The Death and Life of Hong Kong: Eating Crow

Twelve years ago, Fortune Magazine roving reporter Louis Kraar wrote a startling cover story that was meant to provoke. "The Death of Hong Kong" issue so stirred up the city's business elite that they set up The Better Hong Kong Foundation, an organization aimed at countering the perception that the 1997 handover of sovereignty over the territory by the British back to the Chinese would mark the end of Hong Kong.

Ten years after the handover, Hong Kong is alive and well and Fortune has now repented for their dire prediction. Sadly, Lou Kraar, who was a wonderful gentleman and great journalist, died a few years ago and is not around to see for himself how Hong Kong has managed to survive. Sure, the city has its problems - the environment is one major one - but on its deathbed? Not on your life!

Here are links to the 1995 story and Fortune's nostra culpa piece written by another veteran Asia hand and author Sheridan Prasso.

Read Lou Kraar's Fortune Magazine story on "The Death of Hong Kong" on cnn.com

Read Sheri Prasso's Fortune Magazine story "Oops! Hong Kong is Hardly Dead" on cnn.com

Handover Hangover: What Were We Doing a Decade Ago?

Ten years ago on 1 July, China resumed sovereignty over Hong Kong. We were there - from the firing of the Noonday Gun on 30 June to the firing of the Noonday Gun 24 hours later. Globophobe was the last reporter to leave the Convention Centre - after all the new leaders of the Hong Kong SAR government had boarded their limos to go home around 4 am. We think that the following is the best coverage of the handover produced by any news team at the time (even though a lot of good reporting never made it to print):

http://www.asiaweek.com/asiaweek/97/0620/index.html
http://www.asiaweek.com/asiaweek/97/0711/index.html

Check it out.

The Saga of the Lost Bag - and What to Do About Delayed Luggage

As Globophobe's loyal readers (all three of you!) know, we travel a great deal. Currently, we are at the tail end of a business trip that started in mid-May. Not to bore you or dazzle you with our itinerary, but suffice it to say that we have been bouncing between continents and have touched down in Asia (including the Middle East) three times, Europe three times (four before we're through), Africa once, and in between managed to spend four days back in the US - three in Washington, one in New York. On that one day in New York, we barely managed to get a some laundry done and to do some necessary errands such as pay bills. The last two months have been a whirl.

The most testing part of the trip was the two weeks during which we were minus our bag of clothes. In mid-June, as mentioned, we went back to the US for a few days and then had to rush back to Asia. We tried to get on a non-stop flight from New York to Singapore so we could have some time to recuperate on arrival before getting down to business but the Singapore Airlines flight we wanted was fully booked. So instead, we took a gamble. The plan seemed simple on paper: use four separate tickets to travel from New York to Singapore via London Heathrow, Shanghai Pudong and Hong Kong. All the transit times between flights were generous enough and we were even ready for the possibility that a British Airways agent in London might contend that we would need a visa to transit in Shanghai. We xeroxed the pertinent transit rules from the Chinese Foreign Ministry website and carried a paper ticket that indicated that we were booked on a flight to Hong Kong within 48 hours of arriving from London.

Still, we were worried so for the first flight out of New York, we packed our one check-in bag only with clothes. We also decided to wear business attire (suit, tie, leather shoes, dress shirt, cuff links) on board. At the British Airways check-in counter, we presented all four of our tickets, as well as a summary of the itinerary with the respective locator numbers for each leg of the journey. The check-in was fairly simple. The agent tagged the one bag all the way to Singapore but she had to put two tags on the bag because one tag can only accommodate three flight segments. We expressed some concern to her, but she said that this was not unusual and that there should be no problem.

If the bag made all the conections it was supposed to. But we were flying out of New York's JFK on what had been a rainy day. A backlog of flights had piled up and BA182 was more than three hours late departing for London. We arrived at Heathrow more than two hours behind schedule. Globophobe rushed through the Terminal 4 security but got to the gate for the flight to Shanghai just minutes after the flight had closed. The bag of course could never have made the half-hour transit even if Heathrow were operating at optimum efficiency - London's "premier" airport just ain't Changi or Chek Lap Kok. If you're ever on a bus between terminals, check out all the random piles of tagged bags strewn all over the place. Heaven knows how many bags are just lying in luggage limbo at LHR.

After missing the connection to Shanghai, BA made us go through an excruciatingly long queue at the "Flight Connections" counter. We tried approaching "Customer Service" but they provided no customer service. Only the Connections counter could make changes to passenger travel. Once we got to the counter, an agent put us on a flight to Hong Kong; all the flights to Singapore were apparently full. We were actually pleased by this turn of events since we would arrive in Hong Kong in time to catch our original flight to Singapore. The agent told us that since we had three hours before the Hong Kong flight left, it was possible that our bag would be retagged and put on the flight with us. Yeah right, we thought. Fat chance of that. Still, if the bag was put on the next flight to Shanghai the following day, it would arrive in Singapore only a day late.

That was not to be. We got to Hong Kong ahead of schedule. But when we got to the gate from where our Cathay Pacific flight to Singapore was leaving, the agent there refused to let us board. We could not travel without our checked bag, she insisted. The BA agent in London had put us on a later CX flight to Singapore. If our bag made it on the BA flight to HK then it would be on that flight. So we waited and got on the later CX flight. Once in Singapore, however, there was of course no bag. We were late for a dinner engagement so we asked the CX ground staff to handle the lost bag report. We went to our meeting, thinking that the worst thing that could happen would be for our bag to be 24 hours behind.

Wishful thinking. A day passed and there was no bag. Another day, no bag. And no service. CX, the last carrier we flew, was silent on offering compensation or money to buy emergency clothing. Phone calls to "their" baggage service led us to a company called SATS, the CX ground services agent in Singapore. It was not until the day we were to leave Singapore - four days after arrival - that we received an offer of SGD150 to buy clothes and other necessities. This was hardly sufficient. Neither SATS nor CX bothered to call. Instead, we had to call them to check for any update. We could use an online "tracer" service but it gave no indication of where the bag could be. The night we left Singapore for Stockholm via a Qantas flight to London, we went shopping at Changi with the SGD150 and bought a pair of shoes, two shirts, trousers and a coat (necessary for the cold nights in rural Sweden). We ended up spending about USD200 more than the emergency funds.

Once we got to Sweden, we called SATS. Still no bag. The company promised to call us every day with an update. We got no such calls. We were promised an additional SGD100 but as we were in a country with no CX office there was no way we could receive the funds. A week and a half after the bag was lost, just as we were giving up hope, we received an email from a China Eastern baggage service person at Shanghai Pudong. He had apparently found our bag, which had been put on a flight to Shanghai five days after it landed in London. Ryan of China Eastern spotted our email address on our luggage name tag and took the liberty of contacting us. He offered to send the bag to Hong Kong or Singapore. We emailed him back to ask him to send it to Hong Kong, our next destination. We called CX and SATS and they continued to be oblivious, doing nothing to find the bag or to help us out. Cathay kept passing the buck to SATS and SATS could not have cared less about a CX passenger; they are not an airline. Singapore efficiency? Well, not quite.

We should point out here that Globophobe is a Cathay Pacific Marco Polo Club gold card holder - oneworld sapphire, to those who keep track of these things - which means that we flew more than 60,000 miles on CX and other oneworld carriers last year. Did that "elite" status mean we got better service from Cathay? Not at all. Just the run around and promises to call back that were never kept. The only way we got things done such as the payments or SATS staff to call us back was by shouting, lecturing and cajoling the Cathay staff into action. We did more to retrieve our bag then the CX and SATS staff did. They had no idea the bag was in Shanghai, while all the time we were in communication with China Eastern.

When we got to Hong Kong, on the spur of the moment, we decided to fly down to Singapore. We would pick up the errant bag later, we thought. Before boarding the plane, however, we managed to get CX to pony up the additional SGD100. We went shopping at Hong Kong airport and again went beyond the budget by about USD45. We sent a chaser email to Ryan to find out about the bag, but heard nothing. The day after we got to Singapore, he emailed to say that the bag would be on a China Eastern flight to Hong Kong that afternoon. Great - we were to fly back up to Hong Kong the next day and would finally be reunited with our bag two weeks after it had gone astray. Thank you, Ryan of China Eastern! Who says that China's carriers don't provide good service?

That Friday, just as we were about to pack for the flight, we received a call from SATS. We have your bag! Now this was confusing. We thought our bag would be in Hong Kong, but now here it was in Singapore. When we got to Changi, we had SATS deliver the bag up to the Cathay check-in counter. It was indeed our long-lost High Sierra backpack! The double tags from BA in New York were still on it. There was no evidence of China Eastern's involvement. But there it was - in good order and with everything inside (the bag was unlocked).

We repacked at the CX counter so all our new clothes fit into the prodigal bag and a rollerbag which we usually carry on board but which we were using as a check-in bag to carry liquids. At the counter, we saw the agent making calculations, adding up the weights of the two bags. We explained the saga of the lost bag and said that there was no way we would be paying any excess baggage charge. He was sympathetic and rejigged the weights so we could board our CX flight to HK in peace.

So after two weeks of washing our clothes every night, we found what was lost and arrived back in Hong Kong with an expanded traveling wardrobe and a tale of woeful service to tell.

Moral of the story:
1. If you lose your bag, you're practically on your own. Keep pestering the last airline you flew. They are responsible even if they were not the ones that misplaced your bag. Particularly if they rely on ground service agents, service is more than likely to be poor or non-existent. Do not rely on anyone. Keep badgering them.

2. Demand compensation money - emergency funding - immediately. If you have arrived in your home city, the airline may be reluctant to pay up. So if you can provide an alternative home address, then do so. Get as much as you can and ask for more every few days. The airline will have to pony up. (They should also give you an amenities kit to tide you over for at least one night.) Once they promise funds, keep them to that promise and get them to deliver the cash to you as soon as possible.

3. Keep receipts and records of everything you had to purchase due to your lost bag including toiletries and phone calls. Don't go on a spending spree on the assumption that the airline will reimburse you for everything. Be reasonable and you will more than likely be compensated. Some airlines will be more generous than others. When we were stranded in Halifax after 9/11, Singapore Airlines - bless their hearts - paid for a nice hotel room (after we spent two nights in an emergency shelter) and whatever clothes we had to buy. No questions asked.

3. Make sure your name and contact information is on your bag and IN your bag. Include our email address. Tape your business card to an obvious place inside your packed bag so that the card is immediately visible to anybody who should open it.

4. Even after you get your bag, put in for a compensation claim. The airline's liability is limited, but you should claim what you can. If the bag never turns up, then you can also make a separate claim for the loss. Treat the delay and the loss as SEPARATE issues. You should get compensation for both the delay and the loss. Don't forget to claim the cost of the bag, as well as the contents. Note, however, that the airline is not responsible for valuable items unless it is informed that they are in your bag and have agreed in advance to compensate you in case of their loss (not likely).

5. Avoid Heathrow. LHR is now THE transit blackspot of international travel. Stay away! If you are heading to or through Europe, try a more efficient and user-friendly transfer point such as Munich or Helsinki. LHR is not the only problem airport. Apparently Copenhagen's Kastrup has also been flagged by travellers as a troubled port of call. A lot depends on the time of day you are travelling. We went through LHR en route to Sweden at 6 am and it was a breeze. Still, the baggage handling difficulties at Heathrow have created literally a mound of problems for the BAA management. Heathrow had to send a few thousand bags to Milan to have them sorted! Who would have thought that the British would be going to the Milanese to bring order to chaos???????

The Crisis Plus Ten (Part Two): Asia's Leadership Challenge

One of the challenges analysts of Asia have is that the continent is a place where it is often difficult to discern rhetoric from fact, perception from reality. The gap between what is at the surface and what lies beneath, between what is said in public and what is admitted behind closed doors, can be significant.

Take South-East Asia and the region’s integration. On the one hand, ASEAN countries have hailed their efforts to create a free-trade area and to conclude a spaghetti bowl full of bilateral deals in the face of setbacks at the multilateral level. At the same time, ministers tacitly acknowledge that much of the work so far has been focused on lowering tariffs, while certain sensitive sectors have been kept protected. The heavy lifting required to eliminate non-tariff barriers, facilitate trade, and create a real single and seamless market remains to be done. For example, there is no harmonization of rules in the trade of services in the ten ASEAN economies. This deficiency means that global services companies have no ASEAN business strategy; it would not make sense to have one. “What we need is for ASEAN to have a free trade agreement with itself,” advised Steven Okun, Vice-President, Public Affairs, for global package and document distribution company UPS in Singapore, at the World Economic Forum on East Asia which recently took place in the city.

Behind that somewhat jocular statement was a very serious plea for authenticity, for leaders to focus less on grand visions and more on pragmatic policies that would have real impact. “We need less planning and more doing,” said meeting Co-Chair Carlos Ghosn, who is President and Chief Executive Officer of both Japanese automaker Nissan and French car manufacturer Renault. “ASEAN has more of a facility for planning and less of a facility for execution. We may have wonderful plans but execution is 5%.”

ASEAN officials usually bristle at charges, particularly from the business sector, that the organization is all talk and no action. But today, with the pressures of globalization mounting and China and India continuing their market-shaking rise, the chips are down and South-East Asian leaders are speaking more plainly. “The step-by-step way they are handling the integration of ASEAN and East Asia is slow by the reckoning of many of us, too slow by the reckoning of business people,” Singapore Senior Minister Goh Chok Tong conceded. Vowed Ong Keng-Yong, the Secretary-General of ASEAN: “In the coming year or two you will see the leadership focus on implementation.”

In politics, there may be wisdom in discretion and necessity for spin. Yet leaders today cannot coast on vision alone but need to deliver results – and in short order. To be sure, the collective record of Asian leaders over the past two decades has been laudable. Asia has performed extraordinarily well, the 1997-98 financial crisis notwithstanding. According to the World Bank, the number of East Asians living on less than a dollar a day was halved from 300 million to about 150 million between 1990 and 2004, a decline in the incidence of poverty from 29% of the population to just 8%. In Asia as a whole, however, about 20% of the population is still poor.

“We have two faces in Asia,” said Rajat M. Nag, Managing Director-General of the Manila-based Asian Development Bank. “One Asia is growing; the other is falling behind. There are 1.9 billion people in this part of the world who live at US$ 2 a day; some regions are even worse off than sub-Saharan Africa. These two faces must converge rather than diverge as is the case now.”

As Asia progresses and many of its countries become middle-income economies, the shortcomings of the region will stand out more sharply against the backdrop of its fantastic success. Already, a new set of problems has emerged – infrastructure deficits, environmental degradation, energy security, technological development and innovation, and ageing demographics. The most urgent priority will have to be the growing gap between the rich and poor, particularly in countries such as China and India, where the ranks of the middle class have swelled and some have become rich while hundreds of millions remain in poverty. “Differential responses to globalization are leading to income inequality that is becoming a more serious problem in every country, every city and maybe every family around the world,” warned George Yeo Yong-Boon, the Singaporean Minister of Foreign Affairs. “Unless we have global leadership, this problem will become even more acute.”

But therein lies a major challenge. Today, there are no clear lines of global or regional authority. In a world of global threats that require regional and global solutions, there is a lack of regional and global leadership with any clear mandate. In the absence of such an agenda-setting force in Asia, it is up to each country to balance their national interests with their regional and global responsibilities. Authentic leadership means acting to prevent or prepare for crises, not responding to them. It means staying ahead by pursuing reforms constantly, not reacting to competitive pressures or public criticism. It means taking a long view, not governing with the next election or quarterly results in mind.

Indeed, how a government responds to widening disparities in income that are stirring a sense of insecurity, fear and resentment among citizens could be a real test. “Governments may be pressured to roll back reforms and liberalizations and revert to nationalistic rules for foreign investments or protectionist policies for trade,” Singapore Prime Minister Lee Hsien-Loong told participants. “This will not only choke off growth in the region but lead to tensions and souring of relationships.” How countries prepare for the next regional or global crisis will also be an indicator of the quality of their leadership in both the public and private sectors. “A shock will come at some point,” warned Tharman Shanmugaratnam, Singapore’s Minister for Education. “Emerging markets must have shock absorbers. It requires astute management.”

How can East Asian countries ensure that they have the leadership that can provide that astute management? One way is to invest in education that encourages creativity, innovation and a global perspective, attributes that future leaders of the region will need. “The educational system is not responsive enough to the new world that we are facing,” said meeting Co-Chair James T. Riady, CEO, Lippo Group of Companies, Singapore. Minister Yeo stressed the importance of preparing the next generation for globalization. “We can’t just feed them rules and regulations or canned knowledge,” he concluded. “Countries which pay attention to education and value systems will do well. Those which neglect this area are not in the game.”

The Crisis Plus Ten (Part One): Asia's Competitiveness Landscape

When South-East Asian economies were laid low by the financial crisis of 1997-8, their vulnerability to the swift movement of short-term capital and the weakness of their banking and corporate sectors were exposed. Investors fled. Then came a surge of China fever as investors discovered the mainland’s second and third-tier cities and the impressive cost-competitive power of Chinese manufacturing fully flowered. The China machine would produce everything, relegating ASEAN to the role of purveyor of commodities and agricultural products to feed the hungry dragon, said some analysts. China would suck away FDI and South-East Asia’s factories would close, its manufacturing shifting to its giant neighbour. Recently, India’s rise has grabbed the attention of investors and raised questions about East Asia’s competitiveness in the low-cost services sector.

But South-East Asia held its own. ASEAN exports grew along with China’s, though raw material and natural resources demand from China was in no small measure responsible. Vietnam has emerged as a low-cost manufacturing platform with a skilled workforce, an attractive alternative for Japanese investors concerned about their country’s tense relationship with Beijing. According to Nguyen Sinh Hung, First Deputy Prime Minister of Vietnam, speaking at the recent World Economic Forum on East Asia held in Singapore, FDI into his country this year could increase by up to US$ 20 billion, doubling the inflow in 2006. The Philippines, meanwhile, has managed to carve out a niche in electronics, software programming, back-office and call-centre operations. Thailand has continued to be a key automobile assembly hub, while Malaysia’s electronics and semiconductor industries have thrived. Singapore has pushed itself further up the value chain, developing new industries such as biotechnology and strengthening its position as South-East Asia’s premier financial hub. Even in Indonesia, shunned by investors for years after the crisis, FDI has started to rebound. “We have seen companies that left after the crisis come back,” said Muhammad Lufti, Chairman of Indonesia’s Investment Coordinating Board. Indeed, while investment levels in crisis-hit countries may not yet have recovered to pre-1997 levels, not all of the FDI heading to developing Asia is going to China.

The scenario of an overwhelming China juggernaut has not happened. And now, among business strategists, the talk is of a “China Plus One” approach – don’t put all your eggs in one basket, even if it is a Chinese basket. “China Plus One” makes sense for three reasons, said Ko Kheng-Hwa, Managing Director, Singapore Economic Development Board, Singapore. First, there is the logical need to diversify operational risk. SARS, the tsunami, and earthquakes that have hit the region underscore how a sudden crisis could disrupt supply chains. If China’s is knocked out, manufacturers will need reliable alternatives where production can be ramped up quickly. This is especially true in these days of just-in-time production, delivery and inventory management. Second, there is the business optimization motive. Many companies including Chinese enterprises know they have to be global in scale to compete even in their home markets. And third, China and India’s rise is forcing other economies in East Asia and elsewhere to find ways to be more competitive and more attractive to investors. “Everybody is trying to replace red tape with red carpets,” said Koh.

Marketing an economy to investors has become a global game. If an economy cannot beat China on labour costs, then it must try to do so in other ways – the availability of skills, the strength of the intellectual property regime, and a workforce’s capacity for innovation could be key drawing cards. Investors setting up offshore operations do not necessarily flock to the lowest-cost market, said Joseph L. Rice III, Chairman of US direct investment group Clayton, Dubilier & Rice. Reliability and quality are important considerations since these companies keenly want to maintain or even increase the quality of their products, not just make them more cheaply.

There are many other factors for success that countries have to keep on their planning boards. China, for example, has already found that as labour costs go up in parts of the country due in part to the shortage of skilled managers and the growing affluence of the workforce, it must adjust. Affected businesses have moved to hinterland regions. Others have moved up the value chain. Indeed, China has surprised competitors by how quickly it has moved from low-end manufacturing where it dominates to more sophisticated mid-range and even high-end products where it is beginning to have an impact in the market. The Chinese leadership also understands that as energy and environmental costs mount, the country’s industries must become more efficient and innovative.

To be competitive, every economy has to take up the innovation mantra. Singapore, which regularly performs well on global competitiveness rankings, has put the cause at the forefront of government policy. “If we leave out education and skills training, then we will be stuck with the old ways of growing the economy,” explained Goh Chok Tong, Senior Minister of Singapore and Chairman of the Monetary Authority of Singapore. “For the future, you have to create wealth. To create wealth, you have to innovate.” Concluded meeting Co-Chair Carlos Ghosn, President and Chief Executive Officer of both French carmaker Renault and Japanese automobile manufacturer Nissan: “Because of the increasing weight of Asia, the number of industries and sectors where Asia is leading in innovation has got to increase.”

The winners in the globalization age will be those economies and regions that put their competitive advantages package together right and make the right policy choices. The challenge for a region such as ASEAN is that the going is only going to get tougher. South-East Asia will have to make good on its regionalization commitments and go beyond the superficial lowering of tariffs to achieve much deeper integration that truly makes the area a single, seamless market. In this respect, quality leadership and governance – actually implementing ambitious plans – could be the essential ingredient of a globally competitive economy or region. As Goh said, “if you don’t have a government that understands the importance of macroeconomic policies, investment in education, and how to manage socioeconomic divisions in a country, it would be difficult for an economy to thrive.” This plain truth applies as much to the giants of Asia – China and India – as it does to their smaller neighbours who may be scrambling to keep up.