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US$68.9b in foreign investment – but where did it all go?

South China Morning Post – 28 July 2011

Yesterday InvestHK conducted its annual farce at the announcement of foreign direct investment figures produced by the United Nations Conference on Trade and Development.

Simon Galpin, director general of InvestHK, sat on the podium looking like the cat that had got the cream when he announced with evident pleasure that Hong Kong had moved into third place behind the United States and China and had apparently received an astonishing US$68.9 billion in FDI last year.

“This is very significant for an economy of only seven million people,” gushed Galpin.

Indeed it is – and you would have thought he might have been a tiny bit sceptical.

However, on he went to explain how Hong Kong’s wonderful business environment had been able to attract more investment than most of the rest of Asia put together.

According to Professor Wong Tak-Jun, the dean of the Faculty of Business Administration at the Chinese University of Hong Kong – who shared the podium with Galpin – this is not hot money or portfolio investment in the stock market, this is money that is invested in Hong Kong and stays here.

Asked where and in what the money was invested in, he responded: “I am sorry. We don’t have these figures.”

Let’s put this in perspective. The Hong Kong-Zhuhai-Macau bridge is estimated to cost US$10.7 billion so we have the equivalent of at least six of those.

We could also afford at least eight high-speed railways of the kind between Hong Kong to Guangzhou.

The combined IFC1 and IFC2 complex cost HK$20 billion, so according to InvestHK foreign investors put in enough funds last year to build 26 of these vast complexes. Yet they don’t know where the investment went.

If somebody stumbles across a hitherto undisclosed US$68.9 billion of infrastructure could they let InvestHK know?

Of course, these funds are not being invested here. About 10 years ago, Raymond Baker, from Washington’s Centre for International Policy told the Far Eastern Economic Review: “I would speculate, without being certain, that most of what is coming into Hong Kong represents Chinese illegal flight capital that has gone abroad and reestablished itself as a foreign entity. A big proportion then goes back to China.”

According to the International Monetary Fund, FDI is defined as when an investor based overseas acquires an asset in one country with intent to manage that asset.

Another statistic Galpin downplayed was that Hong Kong was ranked fourth for outward FDI, which interestingly came to US$76 billion and was rather more than flowed in. This might explain why we haven’t seen 20 IFCs sprouting up in Hong Kong. So come off it, InvestHK. Stop this nonsense. We are supposed to be Asia’s world city where we do things properly and not play these silly games.

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