Hongkong's inner circle: too small for comfort

SCMP October 2

Hongkong may be a small place but it is not so small as it seems to appear in the minds of leadership which seems to rely on an very limited circle of friends, relatives and civil service peers for key positions. It was thus a relief to learn last week that the new head of the Airport Authority is to be a businessman from outside the charmed circle.

Instead of promoting a bureaucrat with no business experience to a private sector salary in a public sector job the top post has gone to an engineer and oil industry executive, David Pang. This is not to imply that civil servants can never make a successful transfer to the commercial sector, or vice versa. But there is a big difference in thinking, objectives and operating methods between the sectors so it has been disturbing to find bureaucrats being parachuted into positions, such as the chief executive of the stock exchange, when Hongkong scarcely lacks for financial sector executives from the private sector.

Hongkong also badly needs new blood and business leadership. The new successful businessmen are there, but for now leadership is in the hands of the inheritors not the creators of wealth or the top managers. Let us hope that appointment of experienced people like Dr Pang from outside the innder circle becomes the norm.

Unfortunately, omens have not been good. Recently it was announced that Peter Woo of the Wharf group was to succeed Victor Fung as chairman of the HK Trade Development Council. This is a very high profile job, especially overseas. Fung had proved before he got the job that he was an accomplished businessman who had made a huge success of his inheritance, the Li & Fung group. At the TDC, he was articulate, ubiquitous, charming and diplomatic, as good an ambassador as the HK business community is likely to produce.

Woo's chief credential seems to be that, like Tung Chee-hwa, he inherited (in this case through his wife, a daughter of the late Sir Y.K. Pao) a corporate empire based originally on shipping and with its roots in Ningpo. He has not made the same hash of his corporate inheritance as did Mr Tung. In so far as I have any personal views about the man, they are neutral. But one must in truth acknowledge that he is not especially admired by his peers in the property business. The stock market ratings of Wharf and Wheelock do not suggest a stellar market reputation. He is regarded as aloof, which is no crime but not the best qualification for high profile diplomacy. Finally, his political views are antiquated and elitist, to say the least. They doubtless accord with those of Mr Tung but seem woefully out of touch with Hongkong's own sentiments, not to mention the countries overseas where he will be representing Hongkong's overall commercial interests, not that of a small group of tycoons.

Woo's replacement at the Hospital Authority is yet another son of a successful father, this time Dr K.S Lo of the Great Eagle group. Dr Lo's medical background may be a recommendation for the job - even if he has practiced property development rather than medicine for the past 20 years. What is disturbing is his promotion to this position after presiding, a chairman of the listing committee, over one of the most troubling episodes in Hongkong's recent commercial history - the Growth Enterprise Market (GEM). The fact that the GEM index has fallen 60% since its launch might be attributed to bad luck and bad timing. But it is much worse than that.

Dr Lo presided over a GEM which handed out rule exemptions that paved the way for some of the biggest share ramps that this territory has ever seen. The public were repeatedly deluded by grossly exaggerated expectations of the cyberspace future. Principals, their friends and their collaborators in the broking and investment banking businesses got pre-launch shares and options at a fraction of the issue price. They then orchestrated the self-serving drivel which made quick fortunes for them at the expense of the public. Some of the GEM stock tales are worthy of the Carrian saga. The GEM in principle is a good idea. But instead of being used to raise money for idea-rich, cash short entrepreneurs it was exploited to make a few rich people, mostly in the property business, even richer. The boom and bust in the prices of the likes of Tom.com are not going to encourage investors to put money into real venture capital projects. Dr Lo is an articulate person and known as a competent administrator, but the way that GEM has been abused suggests that he is not the right canadiate for a publicly accountable office.

Not that the GEM is the only part of the market to have been driven by hype.. Pacific Century Cyberworks has not been far behind.in the race to create quick fortunes for insiders with handily priced options later unloaded onto a gullible public and venal or plain stupid brokers and fund managers. This is not just me talking. May I quote that level headed market columnist K.L. Law in the Sunday Business Post (September 24): "Hongkong has been through one of the most expensive games of financial pyramid selling ever seen. Think back to the early Cyberport days - the placements, the phenomenal price runs, the dreams. The monkeys were busy here"

Interestingly, the same day's paper carried a story of a teenager being charged with fraud by the Securities and Exchange Commission. He had used the web to spread stories that certain small companies were on the verge of riches, with share prices to rise by huge amounts. As the gullible readers of bulletin boards bought on this "news" he sold out. That seems pretty much what was going on here earlier this year, except that it was not teenagers but big brokerages putting out equally spurious claims for the future of Tom.com, PCCW etc under the guise of "research" backed by nothing but pie-in the-sky assumptions and breaking all known rules of stock valuation. But never expect Hongkong's SEC equivalent, the Securities and Futures Commission to do anything. The town is not too small. But the clique is too tight.  

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