A veteran delegate to the National People’s Congress has hit back at a recent editorial by Nobel Prize-winner Milton Friedman, calling the American economist’s opinions on Hong Kong’s laissez-faire policy unwelcome and misguided.

Jonathan Cheng – Wednesday, October 11, 2006

A veteran delegate to the National People’s Congress has hit back at a recent editorial by Nobel Prize-winner Milton Friedman, calling the American economist’s opinions on Hong Kong’s laissez-faire policy unwelcome and misguided.

Instead of Friedman’s vision for Hong Kong as a free-market city on a hill, NPC delegate Victor Sit Fung- shuen said Tuesday, its success requires the opposite approach: a dose of Singapore-style government intervention.

“Even though Mr Friedman has won a Nobel Prize in economics, he has never understood Hong Kong,” Sit wrote in a combative letter to the local media.

Friedman, now 94 years old, has often extolled Hong Kong as a blueprint for a free-market utopia, most notably in a 1998 journal article titled “The Hong Kong Experiment.”

An editorial Friedman wrote for the Wall Street Journal last Friday, titled “Hong Kong Wrong,” lamented chief executive Donald Tsang Yam-kuen’s remark last month that Hong Kong had long abandoned its policy of “positive non-intervention.”

But Sit said Tsang is right to throw away that philosophy, calling a stronger government hand the only way forward for the development of the high-tech, legal, scientific and financial sectors.

Sit, a local delegate to the NPC in Beijing since 1993, as well as a professor at Hong Kong University’s School of Geography, argued that Hong Kong needs to lure more rising stars out of the private sector and into the government, and put them to work drafting innovative policies that will sustain Hong Kong’s prosperity.

If that sounds like a Singaporean- style model, that is exactly what Sit has in mind, saying Hong Kong needs to learn from its rival to move from an “export-oriented” economy to a more specialized one.

Sit acknowledged Hong Kong has thrived thanks to its history of hands- off government, but said laissez-faire was guiding its economy a century before financial secretaries John Cowperthwaite and Philip Haddon-Cave attached the “positive non-intervention” label in the 1960s and 1970s.

Sit contended the usefulness of a laissez-faire policy is gone – notwithstanding Friedman’s recent protests to the contrary.

“The misunderstanding that Friedman is stirring up could hurt Hong Kong’s international image,” Sit said.

When asked who is qualified to prescribe economic philosophies for Hong Kong, Sit said there are many experts available. “There are quite a lot of names – but not Friedman.”

Friedman could not be immediately reached for comment, but a local defender of the economist, free-trade advocate Andrew Work, called Sit’s comments “unbelievable.”

“How many bad ideas can you put together in one place?” asked Work, chief executive of The Lion Rock Institute, a local free-market think-tank. “It’s really surprising that anyone from Hong Kong would suggest we throw away the legacy of freedom that built us, and mimic the policies that have created one of the most repressed countries in Asia,” he said.

Sit’s ideas may be anathema to free traders, but may foreshadow shifts in that direction. Experts point to the partnership with Disney on Disneyland and its attempt to lure IT firms to the Cyberport project as examples of government involvement in the economy.

Sit may have the ear of the chief executive too. He said he had spoken with Tsang “more than once” about a more proactive government approach. “I think he understands me,” Sit said.