Byline: The willingness of US citizens to provide generous funding for universities puts their wealthy SAR counterparts to shame, writes Sin-ming Shaw

HONG KONG'S WEALTHY are giving very little back to the society that has enriched them beyond imagination. The University Grants Committee estimates total private individual contributions amounted to $540 million last year, a small sum to the mega-rich and far short of what higher education needs.

Without significant alternative sources of income from the private sector, universities will remain dependent on public funds, boding ill for those trying to become first-rate.

Government funds will be limited as Hong Kong's fiscal health suffers from structural deficits. Total dependence on public funds, even if they were forthcoming, reinforces the "iron rice bowl" culture among universities not subject to competition, a necessary condition for excellence.

Every Oxford needs a Cambridge. One important reason why public US universities, such as Berkeley and Michigan, are so good is because they have to compete against private ones for the same pool of student talent and, more importantly, for funds from corporations, foundations, donors and government.

The generosity with which the American rich and the not-so-rich give to education goes far beyond what tax deductibility can explain.

It puts to shame Asians whose dedication to educating their young is supposedly legendary.

Gordon Moore, the inventor of the computer chip, has given $4.7 billion to the California Institute of Technology. The Hewlett Foundation, of Hewlett Packard fame, has donated $3.2 billion to Stanford University.

In January 2002, Sanford Weill, chairman of Citigroup, gave $780 million to the Cornell Medical School. Maurice Greenberg, of the American International Group, an adviser to the SAR Government, chipped in another $490 million. The Greenberg family has now given more than $3 billion to the hospitals of Cornell and Columbia Universities.

Mr Greenberg ranks number 103 on the Forbes list of the world's richest. Mr Weill does not rank at all, unlike a number of Hong Kong's billionaires.

The nouveaux riches here have given a pittance to education. Li Ka-shing, ranked 23 on the Forbes list this year, is a notable exception, as is the unranked Gordon Wu Ying-sheung, who has pledged $780 million to Princeton University.

But Sir Gordon tellingly shunned Hong Kong's universities on the grounds that their mediocrity would waste his money. Mr Li gives huge sums principally to mainland campuses.

In Hong Kong, wealth accumulation has become an end in itself. The rich reject the argument that Americans care more than they do about charity, and, in particular, education.

They insist that America's higher marginal tax rates provide an incentive that Hong Kong's scant 15 per cent flat tax lacks. To address the issue head on, the SAR Government ought to provide the needed incentive by allowing deductions at 30 per cent for every dollar given. That would closely match the American allowances.

Christopher Cheng, chairman of the Hong Kong General Chamber of Commerce, has used the same argument in the context of supporting the arts. A 30 per cent tax deduction should, indeed, apply to all charitable donations. Once that supposed obstacle is removed, Hong Kong's creative and intellectual communities can more forcibly call on the rich to give more.

Hong Kong has to develop a culture of giving if its people want to be proud of their institutions of higher learning.

There is a strong argument for "privatising" at least two universities. Not only would they provide an alternative model, they would reduce the drain on the SAR's budget.

Take the Chinese University. It spends roughly $3 billion a year. The Government should transfer $50 billion to "endow" the university, using a six per cent return as a benchmark. The university will then have to fend for itself.

Its scholars can, like their US counterparts, compete openly for public funds for projects. But they must win on merit. Government bureaucrats may object to "depleting" official reserves by such a transfer. But their reasoning is invalid, because the money stays within the community. Once it has been transferred, an item of recurrent expenditure will forever be eliminated from the Budget. This would immediately reduce the size of the SAR's fiscal deficit.

Certain facts are straightforward. Not all universities, departments and professors are equal. They should not be funded as if they were. Universities should not all remain public, and private funds should be encouraged.

Universities have been overly generous in handing out honorary doctorates to the rich while getting very little in return. Such wantonness actually cheapens the honours and the institutions that give them.

Sin-ming Shaw teaches at the American University of Paris

SIN-MING SHAW
Lord Sutherland is an important man. He is the vice-chancellor of the University of Edinburgh and is completing a major review of the SAR university system, with recommendations for some radical changes.
Change is badly needed, as no one seems to be happy with the status quo. If Hong Kong wants to re-invent itself as a ''knowledge-based'' society, a goal held dear by Chief Executive Tung Chee-hwa, its universities must play a pivotal role. Unless they succeed, the SAR will remain second rate.
Singapore has understood that stark reality and has succeeded in luring eight world-class universities to help lift it from intellectual mediocrity.
Hong Kong's universities are failing. Bosses decry the poor standards of graduates. The Chief Justice has recently lamented the appalling quality of home-grown young lawyers. Our doctors often speak broken English.
Many professors privately admit 30 to 50 per cent of their students should have been kicked out, but unspoken rules prevent this. As a result, 98.6 per cent graduate each year. No wonder the job market is awash with semi-literate graduates.
Hong Kong academia faces many deep-seated problems. Here are just three. One: there are too many universities, with wasteful duplication. Two: their financing rules are costly and irrational. Three: the Government's role is too pervasive, its goals unrealistic.
Hong Kong cannot afford eight equally good universities. City and Polytechnic universities are fine engineering institutions. In recent years, under ambitious, politically well-connected vice-chancellors, they have drifted away from their historic missions while trying to become comprehensive. Predictably, ambition far outstrips performance.
City University offers a Law School and a School of Creative Media. It has a Cross-Cultural Centre to promote Eastern and Western fusion. These are admirable goals. However, it has neither the experience nor the expertise to offer quality courses.
The Institute of Education trains teachers. It should have been absorbed by the University of Hong Kong and the Chinese University, as each already has a far better department of education. Hong Kong's children are increasingly being taught by many staff without the benefit of a broad university education and that, in turn, affects the quality of high school graduates.
Lingnan University aspires to be a liberal arts college. But it costs a lot to be a good one, and its half-hearted attempt is only wasting money. It makes better sense to turn Lingnan into a two-year institution to prepare the largely badly matriculated high school students. Baptist University is located across the street from City University. Why not consolidate the two?
A challenging issue for Lord Sutherland is whether, and how, to allocate resources along the lines of departmental excellence.
Most university departments are unable to attain the momentum to become first rate. Merging some could make sense.
This year taxpayers, through the University Grants Committee (UGC), will pay $14 billion to the eight universities. This is 2.2 times higher than 10 years ago, while the number of students seeking a first degree is 45,600, compared to 29,200 a decade ago, up 56 per cent. Much of that cost increase goes into salaries.
Hong Kong's pay scale is off the chart. We pay our senior professors an average of $1.5 million a year - more than twice what counterparts get in America's public universities and 62 per cent more than Columbia in New York, a more expensive city than Hong Kong. The local pay scale is tied to that of the civil service, which has the effect of paying mediocre professors more than they deserve, but less than that which is necessary to attract the higher-paid in finance, information technology and the life sciences.
The UGC's funding formula underwrites 70 per cent of the cost to educate a student. Until very recently, it was 100 per cent. The formula assumes the unit cost per student is the same for all universities, ignoring the basic principle of comparing returns on investments. UGC admits it wishes to avoid judging who is better. So the funding rule is more about ''face'' than quality.
Since headcounts basically determine funding, the universities have no incentive to turn away students or to allow professors to fail some.
A recently introduced research-funding formula says that the more articles published in well-known scholarly journals, the more research money the employing university will get to reward ''excellence''. This system is mindlessly quantitative - quality cannot be measured solely by publication numbers.
The Government plays Big Brother and decides how many students the universities must accept, and within that not more than four per cent can be foreigners. As a result, our student body is homogeneous and provincial.
Mr Tung aims for 60 per cent of the 18-20 age group to get higher education, against 17 per cent now. He also wants a ''New Elitism'' in our society. Is there a contradiction here? At present, our universities cannot even properly educate the existing crop.
One colonial ''time tomb'' Mr Tung loves to keep under his hat is his chancellorship at all eight universities. Since he is also the political leader, his status automatically politicises the intellectual community, even though he delegates his authority to his stand-in, the vice-chancellors.
He appoints the senior members of the university councils and he can and does reward the more politically correct academics with vice-chancellorships. As a result, many academics think they should be circumspect about what they say publicly.
Dr Ng Ching-fai, vice-chancellor of Baptist University, has said he advised his faculty to stay out of politically controversial issues. It is a puzzling position to take in a free society that expects its scholars to shed light on public issues. Growing self-censorship is a consequence of Big Brother retaining the top post he should have relinquished after the British left.
Taxpayers and academics await with anxiety the Sutherland Report, which is expected to deal with these and other pressing issues such as privatisation and enhancing competitiveness. The report may address the idea that the competitive advantage of each university should guide future funding, so that a more rational division of academic labour may ensue. The bottom line is: with declining public funds, what change must the universities undertake to become first rate?


Sin-ming Shaw is teaching at the American University of Paris this spring. He is a former lecturer at Columbia University and a visiting scholar at Harvard.

Byline: Keeping the Hong Kong dollar `overvalued' will force our economy to stagnate, says Sin-ming Shaw

FINANCIAL SECRETARY Antony Leung Kam-chung said last week that the Hong Kong dollar's peg to its United States counterpart was one of the obstacles to economic recovery, but that changing it would result in undesirable currency speculation.

The South China Morning Post's Jake van der Kamp then took him to task for saying this in his column last Saturday, insisting that the peg is not an obstacle. On the contrary, he claims, a regime of free-floating exchange rates is detrimental to an "efficient economy" while the peg would enforce "needed disciplines" on the Government without which the bureaucrats would run amok in fiscal profligacy.

These gentlemen are two of the most seasoned veterans of Hong Kong's world-class financial community. I have high and equal respect for both, although I know Jake far better and have liberally picked his fertile brain about the state of the world over the past 20-odd years.

But on the question of the peg, both of them cannot be right. So who is wrong? Neither is entirely right, but Mr Leung enjoys a very clear edge.

Let's be careful with definitions. Our exchange system is not just any peg whereby the Government ensures, by hook or crook, that the rate stays pegged. Instead, ours is a currency board where the local unit is linked at the rate of 7.8 to a greenback. It is a system whereby the Government, if it sticks to the rules, has really only one important role to play: that is to issue a sovereign guarantee of convertibility of the banking reserves kept by the banking system at 7.8. Nothing much else.

A pegged rate - I use the term "peg" to mean "link" as that is what it is conventionally called - does not in any way eliminate "speculation" that it will change to a higher or lower rate. Anyone can try and does. Without it, a market cannot exist. Mr Leung errs on this point. He should know "speculation" as a term is largely meaningless in a free market. However, a pure currency board is essentially foolproof in defeating those who wish to "break" it deliberately. It does not require government fiddling. Indeed, intervention invites more speculation, not less.

It is important to understand that a currency-board rate promises only one thing: the fixed rate can stay at that level forever barring a cosmic disaster. It promises nothing else. In particular, it does not promise economic nirvana.

Jake is wrong to say a pegged rate imposes fiscal disciplines although a freely floating exchange regime provides a free hand to the Government to finance white elephants. Jake, what do you call Cyberport and Disneyland? Blue elephants? How would you describe Monetary Authority chief Joseph Yam Chi-kwong's $4 billion purchase of harbour-front office space in the name of supporting the currency while the whole of Hong Kong suffers? A white hyena? Incidentally, America enjoyed the largest fiscal surplus on record under Bill Clinton's presidency while its currency went up and down and up.

Argentina has a currency board pegging one peso to a dollar. It has enormous public debt and fiscal deficits, the sources of its economic crisis. But the exchange rate is still one peso to a dollar even as its high double-digit interest rates are killing the economy.

The tanking of the economy is the implicit price to pay for a pegged over-valued exchange rate, for all the economic adjustments must be borne by the real economy, and none by the exchange rate. In plain words, if you want a fixed rate, you can have it but be prepared to suffer very badly if the currency becomes grossly overvalued.

How much must the economy adjust? That depends on how overvalued the exchange rate is and how inflated the local assets and wages are? No one really knows until the adjustments run their course to reach some equilibrium. Anyone who claims to know when the adjustment should stop is either ignorant or bluffing. Usually both.

That was what the Hong Kong Government did in 1998 when it massively intervened in the share and property markets, by buying $118 billion in stocks and freezing government land sales, while claiming the adjustment was being overdone.

Had the officials not been so arrogant, panicky or ignorant and had instead allowed the market forces to work, Hong Kong would have found a far more solid footing from which to grow again.

Instead, we are forced to go through a slow Chinese water torture. Our economy will stagnate the way Japan has been for the past 11 years because Japan's ruling elite never had the courage to get the painful adjustment over with quickly. It still does not.

The worst consequence of the 1998 official intervention has been to create an "entitlement" culture in Hong Kong among those who suffer from "negative equity", whereby the current market value of their property is less than the outstanding mortgage. At no time in the entire history of Hong Kong prior to 1998 did carriers of negative equity lobby the Government to support the market in order to reduce their private losses. The 1998 incident marked a historic watershed. It sent a message to the public: we can and will override market forces if the paper losses of your assets become "too big". For this gross error, the community will pay dearly.

Mr Leung was entirely correct in saying the peg was an obstacle because he was stating a simple truth - our currency is overvalued. But Jake was also correct in saying that even if the rate is an obstacle, which he apparently does not believe is the case, the Financial Secretary should not be saying so publicly and loudly, as Mr Leung's position is no longer that of a private banker. As Hong Kong's highest official in charge of the monetary system, he is effectively the personification of the currency.

I should say emphatically, however, that if the Government decided to re-peg the local dollar to a lower level, which it should, it should do so overnight.

As usual, the Government is behind the public. "Everybody" knows the dollar is overvalued. Just look at the cross-border traffic. The people of Hong Kong are telling the world with their feet and their pockets. Keep the currency board by all means but lower the peg, now. By how much? Any number from 10 and 12 to a greenback would be fine. The lower the peg, the faster Hong Kong's economy will recover.

`What do you call Cyberport and Disneyland? Blue elephants?'

Sin-ming Shaw (smshaw@attglobal.net) is a writer and private investor who was formerly a regional economist for Chase Manhattan Bank

Byline: The team set up to advise on the SAR's heritage has a duty to be practical rather than political, says Sin-ming Shaw

HONG KONG WAS once a vibrant haven for writers, scholars, musicians, opera singers and film-makers. No more. Now, Hong Kong has a growing reputation as overpriced, overpaid and under-skilled. There is also a widespread perception that the city has little "culture".

The Culture and Heritage Commission, set up last November, is supposed to advise the Government on funding priorities to "promote and develop culture and heritage" in Hong Kong.

Chairing the commission is Chang Hsin-kang, an engineer and the president of the City University of Hong Kong. No better person could have been chosen for the job, as Professor Chang is comfortable with scientific and literary pursuits. He is living proof that the late English scientist C. P. Snow was wrong to say the gulf between the sciences and humanities is too wide to bridge.

The Culture and Heritage Commission comprises six members from statutory bodies, such as the Arts Development Council, two from government, and 11 drawn from various professions, including jewellery designer Lo Kai-yin, architect Simon Kwan Sin-ming, and Lan Kwai Fong realtor Allan Zeman.

The commission has set for itself several goals that range from helping the economy to become more creative, developing Chinese culture and integrating different cultures, to building up national pride. A consultation paper was published in March and the deadline for public submissions has been extended 'til the end of this month.

Unfortunately, the closest the commission comes to telling us what it means by culture is: "Culture is about life." The commission's real agenda has turned out to be more concrete than "life." The commission bemoans the fact that Hong Kong is losing its economic edge due to insufficient creativity and its tendency "towards short-term interests and utilitarianism at the expense of spiritual pursuits". This begs the question whether making lots of money in a short time is justified as long as such endeavours are creative.

Who in Hong Kong is guilty of short-termism? Is it ordinary people who work their tails off just to pay exorbitant rents and mortgages, leaving them little time to be cultivated? Or those from privileged families, who have been educated at (but not necessarily graduated from) the world's best universities? Or could it be the Government, with its misguided land policy that has kept our cost structure high and so has erected a difficult hurdle for would-be artists?

Local university bookstores are a disgrace, being little more than stationery stores selling textbooks instead of treasure troves of great books. Why is this so? The reason is elementary: real estate is too expensive to be used to stockpile books, even at universities.

Property tycoons are coveted and honoured by China's top leaders, as well as by Hong Kong's ruling and intellectual elite, in a fashion no other society can imagine. Universities rush to confer honorary doctorates. They are Hong Kong's role models. The message to the young is that money is everything.

The real-estate business is privileged for two reasons. First, it is a sanctioned cartel, and second, it can create permanent symbols of excellence. Witness the cathedral at Rheims, France, and the gothic buildings at England's University of Cambridge.

With the exception of the I. M. Pei-designed Bank of China building - which is a modern gothic cathedral - and perhaps two other buildings, our famed harbourside and The Peak are littered with architectural trash erected by university honourees and incompetent officials. The Cultural Centre in Tsim Sha Tsui and the new Central Library in Causeway Bay are textbook examples of mindless bad taste and official irresponsibility.

If the people of Hong Kong are short sighted and too utilitarian, it is because the elite of this town teach them to be this way through public policies and private endeavours. In fact, the elite, more than the people, are badly in need of a cultural-development policy.

The commission could do Hong Kong a huge favour by not trying to attain the unrealistic goals in its consultation paper. Most of all, it should avoid political correctness, a curse to creativity and intellectual integrity. It should recommend that our universities each be given a one-off endowment to produce sufficient income to cover each year's projected expenditures - thereby cutting the financial umbilical cord to Government.

The money belongs to the community, and the community would gladly unshackle universities from politics. Universities have been conspicuous by their failure to contribute to Hong Kong's intellectual, artistic and "cultural" life, and have not participated actively as constructive critics of public policy - perhaps for fear of offending those who control their appointments and purse strings.

To encourage private donations, the commission should recommend that all donations be tax deductible at twice their value. That would meet the objections of those who complain the current measly tax deduction of 15 per cent is inadequate. A 30 per cent deduction comes close to what American donors get.

Professor Chang once wrote that competence in a language is a precondition for any creative thinking. Spot on. Chinese should mean Putonghua, not Cantonese. And children should be taught to master Putonghua by scrapping the current mother-tongue policy immediately.

All public-works construction should be open to competition. The Government's Architectural Services Department should only organise such competitions, not do design work.

The commission itself should abandon impossible goals, such as "strengthening social cohesion [and] building up the confidence and pride of people in China". To be proud of what? China's system of justice? Its heritage of Marxism-Leninism? The Communist Party has caused more social division than any other of the despotic rulers in China's long past.

The word "heritage" appears rarely in the commission's consultation paper, although it is at the core of any culture and should not just be about preserving buildings. Hong Kong has a joint heritage: Chinese and British. This has given Hong Kong its valuable uniqueness, which mainland Chinese wish they had. To emphasise the English lineage, which puts the rule of law above men, is apparently not quite fashionable these days. So the commission's omission was perhaps deliberate.

Lastly, the commission should make sure an English-degree holder vets its final report, so as to avoid babble.

The commission should stick to the less pretentious, and then it might do some real good for this community.

Sin-ming Shaw (smshaw@attglobal.net) is an economist. He was previously a TV and film producer, as well as a visiting research scholar of Manchu history at Harvard University

Universities would be shackled if they operated as some business figures suggest they should, writes Sin-ming Shaw

MANY IN THE business elite are unhappy over university polling, while the University of Hong Kong (HKU) inquiry continues into whether pollster Robert Chung Ting-yiu was subject to political pressure from the Chief Executive via senior HKU staff. Peter Woo Kwong-ching, prominent tycoon, former trustee of the Hong Kong Polytechnic University and a current trustee of Columbia University in New York from where he received a master of business administration (MBA), has argued that politically sensitive projects by an academic generate "unnecessary" controversies, inappropriate for a university to sponsor.

Mr Woo has cited the absence of poll-taking by academics at Oxford and Cambridge universities in England, and Harvard and Columbia universities in the United States, to cast doubt on whether Dr Chung should be doing such work on campus. He also questioned whether the pollster could commentate on his findings objectively.

Since this view is broadly shared in Hong Kong's business and political establishment, it would be useful to examine the argument if only to promote a broader public understanding of what a modern university should or should not, does or does not, do.

An elementary point must first be made: whether an academic should be conducting polls, designing spaceships, or advising presidents or dictators under the name of a university is a matter between the academic and the university. It is not self-evident that a university should or should not shelter any of these activities under its name.

Princeton University in the US, one of the world's richest, to this day has refused to establish a law, business or medical school. Yet Princeton's position does not negate the rationale of having such schools at its peer institutions. By the same token, if academics at Oxford, Cambridge, Harvard or Columbia did conduct polls in the universities' names, should universities in Hong Kong follow suit?

Great universities thrive on controversies. The top American universities and politics have been intimately intertwined since President Franklin D. Roosevelt, a graduate of Columbia Law School, and President Dwight Eisenhower, a former president of Columbia, drew heavily on the university to form their brains trusts. There is nothing controversial about academics getting involved in political activities unrelated to teaching. Many do both at the same time. These "public intellectuals" have long claimed that their work in the real world helps their purely intellectual endeavour as professors. No one has proved otherwise.

At other times, influential conservatives in American society harshly criticised Columbia and Harvard for being too liberal, labelling them communist outposts to subvert American minds. Liberals and conservatives often attack these universities at the same time for opposite reasons: one cries, "Too liberal," the other, "Too reactionary".

To avoid controversy just to stay out of political trouble has never been high on any academic agenda. In fact, academics thrive on it. Among many examples is the work done at Harvard and Columbia for the US Government during the late 1960s and early 70s, while the unpopular Vietnam War continued, and which led to vigorous protests by the researchers' teachers and colleagues; and the Manhattan Project to develop an atomic bomb, undertaken at Columbia in New York.

The lay society welcomes academic involvement in such controversies precisely because it looks to the universities as a source of critical thinking to help evaluate whether its government is wasting taxpayers' money and is therefore abusing power. Polls are just one channel for the public to express feelings along the way to the next elections.

Harvard's Kennedy School of Government has extensive connections with politics and has many programmes funded by foreign governments, including China, to train their officials. Scholars have strong and opposing views on this. It is not self-evident why a university founded on openness and democratic values should be training officials from those governments that consider democracy a threat to their power and who would not blink at crushing unarmed professors or students. On the other hand, those who favour such programmes argue that it is better to have them study at Harvard so that when they return to their homeland, they know there is a better way to organise a society than through tyranny.

The proper forum to discuss such issues is the university itself. Once it decides a project can go ahead, it should stand by its academics regardless of whether the work is controversial, unpopular, displeasing to the powerful outside the university, or to idealistic students and scholars within. That is what academic freedom is about. Without it Harvard and Cambridge could never have become what they are - symbols of academic excellence and sources of creative ideas. A university's leaders stand at the front gate to ensure its independence. Only the mediocre ones cave in to outside pressure.

Mr Woo and others claim that famous pollsters such as the Gallup group have never commented on their polling results, and suggest that Dr Chung has compromised his objectivity by doing so. In fact, the analysis pages of The New York Times have published articles by American pollsters, including Mr Gallup, on their work. But the argument is irrelevant.

All social scientists know that absolute objectivity in studying human behaviour is rarely, if at all, possible. Social scientists would agree that a study is objective if its assumptions are clearly stated, data is adequate and the methodology defined. The act of commenting on research results does not compromise the validity of the study. Each is complementary to the other.

A generation ago, Professor Alfred C. Kinsey at Indiana University in the US carried out research on American sexual behaviour in his times. Not only did he produce statistics, he wrote reams of comment and analysis. He was widely attacked by religious groups, parents, and even university trustees for lacking professional ethics and objectivity. Some accused him of corrupting the morals of American society, especially of the young. These were serious charges. But the university stood by him and his Institute for Sex Research on campus. His work is now considered a classic.

When Harvard was planning its business school at the end of the 18th century, many scholars there objected to having a trade school in their midst sharing the name of a great university. Until recently, Oxford and Cambridge were against having such schools since their main purpose - to train students to make a buck more cleverly - is barely related to turning out young ladies and gentlemen of culture and intellectual rigour, which they saw as their principal mission.

It is debatable whether an MBA graduate really knows how to make money faster or whether the world is better off with so many holders of such degrees, but few would now argue that a university should not establish a trade school on its campus. Could not the same rationale apply to having an academic institute specialising in taking polls?

Polling techniques are derived from mathematical statistics. It is a discipline at least as defensible academically, if not morally, as training future investment bankers and brokers, many of whom will someday end up peddling over-priced Internet stocks or property to the less sophisticated retail investors. At least polling by academics is done with some intellectual rigour. Academics jealously guard their reputation, as it follows them to their next job.

What often distinguishes a good university from a mediocre one is whether its leaders stand by what their members do, and do not succumb to powerful, non-academic figures who would not blink at walking over academics for political expediency, sometimes even in the name of academic freedom.

Sin-ming Shaw, a visiting scholar at Harvard, was a lecturer at Columbia University