Stop kowtowing to developers

South China Morning Post  |  Feb 24, 2005

By Sin-ming Shaw

Hong Kong's biggest property tycoons are accorded clout not seen in any other developed society. Senior officials treat them with deference and their public utterances, however pedestrian, are reported by the media as if they were voices from the Burning Bush on Mount Sinai.

The public, no doubt, assumes that the property industry is at the centre of the local economy. Guess again. Take job creation, which must be at the top of a society's priorities. Here, the sector comes up short.

About 62,000 workers are employed in the construction industry and 89,000 in the estate-agent sector - a total of 151,000.

Yet the manufacturing sector, which everyone has long written off as irrelevant, dying or "dead", has 168,000 people on its payroll; 510,000 are employed in the import-export sector; and the wholesale, retail, restaurant and hotel sector has a workforce of nearly 500,000 people.

Overall, these three sectors employ eight times more workers than the property industry.

If society's economic agenda were decided on a purely democratic basis, the property tycoons would have to take a back seat, proportionate to their smaller contribution to jobs.

So, does property generate more for the economy? No. Last year, property accounted for 5.3 per cent of gross domestic product; construction, 3.7 per cent - a total of 9 per cent. By contrast, the import-export sector contributed nearly 23 per cent to Hong Kong's GDP. Its sister sector, transport and storage, accounted for another 8 per cent - a total of 31 per cent, or more than three times that of property.

Not only does this sector contribute far more to GDP, its profits also consistently dwarf those of the property business. Re-export margins - profits from goods made in China and transshipped through Hong Kong - as a percentage of GDP rose from 10.4 per cent in 1996 to 16.5 per cent in 2003, while property profits as a percentage of GDP peaked at 5.9 per cent in 1997, which was a bubble year. The re-export profits accrued to factory owners and their staff living in Hong Kong are, in fact, a major source of demand for local properties.

The real driver of our economy is the "dead" manufacturing sector, now mostly relocated to the southern provinces of China, which is responsible for an estimated 10 million workers. Beijing should be kowtowing to these less visible Hong Kong manufacturers for creating jobs and adding to the country's foreign reserves. And so should the Hong Kong government. Instead, both treat property tycoons as if they were the rock on which Hong Kong was built. In any other civilised country, developers seldom rank as the most respectable people, as the business has little, if any, intellectual content. Underpaid architects provide that.

In the US, Donald Trump has endeared himself to the public by reinventing himself as an entertainer because he knows that a property developer is not taken seriously in a cosmopolitan city such as New York.

Hong Kong, alas, is different. The property industry is in the hands of a few individuals whose wealth is dazzling. Then there is the fact that owning properties has mostly been a good bet for many residents, including those in subsidised housing. Buying properties has become like a drug culture. Even Joseph Yam Chi-kwong, head of the Monetary Authority, "invested" in several luxury flats.

Everyone seems to be addicted to property speculation, and the tycoons are the biggest suppliers. Addicts always kowtow to suppliers, and the government has been hooked for many years.

Sin-ming Shaw is a visiting scholar at Columbia University. This is the second of a five-part weekly series on Hong Kong's economy and leadership

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