Thursday, 2 April 2009

DOWN TO THE DOCTOR’S: In the Land of the Free

Libertarianz leader Richard McGrath recalls some highlights of his recent pilgrimage to the Land of the Free – Hong Kong

It was my privilege over the past week to stay in the western district of Hong Kong Island as a guest at the home of my partner’s brother and his wife.

Hong Kong, or more fully the Hong Kong Special Administrative Region of the People’s Republic of China, accommodates seven million people on eleven hundred square kilometres of land - over six thousand people per square kilometre, four hundred times as densely populated as New Zealand. It has little in the way of arable land and few natural resources. But it has been ranked number 1 for the last fifteen years on the Heritage Foundation’s Index of Economic Freedom. The climate is temperate in comparison with the rest of South East Asia. All in all, it’s an easy place in which to live and work.

On two of our days there, my partner and I attended the latest round of the IRB Rugby Sevens. Despite seeing New Zealand bow out in the quarter finals to Kenya, there was much to enjoy. I love seeing an underdog win, and it was stirring to see the Hong Kong team beat first Tonga and then Portugal, who later went on to win the Plate and Bowl finals respectively.

On the afternoon of the second day, in between the games, I gazed over at the electronic scoreboard and noticed a series of advertising slogans appear on the screen in giant lettering:

Low Taxes. Rule of Law. Small Government. World’s Freest Economy. Free Flow Of Information. The list went on. But it did feel a bit strange. Here was a government department openly advocating laissez-faire free market capitalism. I never thought I would see such a thing, but there it was. A moment I wish all my libertarian friends and acquaintances back in New Zealand could have shared.

In my view, life in Hong Kong is as close to true freedom as most people from my generation are likely to experience in their lifetime, because the government over there walks the talk. There is huge emphasis on the Rule of Law. All are equal before it and English common law prevails. There is a police force of adequate size – three and a half times that of New Zealand. Crime rates are low and one feels very safe wandering the streets. For the last 25 years, Hong Kong’s International Arbitration Centre has been a leading disputes settlement forum.

Low taxation is possible because funding from the Hong Kong Jockey Club, and other sources, covers a large part of the cost of infrastructure. Over two billion New Zealand dollars a year is used by the Jockey Club alone to fund hospitals, schools and roads. It gives another quarter of a billion NZD to various charities. Although the HKJC has a legal monopoly over gambling in Hong Kong (including sports betting and a national lottery), a number of casino boats cruise just beyond HK’s territorial limits.

A perusal of the Hong Kong Department of Legalised Theft’s website is certainly an eye-opener. Personal tax rates are miniscule by New Zealand standards. Many pay a tax rate of between 15 and 17% on income, but there are tax deductions such as a ‘basic allowance’ of $HK100k, plus a standard 75% tax reduction(!) up to a limit of $25k to help low and middle income earners. Thus on an income of $884k, one could pay less than $69k in tax. Mouth watering stuff! There is no requirement for employers to withhold your earnings as PAYE; you keep the money and pay the tax yourself twice a year. There is no GST, capital gains tax or withholding tax on dividends or interest. And so on. The simplicity of the Hong Kong tax system is obvious, in that their entire tax code is contained in 200 pages of print; in contrast, that of the United States runs to over 44,000 pages, much of it written in blood. And get this: if the Hong Kong IRD discovers a way for you to pay less tax, it will advise you how to avoid paying more than the minimum possible under the law and post you the appropriate papers you need to redo your tax return! Contrast that with their New Zealand bloodsucker counterparts who are charged with collecting the maximum revenue possible, despite their disgusting bullshit slogan (which they now seem to have ditched) about being “fair”.

Hong Kong has small, almost corruption-free government - unlike many other parts of South East Asia - thanks to its Independent Commission Against Corruption, which has been a model upon which other countries have based their equivalent statutory bodies.

Free trade is the lifeblood of Hong Kong. There are no tariffs, trade barriers, restrictions on investment, foreign exchange controls, minimum wage (except, I am told, for foreign-sourced domestic servants!) and no xenophobic restrictions on foreign ownership of businesses or land. In other words, with a few isolated exceptions, this is free market Nirvana.

Infrastructure in Hong Kong is modern. Broadband internet is available to 98% of households, from five competing ISPs. The privately-owned deep water harbour container port charges some of the lowest rates in the world, hence has the second highest throughput. The train system is great and co-ordinates well with the airport. There are some stunning bridges and skyscrapers. There are very few monuments to dead dictators.

There is constitutionally-guaranteed freedom of speech and of the press. There is no government censorship of print, the internet, or anything else.

Needless to say to anyone who has visited Hong Kong, tourist goods can be obtained at very reasonable prices if you use night markets such as Stanley’s and the Ladies’ Market. There appears to be less evidence of intellectual property rights violations, with fewer rip-offs of copyrighted brands.

I was fortunate enough to socialize in some very civilized establishments, among them the Hong Kong Football Club, where my host had the distinction of training for a few seasons in the 15 a side national rugby team, including one year as captain.

Here is a country that was colonized by the British and for better or worse took on much in the way of British customs and institutions. However while many ‘expats’ still work in senior positions in Hong Kong’s banking and finance industries, the wealthy elite arise almost exclusively from the (Chinese) indigenous race. So different to New Zealand!

The take home message from all this is: some time in your life, get your ass over to HK and see what glorious achievements are possible if people are given the freedom that is rightly theirs.

Finally, thanks to Grant and Amie for putting us up in HK and showing us a great time. And to KPMG for providing seats and hospitality at the Sevens. (For those in the crowd without private sponsorship, the beer cost $NZ38 a litre!!)

See y’all next week!


  1. Glorious!

    I've written many articles on Hong Kong, and China generally. Even the latter, despite the horrendous PRC government, is a wondrous land from a dozen different aspects.

    The people are generally friendly and hard working and don't take kindly to shirking of responsibility -- amazing considering the decades of Communist rule.

    They were staunch allies during WWII, even more impressive given how the Japanese had raped them for years before US/AU/NZ involvement in the conflict. These were a people who just refused to surrender.

    Yet, it's also a paradox, since the mainland has never had political freedom to any meaningful degree until recently (and that is very spotty).

  2. It is a wonder. Cheers Sir John Cowperthwaite.

    - Sam P

  3. For those who don't know the heroic Mr Cowperthwaite, he is possibly the only bureaucrat whose obituary is ever going to posted here in sadness.

  4. After reading that, who in the hell would want to go to the UK or Australia?

  5. Why is the beer so expensive? Do they tax it


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