>From Int'l Herald Tribune Paris, Saturday, March 20, 1999 In Hong Kong, a Growing Sense That Tycoons Skew Competition ------------------------------------------------------------------------ By Philip Segal International Herald Tribune ------------------------------------------------------------------------ HONG KONG - On any morning, a typical resident here may wake up in an apartment developed by one of a handful of billionaire Hong Kong property owners, take a bus to work owned by one of the same tycoons, and make a mobile phone call along the way over a tycoon-owned network. On the way home, he may stop off at one of the two dominant grocery stores or pharmacies owned by tycoons, go to the post office to pick up a package that was cleared through the port by a tycoon-owned freight handler, or perhaps pay an electricity bill from a utility controlled by a tycoon. Most casual students of Hong Kong know that a handful of fabulously rich people here control the bulk of real estate development, which is the lifeblood of the economy. Less well known is how concentrated other parts of the economy are, often in those same few, wealthy hands. While Hong Kong was voted for four years running as the world's freest economy by the conservative Heritage Foundation of the United States, partly because it has one of the world's lowest tax rates and few trade barriers, the reality of its domestic economy is another story. It features a rash of anti-competitive restrictions and one of the weakest competition regimes in the developed world. Calls by Hong Kong's independent Consumer Council for a competition authority to monitor the government's handing out of licenses and contracts have been rebuffed by government officials, who contend that they are well able to police industry themselves. Yet, the dispute continues. ''In the course of discussions with trade bodies and businesses, particularly small and medium enterprises, the Consumer Council has been made aware of the lack of a level playing field and a vulnerability to monopoly practices in some sectors of the economy, such as anti-competitive cross-subsidization, exclusive dealing, price discrimination, resale price maintenance and price-fixing,'' the council said in a recent submission to the legislature. ''Due to the fact that some very large and powerful businesses have involvement across different sectors, it may be difficult for the various government agencies to monitor market conduct,'' it added. In earlier studies of key sectors of the Hong Kong economy, the council has found a low level of competition in several sectors, including bank deposits, supermarket sales and the supply of gas. Today, only interest rates on deposits of less than a week are still set by a banking cartel, but until a few years ago, all interest rates were set this way. ''While free and open competition has long been the case in the traded sectors of the Hong Kong economy, this has not been the case in some nontraded sectors,'' said the Vision 2047 Foundation, a nonprofit organization, in a 1996 report, ''The Hong Kong Advantage.'' This is hardly anything new. Since the handover to China in 1997, the traditional colonial practice of Britain - the striking of lucrative deals with large business interests in secret - has continued. The latest example to elicit sharp protests came in the budget presented March 3, Then, contrary to normal procedure by which land is auctioned or tendered to the highest bidder, the government awarded a massive amount of prime land to the son of the tycoon Li Ka-shing, Richard Li, to develop a $1.7 billion ''cyberport,'' part of Hong Kong's recent push into high technology. About half of the money will come from Mr. Li's company, which will be allowed to develop one third of the site for expensive, residential property. Critics say the cyberport is simply another mixed use real estate development, dressed up to camouflage a secretive deal that benefits Hong Kong's leading commercial family. ''Has the government suddenly changed the rules of the game'' from open tender? asked Emily Lau, an opposition legislator. ''Are there going to be more and more such secret deals in future?'' ''Auctions and tenders have always served us well in bringing us the best possible prices'' for land, wrote Jake van der Kamp this week in his column in the South China Morning Post. ''Others should have had an opportunity to submit their proposals for a project this big.'' Speaking Wednesday at a seminar on the cyberport, Hong Kong's financial secretary, Donald Tsang, insisted that the cyberport had been created in ''a highly competitive environment,'' adding: ''Cronyism is never in Hong Kong's dictionary.'' Hong Kong, he added, prided itself ''on being transparent and we always maintain a level playing field.'' Companies such as Microsoft Corp. and Yahoo! Inc. have signed on to lease space in the cyberport, though it is unclear what if anything they will do once there that they could not already do in other premises in Hong Kong. The government defended its conduct, saying an open tender would have delayed the start of the cyberport by six months or more. ''Six months is a century in the development of information technology,'' said the information secretary, K.C. Kwong. ''We are competing with the whole world.'' Other areas in which the Consumer Council alleges sluggish competition include the oil industry in Hong Kong. The council has begun an investigation into retail pricing of liquid petroleum gas, after the handful of service station companies were allegedly slow to lower the retail price of their product even though import prices were plunging. This ''points to a lack of competition in the retail supply,'' the council said. Another area of controversy is telecommunications, where legislators and companies that are not owned by tycoons are alleging that the government is backtracking on plans to liberalize the fixed-line telephone sector. After Hongkong Telecom's phone monopoly was broken in 1995, the government licensed three companies to provide fixed-line service. All three companies were controlled by three of the largest property empires in the city. Now, the three-year moratorium on new competitors has passed, but the government is being accused by other phone companies of buckling under to statements by Li Ka-shing, who said that he would make fewer investments in his phone network if he had to face more competition. ~~~~~~~~~~~~ A<>E<>R The only real voyage of discovery consists not in seeking new landscapes but in having new eyes. -Marcel Proust + + + + + + + + + + + + + + + + + + + + + + + + + + + + Every great advance in natural knowledge has involved the absolute rejection of authority. -Thomas Huxley + + + + + + + + + + + + + + + + + + + + + + + + + + + + Forwarded as information only; no endorsement to be presumed + + + + + + + + + + + + + + + + + + + + + + + + + + + + In accordance with Title 17 U.S.C. section 107, this material is distributed without charge or profit to those who have expressed a prior interest in receiving this type of information for non-profit research and educational purposes only.
