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Speech by URA Chairman, Mr Barry Cheung, at the dinner discussion of Business and Professionals Federation of Hong Kong

'Do The Right Thing, And Do It Right'

Sir David, Dr Wong, distinguished guests, ladies and gentlemen,

I am honoured to have been invited to speak to you this evening on the vital topic of Governance, or, simply put -- the need to do the right thing, and doing it right".

I have known about the Federation since it began life in the early 1990s. In fact I spoke about the URA at a similar BPF dinner event, on 20 June 2008 - just a day short of four years ago. Quite a coincidence.

A lot has happened since then of course. For example, the work your organization has done in raising awareness of the issues surrounding ways to improve how companies and the public sector function, has been very valuable. 

Tonight I would therefore like, very briefly, to give you some of my views on the subject, as it is an area that I encounter every day in my role as Chairman of the Urban Renewal Authority, and in the other work that I do.

Certainly, if we look around the world today, it seems obvious that there has been a massive failure of governance across many institutions. Within the financial services industry, the failure to understand and monitor risk, and to control the implications of a skewed structure of rewards, has left the world economy in a precarious state. Equally, the failure of many governments around the world to keep their houses in order, has finally erupted into a crisis in the sovereign debt markets that is threatening in some places to undermine social and political order, and to inflict real suffering on millions of people.

So I think we should consider ourselves lucky in Hong Kong that we are a safe haven, a port in one of the biggest storms we are likely to experience in our lifetime. Our banking system is solid and our government finances are extremely strong. This reflects prudence in regulation and caution in government spending. Clearly, therefore, there is a lot about governance that Hong Kong has got right.

Hong Kong has had its fair share of governance issues too. Hong Kong has many problems that have been challenging our governance, and these problems appear to be growing. So if Hong Kong is to continue to thrive and prosper, we need to tackle these problems at their root. And that means we need to change many things about the way we operate as a society.

At the highest level, rising economic inequality in the midst of continuing overall prosperity, is symptomatic of something which worth our attention. Although Hong Kong's GDP has been growing at an average of 3% in the past 15 years, our Gini coefficient, an index of the income gap, rose to 0.537 in 2011, from 0.525 in 2001, according to the Census and Statistics Department report released yesterday. Papers also said it was the highest in the past four decades. Our wealth gap is on a par with countries like Chile and Portugal.

At the everyday level, I see shocking results of this in my work at the URA. Many of you will remember the terrible tragedy at Ma Tau Wai in 2010, when a building collapsed, and people died. This is just the tip of the iceberg. According to our latest survey of buildings in Hong Kong, about 4,000 blocks are now over 50 years old, a number that is set to grow over the next 20 years to 16,000.  Not surprisingly, many of them are in a terrible state. Some 3,000 buildings in URA designated areas alone are in "poor" or "varied" condition, meaning that they are substandard.  These buildings offer the most squalid living conditions, often with more than three families packed into a flat of around 500 square feet. The common areas are typically dirty and prone to flooding and even electrical fires. The fire on Fa Yuen Street last year illustrated how disastrous the condition could become. It killed nine citizens and injured 19 more. These awful living conditions for thousands of poor and elderly people are a daily reminder of the human reality underlying the Gini coefficient numbers.

Throughout history, such inequalities have undermined trust in economic elites and in government. And so they are today in Hong Kong. Earlier this month, a University of Hong Kong survey showed that people's discontent with government had risen to an all-time high, with 36 per cent of people holding a negative view of government, and a mere 23 per cent a positive view.

Nor is such disaffection prompted only by economic considerations. There is no doubt that the quality of our environment, medical services, land and flats supplies as well as education are under pressure. These problems will take time and money to fix. Yet although our public coffers are brimming, there seems insufficient political will to address these and similar issues.

Many have complained and lamented the fact that Hong Kong is in a dysfunctional state. Most observers see this failure as something structural, and many argue that it is because the Hong Kong Government is not representative of the people. So we need to introduce democracy, the argument continues.

Well of course Hong Kong has been and is evolving away from its colonial past towards a more democratic political structure. Yet despite the limited nature of democracy here, we enjoy a free press. This means that our leaders face many of the media pressures faced by counterparts in Western countries, without being able to point to a democratic mandate. The government is also bound by rules and procedures that were designed in earlier times, when there was no perceived need to be sensitive to public opinion.

This situation breeds a vicious cycle where people with extremist views have come to dominate the political and public agenda, through the appeal they hold with the media through sensationalism, and even to become mainstream. It is all very unhealthy, and, crucially, is not helping in any way to solve the problems that plague our city.

Full democratic elections are still in the future, and they are in any case not a panacea, as the cradle of democracy, Greece, is finding out so painfully. So we need to look at what can be done now to tackle Hong Kong's problems, in order to ensure that society develops in a positive direction.

Clearly, government must regain the trust of the people, and it can only do this if it is seen to be representing the broad interests of society. This in turn means government must have the courage of its convictions to stand against narrow entrenched interests, and against the battering of the special interest groups, to do what is right.

Yes, we need consultations. Yes we need to follow procedures. And yes, we need transparency and accountability. But above all, we need leadership. And I believe that once we have a leadership committed to change in the interests of Hong Kong people, many other things will fall into place. This will especially be the case if the new administration can recruit the talented and committed people who can help execute its plans.

Again, turning to the experience of the URA, I have seen how this works. Like any big public organization in Hong Kong, we attract our share of criticism. We are, some people have alleged, in alliance with developers to push ordinary people out of their neighbourhoods in a rush for development profits as we build ever more flats.

Nothing could be further from the truth. The URA has always seen people, not buildings, as its core concern and we have steadily evolved our response to the challenge of urban decay to meet the changing needs and aspirations of Hong Kong society. This is perhaps most notable in the area of compensation, where we now offer a wide range of options for those affected by redevelopment. We have also worked hard to let people as far as possible undertake redevelopment themselves.

We are underpinned in this approach by the new Urban Renewal Strategy, or URS, which since last year has governed the URA's operations. The review of the URS took two years was one of the most all-embracing community engagement in Hong Kong history. Moreover, the transparent process was not merely about listening to the community, it was about engaging with it in such a way that people were drawn into the very design of the process, and helped to shape the course of enquiry, its aspiration and direction. The process was opened to the whole community, and was supported by well-researched facts to keep all involved entering into an informed debate. Extremists' views were balanced by majority's consensus. The result is a document that is a deep reflection of how Hong Kong people want urban decay to be tackled.

In my opinion, governments and public organisations are under increasing pressure to adopt a new approach to policy-making - one which places greater emphasis on citizen involvement, both upstream and downstream to decision-making.  It requires decision makers to provide ample opportunity for information, consultation and participation by citizens in developing policy options prior to decision-making and to give reasons for their policy choices once a decision has been made. The process takes time, but worth it.

The trust built with the community as a result, meant that the URS has set a sensible and sustainable path for urban renewal in Hong Kong. The process of engagement made sure that we have a proper mandate and that this agenda, unlike many others in Hong Kong, could not be high-jacked by a radical and vocal minority.

I would like to leave off where I began, with the Federation and its members. Neither we at the URA, nor the government, can fight for better governance in Hong Kong on our own. We need the support of forward-thinking professionals like yourselves, and I therefore hope that you will speak out even more forcefully than you have done already regarding various issues. Together, we can make Hong Kong an even better city than it is today. I know that will happen, and that is why I am very optimistic about our future.

Thank you.