Generation 40s – 四十世代

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Cold calling in Hong Kong is so out of control, it makes you contemplate murder

South China Morning Post
CommentInsight & Opinion
2017-05-05

Yonden Lhatoo is perplexed by the government’s reluctance to crack down on telemarketers, despite the public nuisance they cause

I don’t know if people remember any more, but it used to be the most annoying thing in the world to be “rickrolled” – clicking on a hyperlink online, only to be directed to a music video of British pop singer Rick Astley’s 1980s hit, Never Gonna Give You Up.

At least there was an element of humour in being pranked like that, but there’s nothing funny about receiving cold calls from telemarketers in this city, a scourge that sits well above being rickrolled in the global rankings of extreme irritants that make you want to strangle someone. I mean, what could be more infuriating than answering your phone while in the middle of something important, only to find some telemarketer on the other end of the line hawking products you’re least interested in.

It’s been a problem in Hong Kong for many years, but seems to be getting worse these days. I have a couple of apps on my phone to block nuisance calls, but the telemarketers bypass them with fiendish nonchalance.

Last week, while awaiting a call I could not afford to miss, I was ambushed by a saleswoman on the other end of the line and found myself swearing at her in utter frustration. She swore right back and hung up, leaving me to fleetingly contemplate murder.

But my personal experience pales next to that of a family whose allergy to telemarketers was shared online by a doctor. According to his Facebook post, a seriously injured car-accident victim required urgent surgery, but hospital staff seeking his wife’s consent had to make 18 calls to her before she picked up the phone. The caller ID number started with a “3”, leading her to believe it was the usual junk call that such prefixes have conditioned us to watch out for.

The incident has caused enough public concern to squeeze another commitment out of commerce minister Greg So Kam-leung to launch a public consultation on fixing the problem.

So, by the way, is the minister who has pretty much turned a deaf ear to the noise all these years, but was upset when the poor old privacy commissioner took the initiative to conduct a survey in 2014 that found nine out of 10 Hongkongers were bothered by unsolicited calls.

So complained that he had not been consulted, and questioned the validity of the study, although his own bureau a couple of years later found in a survey that 96 per cent of Hongkongers considered such calls a nuisance. And he still wants to “consult” the public first.

The fact is, Hong Kong already has a “do not call” register, and the millions of harassed citizens who have added their phone numbers to the list are protected by law from commercial electronic messages, including voice recordings. But person-to-person telemarketing calls are exempted.

And even if the register were to be expanded to cover cold calls, it would not filter out offshore callers. Having said that, it’s still made a difference in the US and Singapore, so why not here.

The government’s reluctance to take firm action stems from the prospect of an estimated 28,000 telemarketers losing their jobs. But at last count, 30 per cent of these jobs were outsourced to the mainland. The woman who swore back at me had a strong mainland accent, suggesting some office or shack across the border.

It’s a tough call, no doubt, but it’s hard to summon up any sympathy for people whose chosen profession centres on driving the rest of us nuts. The companies they work for should know that cold calls are no longer a cost-effective way of doing business.

I’m talking to you, lady with the potty mouth, and you, Mr Minister. Act now, or may the ghost of Rick Astley haunt you forever with the volume turned up to 11.

Yonden Lhatoo is the chief news editor at the Post

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From VW to HSBC, there’s a simple reason why so many CEOs fail to spot rogue behaviour

South China Morning Post
Business
ANALYSIS: CORRUPTION
2016-04-07

Stephen Vines

Information overload is making us oblivious to what’s often in plain sight

In the wake of practically every corporate or political crisis two questions are asked: First, was the person at the top aware of the problem and second, if so, what did they do about it?

The person at the top is key because there was a time when the “buck stops here” principal was thought to prevail. In other words someone was prepared to assume ultimate responsibility.

Nowadays the great panjandrums who run the world’s biggest companies get visibly agitated when asked to explain why things occurred on their watch. A case in point was the response of Stuart Gulliver, HSBC’s chief, when he was hauled before a British parliamentary committee looking into the banking crisis. Gulliver argued that he could not be held responsible for everything that went on in his bank: “Can I know what everyone of 257,000 people is doing?” he asked, concluding, “Cleary I can’t”.

More specifically questions were asked about whether Martin Winterkorn, the former Chief Executive of Volkswagen, was aware of an email dated May 24 2014, that specified “irregularities” with US emissions tests for two VW diesel vehicles. This memo was part of what VW described as Winterkorn’s “extensive weekend email”; one of the reasons proffered for why he may have overlooked it. Other internal documents, that subsequently came to light, suggest that VW went to some efforts to cover its tracks as the vehicle testing scandal mushroomed.

Responsibility is being dodged because those at the top insist they are suffering from information overload. This affects everyone, as the days are long gone when information distribution was more restricted and far lower in volume, consisting mainly of phone calls, possibly faxes and telegrams and big piles of documents. We are now bombarded by emails and other electronic messaging which, in theory, is more convenient and efficient but in practise may be producing a volume of information that is too vast to absorb.

There is a thin line between what those at the top need to know and what they are capable of knowing. However and understandably those at the top rarely get the benefit of the doubt when the brown stuff hits the fan and questions are asked about why nothing was done on the basis of previous information.

Why, for example did the Belgium authorities seemingly ignore specific warnings from Turkey about the terrorists responsible for the recent Brussels airport and subway atrocities? Did US President George W Bush read the 2001 security briefing warning about Osama Bin Laden’s determination to launch a direct attack on the American homeland, an attack realised in the 9/11 events?

It is always easier with hindsight to pontificate on what should or should not have been done. But, in this case, for example, was the Central Intelligence Agency warning sufficiently specific to provide a basis for action?

And what happens when more junior officials deliberately withhold information from their bosses? Tidjane Thiam, the relatively new broom at the top of Credit Suisse, says that staff in his bank’s market’s division deliberately withheld information about risky bets. No doubt his anger is genuine but there are questions to be asked about whether more probing questions should have been asked by the bank.

In almost all instances of vital information not being acted on in a timely fashion there is evidence that the information was sitting there waiting to be read but either as a result of incompetence, arrogance or straightforward neglect that information lay dormant.

The excuse of information overload is plausible but it seems to be part of that dreaded syndrome where people complain of being too busy to do this or that. The reality is not that they are busy but incapable of organising and prioritising their work. It may be a bit of a cliché but, in my experience, it sure as hell is the case that if you want to get something done, ask a genuinely busy person to do it.

There are many excuses for ignoring information or failing to take account of it but most of them come down to poor organisation. Just because we all suffer from information overload does not mean throwing up your hands and declaring, “I give up”.

On the contrary this proliferation of information is useful but will only be valuable to those who succeed in sorting out their priorities.

Sometimes there are good reasons why the person at the top is not informed of some vital matter but the health of all organisations rests on the idea that the buck stops somewhere. Life is not fair, so there will inevitably be a degree of unfairness when bosses are compelled to fall on their swords for events beyond their control. Yet fall they must because information overload is no excuse for ducking responsibility.


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Why is rent seeking so bad for competition, growth and freedom?

South China Morning Post
Business›Global Economy
2016-06-13

Richard Wong

Rent seeking is one of the core pillars of the study of political economy. Its use in economics is negative and denotes detrimental political and economic activity. Why is that so?

Under most circumstances, the owners of an input of production — land, labour, machines, and capital — will only be able to earn a normal profit (as opposed to a high profit) because competition in the market place will equalise their returns.

The only way for owners of an input of production to extract additional profit would be to cartelise and monopolise. The most effective way to do this is to lobby government to set up regulatory and legal barriers to market entry.

The process of lobbying government is a political process. Economists call such lobbying “rent seeking” because the objective is to secure economic rents that are higher than the normal profits obtainable by competing in the economic market place.

In the economic market, competition drives down costs and promotes innovation, because both incumbents in the market and newcomers can constantly challenge successful firms and individuals.

In the political “market,” the purpose of competition is often to secure government authority to limit market entry by newcomers so as to earn higher returns through cartelization.

The political competition that underpins this rent seeking creates not only a less competitive economy, but a more divided society and a less inclusive polity that curtails freedom.

Industries that are heavily regulated by government, where business has to constantly work closely with government, are much more prone to rent seeking. Building, construction, development, transportation, mining, energy, communications, and so on are often characterised by a high degree of government regulation.

Rent seeking is also more pervasive in less market-oriented economies because the government allocates a large share of the resources (or inputs of production) in society. Societies with big governments and planned economies have more rent-seeking activities and are less efficient and innovative.

China’s high economic growth rates in the past three and a half decades have been the result of curtailing rent seeking through reforms that limit the reach of government and expanding market competition, in contrast with the previous period.

A profoundly devastating issue in rent seeking is the dissipation of economic rent into the rest of the economy. This happens when individuals and businesses commit resources to lobbying government officials and politicians in order to secure higher rent seeking profits.

Such resources can take many forms – hiring lobbyists, launching an advertising campaign to influence public opinion, funding writers and opinion makers to drum up public support, organizing protestors or advocates, and so on – day to day politicking.

These resources cut into the higher economic rents to be gained if the lobbying is successful. There may also be competitors spending on their own rent seeking, as well as parties who lobby to prevent the creation of any such economic rents.

Spending on rent seeking efforts transfers income rather than creates income. The hired lobbyists, advertisers, writers, etcetera could have spent their time and effort in other more productive activities.

Professors Kevin Murphy, Andrei Shleifer, and Robert Vishny showed that the most devastating aspect of rent seeking behavior is that it creates incentives for individuals to choose careers specialising in rent seeking work.

Using enrolment in law studies as a proxy for rent seeking work, and enrolment in engineering studies as a proxy for entrepreneurial work, and applying that to a sample of 55 countries during 1970-85, they found higher enrolments of law students were associated with lower growth rates, while higher enrolments of engineering students were associated with higher growth rates.

One argument in favour of democracies is that in an open society, everyone can lobby government – the idea being that political competition could achieve a dynamic shifting balance of interests to limit excessive rent seeking. But in practise, few countries attain this balance.

If 100 businesses conspire to raise the price of a product by US$1 and one million customers each buy one unit of the product, then each business will earn US$10,000 but each customer will lose only US$1. The incentive for the 100 businesses to become organised and lobby government will be much larger than the incentive of one million customers to organize and mount a counter-lobby.

Furthermore the cost of organising 100 businesses is much smaller than organising one million customers.

Rent seeking harms economic growth by reducing competition and innovation. It leads to the wasteful use of valuable resources and talents in unproductive activities and invariably redistributes resources from large unorganised populations to small organised groups.

Rent seeking is not only bad for economic growth because most rents are ultimately dissipated, but it also produces divided societies and non-inclusive polities.


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To improve banking standards, bankers themselves must choose ethics over short-term profit

South China Morning Post
Comment›Insight & Opinion
2015-04-16

Norman Chan

Norman Chan says while a sound regulatory regime is important, the best safeguard against yet another financial meltdown is for bankers themselves to choose to behave ethically

I was really encouraged by the implicit acceptance, in putting the thorny subject of ethical behaviour on the agenda of a banker’s summit, that it is primarily for the banking industry to seek to regain the moral and ethical high ground it once enjoyed. This is not something which can, or should, be regarded as a “policing” or “enforcement” matter for the regulator. Getting caught out, taking the fine as a “cost of doing business” and moving on with making money is just not acceptable as a sustainable banking business model.

I do not subscribe to the view that banks’ primary role is to generate maximum shareholder value, leaving the regulator to worry about the safety of deposits and the interests of the banks’ customers. Having a licence or franchise to take deposits, which represent the hard-earned savings of millions of people, and use these funds for private gain is a privilege conferred by society on a bank, which merits exemplary professional and ethical behaviour.

The theme of the summit is “Regaining the moral and ethical high ground”. What do we really mean here? I think, in a word: trust. With trust, comes respect.

In the past, banking was regarded as a reputable profession and bankers were highly trusted and respected. They no longer enjoy the same high degree of trust and respect from society, especially after the global financial crisis. What has changed so dramatically?

Well, the modality and governance structure of banking have changed a great deal over the last century. More importantly, these changes have created an incentive system that leads to a misalignment and disconnect between the interests of the owners of banks (that is, the shareholders), bank management and customers.

Not so very long ago, banking was a business conducted by individuals, families and (more latterly) private partnerships, where the owners and managers had ample “skin in the game”. They stood to lose not only their investments but also their family wealth should their actions, or the actions of their partners, result in failure of their bank. This naturally served to temper the degree of exuberant risk-taking. This “alignment of interest” between bank owners or managers and customers and creditors clearly helped promote trust.

That said, many commercial banks have been structured as public joint stock banks with limited liability since the 19th century. So if limited liability has existed for 200 years, what else has been at work to create the problems which surfaced in the global financial crisis?

First, bank employees’ time horizons have shifted. In the past, employees tended to be much more “stable” in the sense of their ties to a given employer. Nowadays, it is much more common for employees to hop from institution to institution to secure promotion or higher pay. In these circumstances, employees naturally identify less with the employing institution. They work at banks, not for banks. This is a two-way street, in the sense that banks, in their turn, can be very adept at severe downsizing if market conditions turn.

Business profiles and activities have also changed over time. Simple deposit-taking and lending businesses have been combined with investment banking, securities and capital markets, and even proprietary-trading activities, to form large, complex organisations, raising clear issues of cultural compatibility across businesses with very different objectives, time horizons and employee profiles. In an environment where near-term profits are highly prized and rewarded, it is all too easy to see how the more aggressive approaches introduced into the mix might prevail in shifting a culture from a client focus to one overly defined by financial performance.

Banks have also expanded from serving more limited numbers of wealthy customers to covering the mass market. Where once the local bank manager might have expected to know a significant number of his customers personally, now customer numbers are so large as to render relationship banking all but impossible. The result? Personal bonds are much weaker or indeed no longer created.

And what about their shareholders? The owners, now in the form of hundreds of thousands of shareholders, have only limited “skin in the game”. Their personal or family wealth, outside of their bank shares, is not at stake if the bank fails. So their perspectives can now be much shorter term.

This mindset is more pronounced among some asset managers and hedge funds. As these asset managers are rewarded on the basis of the annual valuation of their funds’ holdings, including bank shares, they have every incentive to push the banks to achieve higher profitability. So board directors and senior management were, and still are, under constant pressure to pursue higher return on equity. The result? Banks have no choice but to leverage up and take bigger risks.

So where do we go from here? While regulators clearly play an important role in influencing banking operations, it is really up to the industry to decide what it can and should do to regain the trust and respect that banks once enjoyed.

It is against this backdrop that the international community has sought to overhaul banking standards in the aftermath of the global financial crisis. While some bankers may think these reform measures represent a degree of overkill, the public sector firmly believes the current regime – in which bankers pocket huge bonuses in good times (or even in bad times) and the public sector, for fear of a systemic failure, comes to the rescue of troubled banks with a bailout using public funds – must not be allowed to continue.

So the choice is obvious. New regulations dealing with capital buffers, liquidity management, leverage, bankers’ compensation, ring-fencing of deposit-taking business from riskier operations and so on have been introduced.

However, regulators and regulatory measures alone cannot possibly redress all of the problems. There is no substitute for internal governance and controls that are designed to achieve the desired behavioural change across the entire firm. In this context, it is crucial that we have buy-in from the owners, directors and management of the banks.

Banks need to promote the appropriate culture, values and practices across the firm, which are to put the safety of the bank and the interest of depositors and customers ahead of the banks’ own commercial interests, just as bankers did in the past. Only when this happens will bank managers and employees change their mindset from “what can we get away with” to “what is the right thing to do”. Only when this happens can the industry regain the trust and respect that bankers used to enjoy.

Norman Chan is chief executive of the Monetary Authority. This is an edited version of a speech he gave on Wednesday at the Asian Banker Summit in Hong Kong


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Stability will only return when Hong Kong ends its property tyranny

South China Morning Post
Comment›Insight & Opinion
2014-10-15

Andy Xie

Andy Xie says Hong Kong must restructure its property market to help ordinary people – rather than milking them for the benefit of the business elite – if stability is to return

Sky-high property prices are the root cause of the ongoing social instability in Hong Kong. When the average household would have to put aside all their salary for 10 years to afford to buy the space for a bed – never mind eating and drinking, and other living expenses – or that incomes have grown by only 10 per cent in a decade, where is the hope for ordinary people, especially the young? Unless Hong Kong restructures its property market to serve the people, instead of milking them to the last drop, the city won’t see stability again.

Hong Kong has been run like a medieval city state. A business elite at the top has the dominant voice on how wealth and income are created and distributed. Hong Kong’s system encourages people to make money with maximum economic freedom and low taxes.

Tight land supply adds to the problem – often a result of hoarding by a few of the big boys. The banking system is structured to load people with a mountain of debt, which means people must work even harder to keep their tiny apartment.

The system worked when incomes were rising rapidly. When China was not fully open up to the world, Hong Kong had plenty of opportunities as a bridge between the two, and could charge a hefty premium for the service. After China joined the World Trade Organisation, those opportunities as a middleman vanished. Taxing people with ever higher property prices couldn’t work anymore. But Hong Kong’s system didn’t adjust to the new reality. The ensuing instability is hurting everyone. The city’s ruling elite, through uncontrollable greed, have done themselves in.

In contrast, Singapore has been run like a proper dictatorship. The system doesn’t do stupid things to hurt its ruling class. It focuses its greed on foreigners and distributes the spoils among the people through good public housing, quality education and health care, and a nice pension. Most Hong Kong people seem to like Singapore.

When you think about it, medieval city states like Florence and Venice flourished using the same policies. They used strong militaries to protect their trade monopolies and, sometimes, just looted others when opportunities arose. Because their ruling elite had the wisdom to distribute the loot among all contributors, their enterprises or scams lasted for centuries. Their luck finally ran out when rising nation states built bigger militaries.

Both Hong Kong and Singapore are leftovers of the British colonial era. They have enjoyed much higher incomes than their giant neighbours by arbitraging their inefficiencies. The business model is not so different from Venice or Florence centuries ago. As their neighbours change, they must adapt to sustain their income premium. Instead of building ships or making semiconductors, Singapore has switched to casinos and private banking. Maybe these businesses don’t smell so good, but they bring in the money to buy social peace.

Hong Kong hasn’t adapted. When the old model doesn’t work, the instinct here is to squeeze supply further. When the price is too high, let’s carve a flat into several smaller ones. Wouldn’t that make housing affordable? Hence, mini-flats have now become popular for speculators. But, even mini-flats are unaffordable. What’s next? Should people learn to sleep standing up or hanging upside down?

The usual excuse against change is that Hong Kong doesn’t have land. This is a big lie. Only 4 per cent of Hong Kong’s land is given over to residential use. There is the same amount of reserved development land, and big developers hold a considerable chunk of it. Singapore has been developing mainly on reclaimed land. It has a real physical shortage, but has kept public housing cheap and spacious. Land isn’t a constraint to Hong Kong’s development.

What stands in the way is Hong Kong’s ruling elite, a leftover from the colonial era, hanging onto the old model no matter what. Since they don’t have other sources of competitiveness, changing would mean the end to their privileged status. This is why meaningful change won’t happen through consultation among the elite. Some force has to impose the change. If Beijing wants stability in Hong Kong, it must focus on property, which means ditching its business friends.

In addition to artificially controlled land supply, interest rates play a role in the price cycle. But this confuses the debate. The interest rate cycle introduces volatility. So, if the US Federal Reserve raises rates to 3 per cent within three years, Hong Kong’s property prices may fall by 50 per cent over that time.

Yet housing still wouldn’t be affordable. When the price begins to fall suddenly, the debate will surely shift, and political support for limiting supply will return. Hong Kong could repeat the cycle.

Ruling Hong Kong requires a long-term vision, not the zig-zagging we’ve seen since the handover. During the Asian financial crisis, Hong Kong abandoned its expanded, but still modest, public housing programme, laying the seeds for today’s instability. Policy responses now should focus not only on short-term issues.

Andy Xie is an independent economist