Is the Hong Kong government once again set on stirring up unnecessary social discontent while fuelling rampant cynicism? The issue at stake is the West Kowloon cultural hub, which is meant to become a "world-class arts, cultural and entertainment district". At 40 hectares, it is about twice the size of Tsim Sha Tsui.
For the "culture" portion, the Tung administration insists that there must be a canopy, up to 40 storeys high, covering 55 per cent of the land. A detailed study commissioned by the Arts Development Council estimates that it would cost close to $6 billion. The government insists that the real price will be $2-4 billion, but it has not provided any backup data.
Even if the government was right, the canopy entails an absurd expense for a roof with no discernible purpose except perhaps to satisfy the ego of a few public servants hungry for a legacy.
More bizarrely, the government insists that only one private property company should develop this project. This shuts out nearly every enterprise in Hong Kong, including the government - except the largest and richest property companies.
Further, any developer worth his salt can tell you that if the land was sold by auction separately, the public coffers would receive far more revenue than by handing it to one developer. More money would mean that more could be spent on the cultural and arts side of the project. The government, however, asserts that this plan would fail.
The three finalists represent six of the richest property families. Industry analysts say that the winning bidder will become a price maker in the property market. Senior government officials insist this will not be the case. But its record in forecasting supply and demand, hence, property prices, has been comical since 1997.
The financing of the cultural portion will come from the profits of the developer. Ask any taxi driver and he will tell you that the cultural hub is, in fact, a property project. But Chief Secretary Donald Tsang Yam-kuen denies that, too.
Everyone agrees that more culture is a good thing, and yet many people remain unconvinced that all those billions could not be more wisely spent on human capital rather than bricks and concrete. And they have said as much.
But community activists say that Mr Tsang has only paid lip service to their concerns over the years, casting doubt on the value of the ongoing public consultations.
If the government has decided that both the one-developer approach and the canopy are non-negotiable, many people are questioning the value of any consultations. District councillor Ada Wong Ying-kay, a well-known arts promoter, describes Mr Tsang's behaviour as "insincere, inconsistent and dismissive" during meetings.
The people are not angry at the developers' talent to bag a great deal - a skill which is much admired in this town. But they are mad at their leaders, who are supposed to represent them. These officials are, in many cases, acting increasingly as if they were already personal assistants to the most powerful property families - before their retirement.
A number of top officials - including former chief of police Tsang Yam-pui - have, after retirement, made a beeline for lucrative jobs in property companies that, many allege, are now beneficiaries of the government's sweetheart deals.
In a much publicised week-long celebration last winter for his son's wedding, Donald Tsang invited several hundred of his "best friends" to three different parties. The list read like Hong Kong's Who's Who. One guest half joked that he saw the owners of the entire gross domestic product in the banquet room.
The chief secretary sits above government bodies that regulate just about every business his friends own in Hong Kong. While he is well within his right to broadcast the fact that he has rich friends, is that the kind of behaviour for civil servants to emulate? Shouldn't a public leader bend over backwards to avoid any appearances of a possible conflict of interest? One senior communist visiting at the time remarked wryly that this would not happen even in Beijing, where corruption is rampant, unless the minister in question wished to finish his dessert in a detention room. During the dotcom years, the government handed over Cyberport without a tender, or wanting any money upfront, to Richard Li Tzar-kai, the young scion of the richest man in Hong Kong. The other tycoons were furious. A delegation reportedly marched to see Chief Executive Tung Chee-hwa, offering $80 billion to buy that land from the government - all to no avail.
As if on cue, the government this year sold to two of these unhappy developers the controversial Hunghom Peninsula waterfront housing estate. Many believe that the administration has been less than candid regarding the terms and conditions under which the deal was struck, allowing the new owners maximum flexibility in redevelopment.
Two of the three West Kowloon cultural hub finalists freely admit in private that their chances are slim, because they believe the government has long decided on the chosen one: the joint venture between Cheung Kong and Sun Hung Kai Properties.
These potentially unsuccessful bidders are, nevertheless, happy to invest a few million US dollars on the bidding process. Clearly, they must feel confident that the government will "feel their pain". Meanwhile, no outsider can obtain any financial details.
Christine Loh Kung-wai, the founder of policy think-tank Civic Exchange, demands to know: "Why is there no transparency when the public is, in fact, financing the future developer by providing it with the land?"
Others ask why the government is prepared to be flexible on the plot ratio restriction, while remaining fixated on the canopy and the one-company approach.
During the colonial heydays, the governors, too, were sympathetic to the financial interests of British firms. But they seldom forgot that they were representing higher ideals than just money. Nor did they allow friendships formed at Harrow, Winchester, or later at Oxford or Cambridge, to influence public policies.
With rare exceptions, past governors and senior civil servants retired with dignity, living off their already generous pensions. Now, senior civil servants retire to multimillion-dollar jobs with property companies or as private consultants to them.
If this administration and future ones wish to show the world that Hong Kong can indeed be better governed by ethnic Chinese, they could do a lot worse than remember a few lessons about public governance from their former colonial masters.

Sin-ming Shaw was formerly a visiting fellow at Oxford, reading British imperial history.

Last month's mass demonstrations in Hong Kong continue to echo. Never in Hong Kong's history has popular opposition - uniting investment bankers, street hawkers, civil servants and artists, among others - been so loud.

Now China's communist rulers are dithering about how to respond.

One objective of the demonstrators was to voice their desire to select Hong Kong's future leaders through universal suffrage. Today, 800 electors handpicked by the mainland Chinese government - who mostly represent big business - choose Hong Kong's chief executive.

Resistance to the second five-year term of Hong Kong's incompetent and sycophantic chief executive creates a grave dilemma for China's communist rulers. Before July's protests, they had hoped that Hong Kong would provide such a good example of "one country, two systems" that Taiwan would be lured into accepting the sovereignty of the government in Beijing.

But now Taiwan's leaders point to Hong Kong as a failed model of a flawed concept.

Indeed, Mr Tung Chee-hwa's anticipatory subservience to the real or imagined wishes of China's rulers exposed the congenital flaw in the political architecture of uniting a liberal society with a dictatorship. That flaw infects the heart of the "one country, two systems" notion: the idea that genuine autonomy can exist in a country whose supreme leaders do not believe in rule by consent.

Now China's communist rulers find themselves in a bind. If they back Mr Tung unconditionally for the rest of his term, they can look forward to the collapse of their long-term strategy to reabsorb Taiwan, for the alternative to peaceful reunification is coercion. But this increases the likelihood of military confrontation with the US, Taiwan's protector.

In this context, the steady build-up of China's short- to medium-range missile capability is a cause for alarm. Such a nightmare scenario isn't at all likely in Hong Kong, but a steady rot of Hong Kong's vitality is. For if the frustrations of ordinary Hong Kong citizens are allowed to fester without a genuine commitment by China to allow for universal suffrage by 2007, a far more serious eruption of social and political unrest beckons.

Such frustrations are growing. Unemployment now stands at almost 9 per cent - unimaginable before the handover in 1997, when both Mr Tung and China promised that Hong Kong would do even better under Chinese sovereignty than British rule. China's leaders and their handpicked servants in Hong Kong may still believe that Mr Tung's popularity will improve if and when the economy does. So they comfort themselves with the thought that demands for democratisation reflect Hong Kong's economic woes, nothing more.

But six years of divisive and dismissively haughty misrule by Mr Tung's administration, which pits one group against another as its preferred method of governance, suggest that Hong Kong's problems are much deeper.

It is now an acrimoniously divided society harking back to the days when Chinese communists routinely classified their own citizens as either "the people" or "enemies of the state".

Most of Hong Kong's people now recognise that their stagnating economy is not merely a matter of bad policy. It also results from deeply flawed political structures. In an oligarchic economy such as Hong Kong's, the costs of stagnation and the fruits of growth are distributed in grossly unfair ways. This cynical structure must be changed if people are to have enough confidence in the future for the economy to recover.

If China's rulers heed the wishes of Hong Kong's seven million people to have the right to elect their own leaders through direct elections, however, they face the prospect that China's 1.3 billion people will demand the same right. Perhaps so. But a political system is only ever truly put at risk when leaders consistently misrule.

Indeed, democracies are so stable because they allow misrule to be ended through regularly scheduled elections. Because stability is their great goal, China's communist rulers, if they are wise, will allow Hong Kong to show the way to a system in which Chinese govern themselves democratically, peacefully and prosperously.

Taiwan has already done so. Hong Kong, linked physically to the mainland, provides a more intimate case study for China's people to watch and one day follow.

But if the goal is merely for the communists to retain their monopoly on power in both Hong Kong and China, then the rot that has settled into Hong Kong's polity and its economy may begin to infect the mainland. At that point, China might wish it had never heard of Tung Chee-hwa. Indeed, it might wish it had never secured Hong Kong's return.

Sin-ming Shaw was formerly a leading Hong Kong investment fund manager. He is now a resident scholar at Oriel College, Oxford University.

Last month's massive demonstrations in Hong Kong, when over half a million residents poured into the streets in protest against the government of Chief Executive Tung Chee-hwa, continues to echo. Never in Hong Kong's history has popular opposition--uniting investment bankers, street hawkers, off-duty civil servants, and artists, among others--been so loud. China's communist rulers are dithering about how to respond.
One objective of the demonstrators was to voice their desire to select Hong Kong's future leaders through universal suffrage. Today, 800 electors handpicked by the mainland Chinese government -- who mostly represent big business -- choose Hong Kong's Chief Executive.
The unpopularity of Hong Kong's incompetent and sycophantic Chief Executive, chosen by China for a second five-year term that will only end in 2007, creates a grave dilemma for the country's communist rulers. Before July's protests, they hoped that Hong Kong would provide so attractive an example of the idea of ``One Country, Two Systems'' that Taiwan would be lured into accepting the sovereignty of the government in Beijing. Now Taiwan's leaders point to Hong Kong as a failed model of a flawed concept.
Indeed, Mr Tung's anticipatory subservience to the real or imagined wishes of China's rulers exposed the congenital flaw in the political architecture of uniting a liberal society with a dictatorship. That flaw infects the heart of the ``One Country, Two Systems'' notion: the idea that genuine autonomy can exist in a country whose supreme leaders do not believe in rule by consent.
Now China's communist rulers find themselves trapped in a bind. If they back Tung unconditionally for the rest of his term, they can look forward to the collapse of their long-term strategy to re-absorb Taiwan, for the alternative to peaceful reunification with Taiwan is coercion.
But any resort to coercion increases the likelihood of military confrontation with the US, Taiwan's protector. In this context, the steady build-up of China's short- to medium-range missile capability is a cause for alarm, such missiles being the principle threat against Taiwan. As the US Defense Department's ``Annual Report on the Military Power of the People's Republic of China'' recently put it, ``The primary driving force for China's military modernization is Beijing's perceived need to prepare credible military options in any potential conflict in the Taiwan Strait.''
Such a nightmare scenario isn't at all likely in Hong Kong, but a steady rot of Hong Kong's vitality is. For if the frustrations of ordinary Hong Kong citizens are allowed to fester without a genuine commitment by China to allow for universal suffrage by 2007, a far more serious eruption of social and political unrest beckons.
Such frustrations are growing. Unemployment now stands at 9%--unimaginable before the handover in 1997, when both Tung and China promised that Hong Kong would do even better under Chinese sovereignty than under British rule. In fact, many observers believe that Hong Kong's real rate of joblessness is much higher, and fear that the trend is not encouraging.
China's leaders, and their handpicked servants in Hong Kong may still believe that Tung's popularity will revive if and when the economy does. So they comfort themselves with the thought that demands for democratization reflect Hong Kong's economic woes, nothing more.
But six years of divisive as well as dismissively haughty misrule by Tung's administration, which pits one group against another as its preferred method of governance, suggest that Hong Kong's problems are much deeper. Hong Kong is now an acrimoniously divided society harking back to the days when Chinese communists routinely classified their own citizens as either ``the people'' or ``enemies of the state.''
Most of Hong Kong's people now recognize that their stagnating economy is not merely a matter of bad policy. It also results from deeply flawed political structures. In an oligarchic economy such of that of today's Hong Kong, the costs of stagnation and the fruits of growth are distributed in grossly unfair ways. This cynical structure must be changed if people are to have enough confidence in the future for the economy to recover.
If China's rulers heed the wishes of Hong Kong's seven million people to have the right to elect their own leaders through direct elections, however, they face the prospect that China's 1.3 billion people will demand the same right. Perhaps so. But a political system is only ever truly put at risk when leaders consistently misrule.
Indeed, democracies are so stable because they allow misrule to be ended through regularly scheduled elections. Because stability is their great goal, China's communist rulers, if they are wise, will allow Hong Kong to show the way to a system in which Chinese govern themselves democratically, peacefully, and prosperously. Taiwan has already done so. Hong Kong, linked physically to the mainland, provides a more intimate case study for China's people to watch and one day follow.
But if the goal is merely for the communists to retain their monopoly on power, in both Hong Kong and China, then the rot that has settled into Hong Kong's polity and its economy may begin to infect the mainland. At that point, China might wish it had never heard of Tung Chee-hwa. Indeed, it might wish it had never secured Hong Kong's return.
Sin-ming Shaw was formerly a leading Hong Kong investment fund manager. He is now a resident scholar at Oriel College, Oxford University.
Copyright: Project Syndicate, August 2003.

JAKE VAN DER KAMP, in his Monitor column on Wednesday, produced a graph showing GDP per capita and nominal wage per capita relative to the mainland. It claimed to prove Hong Kong is 20 to 50 times more productive than China. Jake is missing the point. Hong Kong is, of course, more productive, but certainly not by such a large amount.

Second, what counts, as he should know, is the change "at the margin". The speed at which productivity is increasing in China relative to Hong Kong is the relevant factor. That narrowing gap is relevant to Hong Kong's deflation. Indeed, to the world's deflation.

Third, one should not use nominal figures that incorporate the distortion of inflation. Fourth, using overall economic figures comparing Hong Kong and China - which has a huge rural and inefficient state sector - is comparing the proverbial apples and oranges.

The process of "arbitraging" between Hong Kong and the mainland does not mean prices in Hong Kong will hit mainland levels. It simply means the relevant prices will eventually meet somewhere in between.

If Goldman Sachs can find a graduate from Peking University who can do as good a job, if not better, at a lower wage than a graduate from Hong Kong University, the Peking University graduate will get the job. Over time, wages of newly graduated workers in the two cities will converge. One will go down, the other up - in real terms.

The argument is, in fact, broader. As China becomes more integrated into the world economy, the arbitraging process is between China and the rest of the world. It also means Hong Kong cannot live happily in the erroneous view that its real estate is non-traded, hence ignoring world price levels.

That argument, albeit in a different guise, was advanced to me by an SAR minister, who defended the off-the-chart public servant salaries in Hong Kong. "Why should we compare ourselves with what an American or a German minister gets?" he asked. We should, because public sector salary levels work into the entire price structure of the economy. Of course, the minister's wage bill is also contributing to the potential fiscal insolvency of the government.

Why is real per capita income in Hong Kong higher than Taiwan, which in turn is so much higher than that of mainland China? Are the Chinese on the mainland born inherently less intelligent, less productive than the Chinese in Hong Kong or in Taiwan? Last time I checked, they all shared similar cultural and racial DNA. The income disparity is due almost completely to different economic systems producing disparate incentives, or the lack of them.

The descendants of Adam Smith that took laissez-faire as the bible, so to speak, ran Hong Kong for the past 150 years. Taiwan is run historically by confucian bureaucrats who thought they could "proactively enable markets".  China is still trying to shed its central planning apparatus that sought to replace market forces with a handful of planners making investment and consumption decisions on behalf of 1.3 billion individuals. If all three societies had exactly the same economic system, all the residents would enjoy roughly the same per capita income.

It follows that as China sheds more of its institutional shackles, the economy will expand. We have had convincing evidence of that.

Due to decades of economic mismanagement, the overall productivity of the mainland economy is understandably below that of Taiwan and Hong Kong.

But one should be comparing Hong Kong with similar urban cities such as Shanghai or Guangzhou, using real gross domestic product figures.

Jake's statistics fly in the face of common sense, not to mention reality. He should ask Johnson Electric management whether its mainland engineers or factory workers are 20 times less productive.

Of course, Hong Kong remains more productive in certain activities. That is not the point. If it were not, the SAR's per capita real income would already be the same as that in Taiwan and the mainland.

Let us try a different question that should help educate the pro-peg fundamentalists. Hong Kong's per capita income at the current exchange rate is roughly the same as America's. If productivity drives income, one could legitimately ask whether Hong Kong society is as productive as the US. Is Hong Kong's intellectual community as creative as its counterparts in the US or elsewhere?

It should, in fact, be greater, as academic wages in Hong Kong are much higher than those of scientists at institutions that have helped shape the world as we know it. What has Hong Kong done to reshape the world?

Is Hong Kong's business community as innovative as America's? What are Hong Kong's best companies and how do they stack up against US ones?

Hutchison, Johnson Electric and Cathay Pacific are excellent companies. But even there, the intellectual content of what these companies do is far below what we would consider cutting edge. These companies are still run on hand-me-down knowledge imported from elsewhere.

Even in the SAR's much-vaunted financial sector, which are the best companies? All are imported, together with the imbedded know-how. So, the question remains. Should Hong Kong enjoy the same per capita income at the current exchange rate?

The forces of arbitrage, sometimes known as "factor price equalisation", are, in fact, already providing the answer. Wages and other prices in Hong Kong are too high and they are being forced to converge, not merely relative to mainland China, but also the rest of the world in comparable sectors. One moves up, the other moves down - meeting in between. That is the logic of markets. Globalisation is speeding up that process. It seems too many in Hong Kong are still in self-denial. There are no free lunches.

Sin-ming Shaw teaches at the American University of Paris