Hong Kong has recently been named the most livable city in the world. This title not only sounds unbelievable, but also comes as an ironic reminder to those Hong Kongers who have recently took the street to protest against the viciously high price of properties, and the collusion between politicians and property tycoons in Hong Kong, rendering housing severely unaffordable.
The vicious high property price is undoubtedly a direct consequence of the government’s long-term policy on maintaining a high land price for fiscal purpose, but the collusion outcry definitely fans the popular speculation that the economy of this Special Administration Region is de facto ruled by the four major property tycoons in Hong Kong. By virtue of their riches, they command the attention of senior politicians in public office, to such an extent that policies are usually formulated with their best interests in mind and preference treatment or direct favoritism are granted to them from time to time either above the law or below the table.
In the 15 years since repatriation of Hong Kong to mainland China, starting from the first HKSAR administration under the First Chief Executive Tung Chee Hwa, up to the most recent term of government, there have been numerous allegations of favoritism, conflicts of interest and suspected bribery with property tycoons by public officials that lend credence to the above speculation. And the most recent one is the sensational bribery case announced last Friday, which is brought against former Chief Secretary for Administration, Mr. Rafael Hui in connection with several directors of Sun Hung Kai Properties (SHKP), the largest property developer of commercial buildings in Hong Kong. The latter has built a multitude of luxurious apartment estates, including the one at Leighton Hill, and has held controlling shares of two of the highest landmark towers in the Central Business District, the International Financial Centre and the International Commerce Centre which they built. Since the burst of the bribery scandal, the stock price of this developer corporation has dropped 15.5%, but still has a market cap of USD 31.6 billion.
It was once reported in a local newspaper that SHKP, together with Cheung Kong (Holdings), another major developer under property tycoon Li Ka Shing, are increasingly dominant in the development of new private homes, accounting for 70% of the market in 2010, with much of the rest of the market occupied by other large developer firms. To understand how these developers have managed to dominate the property development market of the land and built their empires of super riches, a closer look on some of the suspected cases of favoritism and bribery may shed some light.
Last Friday, Mr. Hui was formally charged by the Independent Commission Against Corporation (ICAC) along with the united Chairman of SHKP, Thomas and Raymond Kwok (henceforward called the Kwok’s brothers) and two other related parties for 8 counts of misconduct in public office, false statement and bribery, all focused on Mr. Hui in receiving bribes from Kwok’s brother totaling HK$ 34 million during his public office as former Chief Secretary for Administration, as managing director of Mandatory Providence Fund (MPF), and as the chairman of the steering committee on the development of western Kowloon, a mega project valued at USD 1.0 billion involving cultural facilities and real-estate development.
In the past decade, Mr. Rafael Hui has already been seen as a close friend and business associate of Kwok’s brothers. In 2003, after his resignation from the MPF Office, he set up a consultancy firm dedicated to providing political and economic consultancy services. The following year, while serving as a director of the Kowloon Motor Bus Company, a corporation under the SHKP Group, Mr. Hui was offered to live in a luxurious apartment in Leighton Hill which is worth about HK$ 150 million and apparently at the expense of the Kwok’s brothers. In 2005, Hui was invited by the former Chief Executive, Donald Tsang, his long-term alliance in the government, to become the Chief Secretary for Administration. But instead of moving into the official residence at Barker Road, Mr. Hui insisted to stay in Kwok’s luxurious Leighton Hill apartment. This insistence of maintaining a close tie with the Kwok’s brothers, along with the suspicion that he was granted an overdraft privileges at banks without collateral so as to maintain his lavish style of living (he is known as bon vivant in his circle), eventually aroused the suspicion of corruption.
In fact, since the beginning of this year, there has been some ominous sign of corruption. On March 19, the real estate sector was shocked by an announcement by the SHKP, revealing that its Executive Director Thomas Chen was arrested and investigated by the ICAC for breach of the “Prevention of Bribery Ordinance”. Subsequently, Mr. Hui was also temporally detained by ACIC for questioning along with the Kwok’s brother in connection to above investigation without charges. Last week, ICAC formally issued the indictment, charging that Mr. Hui accepted a consultant fee of HK$ 2.4 million and a free rental of a connected apartment at 20A & B of Block 6 of Leighton Hill during June 2000 to August 2003 period while he was managing director of MPF without proper declaration, and allowed himself to vote for the rental of the MPF office at public dispense in the First Phase of the International Finance Centre in the Central, which is the property of SHKP.
In addition, Thomas and Raymond Kwok were each charged with one count of offering advantages to a public servant, and Raymond was additionally charged with providing false statements, while Mr. Hui was further charged with two counts of providing false statements and engaging in misconduct as a public servant. Another charge of misconduct in public office involves his taking of HKD 3.0 million from SHKP while serving as the Chairman of the Steering Committee on the West Kowloon Development Board between June, 2005 and June, 2007. Furthermore, Rafael Hui was also accused of collecting a total of HK$ 17.475 million from Kwok’s brothers, Mr. Thomas Chan and Kwan Hung Shang for preferential treatment while he was the former Secretary for Administration during March, 2005 and June, 2007. And the last allegation of bribery amounting to HK$ 4.125 million was brought against both Mr. Hui and Raymond Kwok for making false statements on April 25, 2005. If a guilty verdict is rendered by the jury as charged, Rafael Hui would become the highest ranked government official in Hong Kong history to be put behind bar for bribery.
As a veteran senior government official for decade with close alliance with the former Chief Executive Mr. Tsang and other politicians, and as the “Master of Wits”, in the inner circle of the government bureaucrats, Mr. Rafael Hui has been a very influential figure in Hong Kong, while the Kwok brothers of SHKP are counted among the richest business people in the Special Region. The collusion of Mr. Hui with the Kwok’s brother undoubtedly has forged a vicious bond so as to dominate the Hong Kong property market. During the period Mr. Hui was in various senior public offices, it was believed that he had revealed substantial confidential information to his related parties with regard to government policies, internal planning on land sales and zoning, and accorded these parties preferential treatments in exchange of the favors and benefits he received from them.
In light of the dealings revealed in the SHK bribery case, the Hong Kong public would certainly recall the “Leung Chin-Man Event”. This event, still fresh in memory, is related to a controversial granting of an exclusion of a bus terminus in floor area calculation and a job offer to Mr. Leung from New World China Land two years after his retirement. The property developers involved this time are two other major developers, one being the New World Development (NWD), and the other Henderson Land Development (HLD). In the year prior to 2004 when Leung was former Permanent Secretary for Housing and Planning, he acted on behalf of the government to sell a never-occupied high-rise complex called the Hung Hom Peninsula, which was built under the Private Sector Participation Scheme project, for a below-market land premium of HK$864 million to NWD. The latter subsequently sold off half of the share to SHKP. In late 2004, the consortium announced the demolition of these buildings to make way for luxury apartments. Their plan was eventually withdrawn due to the huge public outcry against this needless destruction of “perfectly good buildings” to satisfy “corporate greed”.
Prior to this bargain sale, there is another case of suspected preferential treatment granted to property developer HLD, which had won a tender for a site in Sai Wan Ho for Grand Promenade with a land premium of HK$2.43 billion in January 2001. Six months later, the developer successfully applied for and was granted permission by Leung to exclude the public transport terminus from the gross floor area in its building plan. This exclusion was akin to granting HLD an additional 10,700 square meters to the project, doubling the number of apartments from 1,008 to 2,020, and resulted in lost revenue to the government amounting to HK$125 million. A 2005 Audit Report criticized Leung for having exercised his discretionary power before conferring with other government departments, thus handing to the developer additional revenue of HK$3.2 billion in exchange for a land premium of $6 million. Leung tabled a judicial review to justify his discretionary power and eventually forced the Government in May 2006 to drop the legal proceedings. The government drew severe criticism from the political parties for not pressing the case in court, despite of wide suspicion that conflict of interest was involved in Leung’s dealings with this and the Hung Hom Peninsula case.
The public outcry was soon proven well founded. In July 2008, Leung was offered a post as deputy managing director of New World China Land, a subsidiary of NWD. It turned out that after one year ‘sterilization period’ after retirement, Leung obtained approval from the Civil Service Bureau to take up employment with New World China Land. This job offer immediately provoked public uproar amidst widespread suspicion that it was a quid pro quo for the favors he apparently granted to NWD in 2004.
Controversies surrounded not only the suspicions of Leung’s own conflict of interest, but also of the insensitivity of the committee which recommended the approval for him to take up his new job with a HK$3.12 million pay packet in less than two years after his official retirement. Under public pressure, NWD announced on 16 August, 2008 that Leung had resigned from his post. Leung professed his “shock” to learn that officials had not considered his role in the Hung Hom Peninsula sale prior to granting approval of his job application, and said he would not be seeking compensation from the government, for its “inappropriate handling”. The Secretary for the Civil Service apologized for the poor handling of the case, which seriously undermined the authority and credibility of the Civil Service Bureau.
There are more precedents in favoritism towards property tycoons behind the scenes than meets the eye. One of the most conspicuous one is the Cyberport Project. This project has been conjured up to build a physical hub for information technology on 26 hectares of prime, sea-front land in Pokfulam, Hong Kong Island. The development was announced by Donald Tsang, then Financial Secretary, in his budget speech on 3rd March, 1999. In the days since, the government has been scrambling to justify the project and its decision not to allow a formal tender process for the development of the site, but to proceed into “detailed discussions with the company , i.e., the Pacific Century Group (PCG), from whom the idea originates”, as Sir Donald coyly described in his speech.
PCG is a private company controlled by Richard Li, younger son of Li Ka Shing, who is a long-time friend of Hong Kong’s first Chief Executive Tung Chee Hwa. The Cyberport project was described in the budget on March 3, 1999 as being a “HK$13bn development, mostly from private investment”. A statement from the Information Technology and Broadcasting Bureau (ITBB) the same day said “the Government will provide the site as its equity contribution while PCG will make a capital contribution of about HK$7 billion to the whole development”. From this one could infer that the government values the land merely at HK$6 billion, a valuation believed to be much lower than its fair market price.
Planning and budgeting details of the Cyberport project have been slowly emerging. Upon public disclosure, it turned out that over 75% of the developed area is residential, whereas the office space allocated for the Information Technology firms represents only 17% of the total. And the purported “shared facilities” such as “demonstration facilities”, a “media laboratory”, and “exhibition and trade show facilities” make up part of a small 18,000 sq. m. block which includes houses and apartments, so even if half of this block is shared facilities, it would only account for 1.7% of the development, amounting to a shared Laundromat in a housing estate! Hence, it becomes obvious that the so called Cyberport project is in fact a residential development project in disguise, and it was granted exclusively to the company of property tycoon Li Ka Shing’s son without any formal tender process.
How much the PCG group would stand to gain in this favoritism granted by the Tung Chee Hwa administration? According to one calculation offered in the Webb’s Report, it is estimated that the entire 26 hectare site, developed at a medium-density plot ratio of 5 times, would yield around 14 million square feet of space. At an accommodation value of HK $2,700 per square foot, this land, if sold in stages at auction for residential development, would probably fetch around HK$37.8 billion. This means that the 4.35m sq. ft. of residential space alone has a land value of around HK$11.8 billion if sold in the open market. In addition, the developers’ profit comes to another $7.8 billion. That’s a total of HK$19.6 billion.
Responding to accusations of favoritism prior to a meeting with other property developers on 17th March, 1999, Donald Tsang was quoted in the South China Morning Post as saying “we pride ourselves in being transparent” and in the same paragraph “there’s some misunderstanding. They [other developers] do not know what the conditions of the agreement are.” Right, that’s what Donald Tsang means by transparency. [ Earlier this year, Mr. Tsang, as the former Chief Executive to be on retirement, was himself suspected of accepting a series of privileges and advantages associated with several property tycoons and rich merchants.]
We do not know what impact the Cyberport project would have on the moral standard of other senior government officials upon witnessing such a blatant act of favoritism granted to Li Ka Shing’s son. Some may think the rich property developers are resources of advantages one could seek after retirement if similar favoritism could be accorded to them within one’s discretionary powder which comes with the public office, others may involve themselves outright with offering consultant services for financial gain so as to sustain a life of a bon vivant.
For sure, Mr. Hui and Kwok’s brother are influential figures in the local political and financial scenes. Yet despite of such background, the ICAC is bold enough to launch a series of decisive actions to search for evidence, carry out in-depth investigation for months and, ultimately make arrests, and formally press charges against one of the most corrupted former senior government officials in connection with a powerful property developer. As evidenced by the banner bearing: “Thank you, ICAC, for keeping Hong Kong Honest!” in the march by Hong Kongers last Friday upon hearing the formal allegation of Hui’s bribery case, the effort of ICAC in exposing the collusion of officials and property tycoons is highly commendable. Albeit some critics still complain of ACIC’s consistent exposure of corruption as tarnishing the international image of Hong Kong, most of the citizens regard its unyielding efforts to be upholding our core-value and confidence in our judicial system. In this regard, Hong Kong may be worth the title of being the world’s “most livable city”.