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The Hong Kong lesson

December 12, 2012

The clearer the outlook for our future development, the faster and more efficient it will be for us to achieve. Every single task has to be planned this way in order to ensure better results. How then do we see our future economic development?
We dream of living in a nice, peaceful, green city that satisfies our every need such as healthy food, good quality commodities, better services and good public transportation. We aspire to become a country like Switzerland where rural life is well-suited to satisfying human needs and preserving the environment at the same time.If one imagines this dream in a different way, he or she would be disregarding the dreams of their children.
To achieve this dream of ours, we have to have education, knowledge and labor productivity similar to or higher than thosein these beautiful cities. It goes without saying that, in order to construct proper educational and solid infrastructure, we will need a great amount of capital as well asthe ability to create and manage it.
With the ultimate purpose of raising this capital, we are using the only source we have – our natural resources. We are mining our mineral resources with or without foreign cooperation and selling a half-processed part of it on international markets. Mongolians today are living in a historical era when our natural resources need to be converted into human capital and knowledge. We are therefore presented with a great opportunity to learn from the experiences of many successful countries in this globalizing world and should incorporate those experiences in own endeavors.

Hong Kong

One of these successful countries is Hong Kong -one of the world’s leading economies which accelerates forward faster and faster. Enclosed by the South China Sea, Hong Kong experienced a transfer of its sovereignty from the United Kingdom to the People’s Republic of China (PRC) in 1997. Since that time, Hong Kong has become a special administrative region of China. Until the year of 2047, Hong Kong will be China’s autonomous region under the idea of “one country, two systems.”
The Chinese government ensures Hong Kong’s security and conducts its foreign policy while Hong Kong on its own decides matters related to its legal system, police force, currency, customs and immigration policy and the appointment of its representatives sent to international organizations or events.
Hong Kong was only a village of 7,500 fishermen in the 1840s until the Europeans started to settle there and transformed it into a trade port.By the end of the 20thCentury, Hong Kong had become one of the world’s biggest financial centers. Its economy is dominated by the services sector and the government pursues a policy to minimize its involvement, build infrastructure that cannot be constructed by the private sector and ensures business efficiency and safety.
A total of 7,250 foreign companies are registered today in Hong Kong. The number of foreign companies operating in Hong Kong has been increased by 62.5 percent since 2001. Only 4.3 percent of them were registered in 2011. These companies altogether employ 388,000 people and have a wide range of operations such as foreign trade, sales, business and education services, brokerage and storage and distribution services.
The secret as to why so many companies from different countries are rushing to Hong Kong to establish branch offices or regional business centers is explained by Simon Galpin, the Director General of Hong Kong Investment Promotion. This Englishman stated very clear five reasons:(1) a simple, clear, vivid tax system with low rates, (2) a free flow of information, (3) advantageous geographical location, (4) a free port legal system and (5) rule of law and independent judicial system.
In Hong Kong, profit tax is set at 16.5 percent and all taxes combined cannot exceed 15 percent of salary. There are no VATs (value-added tax), no sales taxes, no mortgage interest taxes, no dividend taxes and no taxes on importing wine. Therefore, many companies (especially parent companies) centralize their operations in Hong Kong.
Hong Kong was ranked the first in the world in terms of competitiveness and economic freedom in 2011 and in 2012. Also, according to the ease of doing business index, Hong Kong was placed in second place in 2011 and in 2012. Furthermore, Hong Kong became the third best Asian city for expatriates to live after Singapore and Kobe in 2011.
With a population of 7 million, Hong Kong’s GDP per capita is USD 37,000, which ranks at 25th place in the world. Twenty one percent of their public budget is spent on education, 16 percent on health, 15 percent on social care and 13 percent on supporting businesses. Hong Kong’s foreign-exchange reserves reached USD 301 billion in the third quarter of this year.
In 2011, 41 million people, 28 million of which were from the mainland China, visited Hong Kong and, during their stay, every one of them purchased goods and services worth USD 1000 daily. Also, each year foreign capital worth USD 84 billion comes into Hong Kong and 82 billion of it goes back to other Asian countries.We need to study the above-mentioned factors associated with Hong Kong which led to its rapid development and wisely reflect upon them in our own undertakings.

Urgent step

The most urgent thing that needs to be reflected upon in our case is the rule of law and independent judicial system – the two most vulnerable points of Mongolia’s development. Kh.Temuujin, the new Minister of Justice and Home Affairs of Mongolia, recently paid a visit to Hong Kong, which makes us hope that his visit will be different than previous ones and actually bring about substantial results.
Hong Kong and the United Kingdom have the same legal system. One of the five judges in the Supreme Court of Hong Kong is an Australian citizen. Any court procedure in Hong Kong is bilingual. All legal procedures evaluated on a scale of 1 to 10 (one being the best and ten being the worst), Hong Kong led Asia by scoring 1.42 followed by Singapore (1.92) and Japan (3.5). If Singapore cannot decide a case with its own legislature, they use the British law. The democratic system is working efficiently in Hong Kong because they can ensure the implementation of law and have independent media and press.
For example, the press is talking about how unlikely it has become for Leung Chun-ying, the Chief Executive and President of the Executive Council of Hong Kong, to be re-elected because he broke down a wall in his home and carried out an unauthorized expansions, which violated construction laws. It was verified by several investigations and although he was sent three letters that demandedhe fix it, he failed to comply. Therefore, he will not be favoured in the next election because of the principle of equality before law. His contender from the opposition party stated that someone like Leung Chun-ying should not be leading public governance because, even though he cancelled the home expansion, his ‘words without action’demonstrateda profound failure of integrity.
Making home improvements is currently a personal decision in Mongolia. The above example reminds us how much has to be done with regard to matching the Mongolian government’s words with its actions. It also reminds us that we needintegrity even though it’s already become a common phenomenon to steal from public property, welcoming “government-born billionaires.” There is so much for us to learn from Hong Kong’s experience.
Hong Kong – Ulaanbaatar, November 29, 2012

Translated by B.AMAR

Short URL: http://ubpost.mongolnews.mn/?p=2214

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