In our first article leading up to the march for universal suffrage on Sunday, we look at the failure of HK's Government to abolish the small-circle corporate voting system which secures business dominance of the Functional Constituencies and a veto in LegCo. We illustrate it with an investigation of the Transport constituency electorate.

Corporate Voting in HK Elections
28 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:

Phrase NPCSC's interpretation
"if there is a need" the Chief Executive must tell us there's a need, then we'll decide whether he is right, and set conditions on reform
"for the record" only if it meets our conditions
"gradual and orderly progress" make the minimum amount of progress that the people will tolerate
"balanced participation" (you won't find that in the Basic Law) we've got more leverage over the tycoons than we have over the people

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.

Shareholder Elector Stake
Govt Airport Authority of Hong Kong 100%
Govt Kowloon-Canton Railway Corporation 100%
Govt MTR Corporation Ltd >76.46%

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:

Shareholder Elector Stake
SHKP Wilson Parking (Hong Kong) Ltd 100%
KMB The Kowloon Motor Bus (1933) Co Ltd 100%
KMB Long Win Bus Co Ltd 100%
SHKP Route 3 (CPS) Co Ltd 70%
SHKP Tsing Ma Management Ltd 66.7%
KMB Park Island Transport Co Ltd 65%
SHKP China Tollways Ltd 50%
SHKP Autotoll Ltd 50%
SHKP Hoi Kong Container Services Co Ltd 50%
SHKP River Trade Terminal Co Ltd 43%
SHKP Hong Kong School of Motoring Ltd 30%

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.

Shareholder Elector Stake
NWSTS Citybus Ltd 100%
NWSTS New World First Bus Services Ltd 100%
NWSTS New World First Ferry Services Ltd 100%
NWSTS New World First Ferry Services (Macau) Ltd 100%
? New World Parking Management Ltd ?
NWSH Tate's Cairn Tunnel Co Ltd 29.5%
KCB New Lantao Bus Co, (1973) Ltd 99.99%

Li Ka Shing

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

Shareholder Elector Stake
HWL Mid-Stream Holdings (HK) Ltd 100%
HWL Hongkong International Terminals Ltd (HIT) 87%
HWL The Hong Kong Salvage & Towage Co Ltd 50%
HWL Hong Kong United Dockyards Ltd 50%
HIT COSCO-HIT Terminals (Hong Kong) Ltd 50%
HWL River Trade Terminal Co Ltd 43%
HWL Hong Kong Air Cargo Terminals Ltd 12.5%

Peter Woo Kwong Ching

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

Shareholder Elector Stake
Wharf The "Star" Ferry Co., Ltd. 100%
Wharf Hong Kong Tramways, Ltd 100%
Wharf Metropark Ltd 100%
Wharf Modern Terminals Ltd 55%
Wharf Hong Kong Air Cargo Terminals Ltd 12.5%

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.

Shareholder Elector Stake
SP Hong Kong Salvage & Towage Co Ltd 50%
SP Hong Kong United Dockyards Ltd 50%
SA Hong Kong Air Cargo Terminals Ltd 30%
SP Modern Terminals Ltd 17.63%

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).

Shareholder Elector Stake
CP New Hong Kong Tunnel Co Ltd 70.8%
Adwood Hong Kong Tunnels and Highways Management Co Ltd 50%
Adwood Western Harbour Tunnel Co Ltd 50%
HKRC Discovery Bay Road Tunnel Co Ltd 100%
HKRC Discovery Bay Transportation Services Ltd 100%

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).

Shareholder Elector Stake
STCTS Far East Hydrofoil Co, Ltd 100%
STCTS Shun Tak-China Travel Ship Management Ltd 100%
Stanley Ho Hong Kong Express Airways Ltd (fka Helicopters Hong Kong Ltd) ?
STCTS Turbojet Ferry Services (Guangzhou) Ltd ?

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)

Shareholder Elector Stake
CHH Hong Kong School of Motoring Ltd 70%
Autopass Autotoll Ltd 50%
CHH Western Harbour Tunnel Co Ltd 37%
CHH Hong Kong Tunnels and Highways Management Ltd 37%

Michael Kadoorie

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

Shareholder Elector Stake
HKSH Peak Tramways Co, Ltd 100%

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).

Shareholder Elector Stake
HKF The Hongkong and Yaumati Ferry Co Ltd 100%

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:

Association of N.T. Radio Taxicabs Ltd (The)
Chuen Lee Radio Taxis Association Ltd
Fraternity Association of N.T. Taxi Merchants (The)
Fraternity Taxi Owners Association
Happy Taxi Operator's Association Ltd
Hong Kong & Kowloon Radio Car Owners Association Ltd
Hong Kong and Kowloon Rich Radio Car Service Centre Association Ltd
Hong Kong & Kowloon Taxi Companies Association Ltd
Hong Kong Kowloon Taxi & Lorry Owners Association Ltd
Hong Kong Tele-Call Taxi Association
Kowloon Taxi Owners Association Ltd (The)
Lantau Taxi Association
N.T. Taxi Merchants Association Ltd
N.T. Taxi Owners & Drivers Fraternal Association
N.T. Taxi Radio Service General Association
N.W. Area Taxi Drivers & Operators Association
North District Taxi Merchants Association
Quadripartite Taxi Service Association Ltd
Rambo Taxi Owners Association Ltd
Sai Kung Taxi Operators Association Ltd
Sun Hing Taxi Radio Association
Tang's Taxi Companies Association Ltd
Taxi Associations & Federation
Taxi Dealers & Owners Association Ltd
Taxi Drivers & Operators Association Ltd
The Taxi Operators Association Ltd
Taxicom Vehicle Owners Association Ltd
United Friendship Taxi Owners & Drivers Association Ltd
Urban Taxi Drivers Association Joint Committee Co Ltd
Wai Fat Taxi Owners Association Ltd
Wai Yik H.K. & Kowloon and New Territories Taxi Owners Association
Wing Lee Radio Car Traders Association Ltd
Wing Tai Car Owners & Drivers Association Ltd
Yik Sun Radiocabs Operators Association Ltd
Rights of Taxi Owners and Drivers Association Ltd
Hong Kong Taxi and Public Light Bus Association Ltd (The)

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:

G.M.B. Maxicab Operators General Association Ltd
Hon Wah Public Light Bus Association Ltd
Hong Kong, Kowloon & NT Public & Maxicab Light Bus Merchants' United Association
Hong Kong Public & Maxicab Light Bus United Associations
Hong Kong Scheduled (GMB) Licensee Association
Kowloon Fung Wong Public Light Bus Merchants & Workers' Association Ltd
Kowloon PLB Chiu Chow Traders & Workers Friendly Association (The)
Lam Tin Wai Hoi Public Light Bus Merchants Association Ltd
Lei Yue Mun Ko Chiu Road Public Light Bus Merchants Association Ltd
Lung Cheung Public Light Bus Welfare Advancement Association Ltd
N.T. PLB Owners Association
N.T. San Tin PLB(17) Owners Association
Public Light Bus General Association
Sai Kung Public Light Bus Drivers and Owners Association
Tsuen Wan PLB Commercial Association Ltd
Tuen Mun PLB Association
United Association of Public Lightbus Hong Kong
Yuen Long Tai Po PLB Merchants Association Ltd
HK Public-Light Bus Owner & Driver Association

Driving instructors also feature heavily, with 10 electors:

Articulated & Commercial Vehicle's Instructors Union
Driving Instructors Merchant Association Ltd
Hong Kong & Kowloon Goods Vehicle Omnibuses and Minibuses Instructors' Association Ltd
Hong Kong Commercial Vehicle Driving Instructors Association
Hong Kong Driving Instruction Club Ltd
Hong Kong Motor Car Driving Instructors Association Ltd
Hong Kong Society of Articulated Vehicle Driving Instructors Ltd
Kowoon Motor Driving Instructors' Association Ltd
Public and Private Light Buses Driving Instructors' Society
Public and Private Commercial Driving Instructors' Society

©, 2005

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