Business Opinion

The world’s freest economy? Just take a look at Hong Kong’s supermarkets, utility firms or taxis!

For the second year running, a prestigious Swiss business school has ranked Hong Kong the world’s most competitive economy, and for the second time in as many years that accolade should be greeted by a cry of incredulity among people who actually live here.

Perhaps those who write the annual competitiveness report for the International Institute for Management Development (IMD), located in Lausanne, saw a positive side to the Wellcome-ParknShop duopoly that controls Hong Kong’s supermarket business while managing to keep prices absurdly high for a shopping experience that is correspondingly low. Cluttered aisles and spoiling fruit and vegetables — at times it can seem that the two chains are in a contest to determine who delivers the least laudable service. Is that the sort of competition the IMD report is celebrating?

hong kong skyline running leaving race

File photo: GovHK.

Or perhaps the esteemed IMD analysts were thinking of those in this city of 7.3 million people who are fortunate enough to own one or more of the 18,000 taxi licenses granted by our government. With each of these licenses now selling for around HK$7 million, their owners are bound and determined through their control of the transportation seat in the Legislative Council (Legco) to block Uber or any other potential rival offering a better product from putting down roots in Hong Kong. It’s been more than 20 years since the false ceiling of 18,000 was established for taxi licenses, creating a grossly distorted market that has given each license the value of gold but also, predictably, led to inferior service now threatened by competition from Uber and the like.

Then there are the city’s two power companies. If you live on Hong Kong island, Ap Lei Chau or Lamma, your sole choice is Hongkong Electric. If you are a resident of Kowloon, the New Territories or other outlying islands besides Lamma, China Light and Power (CLP) is by default your supplier. Once again, zero competition and a sweetheart deal with the government keeps profits high for these two electricity giants while inflating prices for consumers.

CLP Power

CLP Power Hong Kong Limited. Photo: Wikicommons.

Fire up your gas-powered cooker or water heater and the same rules apply: one supplier, in this case Towngas, and no alternatives if you don’t like the pricing and/or the service.

Furthermore, maddeningly, these power and gas companies and supermarket chains are all owned by the same few families who also seem to control just about every other profitable nook and cranny of the city. Hongkong Electric belongs to Li Ka-shing, chairman of  CK Hutchison Holdings and Hong Kong’s richest man, while the Kadoorie family, whose roots and holdings in the city date back to the late 19th century, owns CLP. Towngas belongs to Lee Shau-kee’s Henderson Land Development Company, one of the city’s biggest property developers.

Two other big property developers are responsible for Hong Kong’s duopoly on buses, with the Kwok family’s Sun Hung Kai Properties owning the KMB service covering Kowloon and the New Territories and Henry Cheng’s New World Development controlling New World First Bus and Citybus running on Hong Kong island.

The list goes on. Meanwhile, Hong Kong’s fledgling Competition Commission, another toothless tiger, looks on with benign neglect.

If you crunch numbers in faraway places like Switzerland—ranked second in the IMD survey, by the way, with nanny state Singapore grabbing third—Hong Kong may look like a paragon of competition to you. The view here on the ground, however, makes it startlingly clear that a city applauded in distant lands for its competitiveness and freedom from governmental interference is actually in economic thrall to a handful of oligarchical families whose great wealth and power allow them to block any proposed reforms that would make Hong Kong a more level playing field for businesses of all stripes and a more liveable place for us all.

hong kong not welcome

Photo: GovHK/HKFP remix.

For example, we all know that the fat-cat developers collude with the government to hoard land and drive up property prices, but does anyone have a plan to stop it? No, instead we get proposals to build public housing on the outskirts of country parks.

This sort of deliberately purblind policy-making is overlooked in the IMD ranking as well as in the much-ballyhooed but equally flawed Index of Economic Freedom—which, put out by the conservative Heritage Foundation, perennially finds Hong Kong “the world’s freest economy.”

The problem with these analyses is their compartmentalisation of selective data. In the case of the IMD study, Hong Kong received top rankings in business and government efficiency, but no consideration was given to sky-high rents for commercial space that cut into profits and drive businesses into the ground and out of the city.

And there is also no mention of Hong Kong’s problematic political climate, which in turn produces a jittery business environment. Still suffering from the aftershocks of the Occupy movement of  2014, which paralysed three key commercial sectors of the city for nearly three months, Hong Kong now faces rising calls for independence from China by so-called localists who pointedly repudiate the nonviolent model of civil disobedience embodied by Occupy and other peaceful forms of anti-Beijing protests such as Sunday night’s annual candlelight vigil commemorating the hundreds, if not thousands, who lost their lives during the Chinese government’s military assault on pro-democracy demonstrators in Tiananmen Square on June 4, 1989.

occupy umbrella yellow ribbon

Photo: HKFP.

Alarmed by the rise of localism, Chinese leaders have responded with regular verbal salvos from across the border warning of their plans to tighten Beijing’s grip on the city—almost certainly a recipe for further unrest.

Thus, in addition to the monopolisation of business interests that has long been a part of Hong Kong, we now see the Chinese leadership attempting a political monopolisation of the city. But you won’t hear anything about that from the IMD or the Heritage Foundation.

According to a recent Chinese University survey, 40 per cent of the people residing in the city dubbed the freest and most competitive on the planet by the Heritage Foundation and the IMD would rather live somewhere else, with the younger generation particularly keen to get out of town and find greener pastures elsewhere.

It seems all this economic freedom is just too much to bear.

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The world's freest economy? Just take a look at Hong Kong's supermarkets, utility firms or taxis!