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1. ICAC complaint lodged over Antony Leung's car

2. Cartoon

3. SME loan guarantee scheme a bad idea from the start

4. When money matters more than credibility

1. ICAC complaint lodged over Antony Leung's car
AMBROSE LEUNG and JIMMY CHEUNG, SCMP 17 March 2003

The car-buying controversy over which Antony Leung Kam-chung has offered to resign took a new twist yesterday when a police officer complained to the ICAC and accused Hong Kong's financial secretary of abusing his power.

The development came ahead of today's hearing in the Legislative Council, where lawmakers are expected to question Mr Leung over his purchase of a new Lexus shortly before he imposed a hefty increase on vehicle registration tax.

In a letter to Mr Leung on Saturday, Chief Executive Tung Chee-hwa criticised him for having "clearly breached" the code for principal officials under the accountability system.

The letter said what Mr Leung has done amounted to "gross negligence", and disclosed that he had offered to resign on March 10, an offer Mr Tung rejected, instead giving him a "formal criticism". On Saturday, Mr Leung made a formal apology for his misconduct.

Yesterday, a police inspector complained to the Independent Commission Against Corruption (ICAC), accusing Mr Leung of abusing his position for his own gain.

Speaking before meeting anti-graft officials, Bernard Lau Kwok-fai said Mr Leung should not be above the law. "The evidence shows Mr Leung might have abused his power for his own gain. It is not only a problem of integrity but he might also have broken the law," he said.

Separately, a group of activists, including Tsang Kin-shing, will also complain to the ICAC today.

At a meeting of the Legco constitutional affairs panel this afternoon, legislators in the opposition camp have vowed to try to find out why Mr Leung did not declare his interest ahead of the Budget on March 5.

But pro-government parties appear to be more sympathetic. The Democratic Alliance for Betterment of Hong Kong (DAB) said the incident did not warrant resignation, while the Liberals said Mr Leung had already shown his regret and had learned his lesson.

Democrat Cheung Man-kwong said his party might pursue the case by requesting the setting up of a select committee if it was not satisfied with Mr Leung's explanation. But Ip Kwok-him, vice-chairman of the DAB, said: "Looking at the present situation, I don't believe there is a problem of integrity.

"His crime is not so serious to warrant resignation."

Mr Leung angered the public after he was found to have bought the new Lexus 430 in late January before imposing higher taxes on luxury vehicles.

He later offered to donate $380,000 to charity, twice the amount of the difference in tax the Treasury would have reaped, but maintained that the car was needed to transport his newborn baby girl.

Mr Leung will be the most senior minister to be questioned over his integrity since the ministerial system was introduced last July.

2. Cartoon
SCMP, 17 March 2003

One is Goofy, the other goofed.

3. SME loan guarantee scheme a bad idea from the start
JAKE VAN DER KAMP, SCMP 17 March 2003

Here is a story about how to get your money back if you are a bank that has made a duff loan and are looking for ways to avoid taking the loss.

We shall call the bank Participating Lending Institution 1 (PLI-1). It had a problem with Company A to which it had an outstanding loan of HK$3.9 million and a HK$1.6 million overdraft. Company A stopped making repayments since March 1999.

In December 1999, PLI-1 applied to the government for a HK$2.9 million loan guarantee to Company A. This was approved, and later that month, Company A drew down the guaranteed loan even though PLI-1's credit assessment of Company A was "sub-standard".

One year later, PLI-1 informed the Treasury that Company A had failed to repay the loan and asked that the guarantee be honoured. PLI-1 was promptly paid HK$2 million from the public purse.

Yes, it is just another tale in the saga of Chief Executive Tung Chee-hwa's attempt to stimulate small and medium-sized enterprises (SMEs) by setting up a HK$5 billion loan guarantee fund for them. I cannot give you the names of the bank and the company as the Audit Commission did not reveal them.

But it was not the only such caper from PLI-1. A month after applying for this first guaranteed loan, it applied for another to Company D. It was a smaller guarantee, only HK$300,000, and Company D was in default on repayment within weeks. It took a longer time for PLI-1 to collect from the Treasury this time but collect it did.

The reason it took longer is that PLI-1 had to answer a few questions. It turns out, according to the Audit Commission, that PLI-1 had offloaded a restructured loan into the guarantee scheme. It should have been no surprise. PLI-1 had rated this loan as "high risk".

Then there was PLI-2, which not only offloaded an existing bad loan on to the guarantee scheme while purporting that the borrower was creditworthy but allowed the borrower to draw the money down two days before the guarantee was approved. Yes, PLI-2 collected from the Treasury.

PLI-2 did the same thing only months before, except on that occasion, it allowed the borrower to draw down the cash five days before the guarantee approval and it was a larger loan. The loan was just as duff, however.

It is water under the bridge now as the entire HK$5 billion in the SMEs scheme has been used up but the Audit Commission has nonetheless proposed guidelines to stop the likes of PLI-1 and PLI-2 from raiding our pockets in future should a similar scheme be attempted.

These guidelines are what you would expect. The relevant government departments should be wider awake to the danger of bad loans being offloaded into guarantee schemes, should keep an eye out for related party deals and should not pay cheaters.

They also miss the point. The real flaw in the SMEs scheme lay not in how it was carried out but in its conception. If the banks consider any particular SME a good risk, they will lend money to it. They are not short of the stuff. A special guarantee scheme therefore attracts bad risks.

It is the age-old market lesson. If you try to help any market with special measures that are not based on seeking a return on investment, that market will repay your kind deed by clobbering you over the head. The road to hell is still paved with good intentions.

TALKING OF GOOD intentions, the people who cobble international accounting standards together were undoubtedly well intended when they decided that property companies with freehold land need not book revaluation differences through their profit and loss (P&L) accounts annually but those with leasehold land banks should do so.

They forgot Hong Kong where property companies operate with long-term leasehold land. Thus we had Hongkong Land last year forced to book a revaluation deficit as a loss in the P&L account. What madness. The earnings performances of our property companies will take top prizes at international yo-yo competitions if this standard dictates how they be reported. Their P&L accounts would be utterly useless.

Fortunately, the Hong Kong Society of Accountants has finally recognised how silly this is and has announced that it will not comply. We go back to the old standard.

Revaluation differences will be reflected in the balance sheet but only go through to the P&L account when realised. What took you people so long?

4. When money matters more than credibility
SCMP, 17 March 2003

If cutting the salary of Hong Kong's most vulnerable workers by 11 per cent seems harsh, think of how it must look to outsiders.

Our wealth compared to other cities in the region marks us as superior in so many ways; now we are also being called greedy and heartless.

But the issue of reducing the salary of foreign domestic helpers signing new contracts by $400 a month from April 1 is not simply a matter of public relations and Hong Kong's overseas image. It is also one of allowing debate and discussion in a manner befitting the democratic society we like to think we are building.

Not for the first time has the government, its eye on a massive budget deficit, ignored its constituents. By deducting from the wages of domestic helpers and donating the amount to itself through a levy on employers in November, Chief Executive Tung Chee-hwa's administration has trampled on too many toes.

With so many people involved - more than 230,000 domestic helpers, a similar number of families and at least half a dozen foreign governments - debate should have been obligatory.

Perhaps the reason is because domestic workers are too often perceived as an underclass - despite their being crucial to the economic well-being of Hong Kong. Without their help, many families would be reduced to a single income or their children would be left unattended.

Their employment vulnerability is unparalleled. Neither their hours of work nor their living or working conditions are clearly stipulated by law.

Domestic workers come from the region's most needy countries - Indonesia, Nepal, the Philippines, Sri Lanka and Thailand. They are here because of lack of employment opportunities and high poverty levels at home.

In the case of the Philippines, the eventual annual loss of about $800 million in remittances will be a significant economic blow. With that hard currency being perceived as being stuffed into Hong Kong's coffers, it is little wonder Philippine President Gloria Macapagal-Arroyo is angry.

Only her government has so far questioned the decision, but her consular officials have foreshadowed the likelihood of others joining.

In court this week, the prince versus the pauper scenario will have the regional media glowering afresh. How Hong Kong deals with the challenge will be closely watched.

If Hong Kong deals with the matter of maids' pay as one of mere money, rather than thinking of the wider ramifications, it will become one of reputations. These take a long time to build, but can be dashed in an instant.

Attracting foreigners here is part of maintaining our international image. If we are so off-handed about the lowest paid, how will we be seen about those on higher salaries? Or how about potential investors and their feelings of economic security if rules can be so readily altered without discussion?

Quick decisions on domestic helpers' salaries - as with soccer betting - illustrates how money matters most to the government. Legislation on issues immensely more important to the well-being of our society - child pornography and the labelling of genetically-modified food are still languishing in the consultation stages, years after they were first suggested.

It seems the welfare of the women and their families from the poorest countries in Asia is also of less importance than the revenues that can be raised at their expense. Similarly, the countries they come from can be treated just as injudiciously.

Because of its insensitivity, however, Hong Kong may also eventually lose its credibility.