EU Report Says Hong Kong Tycoon "Too Powerful"

Mary Swire, Tax-news.com, Hong Kong

30 October 2000

The Hong Kong government came under fire in a report released yesterday by the European Parliament in Strasbourg for allowing tycoon Li Ka-shing and his family to wield too much influence in the territory.

The report, presented by Euro MP John Cushnahan, expressed concern that the Li family dominates a large proportion of Hong Kong's private and commercial sectors as well as the stock market, resulting in unfair competition. It said: 'The influence of the Li Ka-shing family on Hong Kong business life has been the subject of criticism from a number of sources within Hong Kong itself. It has been alleged that this family's business operations account for somewhere between one quarter to one third of stock market capitalization and include such sectors as telephones, mobile telephones, electricity, supermarkets and property,'

Further criticisms levelled at Mr Li, 72, stem from the fact that the Hong Kong Stock Exchange has granted the tycoon a package of exemptions for the listing of his Internet company Tom.com. Although the government insists that this is not the first time that the exchange has allowed such exemptions, the report said 'if there is any substance to these allegations they have significant implications for EU businesses who either trade with or locate their Asian headquarters in Hong Kong.'

Li controls Cheung Kong (Holdings) Ltd and conglomerate Hutchison Whampoa Ltd. His companies own huge shares in the power, telecommunications, property, manufacturing, retail and ports industries. But it runs in the family - Mr Li's son, Richard Li Ka-shing is not one to stand in his father's shadow. Already the owner of Pacific Century CyberWorks, he bought the territory's largest telecoms company Cable & Wireless earlier this year. Furthermore, under a cloud of controversy, Li junior has been awarded a lucrative contract by the government to build the science park, Cyberport, without open bidding.

Although the judgements of the European Parliament carry limited force in the SAR, it provoked the Hong Kong government into a fierce response. Reminding the EU of its free market and minimalist intervention policies, the government retorted: 'all businesses, irrespective of their origins, are competing on a level playing field.' The Beijing-appointed chief executive of Hong Kong, Tung Chee-hwa, said: 'Hong Kong's economic freedom is one of the best in the world. It's the same or better than any of the advanced countries.'

With regard to Richard Li's contract to build the science park, the government insisted it was awarded in Mr Li's favour because he promised to 'complete the project in the shortest possible time and to shoulder all the costs and the risks.'

And a spokeswoman for the elder Li's companies said figures quoted in the EU report were incorrect. She claimed that his company's operations (Cheung Kong, Hutchinson, and Hongkong Electric Holdings) account for 15.23 per cent of the total market capitalisation of the stock exchange's main board and not a quarter or a third that the report had stated. But even 15 per cent concerns Mr Cushnahan, who said: 'it's a substantial holding ... when Hong Kong companies trade with us they do so in an environment where monopolies are not allowed. It's only fair that they do the same for us.'

The EU is not the only institution to criticise the government. The Far Eastern Economic Review this month revealed that the Beijing government is attempting to check Li senior's influence over Chinese ports because it fears that his port business is becoming too powerful. Hutchison, which already dominates Hong Kong's port, owns large stakes in the ports of Shanghai, Shenzhen and Xiamen.

Mr Cushnahan's report concluded that, unlike Europe or the US, Hong Kong does not possess antitrust laws. He argues that because the government has traditionally adopted a "hands-off" attitude toward businesses, it should now endorse a package of antitrust laws so that its trading partners can expect fair treatment.

Perhaps Hong Kong has become a victim of its own success. It is a city built on business in an environment that positively encourages intense corporate activity. As Hong Kong's richest and most prominent businessman, Li Ka-shing wields substantial power, and perhaps it was just a matter of time before the government attracted international criticism for allowing this to be the case.

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