China's leaders unite to boost confidence

Vincent Lingga

Senior editor at The Jakarta Post

Hong Kong   /   Mon, September 16, 2019   /  02:45 pm  

The opening of 4 th Belt-and-Road Initiative (BRI) summit in Hong Kong. (Hong Kong Trade Development Council/File)

Senior officials of the Hong Kong Special Administrative Region and China used the 4th Belt and Road Initiative (BRI) Summit held here on Sept. 11 to 12 as an opportunity to reinvigorate international confidence in the city’s status and role as a global financial, logistics and business hub and as the gateway to the world’s second-largest economy.

Hong Kong’s reputation has taken a beating from more than 14 weekends of antigovernment demonstrations, which were ignited by an extradition bill viewed as Beijing’s interference in the territory’s autonomy under its “one country, two systems” principle. The bill was finally withdrawn early this month.

The leaders in Hong Kong and Beijing both seemed to increasingly realize the deep interdependence between the semiautonomous territory and mainland China, as Hong Kong Chief Executive Carrie Lam reiterated during the summit and which was confirmed by data from the Hong Kong Trade Development Council (HKTDC).

“By steadfastly upholding the ‘One Country, Two Systems’ principle and the Basic Law, we can find our way back to reasoned discussion, to the social stability essential to the long-term stability and prosperity and well-being of us all,” Lam told the over 5,000 summit participants from nearly 70 countries.

Meanwhile, vice chairman Ning Jizhe of China’s National Development and Reform Commission said more than a quarter of mainland China’s imports and exports were transported through Hong Kong.

Xie Feng, the Chinese Foreign Ministry’s commissioner in Hong Kong, and Chinese Commerce Vice Minister Wang Bingnan assured business leaders from Asia, the Middle East and Europe that Beijing fully supported the “one country, two systems” principle.

The Hong Kong Basic Law guarantees the “one country, two systems” of governance principle whereby the territory is guaranteed that its democratic and capitalist system “shall remain unchanged for 50 years” from July 1, 1997. Under the law, the city’s residents have freedoms that Chinese mainlanders do not.

Hong Kong Financial Secretary Paul Chan also assured business leaders and government delegations that the recent turmoil had not affected Hong Kong’s core competitiveness, including the rule of law, free movement of capital, goods, information and people, freedom of expression, its sound regulatory system and independent judiciary.

But several business giants, including Alibaba, have postponed planned initial public offerings through the Hong Kong stock exchange. Hotels and retailers have cried out over steep falls in turnover. The tourism industry, which accounts for almost 5 percent of Hong Kong’s gross domestic product, is hurting.

The South China Morning Post cited the Hong Kong Monetary Authority that the territory’s foreign exchange reserves fell from a record high of US$448.4 billion in July to $432.8 billion in August. But the newspaper also quoted analysts who said that the cause of capital flight out of Hong Kong could be attributed to not only the prolonged protests, but also China’s cooling economy and its trade war with the United States.

HKTDC chairman Peter Lam reiterated that Hong Kong’s strong rule of law, good governance practices, credible regulatory system, first-class infrastructure, full integration into the global supply chain and strategic location in Asia had made the territory one of the region’s biggest financial, trade and logistics hubs.

These factors, he added, also make Hong Kong a very important link and conduit in the development and success of BRI infrastructure development. Hong Kong’s trove of professional services talents enables the territory to act as an integrator of infrastructure and real estate projects in the region.
The BRI scheme was launched in late 2013 by Chinese President Xi Jinping to build a network of overland road and rail routes, oil and natural gas pipelines and other infrastructure that will stretch from central China through Central Asia to Europe and Africa.

HKTDC data show that over 60 percent of China’s foreign direct investment was channeled through Hong Kong and that 70 percent of the capital raised on the Hong Kong stock exchange — most recently estimated at a cumulative total of $2 trillion — was for Chinese companies. Moreover, more than 1,500 multinational companies have set up their regional headquarters in Hong Kong.

In turn, China supplies more than 25 percent of Hong Kong’s electricity, most of its drinking water and more than 75 percent of its tourists, who totaled 65.1 million last year. Most business leaders from Europe, the Middle East and Asia were optimistic that even though the financial centers in Shenzen and Shanghai had grown, Beijing would continue to need Hong Kong as the most international Chinese territory to support China’s policies on global integration and opening up to foreign investment.

Business panelists Mochtar Riyadi, founder and chairman of Indonesia’s Lippo Group, Dhanin Chearavanont, chairman of Thai Charoen Pokphand, and Victor Chu, chairman of the First Eastern Investment Group, agreed that the social unrest in Hong Kong for the last three months would not prevent the city from playing a significant role in China’s development and its plans to grow global trade links.

However, in the face of the prolonged political turmoil and waves of street protests, there remained a risk that Hong Kong could lose the fundamental advantages that had made it a highly dynamic financial and logistics hub in Asia.
“No other place can replicate Hong Kong. But its role as a super-connector could be in jeopardy if the social unrest continues,” cautioned Richard Shirreff, cofounder and managing partner of Strategia Worldwide, a United Kingdom risk management and consulting company.

Several other analysts privately raised concerns that a prolonged turmoil might provoke Beijing into forceful intervention to quell the protests and to pressure Hong Kong businesses to fully toe its stance, like Cathay Pacific Airways experienced amid the heightened demonstrations last month.
The dilemma, though, is that Beijing’s heavy-handed measures in Hong Kong could affect BRI projects, with Chinese companies facing suspicion from the projects’ host countries. If the demonstrations in Hong Kong continue to persist, Chinese overseas investments will suffer. The perceived influence of Beijing on the territory’s businesses in the current antigovernment climate may also stymie Chinese companies’ overseas interests.
***

Senior editor of The Jakarta Post, who attended the Belt and Road Initiative Summit on the invitation of the Hong Kong Trade Development Council. The article first appeared on thejakartapost.com.

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.

Read full post »

Auditors’ findings weaken Indonesia’s defense of palm oil industry

Vincent Lingga / The Jakarta Post

Jakarta   /   Wed, August 28, 2019   /   09:23 am 

 

 

The Supreme Audit Agency’s (BPK) findings that millions of hectares of oil palm estates in Sumatra and Kalimantan are currently managed under problematic permits will weaken Indonesia’s bid to defend the sustainability of the industry in the international market.

Unless this controversial revelation is clarified in a credible manner, it will be futile for the government to send missions overseas to confront the global campaign against palm oil.
It is therefore most imperative for the government to act firmly and quickly to resolve this issue in view of the crucially important role of the palm oil industry in the country’s economy.

Senior BPK auditor Rizal Djalil did not elaborate on the discovery when talking to the media last Friday but revealed that almost all big plantation companies in Sumatra and Kalimantan were implicated in permits that were problematic with regard to the right to cultivation (HGU), overlapping concessions, concessions on protected forests or peatland and companies’ obligations to empower smallholders.

Unlike the Development Finance Comptroller (BPKP), which is an internal auditor of the government, the BPK is a politically independent agency whose executive board members are selected by the House of Representatives.

Hence, a BPK audit report is often seen as more credible, especially because the findings follow an investigative, not general, audit, focusing on the legal compliance of palm oil companies with all laws, regulations and the principles of economic, social and environmental sustainability of palm oil management.

The BPK recommendation to President Joko “Jokowi” Widodo to involve the National Police and the Attorney General’s Office to follow up on its auditors’ findings shows the urgency and magnitude of the problems.
The issues of overall sustainability have been at the center of the international campaign against Indonesian palm oil since the 2000s. Most international green NGOs have alleged that the astronomical expansion of oil palm estates in the country has caused massive deforestation.

In March, the European Union restricted the volume of biofuels made of palm oil that may be counted toward the bloc’s renewable-energy goals. By 2020, member states must ensure at least 10 percent of their fuel consumption comes from renewable fuels, but palm oil-based products will not count. By 2030, the EU aims to stop all imports of palm oil.

Then, on Aug. 14, the EU escalated the antipalm oil campaign when the group reintroduced tariffs, ranging from 8 to 18 percent, on subsidized palm oil imports from Indonesia, following a probe which, the group said, found subsidies given to domestic producers

Unfortunately, Indonesia, as the world’s largest producer with an annual output of over 40 million tons of crude palm oil, seems tempted to resort to more traditional trading weapons: duties, tariffs and blockades. Protectionism does no one any good.

Moreover, World Trade Organization rules allow countries to try to influence other nations’ environmental policies through trade terms, as long as they are not discriminatory measures for protectionist purposes.

We previously accepted the main arguments made by the Indonesia Oil Palm Association (GAPKI) and the government itself that the allegations of deforestation are mostly a subterfuge to protect EU producers of vegetable oils such as soybean, rapeseed and sunflower, which have become increasingly uncompetitive as the palm oil yield is nine times higher than those of other vegetable oils.

The government has often seemed frustrated by the NGOs’ endless criticisms because their arguments presented in the debates over palm oil have not always been based on straight facts. Worse still, the governments of EU members and the United States often act in favor of noisy environmentalists.

But the basic question remains unaddressed. How can the government and the industry expect international fora to accept their claims with regard to the sustainability of the industry, when the issue of transparency, which has from the outset become a key battleground in the fight to clean up the palm oil industry, has never been resolved?

President Jokowi has even defied the Supreme Court’s decision in 2017 that the government should make information on palm oil concessions available to the public. Cabinet members related to the industry argued that data on palm oil concessions should temporarily be closed to the public as the government was reviewing all the concessions.

Over the past decade the government has subjected the industry to tougher rules designed to make the commodity sustainable economically, socially and environmentally. But the progress seems to have been much slower than expected given the complexity of the problems, especially in regard to overlapping regulations, changes in spatial planning and the tendency among many local leaders to use the issuance of land concessions as their “cash cows”.

The central government has since 2011 required oil palm growers to fulfill the principles and criteria of sustainability under the Indonesia Sustainable Palm Oil (ISPO) scheme as certified by accredited certifying agencies. But as of July, only 4.1 million ha, or about 30 percent of the estimated total plantation area of 14 million ha, had been certified.
 

Read full post »