INDIA: The democratic accountability which shareholders impose on businesses is absent from many enterprises in Hong Kong, reports Jasper Becker
When David Webb joins the crowd who turn up for the annual general meetings of Hong Kong companies, there is always trouble. How much are the directors being paid? Why is the company so slow to disclose its accounts? Are they diluting the shareholding?
The slight and politely spoken Englishman calls his work Project Vampire. It is vital, he says, to challenge Hong Kong's secretive tycoons whom many blame for leading the former British colony into its worst economic and political crisis in half a century.
"The stock market is no better than betting on the horses. Without reform the outlook seems pretty bad," he says, gazing out of his window at the Happy Valley race course. "The lead we had over mainland China is being rapidly eroded."
Recently the Hang Seng index has been hitting its highest levels for a year as the city emerges from its post-Sars depression helped by signs of a US recovery, but there is a long way to go.
As Britain handed over its seven million citizens to Beijing, there was a labour shortage. Local papers here were running stories poking fun at Brits who were turning up to hawk sandwiches round offices or work as navvies building the new airport on Lantau Island.
Now unemployment has hit 8.7 per cent, and no one is laughing, although they are smiling a lot.
The condescending rudeness of taxi-drivers and shopkeepers is gone and replaced by a sense of humility, if not desperation. The free-spending Japanese and Americans are not coming back. Although the hotels and shopping malls are filling again, now it those poor relations across the border who will soon make up half the annual visitors.
"Oh yes, they have a lot of money these days," Mr Yip, the waiter at the Repulse Bay beach restaurant said hopefully although the tables look desolately vacant.
Before the boom burst, Mr Yip ran his own seafood import company, but like so many other business in Hong Kong it went under. This restaurant still flies in fresh Irish rock oysters, red Tasmanian lobsters and mottled South African galoupa fish, but the days of high consumption are past.
Consumer spending has been falling steadily for the past 57 months. The crash came during the Asian financial crisis which started just months after the handover when Hong Kong refused to follow the other Asian tiger economies into devaluing.
The new post-colonial government of Mr Tung Chee-Hwa then directly intervened in the marketplace by propping up collapsing shares by using government money to become the biggest shareholder in the territory's leading companies.
When property prices began to fall, he stepped in to restrict land sales and abandoned a promise to build 80,000 new homes a year.
Taxes are low in Hong Kong because the government derives much of its budget revenues from land sales, but because China feared the British would ransack the territory before they left, they insisted that Britain should strictly limit land sales before the handover.
This drove up prices, creating a fantastic bubble that made housing unaffordable to most people. So the new chief executive sought to gain popularity by promising to build more subsidised housing to create more homeowners.
"When he suddenly reversed himself, the only ones who gained where the property tycoons," said David Webb.
Hong Kong's rigged property market turned developers such as Mr Li Kashing into some of the richest people in the world and with their fast vast fortunes they also dominate the stock market and almost everything else in the colony.
"I suppose, it is only logical that Tung should cater to their interests since they put him in power," he said.
The chief executive is elected by an electoral college dominated by these big magnates and, as the colony has lurched deeper into recession, he has found himself running a deficit which has ballooned so alarmingly large that Hong Kong's credit rating has been cut.
Even though property prices have plummeted, they are still outrageously high, pushing up wages and retail prices. A small two-bedroom flat costs Mr Yip 35,000 Hong Kong dollars (€4,500), still not cheap but much less than the 60,000 dollars (€7,000) he was paying three or four years ago.
By trying to cushion the fall as much as possible, Mr Tung has created an exodus of jobs. Manufacturing jobs moved across the border to the mainland, and now increasing numbers of people cross to shop or buy houses. Even Hong Kong's bar girls are being driven out of business by cheaper rivals on the mainland.
The lucky Hong Kongers cashed in before the handover and migrated to Canada, the US, Australia or Britain. Now a second exodus of professionals is under way as they migrate in search of better opportunities in Shanghai or Beijing.
Not surprisingly, those left behind, many of them caught in an equity trap where their property is worth less than their mortgages, are furious and deeply suspicious of Mr Tung's attempts to delay direct elections and ram through an anti-subversion law which would stifle any criticism of his government and the Chinese Communist Party.
Somehow the Sars crisis and the government's mishandling of it came to symbolise all the ills plaguing Hong Kong. And, of course, it has dented hopes of relying on high-spending visitors to resuscitate demand.
A Japanese management guru, Mr Keniichi Ohmae, advised the government last week to make Hong Kong some sort of Monaco or offshore banking and investment centre so mainlanders will come and buy property or shares.
It is already trying to make this happen, but it had always assumed it had a higher destiny: by relying on its superior legal infrastructure and accountancy standards to become China's premier financial centre.
David Webb, who spent years working as financial adviser for one of the big Hong Kong companies before setting up his own investment fund, thinks this reveals a dangerous complacency.
Most Hong Kong-listed companies, he said, are family businesses run for the benefit of the owners, not the shareholders.
"That's why there are no hostile takeovers, no outside discipline. Without independent directors on corporate boards, the owners don't care about the reputation or the price of their shares," he said.
By turning up at a.g.m.s and questioning how things are done, he has managed to organise a dozen shareholder revolts which have bolstered his campaign to improve the financial supervision and corporate management. This month Hong Kong announced it was going to introduce quarterly reporting but, as he pointed out, this is more than a year after Shanghai did so.
"China is tightening up its rules, and while there is still a long way to go, by the time they lift capital controls there, in say in five to 10 years, Hong Kong must be a lot better than it is, or it will left behind as a sleepy financial backwater," Mr Webb said.