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Lam’s Escape From Rowdy Hong Kong LegCo Shows Policy Gridlock

Hong Kong Economy Facing Gridlock as Lam Flees Rowdy Legislature

(Bloomberg) -- Hong Kong leader Carrie Lam barely got a few words out on Wednesday before pro-democracy lawmakers forced her to stop talking.

With a projector shining the protest slogan “Five Demands, Not One Less” onto her face, Lam repeatedly paused as the opposition shouted over her in the Legislative Council, known as LegCo. Finally she gave up, and delivered her annual policy address, which normally details economic priorities, via video instead. On Thursday, she’s scheduled to head back to the chambers for a question-and-answer session.

Lam’s Escape From Rowdy Hong Kong LegCo Shows Policy Gridlock

“If she fails to respond to the five demands, it would be a fantasy to expect normal business to resume in the Legislative Council,” said Alvin Yeung, a pro-democracy lawmaker who participated in the disruption. “All of these livelihood issues, she could have introduced them a year ago. She’s trying to compete for popularity. She’s trying to win over people’s hearts. But this is doomed to fail without any legitimacy.”

The pro-democracy bloc only comprises about a third of lawmakers, but Wednesday’s display showed they have the ability to shut down any debate on major economic initiatives even if they don’t have the votes. That spells even more trouble ahead for an economy sliding into recession as protests against Beijing’s grip over the city grow increasingly violent.

Lam’s Escape From Rowdy Hong Kong LegCo Shows Policy Gridlock

In her address, Lam pledged to make housing more affordable and promised cash handouts for students, many of whom have been on the front lines of demonstrations that have spurred regular clashes with police over the past four months. They were among some 200 initiatives aimed at easing some of the discontent that has fueled the protests.

But she’ll have a hard time implementing them as well as a $2.4 billion stimulus package announced in August without the support of lawmakers.

“Many of these measures cannot be implemented without funding approval from the Legislative Council,” James Lau, acting Financial Secretary, said in an emailed statement on Wednesday, referring to the stimulus. A backlog of projects worth more than HK$70 billion ($8.9 billion) and involving about 14,000 jobs is awaiting approval by the Finance Committee, Lau said.

Lam’s Escape From Rowdy Hong Kong LegCo Shows Policy Gridlock

More than 50 legislative proposals are currently awaiting action, according to an Oct. 16 meeting agenda. While some deal with mundane administrative issues -- fees on karaoke parlors and bus route schedules -- others include deliberations on a face-mask ban implemented under a colonial-era emergency law and the official withdrawal of the extradition bill that sparked the protests.

“We’ve already suffered from delays in many, many discussions,” said Iris Pang, economist with ING Bank NV in Hong Kong. “I have no idea when those policies in the policy address can really be discussed or passed in the Legislative Council. This is a big question mark I think every Hong Kong person has in mind now.”

Regina Ip, a pro-establishment lawmaker, said that it was still possible to push things through despite the “disgraceful” interruption by opposition lawmakers on Wednesday. Certain measures announced in the policy address that don’t require new funding -- including relaxed mortgage rules for first-time home buyers and land requisition for new housing -- could be implemented without lawmaker approval, she said.

What Bloomberg’s Economists Say..

“Carrie Lam outlined longer-term fixes for the city’s structural problems in the 2019 policy address, but fell short of addressing economic woes that are plaguing the city as of now -- with deep pains in tourism, retail, and trade sectors.”

-- Qian Wan, Bloomberg Economics. For the full note click here.

“If LegCo cannot function because of the opposition’s obstruction, then the blame lies with them squarely, they are to blame for holding back the progress of Hong Kong,” Ip said in an interview on Wednesday. “The middle class, the thinking people, are very angry about all the damage they are doing to the future of Hong Kong. So they better watch what they are doing -- it could rebound on them.”

The dramatic events in Hong Kong’s legislature came after some of the most chaotic protests in Hong Kong’s modern history. Violence escalated significantly at rallies to mark China’s Oct. 1st National Day and on the weekend following Lam’s decision to invoke a colonial-era Emergency Regulations Ordinance last used in 1967.

Disrupted Agenda

Lam said on Wednesday the violence had damaged Hong Kong’s reputation and appealed for calm without making any new proposals. She again repeated her opposition to the remaining demands, ruling out an amnesty for protesters, an independent inquiry and the ability for Hong Kongers to pick and elect their own leaders.

Part of her problem is that the current impasse requires a political solution rather than economic measures, said Chung Kim Wah, director of the Centre for Social Policy studies at Hong Kong Polytechnic University.

“This kind of economic approach to try to pacify young people isn’t going to be effective right now because Hong Kong people are angry,” he said. “If we don’t work something out on the political system and the government doesn’t admit that the current political structure has played a role in the recent turmoil, Carrie Lam’s proposed policies and any new proposed legislation isn’t going to settle the anger.”

Click here for Bloomberg’s Hong Kong Economy Tracker

While Lam has the majority in the LegCo, opposition parties still have ways to prevent it from operating. Yeung, the pro-democracy lawmaker, said more plans were in the works to disrupt future proceedings.

“We will play some tricks,” he said.

That has the pro-establishment lawmakers worried, even if they don’t all agree with Lam. Holden Chow, a lawmaker in a camp that is friendly with Beijing, said her policy address fell short of expectations and could extend the unrest.

“If the government can’t function and society is paralyzed, it sends a bad message to the rest of the world and in the long run will make people hesitate on whether to invest money in the city,” Chow said. “We’re an international city and if there’s an exodus of foreign companies and capital flight, it will entirely ruin our city.”

To contact the reporters on this story: Iain Marlow in Hong Kong at imarlow1@bloomberg.net;Shelly Banjo in Hong Kong at sbanjo@bloomberg.net;Eric Lam in Hong Kong at elam87@bloomberg.net

To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net;Jeffrey Black at jblack25@bloomberg.net

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