HK endgame in transfer of authority

LONDON: The last stage of Hong Kong's reversion to Chinese sovereignty began in January 1996 with the establishment of the Preparatory Committee (PC). The PC is charged with setting up the final process of transition, working directly, formally and openly with a group of chosen representatives to establish the Hong Kong Special Administrative Region (HKSAR) that will come into being on 1 July 1997. Prior to the establishment of the PC, Beijing had formally only dealt directly with the UK, the present sovereign power.

This final stage is as crucial as it is difficult since it will determine whether the Chinese authorities can create a framework allowing Hong Kong to exercise the 'high degree of autonomy' pledged in the 1984 Sino-Anglo Joint Declaration. While the UK still has an important role in the Chinese scheme of things, it is China's role that is now vital.

The Hong Kong issue is of immense significance for China. It is seen in Beijing as the first application of the 'One Country Two Systems' scheme - originally developed as the blueprint for the peaceful reunification of Taiwan with the mainland. Furthermore, Hong Kong is China's bridge to the international economy and financial sectors, and the gateway to the Chinese overseas communities in South-east Asia. The way the Chinese authorities treat the institutions and the people of Hong Kong will have a bearing on how they will be treated by especially the U.S. and Japanese governments and peoples. It will also affect the judgment in Southeast Asia about the feasibility of the preferred policy of constructive engagement with China.

Perhaps even more significantly, the Hong Kong issue may have an impact upon the fortunes of the new Chinese leadership on the eve of the next Communist Party congress, due some three to four months after the transition. Hong Kong has accounted for 60-70 percent of the direct commercial investment in China, and it has played an important role in generating high growth rates for the Chinese economy. Any sudden downturn could accentuate social tensions and undermine a leadership that lacks confidence in its own legitimacy.

Typically, the Chinese authorities have left most of the practical matters concerning the transition to the very end without having prepared a clear game plan, let alone having addressed the uncertainty that this may have generated. Although it is possible to discern the broad outlines of what the Chinese have in mind, the devil is in the details, and these remain to be settled. Paradoxically, that may turn out to be to the advantage of Hong Kong, as the Chinese authorities have proved in the past to be more flexible as deadlines approach.

The key points involve the choice of the Chief Executive (CE), and the establishment and membership selection of the Provisional Legislative Council (PLC).

The CE is expected to be chosen in October by a 400-member Selection Committee whose representatives are still to be settled. Yet it is by no means clear that Beijing knows what it wants. The CE will be the linchpin of the HKSAR who will command the executive-led government and be responsible for dealing with the Chinese central government. The Chinese authorities have indicated that they want a paragon in this position who will enjoy the confidence of the Hong Kong people, be respected internationally and also be acceptable to Beijing. The nearest figure to fit the bill is Anson Chan, the Chief Secretary - second in command to the Governor. However, Chan has not yet put herself forward as a candidate and her closeness to London is thought to have undermined her position in Beijing.

The other known candidates, Tung Chee-hwa, Lo Tak-shing and Sir Ti Liang Yang, may be more acceptable to China, but do not measure up to the other two criteria. For example, the 67-year- old former Chief Justice, Sir Ti Liang Yang - who is slightly ahead of the shipping tycoon and former Executive Council (ExCo) member, Tung Chee-hwa, in the opinion polls -- is widely perceived as being of weak character and a poor administrator. Tung Chee-hwa, on the other hand, has been criticized for his business connections.

Once chosen, the principal tasks for the CE will be to: * establish working relations with the central government in Beijing and provincial authorities; * work closely with the existing Hong Kong government; and * select the key members of the civil service and the cabinet for the HKSAR.

Hong Kong Governor Chris Patten has promised to cooperate fully with the CE designate. The CE will have the unenviable job of working with the existing Legislative Council to ensure the passage of essential legislation (notably the budget) while also working with the PLC designate whose brief is in effect to undermine the authority of the former. Moreover, the CE will be expected to provide guidance for the future development of the HKSAR, even though technically that would remain the responsibility of China's leaders and the organizations that exist for this purpose.

The PLC has been proposed by Beijing to replace the Legislative Council elected in 1995 under arrangements put forward by Governor Patten in 1992 - these were rejected by China's leaders who refuse to be bound by an institution they regard as imposed unilaterally by London. Membership of the PLC is to be determined by the Selection Committee in December. Its main task is to make new arrangements for elections to the first proper legislative council of the HKSAR which must take place before 30 June 1998 at the latest, as well as to amend some of the legislation opposed by the Chinese.

Ideally, the PLC should be as representative as possible and that could mean, for example, co-opting all those currently elected to the Legislative Council. But the Democratic Party, which has won the majority of the popular vote in the only two general elections held so far, has refused to participate in either the Selection Committee or the PLC, regarding the latter as illegitimate. A possibility for compromise may be found in the Democrats' pledge to participate in whatever new electoral scheme the PLC may offer. The UK has refused to cooperate on this issue, as it regards the projected PLC as subversive of the democratic principle and practice that is embodied in the existing Legislative Council, and no legal basis exists for it in the previous binding agreements.

While Hong Kong has the advantage of possessing the best deep- water port in southern China and easy access to most of maritime East Asia, its prime resource is its people allied to its political, economic system. In Beijing, there is a tendency to focus on maintaining the confidence of foreign investors. But that really depends on ensuring the confidence of the local people, and the professionals in particular. Hong Kong is a successful business environment because its rule of law guarantees foreign investment. There is a risk, however, that Chinese corruption may undermine that rule of law.

The overwhelming majority of the professional people prefer to live and work in Hong Kong. But such is their anxiety about preserving their quality of life and freedom under the law that many have sent their families abroad in search of foreign residence while they remain on a 'wait and see' basis. Some 500,000 people have left since 1984 - although many have returned to take advantage of the economic benefits in Hong Kong after establishing residence overseas - and it is estimated that up to a further 500,000 people have the right to reside elsewhere. The majority of these are business and professional people - the life blood of the territory.

Until recently, China has treated Hong Kong with a curious neglect. Being neither a domestic nor a foreign affairs issue, Hong Kong has never been properly represented in the bureaucratic networks of Beijing. Unlike Taiwan, it has not been at the center of political concerns stemming from the civil war or relations with the U.S. The policy units that have dealt with Hong Kong over the past 15 years or so carry little political weight in Beijing; they compete with each other and are not led by people of high standing in the Communist Party. Furthermore, there has been little interaction between them and the main bureaucracies. Those organizations, such as the Bank of China and China Resources, which have intimate knowledge of Hong Kong through their economic operations, do not appear to have shared their expertise with those making the political arrangements for the transition. On the contrary, they appear to have prudently steered clear of any political engagement. In the past the key questions were determined by the senior leaders themselves, but now that Deng Xiaoping has become incapacitated by advanced age these have fallen to his less renowned successors.

Despite the evident danger that things may go awry, all sides share a common interest in a smooth transition of authority and there are grounds for cautious optimism. Beijing is at last showing signs of wishing to reach an accommodation with the Hong Kong democrats, and it has stopped regarding elected representatives as inherently subversive and 'pro-UK'. The Chinese authorities have belatedly recognized the need to cooperate with London, and in the past 12 months have reached agreement on most of the outstanding matters, including: the Court of Final Appeal; details regarding the huge airport complex; and approval for the container port, number 9. On Sept. 26, China and the UK finally agreed on ceremonial arrangements for the handover, and to establish a UK consulate-general in Hong Kong. However, a number of issues still remain to be resolved:

* whether civil jurisdiction will apply to the People's Liberation Army (PLA) garrison while it is stationed in Hong Kong;

* implementation of immigration ordinances and the rights of abode;

* how 160 or so international multilateral agreements will be applied to Hong Kong after the handover;

* extension of privileges and immunities to the consulate- general; and

* matters relating to the territory's international character.

The immediate priority for Beijing, however, is to manage the actual transfer of authority smoothly. The real test for Hong Kong will come in the following months as residents and investors wait to see whether the autonomy will indeed be of a 'high level' and if the HKSAR will be able to resist untoward pressures from the mainland to bend laws, rules and conventions in favor of mainland personnel and organizations. Beijing's interests will be to work together with the CE to maintain his autonomy, mindful of the impact this will have on Taiwan and the world beyond.