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An Interview with Donald Tsang, Hong Kong’s Chief Executive

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In late May, Donald Tsang, Chief Executive of the Hong Kong government, discussed some leading local issues with Robert Keatley, editor of the Hong Kong Journal, in a Government House interview. Among other things, Mr. Tsang said: a path to universal suffrage eventually will be found despite hesitation in Beijing, free election of the Chief Executive in 2012 may be possible, Hong Kong is making progress on its serious environmental problems, it will not be “sidelined” or bypassed by other Chinese cities economically, and its experiences with free market economics and governance can offer useful examples to China and other nations.

The text follows:

Q. Why are Beijing leaders so reluctant, so opposed, to a faster development of democratic politics here in Hong Kong—what are they worried about?

A. I’m not trying to delve into semantics about whether they are opposed to fast changes in the Hong Kong political landscape. There is a firm conviction in the minds of most people on the mainland, and in fact in a good sector of the people in Hong Kong, and experience elsewhere, that constitutional changes—except in a revolutionary setting—take place steadily, over a period of time. Unless you believe that a system is totally bankrupt, and is not producing a better life for people. Otherwise, in most cases, in Europe and America and elsewhere, it takes a period over which changes will take place to arrive at the final destination.

So when you say it’s not—I’m not trying to defend anybody; I’m just trying to look at it objectively—so when you say it’s not fast, in relation to what? To what other people have gone through, or to particularly successful democracies? Then you come to realize that we haven’t had an awfully long time since, first, the handover or, to be bit more generous, since the time when the British allowed us to dabble in this democratic movement.

So I think they [Beijing leaders] want to find the right formula, and agree on a right formula with ourselves in Hong Kong. And once that’s found, and I’m sure a pathway can be fashioned, we can just go through it and it might then take place very quickly. I’m not pessimistic. The real challenge is that the changes require a tripartite agreement in the Hong Kong constitutional framework. We need the Hong Kong people’s agreement and then the [central government’s] agreement—both looking at things through different parameters—and finally there’s myself as the chief executive, which is less significant because I just follow the majority view in this, provided there is a consensus being built up.

Well, I am optimistic also because the ingredients for change are here, in the sense that everyone agrees that we should change the present system which is not stable [and] is not conducive to effective government. We must find a formula that would lead us to a better life, and not one that would make things worse. We have seen democracy being grafted on certain places where it doesn’t work, and which leads to even bigger bloodshed and pain for other people. I’m not saying that Hong Kong would go through that, but I’m sure we would want a formula that will uphold and augment Hong Kong’s position as an international financial center, one that would be considered to be acceptable here in Hong Kong and on the mainland.

Q. But this is not a revolutionary community; it is stable and already well developed……

A. So we have to look at things deliberately, to look at things objectively. It is not a sovereign state, that is another thing. There is a sovereign consideration, how Hong Kong fits into the mosaic of the nation as a whole. It is unique already, but it is important that it stays there as part of the national fabric and not just splinter off into something different and foreign.

Q. Does that mean the center is afraid of the consequences, of influence across the border, if Hong Kong goes far ahead of the rest of the country?

A. Well, politically, definitely, it cannot tolerate Hong Kong becoming a sort of Taiwan claiming….

Q. But the issue of sovereignty is not on the table.

A. But if you look back on Taiwan’s evolution, it is getting further and further away from the center from the KMT time [when it was] espousing unification as the final goal…now into something very different. So the Chinese, and we ourselves too, look at things in a long time frame, and how it would be and how it might be worked out. But the important thing to remember is that we have a common objective: to achieve universal suffrage, and I believe that the sooner we get it…the more stable the government, the stronger the government will be at the end of the day. And I think this is universally accepted here and on the mainland as well.

But we have to come up with a formula. It is also true to say that we have to spend some time working out what sort of legislature we should have to attain this universal suffrage arrangement.

Q. It’s been suggested that there might be a universal suffrage election for chief executive in 2012, but not the legislature.

A. As far as the community’s wishes are concerned, there is common ground that universal suffrage election of the chief executive should be easier than going on whole hog for the election of the legislature. So the two events probably will not take place simultaneously, and we will have the election by universal suffrage of the chief executive first. That is not unreasonable in that the framework for the election is already clear in Article 45 of the Basic Law. But how we are going to formulate one for the legislature is unclear, and very few people are interesting in debating what it should be. That is the difficult part of it all.

I wouldn’t want to venture a time frame. But definitely from my point of view 2007 is not attainable; anything beyond that is possible. But we must be careful; it must be built on the tripartite consensus that I talked about.

Q. When you came into office, you talked a lot about the need for transparency and accountability. But now there seem to a lot of complaints about government by bureaucratic decree.

A. Let’s be fair, let’s be fair. Let’s talk about West Kowloon [scheduled to be the site of an extensive arts center]. That was started by (former Chief Executive) Tung (Chee Hwa) a long time ago. It went through an international (design) competition that was totally transparent. Then it went through a town plan…a town plan that was accepted a long time ago to make this a cultural headland. Then people had second thoughts about the mode of development. They accepted it at the time it was mooted because the economy was poor, but then fortunately (the economy) changed for the better and then people thought they had other options. The government followed the community’s wishes and started all over again. Now there is no question of dictation on the part of me onto the community; it is really following a consensus.

On Tamar [a central district waterfront site], it is even more unfair, if I may say so, in that we had the plan to build government headquarters there in 1998. That was put to the town planning board, and the plan was published for all and sundry to look at. It was agreed and accepted. Then it was challenged and put to a court, and the court endorsed the plan. Then it was re-challenged in the town planning board, and was endorsed again.

There is only a minority of the population, probably not more than 20%, believing that we should turn it into open pasture for sheep and all those other things—okay, I’m exaggerating—in a place in central where we believe we have a sufficient amount of garden around. In fact, the future development will be largely, largely, open space.

You must remember that the opposition is there; I recognize it. Some people believe we should never build again, and more people believe it is important for all, for the development of Hong Kong, for that piece of land…to be used fully….I challenge you to tell me where else on earth where such a decision has been taken over such a long time in open debate, open process. The people who are screaming now have all gone through the judicial process, gone though the town planning board. They failed because the majority of Hong Kong people believe they were wrong….

I cannot stop them from saying that, they all have the right to be saying so, but it doesn’t mean they are right. It doesn’t mean that the system has not been transparent, that we have not been open. There’s no dictation at all….

So we are not going to have the dictatorship of the minority here. And there are vested interests. I’m sure that people holding property in Pacific Place [a mall and office complex], or around the rim of Tamar, would not want any buildings blocking their views into the harbor. But that is very selfish, if I may say so.

Q. One thing that seems to of growing concern is bad air, the environment. Do you have plans to come to grips with this?

A. We have. In fact, the air is not all that bad. In fact, the air this year is better than it was last year, and last year was better than the year before. The air quality today is not inferior to Washington, DC, if I may say so. [Ed. note: By most measures, Hong Kong air is significantly more polluted than that of Los Angeles, which has the worst air quality of any major U.S. city.] But I’m really not complacent, and I know there is a lot of work to do. Not only in Hong Kong—in Hong Kong we have limitations on what we can do. We have now cleaned up our old vehicular fleet. We have two power stations to look at, and we have to make sure they are up to the mark.

But beyond that, it is all outside of Hong Kong. And on that we are working very hard with the mainland, particularly in Guandong Province. We have a joint plan—we are going to reduce all emissions by half by the year 2010. We are meeting that target. We are setting up monitoring centers in different parts of the Pearl River Delta—13 on the mainland and three, I think, in Hong Kong to monitor emission levels on a real time basis. And Guangdong has now put up a plan to turn Guangdong into a green province of China. They realize that a deteriorating air quality is an impediment to growth and economic prosperity. And I’m sure we can leverage that…and make sure we do even better than the goal we have already set. The goal we have set is not bad at all, but it doesn’t change things overnight.

Q. I understand that the [World Health Organization] is going to change its guidelines on air quality, and the gap will grow between the pollution levels of Hong Kong and what the WHO advises for health reasons.

A. Well, I’m sure we are going to meet whatever standards they put up. By Asian standards, we are not bad at all. We are better than Seoul, better than any of the mainland cities. I’m better than Taipei; I’m slightly behind Singapore, I’m behind Tokyo. I know about that and we work on that.

…I know there are [public health and economic implications]. I know that, I know that. But we must be fair when saying it is deteriorating. I’m telling you that air quality is better than last year, and last year was better than the previous year because of things we have done on the ground. For instance, we have now stopped all our taxis from using diesel, we have stricter controls on emission at all levels, and power companies are doing their part—but not enough. The major polluters now are the power stations.

Q. There’s a perception overseas that Hong Kong may be sidelined economically, that it is being overtaken. How do you respond to that perception?

A. Sidelined is an exaggeration, I would think. Hong Kong is changing all the time, and then areas would become uncompetitive and there are areas which become even more competitive. This is how big cities move upwards on the economic chain. How New York has changed, how we have changed. We have gone, for instance, from a place that relies very heavily on manufacturing to place where manufacturing comprises less than 5% of the GDP, and 90% involves services. Then obviously our manufacturing sector, looked at from a certain perspective, is marginalized.

But is that the whole story? Even in that very minor sector, although we now have a much smaller workforce in manufacturing, we own a lot of factories in the Pearl River Delta. Seventy thousand of them altogether employ 11 million people, for a total is that much, much larger than we would ever be able to do ourselves on our own. In other words, localization has been made use of by the Hong Kong people since way back in the 1980s, making use of the best comparative advantage of our neighbors to develop what we have now become.

In the case of what our role will be in the future, it is quite clear we are an international financial center. We are serving all of East Asia in the same way as New York is doing for the Americas, and what London is doing for Western Europe….if you analyze the economic composition of these three cities they are very similar—with 90% services and little bit of manufacturing and a bit of other things. This is what we do and that I think is what defines Hong Kong. Why is Hong Kong in a position to do that? Because of our legal infrastructure, because of our physical infrastructure, because of our geographical position and because of our specialization so far. And most of all, it is enshrined in our constitution, in the Basic Law, saying that we have to be an international financial center.

The ingredients making up that are being contested, are being challenged from time to time. But these ingredients remain our strong points … I’m talking about the rule of law, I’m talking about the freedom of movement, the freedom that people enjoy here, the totally level playing field, the total lack of foreign exchange controls and a very stable and clean government here. All these things are conducive to what we want to do. You may find some of the cities in Asia possessing some of these ingredients, but not the whole array of them.

Q. But there is a perception that someday Shanghai will sideline Hong Kong. You may not agree, but how do you deal with that perception?

A. It’s a perception that we all have to fight. That’s not the end of the world. I have been fighting since the 1990s that Hong Kong would sink on July 1, 1997 …. The perception is always there, but the important thing is where people put their money. When people trust Hong Kong more than they trust their own country, how do they express that? By putting their own money here….At any one time, there is more than HK$4 trillion moving around, finding a home here. The markets are liquid. Whose money? It doesn’t belong all to Hong Kong people, it belong to people of the world. Why do they put money here? Because they trust Hong Kong more than they trust their own governments, and they put in the money.

Q. I recently your speech in Hainan about developing an East Asian currency. Can Hong Kong take the lead in bringing that about?

A. Intellectually, yes. We have got a framework all worked out in our minds about how it can work. I think it will work. The question is that we need political will and determination, and an economic setting to make it work. Politically, it will never work unless the [Chinese] renminbi and the yen, the Japanese yen, are both in it. But the renminbi will not be able to be in this sort of an arrangement unless it is more or less fully convertible. Also, politically, (Beijing) will find it very difficult to go into the same monetary bed with Japan unless Japan has reconciled with what it has done in World War II. In fact, the perception in Korea, in China, in a good part of the world, is that Japan has not reconciled to what it has done in World War II in the same way that Germany has done in Europe.

Now I do believe that in the future, in the world of ours, there is no place for a small, independent currency. Everyone has to be very careful if you want to hold onto your own [currency]. Hong Kong behaves and is linked to the U.S. dollar, hence we are strong because we behave. We don’t incur debt, we balance our budget, we have a general balance of payments and we regulate our firms. There is no over-borrowing, things are doing well.

But you need to behave, and not everyone is like that. We have been pulled into the mire by what happened elsewhere in the region. For that reason, I will be on this campaign for the rest of my life because I know this is right for Asia.

Q. Short of this currency goal, can Hong Kong take the lead…..

A. We are taking the lead on the monetary side. Bankers and central bankers talking together shows we are taking the lead in this, we are maintaining a dialogue, we are taking a lead.

Q. What can Hong Kong teach China, what can China learn from Hong Kong?

A. It would be very dangerous for me to say we can teach anybody a lesson.
But I think that the way the market works well in Hong Kong would be something for any people to look at. Not only in mainland China but as well for India, for anybody, to look at how the market can work. Another thing is the determination of the government to remain small, and to do only the things which government must. It is something we are rather proud of, and people can draw lessons from that. But beyond that, I would be very careful.

Q. Someone from Beijing who has been involved in Hong Kong matters told me that China could learn a lot from Hong Kong about the organization of government.

A. Well, the civil service is one of the strongest and perhaps one of the most important legacies that the British have left with us. A level playing field for business, the rule of law and a strong and politically neutral civil service, these are our very strong assets that the British have left behind. I’m not saying that the civil service in Japan is anything inferior, but I’m saying that in Hong Kong it is something we are rather proud of. And it is a civil service that is not rampant in its own growth. It is self-contained and it understands its own position in the growth of Hong Kong.

Q. It is well paid and that can be important.

A. Oh, it is, it is. It is part and parcel of our having a clean government here. You cannot expect your civil servants to be totally clean when you underpay them, underpay your civil servants in relation to what the market is paying the rest of the community.

Q. The other thing cited as something China might learn was the public health system, even though you have some basic issues here to deal with.
The Chinese system has collapsed.

A. We are not all that great, either. We have a great system here which has been working seemingly well up to now. It is producing the longest-living population on earth. Do you know that? Life expectancy is the highest on earth, higher than that in Japan these days. It must be our air (laughs). We are doing a lot of soul-searching at the moment because it is getting to be very expensive, and it a non-contributory system. People forecast that the public health system will go bankrupt in about four years, five years time. So we have been looking at how it should be financed. We are very proud of what has been the end product up to now, but it’s costly. Hong Kong Journal

About the Interviewee
Donald Tsang has been Chief Executive of the Hong Kong government since June 16, 2005 when he was selected to complete the remaining two years of the term of Tung Chee Hwa, his predecessor, who resigned ostensibly for health reasons. He is expected to be elected to a full five-year term in 2007. A civil servant since 1967, most of his career has been concerned with economic and financial affairs; in 1995, he became the first Chinese to be named by the British colonial government to the post of Financial Secretary, for which he received a knighthood. He was promoted to Chief Secretary for Administration, the number two government post, in May, 2001. Mr. Tsang was educated in Hong Kong and at Harvard University, where he earned a master’s degree in public administration.

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