Taxpayers' cash not for venturing, Mr Minister
By Sin-ming Shaw
ONLY TWO WEEKS into their job, some of the policy signals the cabinet has sent out are alarming.
The new Secretary for Commerce, Industry and Technology, Henry Tang Ying-yen, is considering investing public money in small and medium-sized enterprises to boost the economy.
All he needs to do is to call Premier Zhu Rongji and hear from China's top manager how much public money the country has wasted on businesses best left to risk-taking entrepreneurs.
Once a firm has public money involved, can the Hong Kong government allow it to go under if the investment does not pan out? How many demonstrations can Mr Tang ignore by laid-off workers if projects were allowed to go under?
Granted, not all government projects lose money. Those that do not are typically monopolies such as those for tobacco or alcohol. Not all public monopolies can make money, either; airlines are an example.
Small and medium-sized firms are by definition firms that have a lower barrier to entry - unless they have a unique intellectual property. If a company developed an operating system that could make Windows XP eat dust, it would certainly be a profitable project. If so, the company would have to fight off investors around the world trying to throw money at it.
Someone should give Mr Tang a quick tutorial on investments. The world is not short of money, only ideas. Bad ideas need government equity; good ones do not.
It is puzzling that the scion of a textile fortune, all made on private initiatives over two previous generations, wants to spend taxpayers' money playing venture capitalist. On second thoughts, maybe it is not so surprising.
Mr Tang has inherited money. But someone should remind him that it is taxpayers' money he wants to play with, not money from his family or friends.
Public investments have long had a disreputable record, and not just in China. The world is littered with money-losing public projects begun with the best of intentions.
The Europeans did not want commercial aviation dominated by Boeing. So they built the Airbus. The engineering is excellent. Even the Americans buy them. But Airbus still lives off taxpayer subsidies as it cannot turn a profit.
Once government assumes the role of investing money to make more, the supply of bad ideas usually is endless. Each of them can be counted on having at least one impeccable social objective such as providing employment.
As secretary of industry, commerce and technology, Mr Tang does have a useful role to play. If his contacts in Beijing are really as good as many presume, he should use them to help Hong Kong-owned firms in southern China get proper legal protection from corrupt official squeezers who have become a routine fact of life.
If he did just that and did it well, he would be a hero to Hong Kong's true wealth creators. Mr Tang should also organise more encounters between university engineering departments and local manufacturers to transfer know-how to the factory floor.
Hong Kong's true strengths are in medium-tech manufacturing. The prime exhibit is Johnson Electric. It is a world-class company with a near monopoly in supplying micro-motors to the best luxury vehicles in the world.
Johnson Electric is essentially a 19th century mechanical engineering firm updated with modern precision technology that has very little to do with "hi-tech". It became successful without any public handout. Nor has any successful Hong Kong commercial or industrial firm received any government subsidy.
Financial Secretary Antony Leung Kam-chung wants to raise taxes next year. He is worried about fiscal deficits that just refuse to go away. Since he cannot get the public servants to cut their wages voluntarily, he feels part of the solution is to increase taxes. But he is wrong to do so because he has not exhausted his options.
Rank-and-file civil servants are not going to take serious pay cuts lying down when senior public servants such as Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong, his deputies and those at other public service bodies make twice as much as Chief Executive Tung Chee-hwa.
If Mr Leung were to cut by at least 50 per cent the wages of the multi-millionaire public servants, then he could look the civil service in the eye.
Salaries at other subvented or semi-public institutions are equally appalling.
The combined salaries of the Hong Kong Stock Exchange and the Securities and Futures Commission last year were $841 million - about 10 per cent of the incomes received by every broker in the world trading through our stock exchange.
If the best ideas this cabinet can come up with consist of throwing public money at smaller enterprises or increasing taxes, then perhaps one cannot expect too much from Hong Kong's "first and best team".
Sin-ming Shaw is a writer and private investor
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