26 October 2016
Kai Ching Estate, completed in 2013, was the first public housing estate found with lead-contaminated water. Residents there may have been drinking tainted water for almost two years. Photo:
Kai Ching Estate, completed in 2013, was the first public housing estate found with lead-contaminated water. Residents there may have been drinking tainted water for almost two years. Photo:

Tainted water saga reveals how China SOEs do business in HK

The way the government should have responded to the lead-contaminated drinking water scare is to identify the main contractor, sub-contractors and installers responsible for the waterpipe installations in the affected public housing estates. It should have disseminated full information about the agencies involved and relevant laws and regulations.

The government did everything but the right thing.

When the scandal first broke out, officials and legislators tried to dismiss the allegations, but as the scare escalated, the government — without any concrete evidence — blamed licensed plumber Lam Tak-sum for all the faults and vowed to sue the scapegoat. Meanwhile, it tried its best to gloss over the fact that state-owned conglomerate China State Construction was the major contractor in all the affected estates.

How Chief Executive Leung Chun-ying handled the crisis is particularly telling.

Leung, having reiterated that livelihood issues are now his top policy agenda, still flew to Beijing after the exposé to meet Zhang Dejiang, a member of the Communist Party’s Politburo and chairman of the National People’s Congress Standing Committee.

Leung dismissed rumors about his impending ouster, stressing that Zhang is highly satisfied with his work.

It appears that many public housing tenants are on tenterhooks over the tainted water scare; they are waiting anxiously for the results of their blood tests. But that seems to be the last thing on Leung’s mind. Later he gave a few hollow comments and came to the defense of the Chinese contractor, stressing that there is no guarantee that locally made pipes are safer than those bought elsewhere.

Leung started his career in the realty sector and was appointed a member of the Housing Authority in the early 1990s. (Later I also became a member and worked with him in the authority for a number of years.)

Some people he met there, like Fanny Law Fan Chiu-fun, became his hardcore supporters. Other realty tycoons, like Shui On Group chairman Vincent Lo Hong-shui, also helped him quite a lot during his election campaign. (Kwai Luen Estate in Kwai Chung, one of the estates where lead-contaminated drinking water was also found, was built by SOCAM Development (00983.HK), Shui On’s listed arm.)

Now we also know that one of the directors of China State Construction International Holdings Ltd. is Raymond Leung Hai-ming, husband of pro-Beijing lawmaker Ann Chiang Lai-wan. It also has been reported that the World Bank imposed a six-year ban on the firm’s parent, China State Construction Engineering Corp., barring it from project bidding as a result of a bribery case.

So why is it that this notorious Chinese firm was still awarded fat government contracts in Hong Kong? Could this be the result of a little help from Beijing’s liaison office in the territory?

Apparently, Beijing has a role in the chain of interests in Hong Kong’s public housing projects.

Let me answer another question first: How come Lam, a nondescript plumber, can work in so many key projects including public housing estates, university student residential halls and government offices? This is because of the Hong Kong Water Works Professionals Association of which Lam is a member.

Local netizens found that as early as in 2004, the association paid a visit to the Liaison Office and met the director of the office’s coordination department, among other Beijing cadres.

Mainland news reports back then noted that in the meeting both sides discussed the possible consequences of the amendments to the Building Ordinance and other related issues.

In this regard, we know that the work of the coordination department is to coordinate with the mainland’s state-owned enterprises, industry associations, Housing Authority and other parties to form a chain of interests. And so, thanks to the Liaison Office, the ties that bind China State Construction and downstream plumbers and their association are established.

I’m not surprised to see the association now passes the blame to Lam in a bid to hide the faults of the state firm.

Take a look at the Housing Authority’s website, and you will discover that the Building Ordinance is basically toothless in regulating public housing projects.

Existing non-divested estates under the Housing Authority’s management and new projects are all exempted from the ordinance. Kwai Luen Estate and Kai Ching Estate in Kowloon City, epicenters of the water pollution scandal, are both on the exemption list.

Shui Chuen O Estate in Sha Tin, where unsafe drinking water was also found earlier this month, was not mentioned, but I suspect it is also exempted from the ordinance.

The fallout is now causing political ripples.

Leung and the pro-Beijing Democratic Alliance for the Betterment and Progress of Hong Kong are among the big losers as most of their supporters are low-income senior citizens living in public housing estates. This evolving crisis is a direct threat to their health.

Suffering from the inferior quality of the homes and facilities built by Chinese state-owned firms, these Leung supporters may resent the government’s policy of integration with the mainland.

Chiang, a DAB member, initially concluded that lead contamination was non-existent but had to take back her words and apologize later. And this was aggravated when netizens exposed that her husband sits on the board of China State Construction.

This could be another heavy blow to the leading pro-establishment party after its blunder in the Legislative Council veto of the election bill.

The contaminated water issue was first uncovered by the Democratic Party. The tenants of the affected estates must be grateful for otherwise they would still be kept in the dark and continue to drink poisonous water for years.

It’s safe to say that some of them may switch their allegiance to the Democratic Party in the upcoming District Council elections and the Legco election next fall.

And when more Hongkongers grow more wary of the products from China and Chinese firms operating in the territory, nativist movements can also gain some extra footing.

This article appeared in the Hong Kong Economic Journal on July 16.

Translation by Frank Chen

[Chinese version 中文版]

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Democratic Party lawmaker Helena Wong Pik-wan first uncovered the contaminated water crisis during random checks of water supply systems in public housing estates in Kowloon. Photo: Democratic Party

Water trucks have been dispatched to affected estates. Photo: Sing Pao

Former full-time member of the Hong Kong Government’s Central Policy Unit, former editor-in-chief of the Hong Kong Economic Journal

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