Making Hong Kong an Ideal Place to do Business -
ICAC's Fight Against Corruption
Speech by Mr. Tony KWOK Man-wai
Deputy Commissioner & Head of Operations,
“Making Hong Kong an Ideal
Place to do Business -
ICAC's Fight Against Corruption”
Ladies and Gentlemen,
I am honoured to speak at this luncheon. On the subject of corruption, which has become a global issue in recent years, I believe I can speak with some authority, as I have been involved as a career officer in the fight against corruption in the last 25 years. I joined the Independent Commission Against Corruption (ICAC) in Hong Kong shortly after it was set up in 1974, which at that time was one of the pioneer independent anti-corruption agencies in the world, and have witnessed how we, together with the public support, turned Hong Kong from one of the most corrupt cities in the world to now one of the least corrupt. Certainly I can share with you many juicy stories in our archives. Although I may wish to reserve some of them for my memoirs after I retire!
So, in the next 20 minutes I would like to cover three aspects: (1) to briefly account for our 25 years’ fight against corruption and our critical factors for success; (2) to answer the obvious question you may have in mind, on whether corruption has increased after the re-unification, which I think I am the most qualified to answer; and (3) on how ICAC can assist you in doing business with or in Hong Kong and protect your investment.
As I have mentioned, in the 1960s and 1970s, Hong Kong, as a British colony, was definitely one of the most corrupt places on earth. There was a saying that “corruption existed from womb to tomb”. From the day you were born to the day you die. Police corruption especially was syndicated. Nearly all types of organized crimes, vice, gambling and drugs, were protected. As a taxi-driver, you could even buy a monthly label stuck on your taxi and it would guarantee you from any traffic prosecution. Such was the scale of open corruption in Hong Kong. You would also find some junior police officers, whilst their official salary was just a few hundred dollars, openly lived in a million dollar worth luxurious apartment and drove a Cardillac. The problem, as you may appreciate, is that these people made no attempt to cover their wealth. This did not happen in the police sector only. It occurred in the government as well as in the business sector and the people of Hong Kong appeared to accept corruption as a way of life, until it reached an intolerable point and that led to the establishment of the ICAC. When the ICAC was set up at that time, very few people in Hong Kong believed that it would be successful. Within 3 years, we smashed all corruption syndicates in the government and prosecuted 247 government officers, including 143 police officers, amongst these are some labelled as billion dollar Station Sergeants, although a few had managed to escape and are still hiding in Taiwan. I should add that since then, the police have started their own reforms and by now, the Hong Kong Police is recognized as one of the most efficient and cleanest forces in the region.
In the early 1980s, we then turned our attention to the business sector where we received great resistance. The business community said that they regarded kickbacks as a normal way of doing business and even described it as the best lubricants for business. We insisted that there could not be double standards in society and private sector corruption could be as harmful as government corruption. Today, the various chambers of commerce in Hong Kong all agree that the ICAC has contributed significantly to making Hong Kong a good place to do business, ensuring a level playing field and the rule of law.
By mid 1990s when all appeared to look under control, Hong Kong was struck by what appeared to be a reemergence of corruption. There were signs that small groups of government officers were involved in organized corruption, a pattern not seen since early 70’s. There is a lesson for us all. Corruption can quickly creep back to threaten our society. Fortunately, our alarm system worked and through our strong and effective action, these small syndicates were smashed quickly.
The reason for this corruption upswing in mid 90’s could be attributed to the uncertainly in some quarters on the then future of Hong Kong - known as the “1997 quick buck syndrome”. There was a high degree of public scepticism, both locally and overseas, as to whether ICAC could maintain its independence and effectiveness to cope with corruption in the run-up to and beyond 1997. These scepticism had prompted the potential corrupt to test our capability. I am glad to say that events in the past three years have proved the sceptics wrong. Business has been as usual for the ICAC and corruption has been pretty much kept in track by our vigilant and rigorous law enforcement actions.
Our major corruption cases continue to hit the press, sending the message that no corrupt could be spared irrespective of their background. Examples of our major cases include:-
- horse race fixing;
- car smuggling;
- cigarette smuggling;
- counterfeit VCDs;
- major corruption-related fraud in China state funded companies in Hong Kong.
In a recently concluded major corruption/bank fraud case - the Carrian case - which took ICAC 15 years to conclude, we successfully prosecuted 6 bankers and a chairman of a large public listed company. The trial judge, while sentencing a prominent banker called Ewan Launder, head of the investment company of the Hongkong Bank, and the last accused in this case, to five years’ imprisonment, said, “The ICAC’s dogged persistence in this investigation demonstrates to the people of Hong Kong and indeed the world that corruption both in the private and public sectors would be rooted out when it is discovered and at whatever cost to the society. It is fortunate for Hong Kong to have the ICAC.”
Our effectiveness after the re-unification has prompted quite a number of favourable and supportive editorials from leading newspapers in Hong Kong. The South China Morning Post, a leading English newspaper, wrote in 1998, “Anxiety about the increase in corruption appears to be receding. The lessening of public concern in recent months has been based on the continued high profile of the ICAC.” It concluded, “Hong Kong maintains a clean image which is an extremely valuable asset in these difficult times (financial turmoil). No efforts must be spared to protect it and that means both recognizing and supporting the contribution of the ICAC to our well being.”
All the survey results by various agencies after 1997 also confirm that Hong Kong remains one of the least corrupt places. Political and Risk Consultancy Limited rated Hong Kong as the second cleanest place to do business; Transparency International, second least corrupt place to do business in Asia. Transparency International came to Hong Kong to study how such a major project like the new Hong Kong International Airport was built without corruption and publish a report recommending it as a model for public work.
No doubt the fight against corruption in Hong Kong is a success story and has a wide ramification in the change of culture in Hong Kong. In a recent millennium survey, the setting up of ICAC was voted as the sixth most important event in the one hundred and fifty years of history in Hong Kong. So, what is our critical factors for success? Maybe some of these can provide you with food for thought in doing business. There are to me five important factors:-
- Three Pronged Strategy. It is the now quite famous three pronged strategy,
which is deterrence, prevention and education, and for that we set up
three different department within the Commission. The Operations Department
- the largest department, with staff of 1,000 - investigate and bring
the corrupt to court. The Corruption Prevention Department, consisting
of about 60 management consultants, examine systems and procedures in
government departments and offer advice to the business sector to eliminate
corrupt loopholes. The Community Relations Department, with 200 odd officers,
educate the public against the evils of corruption and motivate their
- Independence. We are directly responsible to the very top, i.e. the
Chief Executive of Hong Kong. It ensures that we are free from any interference
in conducting our investigation. In my 25 years’ service, I have never
come across or have any undue interference from whatever quarters in our
investigation. Provided there is a report of corruption, we will investigate
irrespective of the background of the suspect or the organization, without
fear of prejudice. No one can order us to stop an investigation until
it has gone through a full process.
- Top-level support. Our Chief Executive has on many occasions reiterate
the government’s firm commitment to fight corruption, and it is not just
words. He also ensures that the ICAC is given the necessary resources
to tackle its task. We cannot run a proper anti-corruption agency on a
shoe stringed budget. Our staff are 1,300 strong and our budget for this
current year is US$94M, working out to be about US$15 per capita, which
we believe to be amongst the highest anti-corruption budget in any government
for the work. Having said that, but looking at it from another angle,
our budget represents only 0.3% of the entire government budget, or 0.05%
of Hong Kong’s Gross Domestic Product and we certainly offer a really
good value for money to ensure a clean society.
- Public Support. Every year, we commission an independent public opinion
survey which continues to report that the ICAC has the support of 99%
of the population in Hong Kong.
- Professional staff. As corruption is secretive in nature and is regarded as one of the most difficult crimes to investigate, we need professional and dedicated investigators to do the job. We are one of the first law enforcement agencies in the world to introduce the interview of all suspects under video. We have a number of specialized units, such as financial investigation (where professional investigative accountants are employed) witness protection, computer forensic and surveillance. In a recent South China Morning Post Editorial, the US FBI representative in Hong Kong was quoted as “regarding the ICAC as one of the world top four anti-corruption agencies.” I should add that many of our officers received training from the FBI National Academy here!
Doing Business in Hong Kong
So, what do you expect if you are doing business with or in Hong Kong. Firstly, when you deal with the Hong Kong government and the public bodies, it is unlikely that you will be confronted with any solicitation of bribes or gifts. You will also find that our procedures are the least bureaucratic and the Hong Kong Civil Service is clean, efficient, transparent and accountable. There is no need for you to go backdoor for any favour. The competition in business is on level-playing field.
Setting Up Your Business
If you decide to come to Hong Kong to set up your business, there are several ways ICAC can assist:-
- We, together with the various Chambers of Commerce, have set up the
Hong Kong Ethics Development Centre. The purpose of this Centre is to
encourage and assist companies in Hong Kong to come up with their own
code of ethics. Through our efforts, over 70% of all large companies in
Hong Kong have a code of ethics.
- Our Corruption Prevention Department have set up a business advisory
service who is able to offer you free corruption prevention advice on
your company’s systems and procedures, e.g. procurement procedures.
- Our Community Relations Department have a team of officers who can
organize talks to your staff on ethics and corruption laws.
- Certainly, if you have any reasons to suspect fraud or corruption,
we have a 24-hour Report Centre where you can approach for assistance.
We had in the past prosecuted “buyers” from various countries who tried
to solicit “kickbacks” in return for purchase contracts. We had also prosecuted
employees of international enterprises in Hong Kong for corruption offences.
Thus, we are here to protect your investment.
- We take a partnership approach with large business enterprises where we proactively approach them to set up points of contact for our regular liaison.
Finally, from our experience in fighting corruption, perhaps we can offer you some tips in preventing corruption in the business sector:-
- Effective code of conduct and clearly set out systems and procedures.
- Adequate supervision.
- This is most important. This old belief, “Don’t wash your dirty linen
in public” should be regarded as totally outdated. If you try to hide
any corruption for fear of creating bad publicity, firstly, it will lose
any deterrent effect because the staff would be more tempted to corrupt
practices if the worst consequence is just a quiet dismissal. Secondly,
if it is found out later, it will create an even greater scandal. The
best advice we have is that , if in Hong Kong, you should approach the
ICAC in the earliest opportunity and it would be seen in the future PR
point of view that it has been a joint effort of the ICAC with the company
management to rid out the bad apples in the company. It would send a very
strong message to your staff and business partners that you have adopted
a totally uncompromising attitude towards corruption in your company.
- If you accept that concept, then it would be in your interests to have
a more proactive strategy to discover corruption and fraud in your own
company by, e.g. (i) strengthening the internal audit; (ii) encouraging
whistle blowing by setting out channels for complaints.
- Finally, protecting the sensitive and IT information, which can often be a source for corruption.
As Deputy Commissioner and Head of the Operations Department of the ICAC, I have continued to instill among my staff a sense of mission, as we all believe that our job plays a significant role in ensuring that Hong Kong continues to have a clean and efficient government, a clean culture, the rule of law, and not least, be a level playing field and excellent place to do business.