Eldon-Online

Korea - Land of the Morning Calm

The western nickname for Korea has not proven so true in my house for the last couple of days, where my telephone has been ringing off the hook, ever since President-elect Lee Myung-bak announced my appointment as co-chairman of the special committee on National Competitiveness. It seems it is the first time a foreigner has been appointed to such a role, and let's not be coy, I am both flattered and honoured (not to mentioned somewhat amazed).

There will be many who ask why I agreed to take this on, and you may be sure that I asked myself the same question. I did not seek the role, and there is no compulsion for me to do so. I owe nobody anything, and I am beholden to no-one. I was rather amused, in fact, by a suggestion reported in the UK newswire Times Online that I might be able to influence the Korean regulators to approve an application from my former employer who wishes to invest in a Korean bank. It only goes to show that the commentators don't know me at all, and the comment from the regulator who said I would not influence them was absolutely right; I wouldn't dream of even trying. The piece, under the byline of Andrew Salmon suggested that I was "unavailable for comment". I think, on reflection, that about the only journalist from Korea who didn't call me yesterday was Andrew Salmon.

So, for those good people who swamped my blog site yesterday - and look like doing the same today - here are some facts (that might also correct some of those in the Times Online's rather inaccurate "potted" CV).

I am a career banker, who started out in 1964, left Britain in 1968 and who has worked and lived in a variety of Middle East countries as well as Hong Kong and Malaysia. I have been traveling globally on business since the late 1980s, and first started visiting Korea regularly from about 1992. I retired from the HSBC Group over two and a half years ago after an association of 37 years. I believe it was a mutually satisfactory relationship, but since leaving them I have got on with my life and have no association with them other than some shares and some friends. I live in Hong Kong.

I am independent, and always have been, sometimes to the dismay of others who wished I was more "flexible". I believe in fair play and get easily irritated by bullies (and by companies like Amazon.com who still refuse to answer my letters on identity theft (mine) - even though I have sent the recent letters earlier this month by registered mail - see "Up the Amazon (.com) Without a Paddle" posted 17 September 2007).

I first got to know President-elect Lee Myung-bak when I chaired the Seoul International Business Advisory Council (SIBAC). I found him to be a man with drive and vision. His views on creating Cheonggyecheon were being criticised by many people, it seemed, but having lived through some of the disruptions caused in Hong Kong by the creation of the Mass Transit Railway, I could see that there was a long term benefit to be gained by short term inconvenience. I believe that today the benefits of Cheonggyecheon are plain for all to see, and I expect Mr Lee has not finished yet.

I have no illusions (or delusions) of "guruhood". I am conscious that I am a foreigner with a remit to suggest ways in which Korea might become a more "acceptable" destination for foreign direct investment. Korea itself has to determine if this is what it wants. I have no magic, no crystal ball, but I hope I bring a degree of openness and objective thinking with no pre-conceived ideas or bias to a country with potential that in my view should be realised.

Hong Kong's Civil Service - or Secret Service?

"The civil service is ever changing, and reforms over the decades - and indeed over the last three years - have seen major advances in efficiency, productivity, cultural attitudes, client- awareness, commitment to higher standards of service delivery, intolerance of corruption and incompetence and - most important of all - commitment to the values of openness, transparency and accountability. "

The words above were spoken in April 2001 at a lunch given for then Chief Secretary for Administration, Anson Chan, at her final public speech before retiring from the Civil Service after a long and illustrious career.

It seems logical, to me anyway, that the qualities as articulated are right and proper, and that in the early 2000s were probably largely followed, despite the odd bad apple.

Fast forward, and I wonder exactly which part of "commitment to the values of openness, transparency and accountability" today's Civil Service doesn't understand.

This week saw a Dutch diplomat severely criticised (perhaps reviled would be more accurate) in both Hong Kong and Holland for actions relating to the apparent abandonment of a Korean child he and his wife had adopted 7 years earlier as a four month old baby. He was initially unnamed - but that didn't last too long. As reported in today's Sunday Morning Post on the matter of the diplomat, the chairman of Adoption United International said "This guy is in public office...he cannot hide behind the fact that privacy should protect him".

By way of contrast we now have the case of a senior civil servant in Hong Kong who, it seems, has admitted to having had extra marital relations - as a result of which he found himself as a victim in a blackmail case. Blackmail is wrong - no question from me on that but, as they say, it takes two to tango. His identity, however, has been protected by a court order, and there I do have a question. Just one.

Why?

I can, I think, understand why there may be occasions when the identity of a victim might be legitimately witheld but it was interesting to read the judgement of the trial judge who said;
"But Judge Chan did not fully accept Mr X's evidence, questioning the reliability of his claims that he went to the karaoke bar for the sole purpose of singing, and that he thought Hui's job was to help customers pick songs and to fix karaoke equipment. Mr X had said he went to the Mong Kok karaoke club to sing on October 21 because he was not feeling happy with his wife after he had taken her to work that morning.

"Why didn't he go home and sing at home in order to relieve his unhappiness?" asked the judge, recalling that Mr X had also told the court he sometimes sang karaoke at home.

Judge Chan also said Mr X could not have been so ignorant about the nature of Hui's job."

I am not going to cast moral judgements on the rights or wrongs of the affair, nor comment on the personal lives of individuals. There are plenty of others in Hong Kong who can and will do that, whether they live in glass houses or not. But if the unidentified blackmail "victim" was a man in the street, or had been stalked (caught) by members of some of Hong Kong's "racier" magazines, I do wonder whether he would have enjoyed the "protection" of a court order that seems to have been the luck of a member of Hong Kong's incorrupt, competent, open, transparent and accountable Civil Service.

Or is he so senior that he needs to be protected at all costs?

Islamic Finance - Hong Kong's Rôle

It has been said many times, and by many famous commentators, that you should never bet against Hong Kong, or its ability to re-invent itself. Probably first in the headline-writers prize in a category for "The Headline You Wish You'd Never Written" would be to Fortune Magazine in 1997 for their "Death of Hong Kong" headline, which prize they would probably have taken again in 2002 for a follow-up headline entitled "Who Needs Hong Kong?". Both stories can be found in a TIME Asia Magazine issue for June 2002, and even TIME themselves were not entirely sure about Hong Kong's future.

Well Hong Kong is still here and doing well, economically at least. But I must say that more than a few eyebrows were raised recently over Hong Kong's declaration that it intends to become a centre for Islamic Finance in the region. Indeed, so enthusiastic is the Government itself that the Chief Executive has declared his intention to lead a mission to the Middle East early next year.

But, the doubters ask, what makes Hong Kong believe it has the skills and wherewithal to undertake such an ambitious task? It has a Muslim population of about 1% of the total population. Malaysia, on the other hand, which has had rules and regulations for Islamic Banking in place for many years - albeit generally under-advertised - has a Muslim population of around 60% of its population. Even Singapore, which some months ago and with some fanfare similarly declared its intent to embark upon an Islamic Finance strategy, has a Muslim population approaching 20% of the total.

Lack of a potential market, and with established competition in place, I wonder just how much Hong Kong understand the difficulties involved in establishing acceptable Shariah Boards, which will be needed to approve the issuance of Shariah compliant products. While this might seem relatively easy on the face of it - I mean how hard can it be to gather a few Muslim scholars together to agree on product suitability - it needs to be noted that differences of opinion occur throughout the Islamic world. What might be acceptable in the pragmatic environment in Kuala Lumpur, is not necessarily seen the same way in Riyadh.

Given that Shariah laws are often a matter of "interpretation", then to say this is a complex undertaking for a largely non-Muslim country like Hong Kong would be an understatement. There are many differing viewpoints. (As an aside there was an excellent series of comments on the issues of Islamic Finance in a three part series produced by CLSA entitled "Islamic economics - Special report").

But, consider this. If you are looking for ways to further strengthen your foothold in international financial markets, you cannot ignore the needs of a growing market that is becoming increasingly sophisticated. If you use data on the growth of the Islamic financial markets such as that provided by one of my colleagues at the DIFC in a recent presentation, and if you realise that according to another colleague only about 20% of the world's Muslim population is actually aware of - and even less use - Shariah compliant products, you begin to understand that there truly is a potential market out there. And as a friend said to me the other day, you don't have to be a Muslim to use the products. If they generate a suitable return, then why not include them in your portfolio? How true.

So, from being somewhat sceptical when the initial announcement was made about the latest Hong Kong ambition, I now admit there could well be some benefits to Hong Kong if we pursue this goal. But we must do it well - and doing things well in business has not usually been a problem in this City.

And as for the Chief Executive's visit to the Middle East...I'm going too!

Tax Efficiency? - or, How To Spend A Penny

I had to laugh - but it was more in wonderment than mirth, and the alternative would have been useless!

I received a tax adjustment bill the other day for HK$1. Seriously, $1. No more noughts or other figures before the decimal point. No error in the bill.

Hong Kong's Inland Revenue Department, in their final review of my last tax submissions, had re-calculated the assessment they previously made of the tax I was due to pay. They decided that due to rounding errors (they previously rounded down, but this was rounded up) I was one Hong Kong Dollar short in my payment to them.

Being an honest and upright citizen (in my opinion, anyway), I clearly needed to ensure that my taxes were all in order and in addition, I believed the Inland Revenue was probably correct! No complaint - no argument, especially over HK$1.

Where the system did break down however, was in the nature of the demand for payment of my one dollar and the promise of dire consequences were I to contemplate non-payment of the sum required, including punitive interest charges on the outstanding sum. And I am sure it would not have finished there - I could see me being detained at immigration in a few months time for trying to leave the country with an unpaid tax bill of HK$1 and punitive unpaid interest charges amounting by then to another 9 cents.

Suggestions, in a best-case outcome (for me) that they might actually waive the dollar, or that they might like to add it to my next tax bill were studiously declined. No, it had to be paid by the deadline...or else.

So my dollar has been paid, by cheque, as requested.

Cost to the taxpayer, me included, for collecting my $1 without further demur, who knows? Contribution to the IRD clerical and management staff salaries for re-calculating and deciding to claim the amount I was short; cost of the many sheets of paper (no electronic methodology here) to advise me that I had short paid my taxes; cost to the Government for use of the postal services; cost to me of making the payment, including the stamp (HK$1.40); cost of the receipt; cost to the environment...and so on? Too difficult to calculate.

I am sure that I am not alone. I wonder just how many other people in Hong Kong's small tax paying community, receive bills for underpaid taxes for miniscule amounts. Sums which, when added together, would probably amount to less than the Government pay to an office cleaner in a year.

Maybe I'm wrong, but I somehow don't think my one dollar in underpaid tax will have covered much of the bill. If it did then clearly Hong Kong's tax collection system is much more efficient than I, and many others, would have believed!