Economists cry foul over Hong Kong's boasts of freest economy

31 Jan, 2005

Hong Kong prides itself on being the freest of the free economies, but analysts and increasingly vocal critics are beginning to question the claim. Fuelled by growing suspicion that the government is colluding with big business, the city's much-vaunted laissez faire economy has been attacked as a collection of cartels controlled by a very wealthy business elite.
This month another survey, by the right-wing US-based Heritage Foundation, named the Chinese territory the world's freest economy.
"I am pleased that the virtues we have been upholding to keep Hong Kong flourishing as a free market economy have once again been reaffirmed," trumpeted Financial Secretary Henry Tang of the January 4 report.
He pointed to the free flows of capital, low taxes, minimal government intervention and Hong Kong's free port status with no tariffs as reasons to invest here.
Critics pounced.
"There is a misconception that Hong Kong has the freest economy in the world - it is called free because there are no laws to control the behaviour of businesses," said Lin Ping, head of economics at Hong Kong's Lingnan University.
"Some companies are very powerful; there is no level playing field. New companies cannot come in and compete fairly, I do not see that as a free economy."
Tsang Shu-ki, economics professor at Hong Kong Baptist University agrees. "Hong Kong is an open economy, a free trade city, and it has no capital control," Tsang said. "But that doesn't mean this economy does not have what we are worried about, and that is anti-competitive behaviour."
Of most concern is the absence of a competition policy, something the government has long resisted, saying it would confuse businesspeople.
European Union Trade Commissioner Pascal Lamy and the International Monetary Fund have long called for a competition law here.
The World Trade Organisation also warned in a 2002 report "the entrenchment of a few dominant conglomerates in the domestic market could constitute an obstacle to greater competition from domestic and foreign firms".
Hong Kong is dominated by a few giant corporations that control everything from air travel to telecommunications, banking to broadcasting. Among the biggest are conglomerates led by the property development units Cheung Kong, controlled by Asia's richest man Li Ka-shing, and Sun Hung Kai, the city's largest developer.
Between them they control Hong Kong's port, supermarkets, pharmacies, one of its two electricity suppliers, much of its real estate and huge chunks of its telecom sector.

Read Comments