Featured Work, The Spectator, Hong Kong - Wed June 20, 2007

The scourge of Hong Kong

Every city needs a David Webb. Hong Kong, a heaving, sweating shrine to capitalism, cronyism and cartels, is lucky it has the real thing. Shareholder rights and corporate governance remain largely alien concepts in this former British colony, which is about to mark the tenth anniversary of its return to China. It sometimes feels that Webb, a former London investment banker who moved to Hong Kong for Barclays, is the only person who cares about the rights of small shareholders, or about checking the corrosive influence of the city’s all-powerful tycoons.

Lean and acerbic, Webb resembles a thin David Shayler, the former MI5 officer. He doesn’t do small talk, and stares at you with disturbing concentration. By his own admission, he’s a geek — in the early 1980s he co-authored instruction manuals for early Sinclair Spectrum computers. Yet he has become one of the most respected and feared players in a city that thrives on creative accounting, insider trading and the protection of vested interests — the very things that Webb has made it his mission to wipe out. And he has gained steadily in influence, culminating four years ago in his appointment as a non-executive director of the Hong Kong stock exchange.

How did it all happen? ‘There’s always been a bit of a politician in me,’ he says. ‘I hold strong opinions and like to make things happen.’ When he left investment banking in 1998, ‘I decided I wanted to benefit the community in some way.’ That involved the creation of a website — yes, ‘the Webb-site’ — which he uses to highlight dodgy financial disclosures by local companies. Hong Kong’s increasingly pro-Beijing media sometimes portray Webb as an anti-business crank, which couldn’t be further from the truth. In fact, the generally lazy local press leans heavily on his painstaking investigations, most of them done with the aid of a single assistant.

‘I’m pro-free markets and pro-business,’ Webb contends. ‘I don’t like government interfering in the economy …but I want government to intervene in price-fixing.’ Any expatriate here would agree that Hong Kong seems superficially to be a free economy, but is at heart a closed shop. The interests that prevail tend to be those of a coterie of wizened tycoons — including local billionaires Li Ka-shing, Lee Shau Kee and Cheng Yu-tung — who pander to Beijing and largely dictate the policies of Donald Tsang, the recently ‘elected’ chief executive of the Hong Kong government.

‘Cartels dominate the economy here, from cement to supermarkets to real estate,’ says Webb. ‘Yet half the people live in subsidised housing. In terms of local economic decisions, it’s the [property] tycoons that dictate policy. I’m not accusing anyone of breaking ICAC [anti-corruption bureau] ordinances, but it does create a culture of collusion.’

The Webb-site is something that every investor should explore. At first its sheer wealth of information is intimidating, but even non-Hong Kong residents will feel their eyebrows rising once they start to wade through the detail. Take the section called ‘Don’s Donations’, a list of contributors to Donald Tsang’s so-called election campaign earlier this year: despite the government’s decision to black out contributors’ addresses — ostensibly to protect privacy, but in reality to prevent the public from knowing who finances the chief executive — Webb’s team managed to identify Tsang’s new best friends. Of the HK$22 million (£1.4 million) raised by Tsang, HK$8.4 million came directly or indirectly from 15 of Hong Kong’s largest corporations. The patriarch of each family-owned firm, Webb found, had broken down his contribution into smaller chunks so as not to attract attention and then paid Tsang via a raft of family members or company subsidiaries. An example is New World Development, a conglomerate run by 80-year-old Cheng Yu-tung, who was estimated last year by Forbes to be worth US$5 billion. Webb found Cheng had donated HK$1.5 million to Tsang via 30 subsidiaries, each stumping up HK$50,000. More than HK$1 million was also donated by 21 individuals or directors connected to Cheung Kong and Hutchison Whampoa, two firms controlled by Asia’s richest man, Li Ka-shing, a 77-year-old worth nearly US$20 billion.

You may ask: so what? If Hong Kong’s top official does the bidding of the industrial titans who helped put him there, then the same could be argued of many other nations, even some in the developed West. Webb counters this in typically fluent terms, arguing that the corrupting influence of so much lobby money holds back important developments — such as real democracy. With so much cash to be made from preserving the status quo, and with local tycoons controlling the city’s power generation, real estate and media, who will ever try to push through change? ‘There’s a connection here between the lack of shareholder rights and the lack of progress on universal suffrage,’ says Webb. ‘Too many vested interests don’t want universal suffrage.’

There are many other gems on the Webb-site. Webb’s favourite is his investigation of Cyberport, the disastrous attempt to recreate Silicon Valley in Hong Kong, which was handed at a ludicrously low price to Richard Li, son of Li Ka-shing, by the latter’s friend Tung Chee-hwa — the city’s chief executive at the time. Then there is Li Junior’s wildly unsuccessful tenure as the head of local telecoms provider PCCW, which saw its stock plummet from HK$140 at the height of the internet bubble to less than HK$5. Webb is now working on a database, to be launched later this year, that cross-checks every director in Hong Kong against all their other interests — allowing users, in theory, to see where Hong Kong’s leading financial lights bury all the bodies.

Yet despite taking on these powerful interests, Webb has not only survived but thrived. His investigations sometimes make him money: he’s a very astute stock-picker. A local fund manager calls him ‘Hong Kong’s pressure valve…. Without him this place would be even more of a banana republic.’ A more sober appraisal is provided by a senior figure in Hong Kong’s financial community with government links, who admits that while Webb complains a lot, ‘he usually has a good point. To be honest, Hong Kong could do with a few more David Webbs.’ So could we all.

Read the full article online at www.spectator.co.uk/columnists/any-other-business/32560/the-scourge-of-hong-kong

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