Hong Kong’s not-so-free market

Investment bankers, Wall Street traders and international entrepreneurs alike view Hong Kong as an oasis of free markets and laissez faire government. This may be true to some extent if you’re setting up business that targets markets outside of Hong Kong, but if you’re looking a capitalize on domestic demand, sucess is almost impossible because of the staunch oligopolies and monopolies. The Asia Times reports on Hong Kong’s ironic ‘free market’:

In what is routinely considered the “freest” economy in the world, an oligarchy of property developers sets supply and pricing. This applies not only to residential apartments but also to shopping malls, hotels, luxury serviced apartments and industrial and office space.

It suggests Hong Kong, rather than being a “free” society, is actually the domain of captive markets.

By any definition, a captive market is a market where very few actors exercise a monopoly. Captive markets – which imply scarce competition – yield immense profits, without relation to costs of production.

A way out for Hong Kong would be, of course, more competition. For two years now, the Hong Kong government has introduced a Competition Bill to the Legislative Council (Legco) – after a discussion that started in 2006. The bill went through quite a few amendments.

Albert Chan, legislative councilor (People Power), called the bill “toothless”. When asked why he cast an abstain vote during the legislation of the bill, Chan explained to Asia Times Online, “The scope of exemption of the bill is too large to be effective. First of all, the government or statutory bodies are granted full exemption of the law. More seriously, there is no legal limitation of market share to prohibit monopolistic control of the market. On the other hand, it will be very hard to collect evidence of price-rigging between oligarchic coalitions, which frequently happens in Hong Kong now.”

Chan stressed the most serious monopolistic control and oligarchic coalitions can be found in sectors such as the property market, petroleum and the telecom businesses. The current competition law, he insists, is unable to deal with these problems effectively.

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