Ordinary Gweilo

From The Guardian, a story about the latest fare increases on the London Underground. The flat fare for any journey in the central zone is now £2, which at current exchange rates is HK$28. Compare that to the cost of travelling on the MTR in Hong Kong, which is much lower – for example HK$5 for Central – Causeway Bay or HK$9 for Central – TST.

In fact, most people who travel on the tube in London don’t pay the single fare because they have a Travelcard giving them unlimited journeys on buses, tubes and rail. For the central zone you pay £17 (HK$238) per week, which is equivalent to only one return trip each day on the tube, but allows you to use the other services as well.

So in fact this is a clever ploy to charge unwary visitors and casual users more, whilst keeping prices relatively low for regular users. This does happen in Hong Kong, but in a much smaller way. If you have an Octopus card you pay about 10% less and also get discounts (if you make 10 journeys on the MTR in one week you can get a free single journey ticket, and your 2nd journey the same day on the KCR is 20% off). Buses don’t normally give any discount for using Octopus, though there are some special promotions.

I have often wondered whether it would make sense to have something similar to the Travelcard in Hong Kong. I assume the reason why it is not offered is that there are some people who make very heavy use of public transport so it would be difficult to get the pricing right. Or perhaps it’s that the Travelcard was introduced in London to encourage people to use public transport and it’s felt that there is no need to do that in Hong Kong.

The Octopus card makes it quite convenient (especially on buses and mini-buses) and of course that is something that has now been copied in many other cities around the world. London’s is called the “Oyster” card, but it is currently only available on the tube and the DLR (the light rail system in what was formerly London Docks).

One thing’s for certain. Having lived in Hong Kong for several years, and in London for many years before that, I am in no doubt about which city has the better public transport system. That it’s also cheaper here is just a bonus!

Simon is whining about having to move to a new office, wait for it, right on the edge of Central. Not Tuen Mun, or Tseung Kwan O, or the Tai Po Science Park, just another location in Central that doesn’t have a view of the harbour!!

His complaint is that the large bank that employs him feels the need to constantly change things. Actually he attributes this to Hong Kong rather the bank, but perhaps it’s a combination of the two (or a feature of the financial industry) because I haven’t noticed it happening very much in my world.

I have very rarely worked in a prime locations, in fact quite the opposite because I have spent most of my time in manufacturing and trading companies. They tend to be more frugal, occupy space in much cheaper locations away from the centre. The most central location I have ever been based was in central London, close to New Scotland Yard (and a short walk from Green Park), but in practice I spent most of my time at clients in much less glamorous places such as Finchley (a boring North London suburb).

I spent some time working for a client in Slough, which is where “The Office” is set, and I can confirm that it is just as unattractive as it appears. The particular factory was right next to the main railway line from London to the west of England, and when an express train went past, all conversations stopped instantly.

Needless to say, travelling from one side of London to another every day was not much fun. If you drive you get stuck in traffic jams (the North Circular is a particular favourite of mine), or if you use public transport you never know what is going to go wrong!

Hong Kong has a very good public transport system (especially if you are brave enough to use the red and green minibuses), and in the time I’ve been here there have been four new rail and MTR lines built (the Tung Chung line, Airport Express and Tseung Kwan O extension on the MTR, and KCR West Rail), with the KCR line to Ma On Shan under construction. Plus several highways, which are served by express bus services. So even places such as Tuen Mun and Yuen Long, which were once quite remote, are now within easy reach.

Mind you, I have had a few problems. Once when I needed to get to Tuen Mun, I decided I could take a bus from Tai Po KCR to Yuen Long and then use the Light Rail (tram). What I hadn’t realised was that the bus stopped almost everywhere en route, and it took an hour just to get to Yuen Long! Time for a cab.

So, Simon, stop complaining and be grateful that you haven’t been exiled to somewhere really remote!

There’s an interesting article by Cathy Holcombe in this week’s Spike, discussing the reasons why Hong Kong doesn’t have the loft-type apartments in disused industrial and commercial buildings that are commonly found in New York, London and many other large cities. It’s not lack of supply, nor lack of demand, but a perverse consequence of the way the leasehold system works in Hong Kong. Yes, it’s the government’s fault.

If you “own” a building in Hong Kong what you actually own is a lease for a fixed period, and for a specific type of usage. So the owners of an industrial building cannot convert it to retail or residential use without paying a large premium to the government. The problem here is that in many cases the premium makes it uneconomic to change the usage, so the building lies empty (or at least under-utilised).

As manufacturing has moved across the border, there are many areas of Hong Kong where old factories or warehouses could be converted to commercial or residential use (Kwun Tong, Kwai Chung, Fo Tan, Cheung Sha Wan, etc.). This has already happened to a limited extent, but mainly by redevelopment rather than conversion (apart from manufacturing companies using their own factory or warehouse space for office use). What we haven’t seen, and are unlikely to see, is the conversion of existing building to residential usage.

The problem with this is that it means that some of these areas are stagnating. The exceptions tend to be where the large developers already have a foothold. Quarry Bay is the prime example of this, with Swire able to re-develop the land where its Taikoo sugar processing plants were located and acquire adjoining plots to create Taikoo Place and Cityplaza (‘Island East’). The point is that Swire had a great deal of land, a great deal of money and a strategic plan. This would be much more difficult for a smaller developer, and impossible for the owner of a single building.

It has to be said that there is some logic in the way this policy works. As Cathy Holcombe points out, Hong Kong generally has a mix of high density, high-rise, developments, green space, parks and mountains, rather than the featureless urban sprawl of cities such as Bangkok or Manila. Converting these previously industrial areas into low-rise yuppie developments would run counter to what passes for the government’s land-use policy – in other words, Hong Kong would not be making optimum use of the land. Or rather it wouldn’t be doing so if the price of the apartments was low, though it is arguable that if this were successful then the price would increase and so the government could increase the land premium for future conversions. This, however, would require rather more imagination and enterpreneurial thinking that we are likely to get from the government department concerned.

[Which leads me off into another more complex subject that I will leave for another day. Suffice to say that I think everyone would agree that Hong Kong needs more apartments, but the property developers restrict supply in order to keep prices high and maximise the profits they can derive from their huge land banks, and the government seems happy to play along with scheme.]

What is clear is that the present system isn’t really working. The most radical solution would be to replace the current system of lease premiums with a profits tax, possibly on a selective basis for areas where re-development is socially desirable. Or I suppose the Urban Renewal Authority could be given more funding, but this is an expensive approach because of the generous compensation they pay to property owners, and, as this is a problem created by excessive government involvement, the answer cannot be more meddling.

One thing I can say for certain – problems such are this are one of the reasons why there was so much hollow laughter when Hong Kong was proclaimed as ” the world’s freest economy” by the Heritage Foundation. Even funnier was that 2nd place went to the socialist republic of Singapore, where 86% of the population live in public housing!

First an admission. When I first came to Hong Kong I lived in Tsim Sha Tsui, and the local shops (especially in Nathan Road) seemed highly dubious. I felt much comfortable sticking to the chain stores – the prices were higher but at least I felt I wouldn’t be ripped off – I’m sure we’ve all heard first-hand accounts of unwary visitors being cheated when they thought they were getting a bargain (particularly on cameras).

It took me a while to figure out that this practice is actually not that common, and in fact is virtually unknown outside the main tourist areas. As I have always lived (and mainly worked) in, er, less well-known parts of Hong Kong, I am most unlikely to be cheated in this way. Having said that, several years I did encounter a hawker in the Wong Tai Sin area selling something or other on the street, shouting out “saam sahp man” (HK$30) – until I walked past when he started saying “forty dollars” in English. Easy mistake to make, I’m sure.

Now I am somewhat suspicious of most of the large chain stores in Hong Kong, and would expect to get a better deal in local shops. I’ll return to the subject of supermarkets in the future because I have plenty to say about them, but perhaps DVDs (and VCDs) are a good example for today. Small shops often have very good bargains, presumably because their overheads are so much lower than the big stores in the fancy arcades. I was in one such store at the weekend, and they had a vast numbers of DVDs at HK$18. Plenty of rubbish, but also some decent movies from the last few years.

At the other end of the scale we have HMV and Blockbuster. HMV remains a more pleasant place to shop than Blockbuster, which has the narrowest aisles I have ever seen, and both will normally have a larger selection and more space than local stores (which often seem crowded with just half a dozen people inside). The prices you pay reflect these differences, even though you might expect larger stores to have more bargaining power with the distributors.

Meanwhile, HMV currently has what it calls a “clearout” sale. What they seem to be doing is putting big stickers on items whilst cutting prices marginally if at all. One “bargain” I saw was Sopranos Series One DVD for HK$800, reduced from HK$850 but available from Amazon for HK$360* (plus postage). Perhaps people don’t want to go the trouble of ordering from overseas (and run the risk of the items being stolen) but that’s a big price difference.

Yes, I am being unfair comparing prices on imported items. Most DVDs produced for sale in Hong Kong are cheaper than the equivalent items in the UK and US. Just as a random example, the HBO series “Sex and City” Season 5 DVD is HK$158 in Blockbuster and more than HK$200* from Amazon.co.uk (with a recommended price of HK$360*).

One problem I now have is figuring out what is a fair price for a DVD. It’s not that long ago that the major distributors starting offering films at $78 or thereabouts, which was a bargain compared to original prices of $200 or more, and it seemed reasonable to assume that this really was a special offer, but now prices are even lower. Locally produced versions of more minor films seemed a bargain at around $35 each, but now many of them are around $20. Can prices fall any further? As a consumer, I hope they do continue to fall, though when I was looking through the HK$18 DVDs I realized that I had already bought (but not yet watched) most of the ones I wanted, often at higher prices! Should I have been patient and waited? Maybe not.

I also hope that we continue get more DVDs of overseas TV series for the local market (such as “The Office” series two and “Sex and the City”) rather than having to rely on imports. Although there was a local VCD version of the first series of the Sopranos, it can’t have been very successful because there haven’t been any more, and they didn’t do a DVD either. Hence HMV is selling the US version at that eye-popping price.

If you don’t want to get DVDs shipped from the UK or US, one good alternative I can recommend is CD Wow. The Hong Kong site has lower prices because they don’t charge VAT, so don’t order from their main site! The good thing about this company is that they ship (worldwide, I think) from Hong Kong, so it only takes a couple of days and they don’t charge for postage. Plus the stuff should fit in your letter box, which makes life easier, though for this reason they don’t ship box sets.

______
* Note: I have calculated UK prices at £1 = HK$14 and deducted VAT (because that’s what Amazon UK do if they are shipping outside the EU). As Hong Kong has no sales tax this seems a fair comparison.