Is Joseph Yam Irreplaceable?

One of the most bizarre arguments against replacing Joseph Yam is that: If you fire him, who will be the chief executive of HKMA? The argument then goes on to ask you to name a person that could do the job.

This is a silly argument: because you are unable to quote the name of a potential successor to a person, then that guy must be irreplaceable. I am quite sure out of the 15 politically appointed ministers, a majority of the Hong Kong people wouldn't even have heard of many of their names before they got appointed. Apart from a few lawyers, I am quite sure none of you have heard of Wong Yan Lung before he was appointed as the Secretary of Justice. No one would have possibly quoted his name when asked who can be the next Secretary of Justice, but he turns out to be one of the most popular ministers, out of this highly unpopular cabinet. Could anyone think of a successor to Ambrose Lee, the Secretary of Security? Hardly. Will our public order collapse if he has to leave his post somehow? Not at all.

I do not understand how on one hand, we claim our city as a "financial center" while on the other hand, we think it is impossible to find just ONE person, out of 7 million people, to maintain that automatic currency board system. If the status of Hong Kong as a financial center depends solely on the existence of ONE person, that is truly dangerous and we should try to make it less so. After all, it is not uncommon for public officials to be unable to carry out their duties, for one reason or another, so how can you say someone cannot be replaced?

Extended Reading:

任志剛，請你依法問責﹗

任志剛憑甚麼出花紅？

何俊仁余若薇失憶？任志剛免責？

任志剛，你收檔番歸啦！

How high is the salary of Joseph Yam?

Salary of Joseph Yam, head of the Hong Kong Monetary Authority, de facto central bank of Hong Kong, is always criticized as too high (which is a fact often denied by the HKMA), but how high his salary actually is?

Check it below and you will be astonished:

Salaries of Central Bankers (USD)

Joseph Yam $1,227,000
Chairman of Federal Reserve $191,300
European Central Bank President $444,000
Bank of England Governor $429,000
Bank of Japan Governor $387,000

Sum of salaries for Fed Chairman, ECB Pres, BoE Governor & BoJ Governor = 1,451,300
Salary of Joseph Yam = 1,227,000

Put it into perspective,

GDP of US+Japan+EU = 64% of world GDP
GDP of HK = 0.4% of world GDP

This certainly looks like how officials in corrupted countries are paying themselves. What a shame for Hong Kong, which always prides itself as "Asia's world city"!!

Don't forget Hong Kong is adopting a linked currency system which means there is no independent monetary policy for the city. The importance of this post is certainly much less than his counterparts in the US, Europe and Japan. Judging from his recent performance in the Lehman mini-bond debacle, Mr. Yam also failed to do its role as a bank regulator properly. Surely his performance as a fund manager for the Exchange Fund is less than inspiring, too. I cannot think of better ways to waste taxpayers' money than giving this incompetent guy a salary enough to hire the 4 most important central bankers in the world.

Mr. Yam, shame on you!


Extended Reading:

任志剛，請你依法問責﹗

任志剛憑甚麼出花紅？

何俊仁余若薇失憶？任志剛免責？

任志剛，你收檔番歸啦！

雷曼事件金管局是否失職？

雷曼事件發展至今，愈來愈多人已認為金管局有不可推卸的責任：其對銀行銷售高風險投資產品予零售投資者的業務監管不力。 　　但是，任總多年來在不同場合，都刻意地指出，「並無法律條文明確規定金管局須負責保障銀行客戶」；以上是節錄自任總在2002年6月24日香港銀行公會晚宴的公開發言稿。再者，在金管局2007年年報中，亦明確說明「金管局並沒有保障消費者的法定權責」（72頁）。因此，在雷曼事件的辯證中，估計金管局一定會一再強調在現有法例下，其並未有被授權保障消費者和存戶的利益，以推卸責任。此外，「一業兩管」的複雜情況，更令金管局容易蒙混過關：強調這是制度漏洞的問題，並不是人為錯誤的問題。 保障存戶利益屬金管局職能　　如果保障存戶利益不是金管局的責任，這是誰的責任？這麼重要的一個課題，政府和立法會都不可能長期視而不見吧！ 　　保障存戶利益是金管局的職能；首先，根據《銀行業條例》，其第七條就訂明了《金融管理委員的職能》的兩大要點：　　1. 委員的主要職能是促進銀行業體系的整體穩定與有效運作。 　　2. 在不限制第1.款的一般性原則下，專員須同時執行七項職能。 　　在這七項職能中，第四項及第七項是清楚地與雷曼事件相關的。第四項是「金融管理專員須遏止或協助遏止與認可機構的業務常規有關的非法、不名譽或不正當的行為」。 　　而第七項的修例，就更清楚說明金管局對 保護存款人的權責：「金融管理專員須採取一切合理步驟，以確保任何認可機構所經營的任何銀行業務、任何接受存款業務或任何其他業務是（i）以持正和審慎的 方式以及適度的專業能力經營的；及（ii）以無損或相當不可能損及存款人或潛在存款人的利益的方式經營的。」　　這些法例和立法精神，明顯要求金融管理專 員有權責須採取一切合理步驟，以保障銀行存款人（甚至包括其他客戶）的利益。一些年邁的存款者被銀行職員誘導投資於雷曼債券，因而損失慘重，這些高風險的 投資產品在銀行零售層面發售多年，金管局未作有效遏止，這明顯是失職。任總如果真能「先知先覺」及審慎執行其職能，香港銀行業的聲譽和以十萬計的銀行客戶，就毋須付出這麼沉重的代價。 　　讓我們再回顧一下，任總在2002年香港銀行公會晚宴的公開發言稿強調「金管局根 據《銀行業條例》第7(2)條的條文，參與促進與鼓勵各銀行維持正當的操守標準及良好與穩妥的經營手法，只是為履行『促進銀行體系整體穩定及有效運作』的 主要職能而附帶執行的工作。」這是非常誤導甚至是錯誤的言論。第一、根據《銀行業條例》，並沒有提出執行第7(2)條文是「附帶」的工作，這是金管局須同時執行的兩項職能之一。第二、第7(2)條文並不只是要求金管局鼓勵銀行維持正當的經營手法，條文中更包括金融管理專員須採取一切合理步驟，保障存款人的利益，這是直接的、不可轉移的責任。 　　專員在多年執行《銀行業條例》的職能中，似乎都有嚴重的偏差和錯誤的理解，而歷任的財政司都沒有察覺，事情終於在雷曼事件曝光了。 銀公紀律委員會「似有若無」　　金管局認為不需要直接監管銀行的經營手法，這是長期的政策。香港銀行公會是根據《香港銀行公會條例》於1981年成立的法定團體，其角色包括向所有銀行推廣最佳營運方法，這是業界自我監管的模式。銀行公會所訂定的《銀行營運守則》，是得到金管局認可的；公會更在2002年成立「銀行營運守則委員會」，由銀行公會、存款公司公會及金管局一同組成，不時檢討及修訂該守則，會員如有違例，銀行公會下的「紀律委員會」可以採取處分，包括譴責及開除會籍。然而，根據銀行公會網頁上的資料：「從未有會員因違例而需要紀律委員會召開會議。」　　香港銀行公會與金管局共同訂立的《銀行營運守則》，四大目標之一是「促進客戶對銀行制度的信心」；今次雷曼事件，實在令大眾失望。 　　就銀行經營受《證券條例》所規範的金融業務，包括銷售須獲證監批准的金融投資產品及提供投資顧問服務，金管局是負責全面執行《證券條例》的機構；金管局與證監會簽了合作諒解備忘錄，在同一標準下，分別向銀行及其他金融機構執行《證券條例》。根據金管局的《監管政策手冊》（SB-1, 1. 4. 1）訂明：「雖然證監會最終負責監管證券市場的中介人，但金管局仍是註冊機構（即銀行）的前線監管機構，並負責日常監管註冊機構的受規管活動。」證監會就受規管活動發出的準則及指引，均適用於註冊機構（即銀行）。 　 　這條在2002年3月通過的《證券及期貨條例》，整合了原本的十條法例，其中包括《保障投資者條例》。根據國際證監會組織（香港是成員）於1998年達 成的一項共識，同意證券業務監管的主要目標有三點：保障投資者、確保市場公平、有效率及減低系統風險。香港在設計新的條例，亦以符合這三點目標為立法基 礎。新條例中有關證監會的「法定規管目標」中，就清楚包括「向投資於金融產品公眾提供保障」和「盡量減少業內的犯罪行為及失當行為」。 　　從以上分析，金管局在執行《銀行業條例》的職能時，有權責保障存款者的利益；而金管局在執行《證券及期貨條例》的職能時，則有權責保障在銀行購買金融產品投資者的利益。在雷曼事件中，金管局是否失職，就有待「立法會雷曼迷你債券事件小組」努力調查真相了。 羅祥國 浸會大學商學院兼任教授 延伸閱讀： 任志剛，請你依法問責﹗ 任志剛憑甚麼出花紅？ 何俊仁余若薇失憶？任志剛免責？ 任志剛，你收檔番歸啦！

Collective Responsibility = Collective Irresponsibility

In the latest Bangkok incident, it is interesting to see when the Hong Kong government officials say "the decision is made collectively", it actually means "the decision is made by no one". If the decision is really so collective, then everyone of them should be accountable.

It is also interesting to see how Ambrose Lee said he will "take up ALL the responsibilities", but nothing has been done at all by him. What do you actually mean by "take responsibilities" if it doesn't mean some sorts of punishments?

Paulson's former firm among largest beneficiaries of bailout

It certainly pays to be Treasury Secretary if your former firm is a brokerage house, a new study says. Goldman Sachs -- formerly run by Treasury Secretary Henry Paulson, and Morgan Stanley, stand to be among the biggest beneficiaries of his $700b bailout. Under the terms, banks will gain less, whereas brokerages will net more cash.
read more | digg story

Welcome to Socialist States of America!

So Henry Paulson, the ex-Goldman Sachs CEO, is so concerned about his alma mater and made an outrageous proposal to create the biggest bailout in human history - $700 billion, which certainly is an underestimation with a true figure more likely in the trillions. This has also coincidentally create the biggest socialist state ever - Socialist States of America.

Notwithstanding US usual rhetorics of free market and self-reliance, such bailout plan totally distorts the market and leads to serious moral hazards. Why should the taxpayers' be used to buy toxic assets purchased by reckless traders who reaped millions of bonuses in previous years? If the government is worried about disorder caused by bankruptcies, bailout plans similar to the AIG bailout aiming at orderly liquidation should suffice.

I also want to draw your attention to the Republicans' election platform 2008 -"We do not support government bailouts of private institutions." Can Mr McCain please kindly come out and boldly reject this proposal? Thank you very much.

We will try our breast

well.. this is one of the most popular clips recently after the Legco election..
This guy is the newly elected legislator....

Food Safety in China

China announced a reform to its bureaucracy responsible for food safety, public health and pharmaceutical industries. The Ministry of Health will take over the State Food and Drug Administration (SFDA) and will become the major watchdog for food safety. Sounds simple? The reality is a number of different bureaus, departments and agencies will be involved along the food production chain.

The Ministry of Agriculture, for example, will oversee the agricultural production while the State Administration for Industry & Commerce will look after food distribution. The SFDA, meanwhile, will still have a role in monitoring restaurants and canteens.

The even more confusing part is how the regional subsidiaries of these agencies will be reformed. As typical in Chinese politics, this can not be easily inferred from the central reforms.

Will this reform boast the low confidence on China's food products? We will have to keep an eye on it.

The Google Browser

So finally, Google is launching its own browser as well. I greatly appreciate their efforts of making this comic in explaining the new browser in layman terms. Given the expectation that cloud computing will be the future, it makes sense to set their foot on browsers - which may be the only application you need in your computer. I am looking forward to it.

Legco '08

The election of the Legislative Council will be held on the 7th September. Partly because most of the focus was on the Olympics in last two weeks, the election didn't earn the attention it deserves. The Hong Kong election system is a weird mixture of popular votes in geographical constituencies and "privileged votes", mainly by corporations and professionals, in functional constituencies.

Party-list proportional representation system is adopted in elections in the geographical constituencies. Though such system has been used numerous places, the Hong Kong version has got a number of defects which the government refuses to fix.

First, it employs the Hare quota instead of the Droop quota in determining the first few seats of the constituency. Under the largest remainder method, the last few seats in the constituency can be won with much lower percentage of votes. This encourages parties to split their lists and radical individuals may have a higher chance to get into the Legco. This is evident in the number of lists relative to number of seats in each constituency. For example, 13 lists, with a total of 30 candidates, are competing for 5 seats in the West Kowloon constituency.

Secondly, the system in Hong Kong does not allow voter to express their order of preference for parties. For example, it is highly possible that people who votes for the Civic Party may want to transfer their votes to the Democratic Party if they know their votes would not get an additional candidate to be elected on the Civic Party list. Under the current system, the voters have to try their luck to distribute their votes appropriately so their order of preference can be properly expressed. With a bit of misfortune, the election results could turn against the voters' expectations, as in the 2004 election. The best way going forward is to switch to a Single Transferable Vote system, which allows the voters to state their order of preferences.

A detailed explanation of the problems of the voting system can be found here.

Medals and Happiness

An interesting article as an afterthought for the Olympics:

Happiness on the Medal Stand? It's as Simple as 1-3-2.

Amidst all the debate on whether China topped the medal tables, maybe it's time to reconsider the values of Olympic medals?

Broken Wings

Liu Xiang, the gold medalist of 110 metre hurdles in 2004 Athens Olympics and China's only hopeful in track and field this year, pulls out of the race due to injury. It would not be exaggerating to say that it is a mournful day for all the Chinese.

"Massive" Bank Merger

Merrill Lynch's chief investment strategist Richard Bernstein says banks and brokerages need ``massive'' consolidation. So who would be the candidates? HSBC is often speculated as a potential acquirer due to its relatively stable performance. So who would be the targets? How about HSBC-UBS (which certainly is a clumsy name)? HSBC-ML had also been rumoured for a link-up previously though the cultural gap will prove difficult to bridge. How about an All-American marriage? With the current situation of the US banks, it will be anything but likely.

Dubrovnik

A must-go for anyone travelling to Croatia!! A nice Adriatic city with the right mix of cultures. It may be a little bit crowded and overpriced in summer, but still it is gorgeous!

Prince Philip Movement

Call me ignorant, but I am utterly amazed to come across this article in Wikipedia:

Prince Philip Movement

Maybe the Royal family could consider moving to Vanuatu if the Monarchy is out of love by the British?

Fate of the Mediterranean Union

The grand scheme of Nicolas Sarkozy's Mediterranean Union receive a heavy blow today as Libya refuses to join this proposed organization, which would include all countries in Africa, Europe and the Middle East that border the Mediterranean Sea. Perhaps such a refusal shouldn't be a surprise since the proposal is admittedly an over ambitious one. It is also unclear that what purposes will such an organization serves.

Gadaffi has put his doubts, which many people share, nicely, "We do not belong to Brussels. The Arab League is in Cairo and the African Union is in Addis Ababa. If they want to cooperate with us, they should go through Cairo or Addis Ababa." For what reasons an extra organization is needed outside of the the African Union, the Arab League and the European Union? With such a diretionless agenda, the Mediterranean Union, regardless of how noble it may sound, is destined to be a failure.

Reforming Social Policy in Hong Kong

In the absence of a contributory social insurance program, the Comprehensive Social Security Assistance (CSSA) scheme serves as the major social welfare program in Hong Kong. For a typical 4-person household, they will only get around HK$ 10,000 each month from the CSSA, including rent. Put it into perspective, each person on average will get less than 15% of Hong Kong’s GDP per capita per year. These figures demonstrate that despite strong economic growth in Hong Kong in recent years, there is increased social polaarization as there are a large number of poor people who did not share the benefits in the economic boom. While the stock market is reaching new highs, nearly 10% of Hong Kong citizens are living at abject poverty. Means-testing in the CSSA scheme is the major drawback of relying CSSA as the major social security program. Apart from its stigmatizing effects, the means-testing criteria also creates strong work disincentive. There is a pressing need to reform the social welfare system in Hong Kong as it is neither economically efficient nor socially just.

A negative income tax is a tax reform that has been discussed among economists. It was proposed by Juliet Rhys-Williams, a British politician, in the 1940s and later by Milton Friedman, the Nobel laureate in economics, in 1962. There are a number of variants of this proposed tax system. In its most basic form, it consists of a flat tax rate and a fixed tax exemption. Normally, if a person’s income exceeds the tax exemption, he needs to pay the tax on the excess of his income over the exemption at the flat rate. When a person income is less than the tax exemption, he will then get a subsidy from the government. The subsidy is calculated by applying the flat rate on the difference between the exemption and the person’s income. In this way, there will be a floor below which no person’s net income can fall.

The benefits of this scheme are plenty. First, it successfully achieves the aim of maintaining income security. By adjusting the tax rate and the tax exemption, we can set the minimum net income that is guaranteed to everyone. Unlike minimum wage, this is done through a welfare payment instead of compelling corporations to raise their wage levels artificially.

Comparing with a means-testing social assistance scheme like the CSSA, the disincentive effects are relatively insignificant. It is because every extra dollar you earn from your own job will increase your net income. There is an incentive for an unemployed person to look for jobs even though he has job a minimum payment from the NIT.

As the social security provision is integrated seamlessly with taxation, it reduces the administrative costs as there is no need to maintain two separate systems. The notorious means-testing can also be removed as the income guarantee will be paid as part of the taxation system, which already has a robust income reporting system. This is especially suitable for Hong Kong as it has got a simple tax system.

The current CSSA scheme fails to provide basic income security, which is a fundamental human right, for its citizens. It also creates serious work disincentives for claimants which reduce the productivity in the society. In addition, this also leads to intensified conflicts between different social groups. It seems sensible that the NIT is a more desirable approach to adopt in Hong Kong, both because of its sound economic rationale and its compatibility with Hong Kong’s situation. The NIT will help to guarantee income security for Hong Kong citizens without infringing the principles of financial conservatism. Compared with other options, this approach works in harmony with the culture of self-reliance in Hong Kong. In order to create a more socially just society in Hong Kong, adopting negative income tax as its social welfare policy will be a step towards the right direction.

To trade or not to trade? That is the question.

Free trade, in theory, should create mutual benefits for everyone involved. In reality, however, markets, especially in agricultural products, have been distorted to the advantage of a small group of people. Trade barriers in the developed countries are bringing endless miseries to people in the developing world. To end the sufferings, farm subsidies in the rich world have to come to an end. Before this can be realized, the Fair Trade system will work as a reasonable intermediate solution to the problem. By promoting Fair Trade, the public awareness on global trade injustice can be raised. Fair Trade is a market based mechanism which aims to perfect the flaws in the current trade system so it surpasses other interventionist approach which will just add on the inefficiencies in the market. If the Fair Trade market has grown into a critical mass, this is likely to bring about structural change to the global trade system. This aspiration can be made into a possibility, taking into account the political hurdles and economic consequences. Engaging the farmers in the developed world by persuading them to invest in developing countries, instead of using the cash subsidies to grow their loss-making crops will create a win-win situation for everyone in the globe. The Fair Trade system will act as the platform for the exchange in this solution. Ideally, the Fair Trade system will gradually converge into the world market system until the grand goal to remove all farm subsidies is achieved. Until then, to trade or not to trade will remain an ethical question.

What an ad!