July 31, 2006
You are what you report

China's former president, Jiang Zemin, has written a travel diary amid much fanfare in the state-owned press...which seemingly includes the SCMP, given they have both a front pager with the stunning revelation that Beijing didn't want God Save the Queen playing just before midnight at the handover and another large article a few pages later lauding the tale of a Chinese President strutting the world stage. Mind you this is the same paper that every few months sends a report to Wanchai to report on the seedy underbelly of life in Hongkie Town. This time the intrepid Barclay Crawford braves Fenwicks and finds hookers selling coke. It's a difficult job:

Wan Chai does not sleep, and even at 1am on a Wednesday the first thing that strikes you in Fenwick the Dock is the swirl of humanity on the dance floor. The largely besuited crowd of drunk, desperate and dateless have long forgotten their wives or girlfriends at home as they gulp their drinks and cavort with women for sale from across Asia and, more recently, South America.

A girl dripping in makeup grabs your bottom, laughs and shows off her surgically enhanced cleavage beneath a tiny top. She is from Venezuela, her friends are from Colombia. She prefers Japan but there is money to be made in Hong Kong.

This may be Hong Kong, but you could be in Latin America judging from the row of tables filled with girls chatting in Spanish at this large disco at the bottom of the East Town Building in Lockhart Road. The girl in green tells you she only knows how to speak English un poquito - a little - but she certainly knows how to order her drink from the scowling bar tender - "tequila rock'n'roll".

You collect the $110 bill, of which she pockets about half, smiles, and asks whether you would like cocaine. "We have the best. Colombian," she says, eyes rolling back in her head, imitating the effect. She asks for $1,500 but you say you've only got $1,000 - the same price she whispered previously in your ear if you want to take her home.

A number is dialled, you make out "coca, coca" and the deal is done, the delivery is on the way. Britney Spears covering I love Rock'n'Roll blasts from the DJ's booth in what could be a cue to the girls, and she asks you for another drink - along with $1,000 for the cocaine.

But don't worry....
The reporter did not buy drugs for this story.
I'd still love to see his expense report for this story. And Fenwick's doesn't even have to pay for this kind of advertising...or was this done on a comp basis?

All of which leads to an interesting new news site set up by a few ex-Standard editors and Philip Bowring: Asia Sentinel. With competition like the SCMP, they should do well.

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[boomerang] Posted by Simon at 08:34
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July 28, 2006
Disease of the week(end)

Maybe this is what John Travolta had?

(via Three Shakes Shaky)

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[boomerang] Posted by Simon at 12:58
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July 27, 2006
Hong Kong's air

Two months ago Donald Tsang told us air pollution isn't that bad in Hong Kong. This week he's seen the smog and launched the Action Blue Sky Campaign, ironically on one of the most polluted days of the year. But the Don needs to stop this campaign immediately before he adversely affects our health. The unlinkable SCMP reports:

Despite the city's lifestyle and often choking pollution, its men live longer than those anywhere else on the planet and women's life expectancy is second only to those in Japan, a Japanese government survey has found. The average lifespan of a Hong Kong man is 79, ahead of Iceland and Switzerland with 78.9 and 78.6. Japanese men live for an average of 78.53 years.
Hong Kong women were second at 84.7 years, just behind the Japanese. Help your fellow citizens: turn your air conditioning up and let's celebrate with some dim sum.

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[boomerang] Posted by Simon at 09:01
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July 24, 2006
Great moments in economics

Hong Kong has three tunnels that join the island with Kowloon. The best located one is also the cheapest and thus extremely congested at all times of day and night. Meanwhile the two alternative tunnels cost more and are used far less. So in a startlingly example of stating the obvious, the SCMP blows the lid on an earth-shattering report the government has sat on:

An unpublished report by prominent academics claims that by manipulating Cross-Harbour Tunnel tolls during peak hour, congestion could be eased so much that harbour reclamation or a fourth tunnel would be unnecessary...An unpublished report by prominent academics claims that by manipulating Cross-Harbour Tunnel tolls during peak hour, congestion could be eased so much that harbour reclamation or a fourth tunnel would be unnecessary.
The estimate for a 4th tunnel is about HK$6.6 billion, give or take a cost blow out or two. What are the objections to this seemingly simple plan? It would be confusing, it would require consensus, it would pass costs on to public transport passengers, it's not feasible, people might slow down or speed up just prior to changing toll times...not one of these is a real objection. What's lacking is the political will to implement such a solution, even though our friends in Singapore managed to do so years ago.

It's not just economics, it's common sense. It won't happen.

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[boomerang] Posted by Simon at 12:58
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Photo of the week

We've found Edward's mum:


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[boomerang] Posted by Simon at 09:01
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July 17, 2006
More pap for HK, please

The Don sez: we are not united enough in Hong Kong, and need more of a PAP-type government along the lines of the one-party state in Singapore.

He seems frustrated with his lack of legitimacy and mandate to get anything done. Perhaps instead combining Hong Kong's tradition of civil liberties with the ballot box is the better solution, Sir Donald?

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[boomerang] Posted by HK Dave at 16:24
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July 15, 2006
Malvinas of the East

Reading an Economist article over the Falkland Islands brought to mind another ex-British colony, albeit with different circumstances:

Britain insists that, regardless of how many countries Argentina can line up in support, it will never discuss the sovereignty question with the government in Buenos Aires unless the islands' 3,000 inhabitants, who consider themselves British, request it. Tough talk from Mr Kirchner will only alienate them further. “We believe it would be morally unacceptable”, says a British embassy spokesman, “to force them to change their government.”
Anyone recall Hong Kongers being asked, especially those on the island and south of Boundary St?

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[boomerang] Posted by Simon at 21:42
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July 14, 2006
One step ahead

There's plenty of fuss over the new FIFA football rankings...thankfully the Big Lychee has only slipped one spot, down to equal 117th with Kenya and New Zealand, and just pipping the Palestine team. Unfortunately Singapore is a few places ahead of us at 111th and the glorious motherland is a heady 89th. Macau is 183rd, ahead of several other tinpot little countries such as Luxembourg, Aruba, Guam and the Philippines.


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[boomerang] Posted by Simon at 19:17
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At least we're not Singapore part 237,402

While it's easy to get carried away with the lamentable state of media in Hong Kong, we must always remember one thing: at least we're not in Singapore. Mr Brown is a popular Singaporean blogger and newspaper columnist. He's been writing for over 10 years. A week ago he wrote a seemingly linnocuous column titled Singaporeans are fed, up with progress! A humourless government press secretary then writes to the paper where the article appears accusing Mr Brown of sarcasm and distorting the truth (which is the point of sarcasm, but never mind) and of "exploiting his access to the mass media to undermine the Government's standing". So what does the newspaper do? It fires Mr Brown. Today is owned by Singapore Press Holdings, which is partly owned by Temasek, the Government holding company. From Wikipedia on SPH:

Shares in SPH are regulated by the Newspaper and Printing Presses Act of 1974, which requires all newspapers to be publicly listed into both ordinary and management shares, with management shares having 200 times the voting rights of ordinary shares and approval from the Ministry of Information, Communications and The Arts needed for any management share transfers. Past chairpersons of Singapore Press Holdings have all been civil servants, with notably strong links to Singapore's secret police, the Internal Security Department. SPH's current executive president Tjong Yik Min served as the head of the ISD from 1986 to 1993.
Needless to say, the humourless public servant mentioned above is the Minister of Information, Communication and The Arts' press secretary.

Cue Hemlock's Why Singapore is a pathetic place. As if to prove the notion, here's an excerpt from Mr Brown's post linking to Hemlock's piece:

After speaking to a lawyer, I decided to pull this [post], no point getting sued for someone else's rants. Singapore's defamation laws are very powderful and I am just a little guy.

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[boomerang] Posted by Simon at 14:47
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You don't own me

Today's SCMP reprints an op-ed piece by ex-French PM Michel Rocard on the Mittal takeover of Arcelor. Let's take a look:

The story takes place in France, Belgium and Luxemburg. But it is really a pan-European story, and in economic terms, it encompasses the entire globe. Mittal, the biggest steelmaker in the world, has gained control of Arcelor, the second-biggest, through what initially was a hostile takeover bid.

This is no mere corporate takeover; it is a conflict between business and social models. Arcelor, originally French and Luxembourgian but now predominantly Belgian, has a strong base in Brazil and operates throughout much of the world. It specialises in high-quality, special steel products designed for the most complicated uses. These products are purchased on middle- and long-term contracts, mainly by long-time customers. It depends very little on the highly speculative world market for raw steel, and its workforce is highly qualified and stable.

Mittal, by contrast, is a conglomerate that has come out of nowhere to become the world's leading steel company in a mere two decades. It did so by brilliantly consolidating and rationalising steel plants throughout the world. Its president is Indian, but it has no factory in India.

Like all good stories, we've got a setting and we've introduced both the goodie and the baddie. That mean upstart Mittal, which is lead by an Indian but isn't really Indian (what that has to do with anything is hard to fathom), is grabbing at that grand dame Arcelor, a company that was created through (gasp) a merger only 5 years ago.
Mittal is a strong but fragile company, for it is highly subject to the speculative waves of the global market for raw steel. It tightens costs and outsources work as much as possible, so its workforce is paid less than Arcelor's employees, and is less stable. Moreover, Arcelor represented a perfect takeover target: most of its capital belongs to diverse shareholders. The opposite is true of Mittal, where owner Lakshmi Mittal and his family hold over 60 per cent of the shares.
Can something be "strong but fragile"? Mittal got where it is by making more for less. This is a "bad thing". And poor, defenceless Arcelor was at the mercy of the predatory Mittal because it has lots of money-grubbing capitalists as shareholders. The horror.
The stakes are clear. Mittal has an obvious interest in gaining control of Arcelor to improve its global geographic balance, boost its market share in high-end steel products, and reduce its vulnerability to the speculative jolts that occur in the raw steel market.

Conversely, Arcelor has absolutely no interest in the success of this takeover. If it is led into a more adventurous strategy, its sustained policy of research and heavy investment in upmarket steel products may be weakened. Its workforce faces erosion of its advantages in wages and job security. This explains why the management, most of the workers and the unions of Arcelor refused Mittal's offer.

Actually, Arcelor's management accepted the offer. Why would Mittal's control lead to a decline in research and investment? Steel jobs and wages were under pressure already - the takeover will probably help protect many workers by bringing them into a more diversified, stronger company. Arcelor has every interest in the success of this takeover, just as Mittal does.
But Arcelor's shareholders have made their choice: the immediate profit offered by Mittal was enough. So the shareholders chose to cash in on a temporary bonus, taking a risk on the progressive erosion of the firm, and perhaps the end of its policy of focusing on high quality while treating its workers with respect.

This choice directly concerns more than 150,000 employees. Indirectly, it concerns all of us, for the choice made by Arcelor's shareholders is far from being an exception; on the contrary, it reveals the deep economic and social significance of corporate takeovers of this type.

The Arcelor shareholders made their choice in a legal, legitimate takeover, where Mittal offered them enough money to make them sell their shares. It's not a "temporary bonus" - it is a transaction just like the share trades that happen on every exchange in the world everyday, including in Paris. It is the fundamental right in a market economy that the owner of something has complete control over it. In the same way, each citizen has a right to vote for whomever they choose, temporary bonus or not. I'm not sure how Mr. Rocard has had access to the thoughts of every shareholder when they made their decision, but he was a Prime Minister, so maybe they have ways?
Where are our societies heading if company owners consider that quality is too expensive and that workers must be made insecure in order to make them less demanding? A system governed by such rules is prone to give rise to various social conflicts, and perhaps to violence. Above all, such a system is neither viable nor sustainable in the long run.

For this reason, it is dangerous to maintain the outdated legal concept according to which a company belongs only to its owners or shareholders. Indeed, in reality, the company is a community of men and women who draw their incomes from the same economic and technical venture. It would be prudent to adapt the law to this state of facts, and to give employees, too, a say in their destiny.

In the wake of this takeover, governments must address this gap in the law, as no society can afford to permit the economic system to continue its march towards indifference to the welfare and security of workers.

My emphasis. This "gap in the law" has been the foundation of modern capitalism, the world's most successful economic system. The idea that a company belongs to a shareholder is not just some legal nicety, it's the fundamental building block of the system. If everyone looks after their own self-interest, Adam Smith's "invisible hand" guides us to a place where we're all better off. There is another system where "stakeholders" are all considered owners of the factors of production - Karl Marx wrote about it. It doesn't have a good track record.

Above setting certain basic rights the less a government or economic system is involved in workers' welfare, the better. Ironically France is excellent proof of that.

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[boomerang] Posted by Simon at 09:02
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July 13, 2006
The Evil Train to Tibet?

I was quite amused by an article in the People's Daily today that expressed how China was 'soured and saddened' by Western press reports condemning the railway, not least from the Guardian newspaper in the UK. The funny thing is, they dredged up a report on railways in India, apparently from the Guardian a year ago, that had this to say:

"in India, nothing can link up the whole country but rail routes...­ From a broader sense, railways gives India a sense of unity."
Of course that is true also in a tragic sense this week. Now I've done a quick search of the Guardian website to find the article they reference, and I couldn't find it, so it's possible that this was not said, but I think it is entirely plausible given that I've read similar things expressed about railways in many other places.

The point is, I have to agree on this point with China. Why begrudge China's right to put a railway line in its own country? I think we must all be realistic and accept that Tibet, after over fifty years, is not going to be allowed its own independence by China. That being the case, why criticize a move that might help move at least a trickle of the economic prosperity enjoyed further east to Tibet? Some say that rampant tourism will wipe out what remains of Tibet's indigenous culture. But is that so that wealthy Western tourists can still fly up to Lhasa and, travelling a bit further, find some sort of Shangri-La untouched by time? Because there is no point trying to keep Tibet in stasis until some revolution somehow gives it back its independence.

If you travel to Germany, you don't expect, except on special occasions, Germans you meet to be wearing lederhosen. Does it make sense that we feel it's OK to want to expect indigenous costumes and historic poverty when we go to Tibet? Is it right for us not to want a railroad to a country, so that it remains too poor to afford anything except ethnic homespun?

'Free Tibet' is a pipe dream. The sooner people get over that and hope that people in Tibet can afford more opportunities, improved healthcare, safer roads, and more education, the better.

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[boomerang] Posted by HK Dave at 08:18
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July 12, 2006
Minority rights

Hong Kong is a city where the average punter is at best ignored when it comes to politics or money. For example: say you owned a telephone company. You bought into it when there was much hype over the future of the telecommunications and then proceeded to watch the guy running it destroy massive amounts of value thanks to a takeover of an old world telecom utility by a new-fangled internet/property venture (and no, I'm not talking about AOL/Time Warner). After watching the share price sink, finally there's a glimmer of hope when a couple of private equity types say they're prepared to pay a hefty amount for the company's assets. But these private equity types may pose a threat to national security by running the phone company, so Beijing makes its displeasure known. This is despite the share price sinking because the market (and world) has decided that old world telecom companies are being rapidly superceded by broadband internet, mobile phones etc.

Thankfully a local financier is ready to come to the rescue of the major shareholder in the company, buying him out and effectively gaining control of the company without having to launch a full takeover bid. The major shareholder, despite being the son of the richest man in the land, is so grateful to be out of the mess and feels so guilty he is even prepared to pay a special dividend to the minority shareholders who are again going to be stuck.

Here's the maths of the PCCW deal. Richard Li is going to pay a special dividend of around 35 cents a share to the minorities. The share price was about $4.80 before all of this fuss. Francis Leung is paying $6 for Richard Li's shares. The other bids were around the $5.60 mark. But $4.80 plus 35c gives you $5.15. The minority shareholders are at least 45c a share worse off under this deal. Francis Leung, on the other hand, gets control of PCCW without having to pay a takeover premium, without having to make an offer to all shareholders and knowing that at least two other parties value to the firm at $60 billion, as opposed to the $40 billion or so his purchase implies.

Somewhat unbelievably, Richard Li has effectively gifted about $20 billion to Francis Leung. And there's this mea culpa:

Li, PCCW's chairman since 2000, said he will step down from the post after Leung finishes paying his initial 30 percent, or HK$2.748 billion. "I think [Leung] will make a much better new chairman of PCCW because of his experience in finance," Li told reporters. "I don't think I have been doing a particularly good job."
PCCW shares went as high as $140 in the internet share bubble, and were $80 6 years ago, $15 5 years ago. No, Li hasn't done a very good job at all...except for getting himself out of his self-created mess. How frustrating to know someone is prepared to pay 50% more for your shares but are blocked because of false protectionist reasons - Li must be truly desperate to cash out of PCCW. It's not exactly a vote of confidence in the company's future from its current chairman and erstwhile major shareholder. And for all those who jumped up and down when CNOOC was blocked from buying an American oil company, welcome to the same thing in reverse.

What a fine day to be Francis Leung and a terrible day for PCCW minority shareholders. I wonder if David Webb will weigh in?

Update July 12th

Today's SCMP reports that somewhat bizarrely, the source of financing for Leung's purchase of Richard Li's shares is....Richard Li. The bankers are apparently not interested in financing the purchase, and given how high profile this deal is you can bet the banks would have all cast a close eye over the deal. But Francis Leung is not a silly man and obviously has an ace or two up his sleeve.

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[boomerang] Posted by Simon at 11:26
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July 07, 2006
Gweilos in their Paddies

Have any of you seen this ridiculous ad being shown on English-language TV: "Stop illegal cultivation" because illegal cultivation erodes hillside slopes.

While this is a perfectly valid message, the fact that government funds were being spent on English language television ads is ridiculous. I can't imagine the 2% of English speakers are major culprits in the illegal cultivation racket.

Are we talking about Lamma Island hippies growing their weed on hiking trails?

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[boomerang] Posted by HK Dave at 12:29
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July 04, 2006
Democracy's new saviour

The July 1st Hong Kong democracy march again did little to advance the cause. But the release of a summary of Regina "Article 23" Ip's thesis certainly will...so does that mean one person can make more of a difference than 57,000 (or however many marched)?

This week's must-read is from Roland at ESWN: the parachutist's adventure in Hong Kong. He points out how irrelevant the number of marchers is, and how bad a job the current democrat camp leaders are doing. And the fuss over Regina Ip's paper is simply proof of his thesis. Who'd have thought Ip would be the saviour of the democracy cause in Hong Kong?

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[boomerang] Posted by Simon at 13:16
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Scenes from a property bubble, Hong Kong style

City's biggest bank to flog its staff quarters on the Peak thanks to sky high valuations. But won't someone think of those poor bankers, left on the street? But I know someone who can help:In April, Hutchison Whampoa managing director Canning Fok Kin-ning bought a detached house at 37 Deep Water Bay Road for HK$350 million.

He must have some spare space in there somewhere.

Meanwhile, in the Twilight Zone, Regina Ip becomes a democrat. I've heard of a road to Damascus conversion, but never a road to Stanford...

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[boomerang] Posted by Simon at 11:30
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