Moving Hong Kong Forward

While there is a sense that the financial crisis is loosening its grip, economists predict the next crisis is around the corner, glaring red in government budgets. In recessions, dirigiste practices are fashionable. In this environment, governments either resist progress with policies that increase debt and entitlements, inflate regulatory bubbles, and support protectionism – or – they follow best practice to apply smart regulations, undo crony capitalism, remove barriers to create opportunities and ensure proper safety nets are in place. Not surprisingly, most governments’ policy follows the former, breeding uncertainty.

Hong Kong is now considering major changes following international trends, while larger issues like land reform linger. Hong Kong is still largely competitive, a great place to live and do business, but what direction is it headed in with the introduction of labour and competition policies, expansion of the tax law, new transportation projects, etc. What policies will move Hong Kong forward?

In this issue of Best Practice: Moving Hong Kong Forward, authors analyse if the policy changes will do just that. Our cover story is dedicated to the recent debate surrounding Minimum Wage. After dissecting the bill and its potential impacts on Hong Kong, the authors of “Minimum Wage – Good Intentions, Bad Results” contend that after implementation, Hong Kong’s least competitive workers would be worse off. Hans Mahncke appeals to readers that an across-the-board competition law would not serve Hong Kong’s competition issues in “Competition Law – Why Hong Kong is Different.” After his examination, he maintains that only a reform of the land system and natural monopolies can fix Hong Kong’s competition problems.

Bill Stacey adds a twist to this discussion with his detailed assessment of the Hong Kong Mortgage Corporation in “HKMC – Past its Use-By Date.” After breaking down its policy rationale, financial performance and outside-its-mandate activities, he illustrates that the government and the HKMC itself realizes that its need has expired. Stacey reminds us that government involvement in mortgage markets has proved disastrous, leaving the HKMC, for all that it was and is today, far from desirable.

In “Reflections on Global Legal Centers,” Larry Ribstein, who took part in a panel in Hong Kong this past summer on jurisdictional competition, weighs in on the current tussle between onshore and offshore governments. Ribstein’s analysis aids readers in understanding why Hong Kong recently introduced a bill to fund and add another sector to the Inland Revenue Department in order to avoid being on the OECD naughty list and comply with sharing tax information.

Andy Morriss, in Best Practice’s Global Perspective Policy Analysis, “Changing the Rules of the Game,” unveils the measures onshore governments are taking to limit offshore financial centres’ ability to compete in the global financial market, and how they are doing so at their own peril.

Arnold Kling’s “Should Mortgages be Securitized” warns that in order to revive mortgage securitization, taxpayers must absorb large risks.

Around the World takes a look at Hong Kong’s economic freedom and free trade agreements while Leader’s Bookshelf reviews the influential book The Rotten State of Britain, and the highly controversial Prisoner of the State: The Secret Journal of Premier Zhao Ziyang.

Moving Hong Kong forward doesn’t have to be like pulling teeth – but it takes the kind of determination and follow through that Zhao Ziyang had to record his memoirs, and the editors to release it to the public. Let us move Hong Kong forward, with best practice, in the right direction.