the American phone company ATT by listing on the stock market (with unconnected owners) drove the digital age by spawning bright young technology engineers to develop Silicon Valley.

Competition drives out uncompetitive, lazy, fat-cat rent seekers who are fundamentally unproductive. They might even be pleased to get out before the next stock market crash with money to invest into new projects, driving new industries.

A competition commission will enable us again to “bet on Hong Kong”. The only downside is in dealing with the question “Why is there only one competition commission?”

Source: SCMP

By Pathay Singh on 03/30/17