Online Extra: Q&A with Hong Kong Financial Secretary Leung
Hong Kong Financial Secretary Antony Leung is a rarity, a man with an impressive private-sector background who has recently stepped into the third-most-senior official post in Hong Kong, a slot that in the past was almost invariably filled by a career civil servant. Leung, the Asia-Pacific Chairman for J.P. Morgan Chase & Co. until he took up the new post on May 1, has attacked the job with the pragmatic, can-do spirit of a man who has risen through the ranks of the private sector
Give the 49-year-old Leung and the administration of Chief Executive Tung Chee-hwa credit. They know they have a wide range of problems ranging from unemployment to declining competitiveness. They're tackling them with a variety of initiatives ranging from educational reform to environmental improvements. Leung says education, finance, tourism, and logistics are all areas where Hong Kong, despite its high costs, can carve out a profitable role as China grows. Although there's a danger that the Tung Administration may move too far away from Hong Kong's traditional noninterventionism, and there is a limit to what government can do, critics can't accuse it of standing still
One area, though, where Leung doesn't see any need to move faster is democratization. The city's convoluted electoral system is riddled with rotten boroughs, giving some corporate voters 4,000 times more punch than the votes of ordinary citizens. And the Legislative Council (Legco) itself has few powers
But Leung follows the lead of Chief Executive Tung, who feels democratic reforms are unnecessary, despite critics' contention that more democracy is necessary to build community support for the trying times ahead. Indeed, Leung rejects the notion that a one-person, one-vote system is the litmus test of democracy. Instead he says: "Freedom of information, that is democracy. The rule of law is one of the cornerstones of democracy
Leung spoke on July 6 in his office to BusinessWeek's Hong Kong-based Asia Regional Editor Mark L. Clifford. Edited excerpts of the interview follow:
On Hong Kong's competitive challenges:
How can we continue to be Asia's world city with the challenges of a higher cost base in Hong Kong and not [any longer] being the only gateway or window to China?
Having examined the challenges, there is clearly a huge opportunity. We are still a gateway to one of the fastest-growing regions in the world. The entire world is moving into the knowledge economy. Hong Kong to a certain extent has been moving faster than anywhere in the world. We are [already] 80%-plus in terms of GDP [accounted for by] services.
How can we remain the premier world city in Asia, moving even further up in the value chain and simultaneously making sure everybody in Hong Kong has the opportunity? That is the challenge. We want to ensure that Hong Kong will become a civilized, free, democratic and obviously prosperous city with a new sense of vitality.
We will focus on developing higher value-added sectors. It doesn't mean that the people who don't do these jobs will lose out. Some jobs will be replaced, but we have such high social mobility. That is the beauty of Hong Kong. By developing the higher value-added sectors we believe that these sectors will require business or support services. These will create jobs for our people who may not be as highly skilled or as highly trained.
On Hong Kong's strengths and the priorities for reforms:
The first set of strengths is our institutional strengths. I strongly believe that the rule of law, a level playing field, the free flow of information, and a clean, efficient, and small government are some of our institutional strengths. We will do our utmost to preserves these strengths.... We have to improve some further. A low tax and a simple tax regime is a major advantage. It is also very important to maintain our law and order.
Some improvements have been made. We will do more. The number of hours the air quality [index] was over 100 in 2000 was half that of 1999 . We are seeing more blue skies than two or three years ago but we clearly need to do a lot on the environment side. This is very, very important.
We complain about [students' and workers'] standards of English. We have to do a lot more. In general [Hong Kongers] are well educated, they possess a good work ethic, and have a can-do attitude. That is one of our strengths.
The objective is graduates who enjoy learning, who can communicate well, in English as well as putonghua [Mandarin Chinese] and Cantonese. We have to see that our graduates can think independently and creatively. There will be a lot more initiatives. In the next 10 years we are doubling, from 30% to 60%, the [percentage of the university-]age cohorts to enter tertiary education.
We have opened our doors to talent from all around the world. We are opening our door wider. For professionals in IT and financial services, if their employers have a good job for them, they can come to Hong Kong. We will probably do more moving forward.
In the area of financial services, having not just banks but related services. We have exchanges, lawyers accountants, consultants. With so may talents located so close to each other -- in the logistics area having so many shipping routes, air rights -- this hubbing effect is wealth-creating.
These are strengths we have. How can we leverage the strengths to further leverage ourselves in a global world we have to increase four kinds of flows.
1 The money flow
2 The people flow
3 The cargo flow
4 The information flow
How can we get more information flow to go through Hong Kong? A lot of policies will be focused on increasing our flows.
We are thinking about how to improve our [securities] markets. We are examining how to improve our corporate governance. Our regulatory environment is very good, up to international standards. We intend to keep that.
We are thinking of ways of increasing the [cargo] throughput. We are already quite expensive compared to the neighboring [ports]. You compete on ideas and knowledge and speed. We think you can move things faster through Hong Kong.
We have a free end open environment. We are probably one of the best places to be an information hub.
[Chief executive] C.H. [Tung] , [Chief Secretary] Donald [Tsang], and I are all taking about how we can increase our cooperation with the mainland. On the 25th [of July] the we are convening a Hong Kong-Guangdong liaison committee meeting. We have to recognize change and embrace change. We have to maximize the opportunities presented by the mainland.
Last year we had 30 million [tourists from] Hong Kong to the mainland vs. 3 million mainland visits to Hong Kong. [We want to make that more balanced.] It is not that we are going to eliminate the restrictions [on mainland travel to Hong Kong], [but we would like to] enable the mainland visitors to come more easily. We are talking to the mainland authorities to see how we can increase the number of business visas. Also, on the tourist side we have been talking to them about increasing the quota to allow more travel agents to handle this tourism.
[We also have] to enhance Hong Kong's role as a logistics hub and in supply-chain management and e-commerce. People say our manufacturing has died. It is the contrary. At the peak in the 1970s we employed 1 million people [in Hong Kong]. Now we employ more than 5 million in the mainland. Now we can build on this strength in not just manufacturing and trade but supply chain management and e-commerce and trade.
[We want to] increase cooperation with the mainland. There are more than 40 million people in the [Pearl River] delta with double-digit GDP growth. How can we leverage our hinterland? It is an area we are working very hard on.
The [last] area is how to improve efficiency in the government. We have to make sure the bureaucracy will not become a hindrance.
On relations with the neighboring Chinese province of Guangdong:
The community in Hong Kong sees the need and the importance to work closely with the mainland, particularly the delta, so we have very strong community backing.
The solution is not to close the border. Economics weighs heavier than politics. Even though [more] of our people are going to the mainland, the solution is allow more mainlanders to come here. The mainlanders are the highest spenders among all tourists.... Let's get closer to [the mainland].
On Hong Kong's role as a financial capital:
We are not just talking about a country, we are tailing about a continent. Asia is big enough to have two financial capitals. I would like to see Hong Kong be one and Shanghai another--maybe Tokyo [as well].... Shanghai will become a very important city, but Asia is large enough to for two [financial centers].
Hong Kong doesn't aspire to be the financial capital of China. We want to be the financial center of Asia. We are reviewing our corporate governance. We are improving our financial infrastructure.... Financial centers are never cheaper. Look at London, look at New York. If cost is the only consideration, the financial center of the U.S. would not be in New York.
On Hong Kong's anxieties:
People in Hong Kong are less positive and sometimes quite anxious. For about 15 years Hong Kong did very well. People had an expectation of a certain way of life. People [now] recognize that what goes up may come down. People lost a bit of their confidence.
People have to adjust to a region that is part under siege, but greater China is doing very well. People see that our cousins in the north are moving faster than us. Hong Kong is a fast moving place, but they are moving faster. People see there is competition and may react with fear.
Without the Asian financial crisis people might [have] become too complacent. Without competition from our compatriots in the north we might not be moving as fast. Hong Kong people are moving fast. Looking at the [record of the] last 50 years, they will rise to the occasion. We have a hinterland that is friendly to us.
On democracy, Hong Kong-style:
Hong Kong people have the freedom to express themselves. There is no shortage of comments, both constructive and otherwise. The Hong Kong press is full of criticisms every day. I see that as democracy at work. Our Legco is not a tool of the government. It is playing its role as a check and balance.
I for one know that information flow is so important -- without information flow, how can you trade? I was a trader. Freedom of information, that is democracy. The rule of law is one of the cornerstones of democracy.