Anywhere but in Hong Kong
David NG is bailing out. He's selling his apartment, quitting his job and moving with his wife and baby daughter to Canada. The boom years that lured the 32-year-old computer consultant back to his hometown of Hong Kong are gone. Now he sees no future in the city he calls home.

Debts to pay
In a city where businesses are struggling and bankruptcies are rising, one trade is thriving: debt collection. Hong Kong's 100-or-so debt-collection agencies have rarely been busier - and their tactics have never been nastier, as Sharon Yeung discovered earlier this year.

Shortly after moving into a new apartment, she was visited by a heavy, who demanded to see a man she had never heard of. "Don't try and hide him. I know he's here'', the visitor roared. After 15 minutes of verbal abuse, he stalked off with this parting shot: "It looks like your flat has just been redone. Be careful".

Yeung was caught up in a mess not of her own making. Actual debtors may endure non-stop abusive phone calls, jammed fax lines and threats of non-existent criminal penalties. None of this is illegal - yet. At the most extreme end, debt collectors have even torched homes.

Banks and lenders are turning to debt collectors in the face of a sharp increase in bad debts. The manager of the collection department of a lending company, who asked not to be named, said he sees 200 accounts a month in arrears at an average of $4,500. "We'll only see a fraction of that coming back", he says.

That doesn't stop debt collectors from trying, though. But at least debtors can take some comfort from a call by Hong Kong's Law Reform Commission to licence collectors and criminalise many of their harsher tactics.

Still, that's unlikely to have much impact just yet on the city's debt collectors. As the lending-company manager says, "They can expect to do a roaring business through the middle of next year and possible even longer".

He's not alone. Many of his friends are leaving too - one to Malaysia to start a business, another to Vietnam to explore some business opportunities. They all have something in common: They're educated, middle-class and - like 250,000 other Hong Kong people - hold passports from someplace else. They came in the mid-1990s for the opportunities that Hong Kong offered, but as this city of seven million struggles with an uncertain economic future, they are pulling up stakes and moving away.

"We can't see a future here," says Ng, who grew up in Hong Kong but moved as a teenager to Toronto with his family in the mid-1980s. "Sometimes my friends and I get together and this is all we can talk about. It's so depressing."

There's a deep sense of malaise in Hong Kong. The city that for decades embodied Asia's spirit of can-do capitalism now feels adrift - its economic future cloudy, its political leaders scorned. A recent survey by Mastercard International found people in Hong Kong are gloomier about the future than anywhere else in Asia.

As a result, many in Hong Kong's middle class are voting with their feet, moving to places like Canada, Singapore and, increasingly, China. That's hollowing out the city's educated, white-collar workers and widening the gap between rich and poor. Some argue that there may be long-term benefits. Just as it did in the past, Hong Kong is once again reinventing itself, this time as a city that's economically competitive with its mainland rivals. How long the process will take, though, is anyone's guess. In the meantime there's a lot of pain to be got through.

In some senses, Hong Kong has been here before: This is a city that was built by immigrants seeking temporary refuge. Hong Kong has twice before witnessed large flows of people fleeing political uncertainty: In 1949-50, they flocked here from the mainland in the wake of Mao's communist revolution; between 1987 and 1997, they left Hong Kong ahead of the handover from British to Chinese rule.

Moving on
Now, on a smaller scale, Hong
Kongers are on the move again. But this time it's economics, not politics, that's the driving force. Although Hong Kong has just technically come out of recession, a whole host of indicators continue to paint a gloomy picture. Unemployment is at 7.6%, down from a record high, but expected to rise again. Welfare payments are also at record highs. Consumer confidence is close to record lows.

Retail sales and property prices continue to fall and the city is now in its 46th consecutive month of deflation. An estimated 150,000 Hong Kongers are facing unrealised losses on their property investments. A recent poll shows approval ratings for Chief Executive Tung Chee-hwa, who heads Hong Kong's government, are hitting new lows.

Yet such figures can't capture the deep pessimism that has gripped the city. A better indicator is the other statistics that speak to the climate of despair. Suicide rates have never been higher while personal bankruptcies almost tripled to 12,407 in the first seven months of the year - also a record high. Crime is up, too: Robberies in the seven months to July were up 16.5% from a year ago. Divorce and domestic violence are also both on the rise, say social scientists.

"People are giving up and leaving," says academic Michael DeGolyer of the Hong Kong Transition Project, a long-term project that's monitoring the territory. "They are buying property outside the territory, they are killing themselves. The only way you can characterize it is that Hong Kong people are in despair at their own government."

Ellen Chai, a native-born Hong Konger, lost her job in May and is moving back to her adopted home in Canada. Like David Ng (neither Ng nor Chai, who both still have close family ties to Hong Kong, wished to give their real names for this article), the 50-ish executive secretary first emigrated to Toronto in the mid-1980s but was lured back to Hong Kong a few years later by the giddy boomtown atmosphere of the time. "In the 1980s it was an exodus. Everybody was leaving Hong Kong then," says Chai. "It's funny, all of a sudden in the early '90s the flood came back but now it's starting to flow the other way again."

Air pollution
Like other emigrants, Chai is leaving for several reasons. Job prospects are one factor, family is another - both her sons live in North America. Quality of life is also a concern - Hong Kong's worsening air pollution has taken a toll on her health. "My major reason for leaving is that my children are not here. Another thing is the pollution, and my health is not good," says Chai. "I still like the accessibility of everything in Hong Kong but more and more I'm really looking forward to the quality of life in Toronto."

To be sure, the emigration now taking place does not begin to rival the numbers that left Hong Kong in the late 1980s and early 1990s. Nor is the city depopulating: Foreign companies continue to set up their regional headquarters here and I50 mainland Chinese settle in the city each and every day.

But one thing is clear: Those who are moving belong overwhelmingly to the city's skilled middle-class. More than three-quarters of Hong Kongers working in China, for example, are either managers or professionals and 88% have a secondary education or higher.

According to Hong Kong's Census and Statistics Department, 190,800 Hong Kongers now live and work in China, mostly just across the border in Guangdong province - a 20% increase from three years earlier. Another 41,300 have taken up residence in Guangdong and commute into the city. Hong Kongers now also collectively own or rent some 218,000 residences in China - double the number five years ago.

But those figures may be too low. The statistics are over a year old and only measure Hong Kongers who still keep a residence in the city. Aware that the number may be far higher and growing fast, the city plans a separate census in Guangdong later this year. More recently, the Beijing Youth Daily estimated that up to 500,000 Hong Kongers now live and work in China.

Part of the reason for the exodus is that many of the city's middle-class, white-collar jobs are leaving, just as manufacturing jobs did in the 1980s and 1990s. As a result, Hong Kong is becoming increasingly divided between rich and poor. "In Asia, Hong Kong is among the worst in terms of income distribution," says Fernando Cheung, a lecturer at Hong Kong Polytechnic University's Department of applied social sciences. "It's comparable to the averages in places like Latin America or Africa. Certainly a Third World income distribution."

Lost competitiveness
One likely aspect of the future is that Hong Kong will have to restore some of its lost competitiveness, particularly with the mainland. "Quite clearly, cross-border flows of people have very much increased in intensity," says Hong Kong government economist K.Y. Tang. "It is not what is usually defined as emigration, but rather can be understood as closer economic integration."

Whatever it's called, in Hong Kong it's likely to mean continued price falls. That won't stop until the cost of living in the city begins to approximate costs in neighbouring Guangdong province - where prices are rising.

That may take a while. Currently, property prices in the border city of Shenzhen for a mid-range flat are around $I50 per square foot - that's at least half the going rate for Hong Kong. Salaries too are half or less of what they are in Hong Kong, though in certain clerical and accounting jobs anecdotal evidence suggests that the wage gap is narrowing fast. The middle-class, white-collar workers who are migrating north in search of jobs are also part of that adjustment process.

"I don't know what is going to happen, but basically you will see the cost of living continue to decline for most people in Hong Kong until we are more or less equivalent to the people in China," says Cheung at Hong Kong Polytechnic. "And at that point, the long decline will probably stop."
(These are excerpts of an article that appeared in the latest issue of the Far Eastern Economic Review.)

The need for new business paradigms
By Chandra Jayaratne
(The following are excerpts of a presentation made recently by the former chairman of the Ceylon Chamber of Commerce to The Sunday Times Business Club on the theme of peace and the private sector.)

The Private Sector Vision 2020 identified Sri Lanka as a nation where its multi-ethnic and multi-religious people will live in harmony, with peace, internal security, political stability and good relations with India, enjoying sustainable economic growth and a per capita income of not less than $ 4000, with those below the poverty line being less than 10 percent of the people.

Peace and development
The building blocks of this "House of Sri Lanka" are now beginning to be laid in a carefully planned manner and it is the fervent hope of a majority that political, religious, business, trade union and other leaders of society will extend their support to make this dream come true.

In the context of potential peace and development and the expectation of the private sector being the relied upon driver of the growth engine, the current business models and business paradigms are unlikely to deliver the desired returns for the local private sector, within a globalised open market oriented business environment.

Therefore the need of this hour is for the local private sector to actively seek sustainable growth and competitiveness, via new paradigms and new business models and this article attempts to catalyse a few thoughts, merely as examples of the opportunities available in some sectors of the economy.

In the trading sector, without waiting for wholesale/retail traders and direct clients being canvassed or calling the manufacturers and importers, can a new paradigm of toll free calling systems be introduced as a facilitator for enhanced trading?

New paradigm
In the technology related services sector can a new paradigm of flexi hours and home-based services support and leverage capability best, including the key resource group of professional women in child bearing age and those engaged in domestic chores?

In the industrial and commercial sectors, can we evaluate the option for a new partnership of employer-employee relations being built with consent outside the framework of labour laws and holiday laws, based on compensation packages genuinely leveraging effective gain sharing?

Can this regime, even the trade union check off be related to gain shares of employees, thereby gaining acceptance of the trade unions to the principle of gain sharing?

In the banking sector, can commercial and development banks be led primarily (with risk emphasis say of 75 percent) on estimated cash flows and assessment of markets and management capability and not on the basis of security of backing asset covers?

In the tourism sector, can we attract the high end focused segment of wealthy, elderly and professional classes of tourists, under the theme developed by the Ceylon Chamber of Commerce titled "Care Services", offering care of the mind, body and lifestyles?

Can we support this business model with similar operations in key western nations and high-end infrastructure facilitated apartment complexes in Sri Lanka? Similarly can we draw in high-end segments of knowledge and information seeking tourists?

Construction sector
In the construction sector can we compete with international contractors engaged in triple R and infrastructure related projects in Sri Lanka, by engaging Chinese/Vietnamese labour and deploy latest technology and develop capabilities to effectively compete overseas contractors?

To make Sri Lanka a maritime services hub can new alliances and business clusters invest and manage resources in network partnerships and provide a way forward for competitiveness?

Can we develop an additional dockyard at Hambantota or Trincomalee to cater to naval craft of Western nations?

Can our private sector extend business alliances even amongst their competitors, especially in the area of shared services thus significantly reducing transaction costs?

Can we leverage the resources of the sea for fisheries, aquatic plants and mineral exploitation, whilst enhancing the image of Sri Lanka as the pleasure crafts and cruise ship destination designated tourism flagship country in the region?

Cannot the private sector make genuine commercial enterprises of value addition to farmers and fishermen and the rural economy though market complexes with packaging, sorting, value addition and logistics facilitation services?

Cannot the plantation sectors meet emerging competition from China/Vietnam and also meet the expectations of labour, whilst at the same time improve the cost competitiveness, by converting plantations to smallholder crop based, facilitated and farmer managed business models, with quality support and conversion facilitations only being within the organised private sector?

Network alliances
In network alliances with Indian partners, can Sri Lankan business provide significant backend processing and office support leveraging the capability of youth?

May I remind the private sector entering this new paradigm led operating arena of some vision related commitment focus of what the former US President, Lyndon Johnson told the public in the context of a nation coming out of the Vietnam war.
"What matters in a new vision is:
* not how big but how good,
* not how much of wealth is created but how you created it,
* not how fast you go but where you get to in the end."

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