If some of the foreign press is to be believed, Hong Kong is run by a few cartels of big businesses which thrive on cosy relationships and collusive arrangements. According to these reports, monopolies and restrictive practices abound, from electricity supply, gas, petrol stations to mobile phones. The image is that of markets controlled by a few privileged firms, whether in aviation, container terminals or trains, even driving schools. The consumer gets a raw deal because anti-competitive practices are pervasive, in supermarkets, taxis, movie and CDs distribution, text book supply, distribution of rice and livestock, photography for weddings; not to speak of lawyers and doctors keeping their fees high by shunning competitors. The same goes for the sectors that count the most, namely, property and banks; they are controlled by a few tycoons in the former case while a cartel runs the industry in the latter. In short, the SAR is no free market bastion.

But is it? If one considers the views of esteemed organisations like the Fraser Institute or the Heritage Foundation, the weight of international public opinion is still firmly on the side of Hong Kong as the freest and most competitive economy. Even in the most oft-criticised sectors such as property and banking, considerable progress has been made -- witness the lifting of the interest rate agreement among banks. For critics of the real estate sector, the downturn and the prices slump has led to a re-discovery of market forces; the market is working after all. As to distribution, whether the market is fair or not, the Internet is turning the industries upside down.

No market is perfect, and even staunch supporters of free-market Hong Kong will concede that some restrictive practices do occur. The question is how much and what to do? One extreme view put forward by the Consumer Council a few years ago is to enact a Competition Law and establish a Competition Authority. That has met with general disapproval from the business sector, including small and medium enterprises, who have not been persuaded by the merits of another regulatory body. The government also rejected the proposal but instead formed a Competition Policy Advisory Group (COMPAG) chaired by the Financial Secretary to oversee policies related to competition.

In fairness, the Consumer Council is not the lone voice in calling for a Competition Law. Every now and then, echoes of the council's 1996 proposal can be heard from among the business sector. Some Hong Kong investors looking for opportunities abroad are increasingly finding themselves using the same arguments which favour a competition law, such as -- a level playing field -- in negotiating market access into other countries, thus making it difficult for them not to be sympathetic to the same arguments in their home territory. Even the WTO, that global regulator, guardian and promoter of free trade, is studying the relationship between competition policy and trade.

The strongest argument against a competition law is that anti-competitive behaviour arises from too much rather than too little government regulation. The answer to more competition thus lies in reducing regulation, not increasing it by a competition law. The role of government regulation should be to keep the market always accessible, instead of mandating any competitive process or getting involved in assessing the business practice of industry players. The regulator should simply set the rules to enable the market to work itself out. Thus de-regulation, rather than more regulation, is the key to enhancing competition, as illustrated by our own telecommunications industry. That is why the Chamber has long advocated pro-competitive regulatory reform on a sector-by-sector approach.

Perhaps a fair conclusion is that we should always try to strengthen our competition regime, but there is no sufficient ground yet to demonstrate that a legislative approach would be appropriate. Instead, competition should be promoted through a rigorous advocacy programme as well as industry self-regulation. This is exactly what the Chamber has been doing. Last year, through the Chamber's service sector think tank, the Hong Kong Coalition of Service Industries, a set of guidelines has been developed to assist service industries in establishing their own codes of practices on competition. The Chamber is also at the forefront in campaigning for free market access and a level playing field, both for companies doing business in Hong Kong, as well as for Hong Kong companies doing business abroad.

After extensive discussion and deliberation, the General Committee formulated a Chamber Statement on Competition to encourage pro-competitive practices among Chamber members, so as to preserve and enhance free competition. This statement is now being widely promoted.

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