Occasion Address at Macquarie University Hong Kong Graduation Ceremony
Speeches
07 Nov 1999
Occasion Address at Macquarie University Hong Kong Graduation Ceremony
Joseph Yam, Chief Executive, Hong Kong Monetary Authority
Chancellor, Members of the University, graduates and guests.
- The last time I had the opportunity to don academic robes was
29 years ago, when I graduated among the first batch of students of
the Social Sciences Faculty of the University of Hong Kong. I was
fortunate enough to be among those in that pioneer class of 1970 to
receive an honours degree in Economics and Statistics. I naturally
felt elated at being recognised to be, so to speak, among the top
of the class. But at the same time, I must now confess publicly, I
did harbour doubts as to whether I deserved the honours. The cause
of my doubts was very simple: after three years of intense academic
pursuits, I still did not have the faintest idea of what could be
done to better the economic wellbeing of Hong Kong. If this was
supposed to be the mission of an economist, albeit one with just a
bachelor's degree, then what I deserved was not honours, but, at
best, what was called an "RP" - a referred pass.
- This anxiety was further heightened by what one of my late
uncles told me on my graduation. In response to my rather naive
urge to do something for the people of Hong Kong, he diplomatically
and philosophically drew my attention to the fact that Hong Kong
was run very much by the invisible hand and that there was little
need for the services of economists. Where economic management was
needed, it would be the responsibility of a few senior expatriate
officers of the then colonial government, who definitely did not
need the services of local economists fresh from university. He
advised that, given my physique and my then excellent eyesight, my
future lay best in joining the police force as an inspector, for in
law and order he saw power and glory; and rather unashamedly he
added that he also saw the road from rags to riches. He reminded me
that, in any case, the reason why I had managed to get into
university, with my rather mediocre academic record in high school,
was simply the lack of competition. This was, according to his
analysis, due to my being in the first crop of post-war babies to
fill a demographic vacuum left by the war. Further, there had been
an exodus of many of my capable peers, who were migrating in the
late sixties with their well-to-do parents, out of concern about
the disturbances in Hong Kong induced by the Cultural Revolution in
the Mainland.
- While I must give my uncle credit for his frankness, it was not
the road from rags to riches that I sought, although the stark
reality of life for a low-income family always loomed large. There
was, therefore, a need for compromise. And so when the opportunity
to start a Civil Service career presented itself in the form of a
vacancy as a Statistician in the Census and Statistics Department,
I went for it. This was probably to the disappointment of my mentor
for three years, an economics lecturer now working in the World
Bank. But it was a job well paid and the only job that had some
relevance to what I had learnt in university, given indeed that the
colonial government had no need for economists.
- There was no perceived need for economic statistics either,
other than those that came as a by-product of the general
administration of government, such as the collection of taxes, the
enforcement of exchange control and the minimal regulation of
various business activities. In this connection, it is interesting
to note the view of a senior government official then on the need
for economic statistics. In response to a request by a Legislative
Councillor for GNP data to be compiled, the then Financial
Secretary, Sir John Cowperthwaite, said that: "(Hong Kong is) in
the happy position ..... where the leverage exercised by Government
on the economy is so small that it is not necessary, nor even of
any particular value, to have these figures available for the
formulation of policy". He added that: "we might indeed be right to
be apprehensive lest the availability of such figures might lead,
by a reversal of cause and effect, to policies designed to have a
direct effect on the economy".
- It would be difficult, particularly in present day
circumstances, to agree with him on this. But I have to thank him
for enshrining this very extreme view of economic policy because it
was his conservatism that later, after his retirement, provided
fertile ground for the quest of information. And, as expected,
information promotes knowledge as well as exposing ignorance, which
in turn strengthens the desire for more information. This
productive process, well harnessed over the years by successive
financial secretaries, provided the foundation for the achievement
of excellence in financial management in Hong Kong, as the record
clearly shows. I have been privileged with the opportunity to play
some part in this process throughout my career as a public officer,
first as a Statistician, then as an Economist, when the utility of
this latter profession was eventually established in government,
and now as Monetary Authority.
- At the working level, there was a clean sheet on which to lay
down blueprints and there was an understanding community to which
sensible arguments could be put and from which support was
forthcoming. So, prudent policies of long-term benefit to the
community were successfully pursued, even though these policies
often involved temporary hardship. There was also scope for healthy
debate, before a decision was taken, about whether or not there was
a case for government to intervene in the functioning of the
economy, at the macro or micro levels, rather than leaving it all
to market forces. To quote Sir John Cowperthwaite again: "over a
wide field of our economy it is still the better course to rely on
the nineteenth century's 'hidden hand' than to thrust clumsy
bureaucratic fingers into its sensitive mechanism". Indeed, this
sentiment was to be later developed and philosophised by his
successor, Sir Philip Haddon-Cave, as the policy of positive
non-interventionism - a policy that has served Hong Kong extremely
well in the years that followed.
- This policy, at least the main thrust of it, is familiar to
all. But, as someone who has taken part in the development and
implementation of it, let me nevertheless point out an important,
exceptional aspect of this policy that has been frequently
neglected. This is the responsibility, under this policy, for
government to take decisive action to get involved where the
invisible, or hidden, hand is not working in a manner consistent
with the public interest. There have, of course, been more examples
of the Government elegantly refraining from intervention than
bravely indulging in it; but there was no lack of such
interventions when circumstances dictated. And some interventions
were more controversial than others, notably those that were taken
to correct failures in financial markets. This is understandable.
Whether you are a casual observer or a staunch supporter of Hong
Kong, it is difficult not to feel sceptical when you see market
intervention launched in the freest market in the World. This is
particularly so when you have not had the chance to appreciate the
background and the full justifications for such action.
- And there has been increasingly lively debate on each and every
issue of public policy, encouraged by the inevitable and continuing
process of democratisation in Hong Kong. The grounds for reform and
debate were particularly fertile in the monetary field, as the long
history of operating as part of the Sterling Area that was
dismantled in 1972 left Hong Kong with no institution or instrument
for monetary policy. These inadequacies were belatedly brought home
in the early eighties, when confidence in our currency, then
floating without an anchor, was badly shaken under the influence of
uncertainties over the political future of Hong Kong. It was then
in 1983 that the fixed exchange rate anchor to the US dollar was
established, and other inadequacies in monetary management
subsequently addressed.
- In the event, this process of monetary reform turned out to be
a continuous one that is still very much alive today. There have
been many new challenges, brought about by the explosion of
international finance, as the powerful combination of financial
liberalisation and the advance of information technology have taken
hold of the financial world. These challenges have tested the
robustness of financial systems and institutions in all
jurisdictions that freely embrace international capital. They have
meted out harsh punishment to those that were found lacking. Even
those with an exemplary track record of pursuing prudent policies
were not spared, for, as international finance outgrew the
international financial architecture, they have become vulnerable
by virtue of their openness and smallness. As a small and open
market, we had our share of all these. The anxieties before and
after the political handover, and the requirement laid down in the
Basic Law for the development of Hong Kong as an international
financial centre have added further complexity to the task of
delivering monetary and financial stability.
- There have thus been an abundance of events to test skills and
nerves, and to draw upon one's most innate potentials, to the
extent they exist in a public officer, in defence of the public
interest. To have been involved in this process and to be
responsible for steering it in recent years is, and will
undoubtedly continue to be, the experience that I treasure most in
my professional life. There is still much to do, including the
urgent tackling of important regional and international financial
issues on which there is still a great deal of disagreement. The
response to excessive volatility and inadequate transparency in
international finance must surely be greater disclosure and
enhanced regulation. This is essential for harnessing the explosion
of international finance. A lack of response will undermine the
contribution of financial freedom to global economic growth and
development.
- Australia and Hong Kong are close allies in the push for reform
in the international financial architecture. This is why I am
particularly pleased to be receiving such valuable and meaningful
encouragement from a fine and progressive university in Australia
that is also famous for its strong record in economics and finance.
In bestowing me this rare honour, to clothe me with this much more
esteemed robe of academia than the one I wore 29 years ago, you
have given me renewed stamina to persevere. And in conclusion I
would like to offer my congratulations to all those here today who
have the privilege to become graduates of Macquarie University. You
have been well equipped by Macquarie University to meet the many
challenges of working, in whatever capacity, in an international
financial centre at a time when international finance is undergoing
dramatic changes. I wish you and your family members all the best.
Thank you.
Joseph Yam
Hong Kong
7 November 1999