Many Worry China Will Corrupt Hong Kong And Harm Its Economy

HONG KONG - Before W.M. Lam visits communist cadres in the southern Chinese town near his textile factory, he slips several hundred dollars into his briefcase. When Lam meets with officials back in his native Hong Kong, he carries the same briefcase - minus the cash.

"In China, you never know whom you are going to have to pay off, but you know you will pay off somebody," said Lam, who feared reprisal if the location of his factory was identified. "In Hong Kong I don't need to pay somebody to get something done, and they would arrest me if I tried."

Experiences such as Lam's bring to the fore the single issue that most worries Hong Kong people about rejoining China. Today, Great Britain was delivering a glittering territory ranked as one of the world's least corrupt places to a poor, communist-led country that is counted among the most corrupt.

"Corruption heads list of fears for handover," said a recent headline in the South China Morning Post. The article cited a poll of Hong Kong Chinese, 72 percent of whom named public- and private-sector corruption as the issue causing the most unease.

That fear contrasts with high levels of overall confidence in Hong Kong's future expressed by both local Chinese and expatriate business people. More than 90 percent of the members of the British Chamber of Commerce remain optimistic, said Christopher Hammerbeck, the organization's executive director.

"But corruption is an area which we have a high level of concern about," he said.

In the public sector, corruption means public servants use their office for private gain. Corruption in the private sector includes using bribes or connections to gain an unfair advantage in the market.

The result, according to the World Bank, "hinders economic efficiency, diverts resources from the poor to the rich, increases the costs of running businesses, distorts public expenditures and deters foreign investors."

No wonder many residents directly link the territory's continued economic growth and political stability to its clean reputation. Their fears encourage doubts about Hong Kong's ability to stop corruption from seeping into agencies like the civil service and the police department, as well as businesses where foreign and Chinese companies now enjoy equal legal protection and consideration in bidding for contracts.

Already, Hong Kong investigators have uncovered collusion between mainland and Hong Kong police officers; they were found to be using gang members as go-betweens to operate drug, smuggling and gambling rings.

Such discoveries suggest the territory may prove too tempting for an array of Chinese.

Hong Kong was not always clean, however. Until the mid-1970s, eight in 10 employees in many government departments were probably corrupt, said John Heslop, an assistant director with the territory's vaunted anti-corruption commission.

After a scandal in which the British police superintendent fled Hong Kong under suspicion of corruption, the government launched a massive cleanup campaign. It raised salaries of civil servants and police to discourage bribe-taking and increased government transparency. Most important, the government created the Independent Commission Against Corruption, with far-reaching investigative powers.

By the mid-1980s the government largely had corruption under control. Last year, Hong Kong-based Political and Economic Risk Consultancy Ltd. ranked Hong Kong as the second-cleanest place in Asia for business after Singapore. It ranked China as the third-most-corrupt country behind Indonesia and India.

Back-door contacts concern business people, who fear mainland officials will use connections to manipulate deals, channeling projects and land to locals with proven loyalty to Beijing.

Eroding press freedom and self-censorship could also reduce accountability of public officials. When future chief executive Tung Chee-hwa named a property mogul to head a housing task force, newspapers raised conflict-of-interest charges. The appointee, Leung Chun-ying, resigned from directorships.

But Heslop considers the corruption worries to be unfounded. The number of corruption complaints is rising only slightly, according to ICAC statistics.

"We have everything under control," said Heslop.