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By Robert Keatley, Editor, April 2007

The early months of 2007 gave Hong Kong its closest thing yet to a serious political campaign for the post of Chief Executive when incumbent Donald Tsang easily won a full five-year term by defeating barrister Alan Leong 649 to 123 in a restricted ballot. Only members of the territory’s 800-person Election Committee—about half elected and half appointed—were allowed to vote; most represent business and other organizations that take political guidance from Beijing.

Some pro-democracy activists denounced this so-called “small-circle election” as a sham that didn’t represent the popular will. But many others saw the vote—even though the result was fully expected—as useful practice for the not-so-distant future, when they hope China’s promise of universal suffrage for Hong Kong will be in effect. This election was the first one with a pro-democracy candidate on the ballot.

It was clear from the beginning that most Election Committee members would vote for Mr. Tsang, who had Beijing’s blessing, yet the contest had many trappings of a truly democratic campaign. The rival candidates had contrasting election platforms and campaign promises, and they criticized each other’s priorities. They held two lengthy televised debates about policy choices and made numerous campaign appearances to press the flesh in various Hong Kong neighborhoods, as if their audiences had access to the ballot box. Perhaps for different reasons, both seemed to take the process seriously.

For Mr. Tsang, it may have been chiefly about credibility. He wanted to ensure that the final vote was as lopsided as predicted, while at the same time being able to say he had connected with and could fairly claim to represent the non-voting public. His predecessor, Tung Chee Wah, who eventually resigned, was initially welcomed but came to be seen as an unpopular and ineffective leader foisted on Hong Kong by the Chinese central government.

For Mr. Leong, it was about promoting the concept of democratic politics while waging a doomed campaign. He used the debates and his campaign appearances to criticize government priorities and urge greater transparency in policy-making. Specifically, he demanded more expansive social programs designed to help Hong Kong’s poorer citizens—the income gap is widening—in such areas as education and health care, and called for a minimum wage. He also demanded more aggressive environmental programs in a city where worsening air pollution has become a major public concern. And he urged faster movement toward universal suffrage, which would allow elected officials to set government policies.

Beijing authorities tolerated all this but seemed uncomfortable; as always, they feared the political process could get out of hand. According to many reports, mainland officials used implicit and explicit pressure on Election Committee members to keep them in line; one member warned his colleagues publicly that Beijing would know how they voted and might react accordingly, even though the ballot was officially secret.

In any case, there never was much chance that Beijing would be shocked by the result, thanks to an unlikely alliance of capitalists and Communists that opposes full voting rights anytime soon. Mainland officials don’t want to risk having their influence eroded in Hong Kong or across the border, while most Hong Kong business leaders regularly echo Beijing’s political views to help protect their profitable operations inside China. (They also fear more populist politics could lead to higher taxes.)

Beyond that, Mr. Tsang remains popular with the Hong Kong public, and his experience seemed to count. While polls showed most people liked the idea of a political campaign, relatively few seemed ready to put Mr. Leong in the top government job even if they could. Surveys indicated a free vote would have given Mr. Tsang 65% or more of the ballots.

What comes next? Two of Mr. Tsang’s early promises concerned democratic politics and cleaner air. He said he would publish a roadmap and timetable for political reform before the next election in 2012, and would heed public calls for tougher environmental action. Some analysts believe the next Chief Executive race could be an open one, though China might insist on vetting the candidates in some way. It seems less likely that all 60 Legislative Council (Legco) members would be popularly elected by that date; at present, half are chosen by interest groups. Mr. Tsang also said he would try harder to consider diverse public views on leading issues; his governing style has been criticized as being high-handed and arbitrary.

However, it was not certain just where Mr. Tsang’s political roadmap would lead, or if democracy activisits would follow. “We all want to achieve universal suffrage as soon as we possibly can,” Mr. Tsang said shortly before the election. But immediately afterward he made clear that he would not irritate Beijing by seeking rapid and radical change. He said his approach would be “pragmatic and proactive”. Beijing repeatedly has promised it will permit free local elections in Hong Kong eventually, but so far has refused to set a target date.

Meantime, those who favor faster political reform were trying to draft specific proposals. Former government Chief Secretary Anson Chan—head of a private group that lobbies for more representative politics—unveiled a plan that would have the chief executive elected by popular vote in 2012 and all Legco seats by 2016; business leaders called it too radical. Democratic parties that had united to get Mr. Leong on the last ballot were, meanwhile, trying to forge a common policy about terms for the next one. But mainland spokesmen cautioned that Hong Kong should worry more about making money and less about voting.

Faster action on pollution seemed more likely. One new study found that the city had only 41 (relatively) pollution-free days during 2006, with Hong Kong’s own sources accounting for most of the smog 53% of the time and mainland sources responsible 36% of the time. Previous studies had blamed Chinese sources for 80% of Hong Kong’s air pollution problem, suggesting that solutions lay somewhat beyond local control. Whatever the causes, there is no doubt that air quality has declined sharply in recent times, with adverse health and economic effects. A Chinese University study found an increase of lung disease due to severe air pollution; there were increasing reports of foreign companies moving offices or personnel to other cities to escape Hong Kong smog; the new chairman of the American Chamber of Commerce said environmental issues are his top priority.

Mr. Tsang’s administration has made some green moves. A new emissions-trading plan for powerplants in Hong Kong and neighboring Guangdong Province is expected to cut three listed pollutants—but not carbon dioxide, or greenhouse gas—in coming years. From April 1, owners of diesel vehicles that burn low-grade fuel must begin phasing them out of service. Households soon must pay higher sewage fees to finance a clean-up of Victoria Harbor. But calls for more stringent rules continued, even if some would raise operating costs for local businesses.
The economy, meantime, continued to do well. The government said it grew 6.8% in 2006, and most forecasts said prosperity would continue. Unemployment fell to an eight-year low of 4.3% and exports increased 11.6% in the year through February. Business and tourist travel remained at high levels, as did retailing. Despite some soft spots—and spiraling property prices—there didn’t seem to be any economic threats in view, thanks largely to China’s continued fast growth.

But demographics did offer some long term concerns. Hong Kong’s population grew only slightly to 6.9 million (300,000 below earlier forecasts), and that due mainly to immigration as the birth rate fell. The annual population growth rate dropped to 0.4% and the average age continued to rise—to 39 years in 2006 compared to 36 in 2001 and 34 in 1996. Another 13 primary schools were ordered to stop taking in new students and close eventually due to a declining number of children; last year nine were told told the same. The Department of Health said Hong Kong men and women now have the world’s longest life expectancies, but experts said this will bring the government much higher medical and welfare costs in future years—aggravated by pollution.

For now at least, Hong Kong could afford it; official reserves were US$134 billion. The fiscal year 2007-2008 budget, announced in February by Financial Secretary Henry Tang, included US$2.56 billion of tax cuts and other relief measures—such as a 50% cut of wine duties—yet still forecast a US$923 million surplus in the operating account and US$3.25 billion surplus in the consolidated account. This gives Hong Kong an expected surplus equal to 2% of GDP, even though total spending was predicted to be US$31.84 billion.

Late last year, these surpluses—plus the proposal’s obvious unpopularity—caused the government to drop plans for a general sales tax. Even so, Mr. Tang warned again that Hong Kong eventually must broaden its tax base to meet expected social spending, especially for health care. He said public consultation on possible new measures would begin later in 2006.

Yet if Taoist ritual is reliable, Hong Kong’s immediate outlook is positive. In an annual lunar new year ceremony at Che Kung Temple in Sha Tin, a Liberal Party legislator, substituting for a government official deemed to have bad luck, drew fortune stick number 36. This was interpreted to mean the Year of the Pig would bring more good fortune and prosperity.

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