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POLITICS CREEP BACK AS THE ECONOMY BOOMS

By Robert Keatley, Editor, July 2006

Political activity in Hong Kong picked up again after a winter lull, and the scene was set for some significant moves in the coming months. However, Chief Executive Donald Tsang Yam-kuen kept his high approval ratings in public opinion polls and no crisis issue was in sight.

This relative tranquility reflected, among other things, a boisterous economy that enjoyed an 8.2% growth rate for the year ending March 31, with forecasters predicting that prosperity would persist throughout 2006. Unemployment fell to a 57-month low of 4.9% and other indicators also suggested that the good times will continue to roll.

As the quarter ended, Mr. Tsang won a notable victory when the Legislative Council (Legco) voted 40-10 to finance a new government headquarters complex at the Tamar site on the Central District waterfront. This HK$5.2 billion (US$670 million) project had been the subject of a long-running political dispute, with critics claiming it reflected a high-handed way of managing public affairs and willingness to waste public money on a showpiece project to gratify the egos of senior officials. But Mr. Tsang insisted that Hong Kong must replace its cramped, 45-year-old main offices with efficient new quarters for the executive, judicial and legislative branches. In the end, he won support from most political parties, including from several democratic groups that normally are in opposition.

This suggests the Chief Executive will continue to get his way on most issues despite frequent complaints about his governing style and an alleged lack of transparency. Most public opinion polls give him a positive rating of 60% or higher, and a booming economy has—at least for the present—removed much of the discontent that gave his predecessor, Tung Chee Hwa, so much grief. With his trademark bow ties and a generally cheerful demeanor, Mr. Tsang has proved to be an adept politician and promises to spend much time working the neighborhoods in the months ahead.

This arises as Hong Kong begins to get ready for an election campaign of sorts next year. Mr. Tsang will then complete the five-year term of Mr. Tung, who resigned ostensibly for health reasons, and stand for his own full term as chief executive. Voting is limited to 800 generally pro-Beijing notables and the outcome is not in doubt. Even so, the process could be more complex than in 2002, when Mr. Tung won by acclamation as he faced no opposition.

This time around, some Hong Kong politicians hope to unite behind a rival candidate—provided they can convince at least 100 of the 800 eligible voters to sign nominating papers, allowing them to put another name on the ballot. The goal would not be victory, which they deem all but impossible, but to have a serious campaign debate about leading issues. Included would be the pace of democratic reform, public health programs and the environment, among other things.

Just who might garner the necessary 100 signatures is unclear. One possibility is Anson Chan Fang On-sang, formerly the government’s number two official who is favored by some pro-democracy advocates though not by many leading business tycoons. Ms. Chan, with unusual fanfare, declared her intention to join this year’s annual July 1 pro-democracy march and has remained enigmatic about her longer-term political ambitions, if any. Another possibility is Legco member Audrey Eu, leader of the new Civic Party that is trying to modernize Hong Kong’s electoral politics. Her selection would mark a generational change.

In any event, the 2007 election might be a useful test run for a more interesting contest the next time around. A consensus is building in Hong Kong that the 2012 choice of a chief executive will involve universal suffrage for the first time—even though the parallel vote for Legco likely will remain a mix of direct and indirect balloting as at present. Leaders as disparate as Mr. Tsang [see his interview in this edition of the Hong Kong Journal] and veteran pro-democracy politician Martin Lee agree this is a possibility.

The key issue is the screening process. A real contest between two or three candidates, all deemed acceptable in Beijing, is one thing; a race involving someone like the staunchly democratic Ms. Eu would be another. It’s unknown what restrictions Chinese leaders might want on the selection process to keep out candidates they distrust.

Meantime, Mr. Tsang’s immediate problems are more prosaic. Even though the Tamar project is now set to go forward, there almost certainly will be future disputes about its cost and design. And construction of the delayed West Kowloon cultural center remains unresolved. This huge project, involving Hong Kong branches of three leading foreign museums, several performance venues, parks and a mix of apartments and offices on some 100 acres (40 hectares), ran aground when leading developers rejected government financial terms. When combined with public criticism of the overall plan, this forced an official rethink; a new planning committee is supposed to table revisions by October.

In addition, Mr. Tsang will face growing demands for action on the environment. Hong Kong people are increasingly unhappy about air and water pollution, most from neighboring Guangdong Province where officials don’t enforce environmental laws systematically. Although Mr. Tsang claims the local air has grown cleaner over the past two years, others say any gains are deceptive—reflecting, for example, increased rainfall—and that the long term trends are negative. Hong Kong too often has smoggy days when it is difficult to see across the harbor.

A study by three Hong Kong universities and a local think-tank estimated the direct costs of pollution at 1,600 premature deaths and HK$2 billion per year. It put air-quality standards below those of Paris, New York, London and Los Angeles, and said they fall 20% short of World Health Organization recommendations. Anecdotal evidence indicates that pollution has deterred some foreign firms from expanding in Hong Kong, or caused others to relocate. The American Chamber of Commerce, among others, has asked the government to back more vigorous environmental protection. All this makes it likely that Mr. Tsang will face more insistent demands for action.

The economy is another matter. Rapid growth continues across most sectors, with foreign trade, retailing, finance and tourism leading the way. Only construction, due to completion of several major projects, showed a decline in the year’s early months. The year’s first quarter saw Hong Kong enjoy a record HK$11.5 billion (US$1.5 billion) balance of payments surplus and a large budget surplus—prompting calls for cuts in its already low tax regime. The year’s growth rate is expected to exceed the official 4% to 5% forecast.

The business world was invigorated by some especially big deals. The mainland’s Bank of China used Hong Kong as the base for its successful US$9.7 billion initial public offering, China’s largest one to date and biggest anywhere for six years. Cathay Pacific Airways acquired Dragonair, giving it more access to mainland cities, and doubled its holdings in Air China, the mainland’s flag carrier (which also increased its stake in Cathay Pacific). And as June ended, PCCW, the telecoms company that aspired to greatness but fell short, was negotiating to sell valuable assets to foreign buyers.

The quarter’s final days also brought Hong Kong a political paradox that illustrates its undefined future. Jia Qinglin, chairman of the Chinese People’s Consultative Conference and (more importantly) a member of the ruling Communist Party’s politburo, arrived for three days of politicking to commemorate the July 1, 1997 transfer of Hong Kong’s sovereignty to Beijing. But he left town two days before the actual holiday, which also will bring the annual public protest on behalf of universal suffrage—something China so far has refused to allow.


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