Saturday, June 15, 2019

Hong Kong’s extradition bill will only drive businesses to Singapore and elsewhere

By Richard Harris

14 June, 2019

I am just coming up to 50 years in Hong Kong. I saw through 1997, and there’s a pretty good probability that I will see through 2047. That makes me a very connected observer of my city.

Last Sunday, a million people surged onto the pavements like the floods of a June rainstorm. In 1997, there was an air of hope and confidence in the special administrative region, thanks to the Basic Law.

It allowed Hong Kong to have many years of relatively independent development, interspersed with some increasingly frequent cack-handed interventions. Hong Kong’s troublesome insistence on defending its 155-year-old way of doing things has clearly irritated Beijing.

China has a very long memory and revenge is a dish best eaten cold. The seeds of the extradition treaty were planted 16 years ago in the failed enactment of Basic Law Article 23, the National Security Bill 2003.

That time, a mass march succeeded; the people’s voice was heard and the proposal was shelved. Beijing then understood that Hong Kong was a rebel province. It is payback time. The fugitive offender ordinance is unfinished business.

The extradition treaty was a god-sent opportunity to enact a law that will, as the Chinese idiom goes, “kill the chickens to scare the monkeys”.

There were a lot of chickens marching last weekend and the response by Chief Executive Carrie Lam Cheng Yuet-ngor to continue with enacting the ordinance regardless, has swept away the last vestiges of the authorities’ credibility.

That actually is not as bad as the news that has come out in private conversations with lawyers, bankers and businesspeople.

They have indicated that it is getting increasingly tough to do international business here.
Singapore is mentioned as a frequent competitor. A Singaporean friend said about their government: “They really have got their stuff together”. Although he didn’t actually say “stuff”.

The extradition bill has already damaged our reputation as a global money centre.
The Nordic Chamber of Commerce said that the fugitive offender ordinance “represents a major change to Hong Kong’s external legal and judicial arrangements” that sits uneasily with a “stable and transparent centre for commerce and trade”.

Businesspeople don’t stick their heads above the parapet — they quietly vote with their feet. People are moving their money out.

The Hong Kong dollar is bumping up against its weak limit against the United States dollar.

“Of course,” they say, “Hong Kong is absolutely fine — but why take the risk, I’ve got my money in US dollars just in case.”

Surprisingly, not everybody outside our borders realises that we are a global city with the rule of law, low taxes and a century of top-level business skills.
Or that Hong Kong is the one city that never sleeps, where you can get business done in record time. As my wife says, “Hong Kong is New York – but in colour.”

[But now, there is Shanghai, Shenzhen, Beijing
For the first time, I am seeing the most committed and loyal supporters of Hong Kong privately turn to Plan B.

Formerly diehard Hong Kong residents are looking at business resident visas in places like Malaysia, Singapore, Taiwan and Thailand – or just using their foreign passports.

“Good riddance!” you might say, but you cannot be a global financial centre without the globe. China is the sovereign power and if the authorities keep to their domestic hard line, we must expect Beijing to tighten its grip. Hong Kong’s autonomy is a bad example to the rest of the nation.

Yet, enacting such an open-ended law by fiat will only drive business to places like Singapore.

Hong Kong must have some process of assimilation with the mainland, but politics should not have to damage our wealth.

Forcing the bill through will be a blow to our much-envied stability and transparency but power means little if your citizens distrust and resent you.

Forcing it through will also lead to a counterreaction. There is talk of more marches; shopkeepers have closed stores to allow staff to protest. Economies run from the bottom up.

Soothing political words from the ruling classes who have lost credibility with the Hong Kong people will not support the economy or provide evidence of a better business environment in the future.

Yet it cannot be beyond the wit of those same authorities to be a little more creative about how to bring Hong Kong into the fold while safeguarding our economic future.

I am sure that when I finally see July 1, 2047, it will be an anticlimax. We will have fully adapted to our new sovereign.

The Basic Law will be a distant memory and Hong Kong will merely be the 14th largest city in China. It may be smaller if political restrictions hinder our reputation as the go-to place for international business in Asia.

Our unique characteristic, the one thing that only we can give away, is the drive and energy that Hong Kong people have to get things done.

That, I hope, will never disappear.



Richard Harris is chief executive of Port Shelter Investment and is a veteran investment manager, banker, writer and broadcaster, and financial expert witness.

[I feel for the writer, and the HK people.

But, why should Beijing care about HK's wealth (as the writer hopes)?

When HK's economy was 20% of China (in 1997), it was the goose that laid the golden (well, 20%) egg. And maybe then, China had more reason to care.

Today HK is less than 3% of China's economy. Shanghai, Shenzhen, Beijing, Guangdong are as prosperous if not more so. The rise and success of these Chinese cities without the SAR status meant that Chinese cities can succeed and prosper without democratic trimmings.

HK is an embarrassment to Beijing. Or rather, HK's continued prosperity while being an outpost of democracy in China is.

As HK is eclipsed by Shanghai, Shenzhen and Beijing, it ceases to be critical, and it's autonomy is simply irritating to China.

Even if the extradition bill is shelved, it would only be temporary. There is no commitment from Beijing that it would allow HK's democracy and SAR status to persist beyond 2047.

This protest, even if successful, would simply delay the inevitable. China plays the long game. It can afford to.]


Hong Kong tycoons moving assets to Singapore as fears rise over proposed extradition law
14 June, 2019

HONG KONG — Some Hong Kong tycoons have started moving personal wealth offshore as concern deepens over a local government plan to allow extraditions of suspects to face trial in China for the first time, according to financial advisers, bankers and lawyers familiar with such transactions.

One tycoon, who considers himself potentially politically exposed, has started shifting more than US$100 million (S$137 million) from a local Citibank account to a Citibank account in Singapore, according to an adviser involved in the transactions.

"It's started. We're hearing others are doing it, too, but no-one is going to go on parade that they are leaving," the adviser said. "The fear is that the bar is coming right down on Beijing's ability to get your assets in Hong Kong. Singapore is the favoured destination."
Hong Kong and Singapore compete fiercely to be considered Asia's premier financial centre. The riches held by Hong Kong's tycoons have until now made the city the larger base for private wealth, boasting 853 individuals worth more than US$100 million — just over double the number in Singapore — according to a 2018 report from Credit Suisse.

The extradition bill, which will cover Hong Kong residents and foreign and Chinese nationals living or travelling through the city, has sparked unusually broad concern it may threaten the rule of law that underpins Hong Kong's international financial status. Hong Kong's Beijing-backed leader, Carrie Lam, has stood by the bill, saying it is necessary to plug loopholes that allow criminals wanted on the mainland to use the city as a haven. She has said the courts would safeguard human rights.

Protests and violence forced an initial legislative debate to be shelved last Wednesday and it is unclear when they would resume to pass the bill.

Professor Simon Young, of the University of Hong Kong's law school, told Reuters that it was understandable that some Hong Kong residents might be considering moving assets out of the city given the little-noticed financial reach of the bill.

If the bill becomes law, it will be possible for mainland Chinese courts to request Hong Kong courts to freeze and confiscate assets related to crimes committed on the mainland, beyond an existing provision covering the proceeds of drug offences. "This has been largely overlooked in the public debate but it is really a significant part of the proposed amendments," Young said. "It may not have been overlooked, of course, by the tycoons and those giving them legal advice."


The head of the private banking operations of an international bank in Hong Kong, who declined to be named, said clients have been moving money out of Hong Kong to Singapore. "These aren't mainland Chinese clients who might be politically exposed, but wealthy Hong Kong clients," the banker said. "The situation in Hong Kong is out of control. They can't believe that Carrie Lam or Beijing leaders are so stupid that they don't realise the economic damage from this."

Lam's office did not immediately respond to a request for comment.

The amendments seek to simplify case-by-case extraditions to jurisdictions, including mainland China, beyond the 20 with which Hong Kong already has extradition treaties.

As well as removing an explicit block on extraditions to mainland China in the current Fugitive Offenders Ordinance, the amendments also remove the restrictions on the mainland from the Mutual Legal Assistance in Criminal Matters Ordinance, known as the MLAO.

According a recent Hong Kong Bar Association study, the MLAO allows foreign jurisdictions to ask Hong Kong authorities to gather evidence for use outside the city "and to render other forms of assistance, such as freezing and confiscating the assets of persons wanted for crimes in other jurisdictions".

Search, seizure and confiscation can involve cases with a penalty of two years in prison or more, compared with the threshold of seven years for extraditions under the Fugitive Offenders Ordinance, the submission notes. Requests can also be made at the investigative rather than prosecution stage.

The association notes that the mutual legal assistance amendments would "significantly strengthen the impact of the amended Fugitive Offenders Ordinance in relation to criminal prosecutions on the mainland".

Prominent commercial lawyer Kevin Yam said he was aware of high net-worth Hong Kong figures taking steps to move assets to Singapore as they matured or market conditions proved favourable.
"At this point I would say it is a steady trickle rather than stampede but is most definitely happening," he said.

Three other private bankers said they had received inquiries from clients about the impact of the bill, but had not yet seen the funds move.

Yam said few expected the bill to be widely exploited by Beijing overnight if passed, but it was creating a climate of deep unease, with the fear it could be used more liberally in coming years.

"It is great for Singapore," he said. "And such an own goal for Hong Kong."

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