A tycoon warning for the world from Hong Kong

IF ONLY governments were run by successful businessmen, wouldn't that make them work far better? It's an interesting idea but one which could be quickly dispelled by a trip to Hong Kong which nowadays is run by a former shipping tycoon.

Those wishing to make the trip seated in the first-class compartment of an airline had better wait until the end of the week because from today many of the seats will be taken up by a gaggle of tycoons travelling at the Hong Kong taxpayer's expense to the first meeting of the chief executive's council of advisers (note that business-minded Hong Kong calls its head of government the chief executive).

Jetting in for the meeting are such luminaries as the media tycoon Rupert Murdoch, Karl-Hermann Baumann, the chairman of the German conglomerate Siemens, Cor Boonstra, the head of Royal Philips Electronics in the Netherlands, Maurice Greenberg, the boss of the insurance giant the American International Group, and Shoichiro Toyoda, the veteran chairman of Japan's Toyota Motor Corp.

Yes, there is no doubt that the chief executive, Tung Chee-hwa, who was formerly the head of the Orient Overseas shipping line, has gathered some of the biggest names in the global business community to advise him.

They are arriving a week after Mr Tung completed a round of meetings with groups of legislators. Without exception all those elected by a process of universal suffrage, a minority in Hong Kong's exquisitely rigged system, emerged from their meetings saying that Mr Tung had no intention of listening to them.

They have a point; the chief executive is impatient with local politicians who do little more than put up "political shows". He feels far more comfortable with the men (there are few women involved) of business. Yet the tycoons who have traditionally been such an enormous influence in the running of Hong Kong are restive. They may have Mr Tung's ear but they are deeply affronted by the temerity of elected politicians who criticise them for being mean during times of economic recession and for having too much influence over the government.

One of their number, a high-profile property developer called Ronnie Chan, moaned: "People used to say, before the handover: `The communists are coming.' But the local community are the communists." That was big news to most of the people who live here, the majority of whom are refugees from Communist China.

However Mr Chan's definition does not quite coincide with that of Karl Marx. He defines Communism as allowing the hoi polloi to have a say in government and to press it to implement policies that are not supported by the business community. The publicly stated opinions of the local tycoons are terrifying enough; in private they are even more Neanderthal in their views.

Having been drawn from this group Mr Tung shares their prejudices and is intent on running a government free of "political meddling". The crowning irony of this authoritarian, some say arrogant, style of government is that in laissez faire Hong Kong it has led to a far higher degree of state intervention than would even have been contemplated in Britain during the brief moments it was ruled by Labour governments which lacked the appellation "new" before their name.

In the wake of the Asian financial crisis Mr Tung's administration has plunged into the stock market and snapped up more blue chip shares than any other single holder of equity. In effect some 10 per cent of the market has been nationalised. As a result the stock market is far less liquid and far less attractive to overseas investors.

Before plunging into a share-buying frenzy, the government ordered a freeze on all land sales to prevent the property market from sliding into free fall - or, to put it another way, to help the big property developers from having to face drastic cuts in the vast profit margins they have traditionally enjoyed.

Whatever the motive for the government's action, it has succeeded in limiting the operation of the free market in two of the most crucial areas of Hong Kong's economy. The government says it acted to defend the local currency and to thwart speculators, previously known as investors when they were pouring money into the former colony.

The government acted as it did because it is led by people who think that they alone can fix problems. They do not trust the market to find equilibrium. And they certainly do not trust those elected by the people to have a say in how problems can be solved.

Mr Tung behaves much as he did when he was running his shipping empire and trying to rescue it from collapse in the 1980s. Like most Chinese companies, Orient Overseas is not famous for its democratic style of management. Decisions were taken at the top and handed down to the minions. When trouble hit the company Mr Tung mobilised his friends in the big banks around the globe. He thinks governments can be run in the same way, which is why he is such an interventionist.

The situation is exacerbated by Mr Tung's inability to realise that the people he governs expect to see him when a crisis emerges, and expect him to explain what he is doing.

In the less than two years since Mr Tung took control, Hong Kong has been hit by a series of crises, including a mysterious and deadly bird flu, poisoning of the seas and the worst recession in three decades. Mr Tung has led firmly from behind.

The people whom he is leading have no recourse to the ballot box to express their discontent. Instead sullen resentment is building and taking Hong Kong into uncharted waters as the recession deepens.

As Mr Tung's popularity ratings have steadily declined he has done what most failing governments do these days. A highly paid spin doctor has been appointed who will start work shortly. Mr Tung, meanwhile, has been prised out of his office and started getting out and about. He still gives the impression that he has better things to do. Fortunately, he is a naturally friendly man who is actually quite good out on the streets but doesn't understand why he needs to be there.

What Mr Tung's administration has proved is the unlikely truth that governments are actually better run by politicians, particularly those subject to elections that give them a constituency somewhat wider than a small band of tycoons who are not the ideal guardians of the public interest.

Stephen Vines is the author of `Hong Kong: China's New Colony' (Aurum Press, 1998)