SOUTH CHINA MORNING POST WEDNESDAY, FEBRUARY 25, 2009

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Hong Kong will need to make major changes to survive a new world economic order, write Joseph Cheng and Anthony Cheung

Frank Ching
frank.ching@scmp.com

Think big

Smarter power

t the recent meeting of the Group of Seven finance leaders in Rome, Italys finance minister called for a new world economic order and argued that while this might seem rhetorical it is a true goal we should be aiming towards. In support of this call, US Treasury Secretary Timothy Geithner agreed that we need to begin the process of comprehensive reform so the world never again faces a crisis this severe. At a Global Business Forum, held recently in Hong Kong, professional economists agreed that the global crisis will be severe, widespread, and unpredictable in its speed and shape. All this will lead to a protracted slowdown of economic activity worldwide, and a deep deterioration of confidence among investors, manufacturers and consumers. The emerging world economic order, and disorder in the interim, will be characterised by: much less independence for the financial sector worldwide; far greater government intervention and

Decision-makers need to set visionary and motivating goals that can lift the hearts and minds of the people

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oversight; tighter credit across all economic sectors; rising unemployment across all salary levels; further coupling of developed and emerging economies; increased protectionism; and a trend towards globally co-ordinated fiscal and monetary polices. Given these changes, can Hong Kong survive a new world economic order when it finally arrives? Traditionally, the citys economic prosperity has come from four major revenue sources: opportunistic property development; speculative stock market investment; entrepot cargo shipment; and, in recent years, financial services in support of mainland-related businesses. All this has been done within a macro environment, with the government expected to play a minimal role in economic affairs. Past wisdom and success no longer suffice to equip Hong Kong to meet the challenges ahead. Increased government involvement in economic planning and

oversight of financial institutions is somewhat alien to Hong Kong and will dampen opportunistic and speculative investment. The erosion of the citys position as both a trading platform of sourcing for mainland-made goods and a logistics hub for cargo shipments will further cut into its revenue base. Hong Kong people and businesses need to develop new capabilities to weather the storm and emerge as winners when the dust settles. Five major adjustments are necessary to facilitate fundamental changes and outof-the-box thinking. First, given such great uncertainties, companies need to be innovative; experience no longer applies. An innovation culture encourages people to be creative and rewards them when successful, but an experimentation culture goes one step further, by supporting and being committed to research-based creative endeavours, even if they fail. Hong Kong and many other Asian societies currently lack such a culture; taking risks that could end in failure are to be avoided. Second, as the worlds resources become increasingly constrained, coupled with the tightening of credit and increased oversight by regulatory bodies, future investment decisions will only be made after careful deliberation, not through speculation or opportunistic reasoning. A strong value-added commitment has to be instilled in Hong Kong business, with a dedication to value creation, rather than profits from transactions, as the primary means of securing returns. Third, we need to develop a cooperative competitive environment to replace the current self-centred, tribal mentality in the Hong Kong psyche. We should encourage partnerships with neighbouring cities and nations, to launch large joint projects that strengthen the regions global competitiveness. Fourth, we need new thinking about Hong Kong as a global city. Historically, it had benefited immensely from Chinas economic failure and subsequently its opening up and reform. Now, and in the future, prosperity has to come from mainland Chinas rise. Hong Kong must

not allow itself to be marginalised but should opt to integrate effectively with the mainland and play an active role in its modernisation. Hong Kongs international connectivity, and human and financial capital, make the city of great relevance to the mainland. The city should have global leadership aspirations, grounded in the richness of its human, capital and geographic resources. Finally, decision-makers, in both the private and public sectors, need to develop a proactive strategic mindset. Given its colonial history, Hong Kong has not been accustomed to thinking strategically. At a time of turbulent change, where there are no guidelines for what may come next, decision-makers need to set visionary

and motivating goals that can lift the hearts and minds of the people, as well as mobilise the necessary resources to create a better tomorrow. Otherwise, the new world order will arrive before we know it; and the opportunities will pass us by just as quickly, leaving Hong Kong lagging behind our competitors in the region, and the rest of the world.

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Joseph L. C. Cheng is professor of international business and director of the Illinois Global Business Initiative at the University of Illinois. Anthony Cheung Bing-leung is an executive councillor and president of the Hong Kong Institute of Education

uman rights groups criticised the way US Secretary of State Hillary Rodham Clinton approached her first trip to China. But she was right and Amnesty International and others were wrong. Mrs Clinton said that world events have given us a full agenda and, while other issues, such as human rights, Tibet, religion and freedom of speech are part of the Sino-US dialogue, there is a need to focus on pressing problems important to future peace, progress and prosperity for both countries and for the world. For indicating that the human rights issue will not be paramount at least not on this trip she came under fire from groups such as Human Rights Watch. Amnesty International said it was shocked and extremely disappointed that human rights will not be a priority in [Mrs Clintons] diplomatic engagement with China. In fact, she did not say that. She made it clear that human rights would remain part of the agenda but that the issue cannot supersede the importance of others, such as the global economic crisis and climate change. That position must be right. The Sino-US relationship cannot be held hostage to a single issue, regardless of its importance. And, at a time when the global economy faces a devastating economic downturn, it is only right that the US and China should focus their minds on tackling this problem rather than attacking one anothers human rights record. The same is true of climate change. This is a problem that affects every country and it cannot be properly dealt with unless the United States and China two of the largest emitters of greenhouse gases work together rather than be at cross purposes. It is fair to say that the worlds future could be at stake. Mrs Clinton was criticised in particular for saying, even before she raised human rights issues with Chinese officials, that we already pretty much know what they are going to say. That is refreshing honesty. The US and China have conducted a human rights dialogue for years, and Chinas position has not shifted. Yet, she was pilloried for being honest. Presumably, her critics prefer her to act hypocritically and pretend that dialogue on human rights will produce improvements in China. Raising human rights issues with ...................................... China has become routine and often the gesture is largely pro forma, simply so that a US or European official can tell constituencies at home that he or she had raised the human rights issue. But, inevitably, Chinese who have to go along with this play acting understand the hypocrisy of such encounters. This cannot possibly cause them to give human rights a higher priority in their national agenda. Instead, it confirms their belief that these foreign officials are hypocrites. In fact, on this trip, Mrs Clinton not only discussed human rights issues with Chinese officials, she met Chinese women who are directly working to improve the situation on the ground. The secretary of state spent an hour with 23 women working in law, poverty, health care and the promotion of gender equality, including Gao Yaojie, an 82-year-old Aids activist. Several women whom she had met in 1995, during a United Nations womens conference in Beijing, told her that grass-roots organisations had grown rapidly and are having an increasing impact on Chinese society. It is more likely that human rights will be enhanced in China through the work of such non-governmental organisations than through sterile dialogue. It was good that, in addition to discussing human rights with her Chinese interlocutors, she showed that she took human rights seriously by meeting these representatives. Time spent with these women was probably more productive than talking to officials. In the end, it is important to put things in perspective. China and the US need to work together to tackle global issues. If this happens, the world will be a much safer place. If it doesnt happen, then no amount of criticising is going to help.

It is more likely that rights will be enhanced in China through the work of NGOs than sterile dialogue

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Frank Ching is a Hong Kong-based writer and commentator

Other Voices A global investment tide to raise all boats

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Jeffrey Sachs The world has yet to achieve the macroeconomic policy coordination that will be needed to restore economic growth following the Great Crash of 2008. In much of the world, consumers are now cutting their spending in response to a fall in their wealth and a fear of unemployment. The overwhelming force behind the current collapse of jobs, output and trade flows, is even more important than the financial panic that followed Lehman Brothers default last September. There is, of course, no return to the situation that preceded the Great Crash. The worldwide financial bubble cannot and should not be recreated. But, if the world cooperates effectively, the decline in consumer demand can be offset by a valuable increase in investment spending to address the most critical needs on the planet: sustainable energy, safe water and sanitation, a reduction of pollution, improved public health and increased food production for the poor. The US, Europe and Asia have all experienced a collapse of wealth due to the fall of stock markets and housing prices. The downturn is so large that unemployment will soar in all major regions of the world economy. Households will gradually save enough to restore their wealth, and household consumption will gradually recover, as well. Yet this will occur too slowly to prevent a rapid rise in unemployment and a massive shortfall of production relative to potential output. The world therefore needs to stimulate other kinds of spending. One powerful way to boost the world economy and to help meet future needs is to increase spending on key infrastructure projects, mainly directed at transport, sustainable energy, pollution control, and water and sanitation. There is a strong case for global co-operation to increase these public investments in developing economies, and especially in the worlds poorest regions, including sub-Saharan Africa and Central Asia. The G20, which comprises the worlds largest economies, offers the natural setting for global policy coordination. The next G20 meeting, in London in April, is a crucial opportunity. The leading economies especially the US, the European Union and Japan should set up new programmes to fund infrastructure investment in poor countries. Japan, with a surplus of saving, a strong currency, massive foreignexchange reserves and factories without domestic orders, should take the lead in providing funding. Co-operation can turn the sharp decline in worldwide consumption spending into a global opportunity to invest more in the worlds future well being. By redirecting resources from rich countries consumption to developing countries investment needs, the world can achieve a triple victory. Higher investment and social spending in poor countries will stimulate the global economy, spur development, and promote environmental sustainability through investments in renewable energy, efficient water use and sustainable agriculture.

Hard-learned lessons in Hospital Authority cases

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Joseph Wong There are a number of lessons the government should learn following the recent release by the Hospital Authority of the investigation reports into hospital mismanagement. In the case of the Caritas Medical Centre, where a heart attack victim collapsed and died outside the hospital, the first lesson is about management accountability. We often associate accountability with political or policy decisions taken by ministers or their deputies. Sometimes, we fault frontline staff for failing to act in accordance with the established rules and procedures. But there is an important layer between the policymakers and the frontline staff the managers who devise systems and procedures, and ensure that staff deliver services efficiently and effectively. We can debate whether the punishment imposed on the Caritas chief executive and the accident and emergency head was light: they were barred from promotion and any salary increase for 14 months. However, the Hospital Authority should be commended for taking disciplinary action against its senior staff. This is a lesson for all senior civil servants. The accountability system imposes political responsibility on ministers and their deputies. But it does not exonerate senior civil servants from their management responsibilities. Following the Caritas case, the public will expect to see similar, if not harsher, disciplinary treatment for senior civil servants who err. The second lesson from the Caritas case is about the need to overcome the negative impact of the disciplinary system in the Hospital Authority and, for that matter, in the government on the quality of service. Currently, the system is based on a detailed set of rules and procedures with the aim of establishing whether a civil servant failed to discharge a specific duty. It implies they undertake unspecified duties at their own risk. Thus, the Caritas receptionist was found to be not at fault, as the procedure did not require her to help, such as by dialing 999. The procedure report on the missing babys body at Pamela Youde Eastern Hospital, I have no sympathy for the technician, in charge of the mortuary at the time, who lied about the incident. But I have grave reservations about the Hospital Authority dismissing him quickly apparently under intense public pressure without allowing him to first put up a defence. There are two lessons the government should learn here. The first is the need to strike a balance between speed and justice. The public will always want justice done quickly, particularly in despicable cases. But the accused should have the right to due process and natural justice. Second, there is a need to review procedures in the disciplinary system and shorten the length of time required for completing a disciplinary case. A review was carried out a few years ago, when I was secretary for the civil service. Though procedures were simplified, a case can still take a month or more to complete; this may fall short of public expectations. The Hospital Authoritys reputation has been badly dented by these two incidents. But at least they have given the government and the authority plenty to think about.

Can Obamas liberal experiment prevail?

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David Brooks We cannot successfully address any of our problems without addressing all of them Barack Obama, February 21, 2009. When I was a freshman in college, I was assigned Reflections on the Revolution in France by Edmund Burke. I loathed the book. Burke argued that each individuals private stock of reason is small and that political decisions should be guided by the accumulated wisdom of the ages. Change is necessary, he said, but it should be gradual, not disruptive. For a young democratic socialist, hoping to help begin the world anew, this seemed like a reactionary retreat into passivity. Over the years, I have come to see that Burke had a point. The political history of the 20th century is of social-engineering projects executed by well-intentioned people that began well and ended badly. These experiences drove me towards the crooked-timber school of public philosophy: Michael Oakeshott, Isaiah Berlin, Edward Banfield, Reinhold Niebuhr, Friedrich Hayek, Clinton Rossiter and George Orwell. These writers had a sense of epistemological modesty. They knew how little we can know. They tended to be sceptical of technocratic, rationalist planning and suspicious of topdown schemes to reorganise society. Before long, I was no longer a liberal. Liberals are more optimistic about the capacity of individual reason and the governments ability to execute transformational change. I am a great admirer of President Barack Obama and those around him. And yet the gap between my epistemological modesty and their liberal world views has become evident. The people in the administration are surrounded by a galaxy of unknowns, and yet they see this economic crisis as an opportunity to expand their reach, to take bigger risks and, as Mr Obama said on Saturday, to tackle every major problem at once. Mr Obama has concentrated enormous power on a few aides who are unrolling a rapid string of plans: to create 3 million jobs; redesign the health care system; save the car industry; revive the housing industry; reinvent the energy sector; revitalise the banks; reform the schools and to do it all while cutting the deficits in half. If ever this kind of domestic revolution were possible, this is the time and these are the people to do it. Yet they set off my Burkean alarm bells. I fear that, in trying to do everything at once, they will do nothing well. I worry were operating beyond our economic knowledge. I worry we lack the political structures to regain fiscal control. I can see why the markets are nervous and dropping. Its also clear were on the cusp of the biggest political experiment of our lifetimes. If Mr Obama is mostly successful, then the epistemological scepticism of conservatives will have been discredited. If they mostly fail, then liberalism will suffer a grievous blow, and conservatives will be called upon to restore order and sanity. Itll be interesting to see whos right. But I cant even root for my own vindication. The costs are too high. I have to hope Mr Obama is going to prove me wrong.

Following the Caritas case, the public will expect similar treatment for senior civil servants who err

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will probably be improved to cover this scenario. But this is not enough. Hospital Authority chief executive Shane Solomon was right to emphasise that staff should move from a rule-based culture to a service-based one. But public servants are so accustomed to following rules that it is more effective to promote a service culture by embodying it in the rules. For example, there should be a cardinal rule that can override other rules and regulations: in an emergency, particularly where human life is at risk, civil servants may take any action they consider most appropriate to help the citizen concerned. Conversely, they should not be held accountable even if their actions fail to achieve the intended purpose. Turning to the investigation

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Joseph Wong Wing-ping, formerly secretary for the civil service, is an honorary professor at the University of Hong Kong Contact us Agree or disagree with the opinions on this page? Write to us at letters@scmp.com If you have an idea for an opinion article, e-mail it to oped@scmp.com

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Jeffrey Sachs is professor of economics and director of the Earth Institute at Columbia University. Copyright: Project Syndicate

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David Brooks is a New York Times columnist