Jeffrey Lam

Legislator Jeffrey Lam
http://www.rthk.org.hk/rthk/radio3/lettertohongkong/20080928.html
Dear Citizens of Hong Kong,
I know many of you have had a rough roller coaster ride recently. In just one week, we have seen the collapse of Lehman Brothers, the buyout of Merrill Lynch and the crisis surrounding the world ’ s largest insurer AIG. This financial hurricane threatens to jolt the world economy and has filled Hong Kong ’ s stock market with all the gloom. low-risk products? Unfortunately, the Lehman tsunami has already taken its toll on Hong Kong as buyers of mini-bonds backed by Lehman Brothers will stand to lose their life savings following its bankruptcy.
This is very upsetting. In fact, I feel the pain of these buyers. They took mini-bonds as a low-risk tool to safeguard their life savings from depreciation only to be told that the mini-bonds are indeed a high-risk derivative product that offers little protection. All they are looking for is only a mere three per cent yield every year and they relied on managers ’ professional advice to make their investments. However, some investors did not even know the products they purchased are linked with Lehman Brothers. Nobody had told them anything.
Those who remain unaffected in this debacle should not count themselves lucky because we do not know who will be the next victim. The Lehman mini-bond fiasco should not be treated as an isolated case. Indeed, when the financial market is going increasingly competitive, we have seen many aggressive managers who go all the way to talk you into buying their products. More often than not, they only emphasize on the good but do not warn you of the bad of the investments. Have they really explained to their clients the real definition of mini-bonds? The real risks associated with the notes? And the real issuer? Have investors been misled into believing that mini-bonds are These are the questions we have to look into and the regulatory authorities should not turn a blind eye to their plight.We, the Liberal Party, have therefore urged the Chief Executive to look into this matter and set up an ad-hoc group to help them reclaim most of their assets with legal assistance. We expressed to him the urgent need to strengthen the existing regulatory regime that oversees derivative products and to probe the sale approaches in question as well as any irregularities. We hope the Government can enhance the transparency of the system by providing investors with all the necessary information so as to better safeguard their interests. The Government should also keep a close eye on other cash-strapped financial institutions and formulate a contingency plan to prepare for the worst. It has to be pro-active and be able to stifle a flame before it grows into a roaring fire. The run on the Bank of East Asia triggered by credit rumours on Wednesday was an unfortunate example. It showed how easily these days customer confidence can be shaken. I have immediately reflected this public concern to Financial Secretary John Tsang.
I have urged the authority to take prompt action to restore public confidence in Hong Kong ’ s banking system by revealing more support data and providing a greater safety net for depositors.
In fact, they are not the only ones who suffer. The small and medium businesses are also feeling the pinch. Because of the US ’ s credit crunch, banks have already tightened their purse strings. Many small firms already find it hard to secure loans and they have to pay more to borrow money. This is definitely bad news as SMEs [small-medium enterprises] form the backbone of our economy by accounting for 98 per cent of business establishments in Hong Kong and 50 per cent of the total private sector employment. The poor availability of credit has definitely begun to have an impact on them.
Nobody will know whether the US$700 billion rescue proposal by the US Government to bail out financial firms will save the American economy, but one thing is for sure: it will lead to a massive devaluation of the dollar. This will set off a global chain reaction of high commodity prices, weak export demand, rising inflation and soaring bills of fuel, electricity and food. How can they keep their business afloat in the face of all these difficulties? Actually I know many friends who run small businesses are now agonizing over their future. They aired their grievances to me and said life is becoming more difficult for them. We can now see some very quiet evenings at restaurants and shops as everybody has to scrimp and save for a rainy day or even a storm in the future. And, because of high rent and utility costs, our long-standing spirit of entrepreneurship which has brought us success is nowhere to be seen now. Business operators dare not venture out into the world of new creative business because of all the financial constraints. I feel their plight and the Liberal Party would do whatever it takes to help them.
Indeed, we have called on the Government to raise the amounts of Working Capital Loan Guarantee and SME Development Fund for SMEs to finance and develop their businesses. Under special circumstances, the Government should offer borrowers greater flexibility in making repayment. In addition, we have also urged the administration to further relax and speed up the licensing process and the procedures to convert the use of vacant factories to spur the development of creative industries and local small business in Hong Kong. I still reminisce the good old days of the Poor Man ’ s Nightclub Market where we could have a happy night out eating and shopping. I hope the Government can bring back the vigour, vitality and creativity of that golden period.
Apart from the Government, I also hope landlords could make rental adjustments in these trying times to ease the plight of SMEs when they are grappling with reduced sales and rising bills. After all, if the small businesses cannot survive through the coming economic chill and have to pull down their shutters, who will go to rent their units? It will eventually hurt their rental business and become a no-win situation to all. Let us work together to fend off the coming challenges. I believe, with the perseverance, determination and ingenuity of Hong Kong people demonstrated in the past, we can ride out any storms and emerge stronger day after day.