Corporate Voting in HK Elections
28th November 2005

In the Government's proposals for electoral reform, it did absolutely nothing to abolish the small-circle corporate voting system used in many of the so-called Functional Constituencies (FCs) which comprise half of Hong Kong's current 60-member Legislative Council. The same corporate electorates also elect many of the members of the Election Committee (EC) which chooses the Chief Executive of Hong Kong. Indeed, under the proposals, 100 of the 800 new seats on the expanded EC would go to the industrial, commercial and financial sectors which are dominated by corporate voting.

Those FCs which allow corporate voting generally have very small 3-digit electorates, the elections are often uncontested, and the FC legislators play a crucial role in blocking the democratically elected members' motions in the Legislative Council. That is because, under Annex II of the Basic Law, in order to pass a member's motion, such as a call for a competition law, or an amendment to a Government-tabled bill, a majority is required of "both houses" - a majority in the 30 FCs, and a majority in the 30 geographically elected constituencies. So it only takes 15 votes in the FCs to block a motion.

Even the proposal to add 5 new FCs to be elected by District Councillors does little to change this block. Under any realistic voting scenario, at least 1 and probably 2 of the 5 new FC legislators would be pro-Government members and the Government would only need 18 out of 35 FCs on its side. We think it's likely that the Government will come up with some token concessions on the electorate for the proposed District Council seats to try to head off the pro-democracy march on Sunday, but the retention of corporate voting in the FCs is reason enough to march anyway.

Those vested interests in Hong Kong who are calling for a bicameral (or two-house) system as a purported form of universal suffrage are in reality calling for maintenance of the existing system in which business interests carry a veto in the "upper house". Going down this road would take Hong Kong no further towards a true democratically elected legislature accountable to the people.

Since the National People's Congress Standing Committee (NPCSC) published its decision of 26-Apr-04, the HK Government has taken to using the phrase "balanced participation" - a euphemism for keeping the business-dominated functional constituencies (whatever they are subsequently called), and ignoring the fact that prosperous and stable societies are positively correlated with universal suffrage. What could be more "balanced" than one vote per person?

The NPCSC decision said:

"Any change...shall conform to principles such as being compatible with the social, economic, political development of Hong Kong, being conducive to the balanced participation of all sectors and groups..." (emphasis added)

What this "balanced participation" is really about is the fact that the mainland and HK Governments have more influence over business and special interests than they do over the population at large. After all, the profitability of businesses often depends on the terms of government licenses, regulations, permits, land leases, laws, taxes and subsidies. In return, through the FC system, Government can count on the support of business interests in the Legislative Councils and in the CE elections.

To be sure, in almost any democracy, there are strong, well-financed corporate and special-interest lobbies, and depending on the quality of campaign finance laws, they can be very influential on government policy, but the difference is that they are nothing more than lobbyists without a vote of their own, and ultimately those democratically elected governments have to make policies that as a whole are acceptable to the public who elect them by universal suffrage, or they won't win re-election. By contrast, the HK Government's mandate, and its support in the Legislative Council, is dependent on just a tiny fraction of the population who control the corporate and special interest votes.

Within the 30 FCs, some "professional" FCs are elected by thousands of individuals, such as the legal, medical and accounting sectors. It is no coincidence that these sectors, with large electorates, tend to produce pro-democracy legislators. So the Government and the business lobby rely on the FC legislators who are elected through corporate voting to counter this weight.

The NPCSC interpretation

The controversial 26-Apr-04 decision of the NPCSC and the earlier procedural decision of 6-Apr-04 in essence re-wrote the Basic Law, which says, in relation to any changes after 2007 to the method of electing the Legislative Council and to procedures for passing bills and motions, that changes only have to be reported to the NPCSC "for the record". So here is a quick linguistic guide to the Basic Law:

Perhaps what Beijing fears most is not democracy in Hong Kong, but a successful democracy in Hong Kong, because it would increase public pressure in the mainland for democratic reforms of its own and an end to one-party authoritarian rule with all the corruption, economic mismanagement and oppression of free speech that goes with it. At the same time, however, they must recognise that if hundreds of thousands of Hong Kongers repeatedly take to the streets in a peaceful demand for the right to elect their own leaders, then the path of least resistance will be to give them what they want.

Not Progressive

Attempts by the HK Government to portray the latest electoral reform proposals as "progressive" or in the words of Henry Tang "actually more progressive than the 1995 electoral arrangements" ignore the fact that the FCs had far more representative electorates in 1995, when the Patten administration tabled legislation which allowed anyone who worked in a sector to register and vote in it.

That was the reason that Beijing derailed the so-called "through train" of the 1995 Legislative Council, replacing it on the 1-Jul-97 handover day with a hand-picked council and then amending the election laws to return to the old corporate voting system from 1998 onwards.

Case study: the Transport Constituency

To demonstrate just how crooked the system is, we took a look at the Transport Constituency, where the 191 eligible electors are helpfully listed on page 4 of this document, and cross-matched it with our database, annual reports and other sources to tell you who pulls the strings on these electors, that is, their owners. We also look at the extraordinary proliferation of associations, many of which must have overlapping memberships and each of which gets one vote.

Of the 191 eligible electors, only 182 of them actually appeared in the 2004 Provisional Register for the Legislative Council elections. However, we can't tell you who did or didn't participate, because the electoral register is not a published document. It is available for public inspection, but you will break the law if you try to use it "for a purpose other than a purpose related to an election". You can't take copies, and it is a grey area, untested in court, as to whether research on a specific election or on electoral systems in general is a "purpose related to an election". Just to look at the register, you have to sign a declaration like this one. This is an example of the secrecy that surrounds the debate on electoral reform.

Apart from their legislator, the electors of the Transport constituency also elect 12 of the 800-member Election Committee.

Stacking the vote

The Government's system of allocating 1 vote to each association or company in an industry naturally incentivises the creation or registration of new associations or companies in a sector, even if it is the same people behind them. The number of registered electors in the Transport constituency grew from 137 in 1998 to 152 in 2000 and 182 in 2004, and it cannot be said that the number of people involved in the transport sector grew that much in the same period. Whether an association or company is admitted to the list is initially determined by the Government tabling an amendment bill to the Legislative Council. There is no relationship between the number of employees, turnover, net assets or any other business statistic and the number of votes a company or association has.

We found that of the 191 eligible Transport electors, 36 are taxi-related associations, 19 are minibus associations and 10 are driving instructor associations. These three lobbies alone amount to 65, or over one third, of the electorate. Bear that in mind next time you hear their legislator whinging about diesel duty being too high, when it is far lower than the duty on unleaded petrol which private motorists pay, and when LPG is exempt from duty and franchised buses are exempt from diesel duty anyway. And don't forget the $1.4bn in taxpayer grants handed out to get the taxi and minibus owners to buy LPG vehicles in the first place. Yes, in Hong Kong, we don't charge the transport trade for air pollution, we pay them to reduce it.

The names of some trade associations suggest overlapping membership through their geographic coverage. While some of the apparently overlapping trade associations may exist separately for historical reasons, others may have come into being, or stayed separate, simply to claim another vote for their sector. Similarly, companies under common ownership may continue to exist separately rather then undergo a full merger, and thereby avoid losing voting rights in the constituency.

Our research also identified tycoons with heavy voting interests, including 1 family with stakes in 11 electors. We also found 3 electors which are controlled by the HK Government, and several which are controlled by overseas Governments, including Dubai, Singapore and of course mainland China.

It's worth reminding our readers that we only looked at one sector. If we had extended our coverage to sectors such as the Real Estate, Hotels, Hong Kong General Chamber of Commerce, Chinese General Chamber of Commerce and others, then we would have found many of the same tycoons controlling corporate electors in those sectors too.

Elector Groups

HK Government

Yes, the HK Government actually has 3 votes in this sector - which sullies the separation of the Executive and Legislative branches of our government.

Note: the Government refuses to disclose its aggregate holdings in the MTRC, claiming immunity from the disclosure provisions of the Securities and Futures Ordinance.

The Kwok brothers

Walter, Thomas and Raymond Kwok control Sun Hung Kai Properties Ltd (SHKP, 0016) which controls 33% of The Kowloon Motor Bus Holdings Ltd (KMB, 0062). Combined, they have stakes in 11 electors:

Cheng Yu Tung

NWS Transport Services Ltd (NWSTS) is 50% owned by NWS Holdings Ltd (NWS, 0659) and 50% by privately-held Chow Tai Fook Enterprises Ltd. Both are ultimately controlled by Cheng Yu Tung. NWSTS owns 29.98% of Kwoon Chung Bus Holdings Ltd (KCB, 0306). In the case of one "New World" elector, we were unable to determine whether it is part of the group, and this is indicated by a question mark below.

Li Ka Shing

Mr Li controls Cheung Kong (Holdings) Ltd (0001) which controls Hutchison Whampoa Ltd (HWL, 0013).

Peter Woo Kwong Ching

Mr Woo's family trusts control Wheelock and Co Ltd (0020) which controls The Wharf (Holdings) Ltd (Wharf, 0004).

The Swire Family

Family trusts control unlisted John Swire & Sons Ltd which controls 67% of the voting rights in Swire Pacific Ltd (SP, 0019,0087), which owns 66.7% of Swire Aviation Ltd (SA). The other 33.3% is held by CITIC Pacific.

CITIC Pacific

CITIC Pacific Ltd (CP) owns 70% of Adwood Co Ltd (Adwood). The other 30% is owned by Kerry Properties Ltd. CP also owns 50% of Hong Kong Resort Co Ltd (HKRC). The other half is owned by HKR International Ltd (0480).

Stanley Ho Hung Sun

Shun Tak Holdings Ltd (0242) and former gambling monopoly Sociedade de Turismo e Diversoes de Macau SARL (STDM), both controlled by Stanley Ho, own 60% and 40% respectively of Interdragon Ltd, which owns 71% of Shun Tak-China Travel Shipping Investments Ltd (STCTS). The other 29% is owned by China Travel International Investment Hong Kong Ltd (0308).

Cheung Chung Kiu

Mr Cheung controls 38% of Yugang International Ltd (0613) which controls 34% of Y.T. Realty Group Ltd (0075) which controls 29.9% of The Cross-Harbour Holdings Ltd (CHH, 0032). CHH owns 70% of The Autopass Co Ltd (Autopass)

Michael Kadoorie

The Kadoorie family controls The Hongkong and Shanghai Hotels, Ltd (HKSH, 0045).

Lee Shau Kee

Mr Lee controls Henderson Land Development Ltd, which through subsidiary Henderson Investment Ltd controls 31.33% of Hong Kong Ferry (Holdings) Co Ltd (HKF, 0050).

Foreign governments have votes too

Corporate voting also opens the door to electors who are controlled by overseas companies and Governments. For example....

CSX World Terminals Hong Kong Ltd, an elector, is 66.66% owned by Dubai Ports World, the Dubai government-owned port operator, and 33.34% owned by PSA International Pte Ltd, the Singapore Government-owned port operator.

Asia Airfreight Terminal Co Ltd (AAT), an elector, is 49% owned by Singapore Airport Terminal Services Ltd, which in turn is a subsidiary of Singapore Airlines, which is controlled by the Singapore Government. Another 10% of AAT is owned by Keppel Telecommunications & Transportation Ltd, a subsidiary of Keppel Corp Ltd which in turn is controlled by the Singapore Government. So altogether, the Singapore Government has an interest in 59% of AAT.

China Merchants Shipping & Enterprises Co Ltd, an elector, is a subsidiary of China Merchants Logistics Group Co Ltd, owned by the mainland Government. The same group also controls China Merchants Holdings (International) Co Ltd (0144), which has a 20% stake in AAT.

Chu Kong Shipping Enterprises (Holdings) Co Ltd (CKSE), an elector, is the controlling shareholder of HK-listed Chu Kong Shipping Development Co Ltd (0560). CKSE is in turn owned by the Guangdong provincial government.

Taxis, minibuses and driving instructors

There is a gaggle of electors who are associations of taxi owners, drivers, operators, servicers and so on. The membership of these associations is unlikely to be mutually exclusive - i.e. some people, or companies, are probably members of multiple associations. It is beyond the scope of this article to investigate that.

Here's a list of 36 Taxi voters:

The last of the voters named above is a joint association between taxi and public minibus people. Here is the list of 19 minibus voters:

Driving instructors also feature heavily, with 10 electors:

Copyright Webb-site.com, 2005