Monday, March 26, 2007

HK's Future

HK did not depreciate the HKD during the difficult 1997-2001 period, it should have but Tung and his top dogs lacked the political willpower to carry out such a decision. Probably they did not get the Ok from Beijing then. The financial climate has improved markedly over the last 3 years, especially since Tsang too over the Chief Executive role. Its not really Tsang's ability, much of the goodness and turnaround were due to cyclical factors.

But you have to give it to him, some people are just lucky, some not so much. Tung had probably the worst kind of luck, started in 1997, Asian financial implosion, unemployment, blame seeking population, SARS, etc... Tung had bad luck but he has also shown a consistent inability to lead, inability to step forward, inability to be proactive; dwells and surrounds himself with rhetoric ... so much so that in the end, even Beijing admonished him severely in the open.

In that sense Tsang was luckier, even though nobody bothered with the fact that Tsang was also Financial Secretary under Chris Patten, and more importantly the #2 under Tung. If Tung was bad, surely some of it must be due to Tsang??!! Luck baby, luck!

To keep its stature as Asia's financial center, Tsang better stop meddling with the taxation and economic side of things. The GST proposal should be shot down. There should be less bureaucracy and more small government. HK is HK because of the infrastructure, the low tax regime, its location, the people's energy and language skills, low bureaucracy, legal redress system, low crime rate, logistics hub, the China factor, etc... HK must ensure these are kept and not eroded. Why is there a need to raise personal/corporate taxes or GST? There is enough surplus already. To try and broaden the tax base because you fear you can no longer rely on land sales for revenue in the future is myopic. As long as HK is kept as HK, the tax revenues and economic activity will guararntee sufficient growth to the coffers. It is only when you start to tinker with the "free-markets" system that you push yourself closer to Singapore, Sydney and Tokyo.

While moving HK towards universal suffrage has been a priority for Tsang and most HK people. I think HK people should realise that they are and will always be part of China, and Beijing understands that at the end of the day HK people just want to be left alone to make money. All the talk about democracy is HK people's fear that HK will be changed or raped by Beijing in the future. Seriously, that will not happen.Beijing understands the importance of having HK be what it is. Shangahai or Beijing will grow but will never be HK. HK is like purgatory, a bit of heaven and a bit of hell with proper rules.

Tsang did put through reform proposals for democracy but was shot down by democrats themselves as being not going far enough. Please man, here you have Tsang trying to do reforms bit by bit but you want him to take the big club to Beijing - doesn't it look silly. Its like having diabetes and Doctor Tsang says to cut off one leg to keep you alive, and the bloody stupid lawmakers said to the Doctor to cut off both legs or let him die unless he can find a proper cure for diabetes!

To keep HK doing what it does best, it now has to address issues on competitiveness and clean air as well. There is still too many proposals and not enough implementations to clear the air pollution. Tsang in many ways is a lot better and closer to HK people, not like the golden-spoonfed tycoon's son Tung, plus the fact that Tung's Shanghainese did not sit well with HKers after a while. Tsang is more one of them and it was his intervention in the HK markets' financial crisis in the 90s which brought him a lot of admirers.

HK has to understand completely that it was its links to China that brought HK's economy back onto the map over the last 3 years. The amount of financial activity due to China shares, IPOs, investment banking, share trading, outsourcing, tourism etc... cannot be underestimated, its like HK is now the "services" center for the entire China as the latter moves up the development curve. That is huge. That's the future and Beijing knows it, so cool man, let Tsang do his thang!

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