People tend to fail to distinguish between competition and competitiveness. Competition relates more to an individual firm or market. The economics of competition is that a higher degree of competition will always benefit the consumers. The other extreme of competition is monopoly where one company occupies the whole market. There are so-called natural monopolies in public utilities such as underground transportation networks, electricity supply or other infrastructures. In Hong Kong, many public utilities are not entirely government owned, and some degree of public pressure can be exerted to ensure equity.

Thus, competition in Hong Kong relates more to private goods. It is natural that companies in any market would like to compete in order to survive or eliminate other competitors. While the public may not know a company's strategy in competing with others, data on the "concentration ratio" of some industries in Hong Kong is available. This ratio provides the level of market share by the largest 10, 20 or 50 companies. For example, the largest 10 companies in the export and import business account for only 8 percent of total business receipts. Competition is keen in the export and import business.

Competitors can also create new markets. For example, people have been complaining about supermarket prices. The same kind of food items sold in the wet market could be more expensive in the supermarket. The latter may charge more because they are different kinds of markets when compared to the wet market. Supermarkets provide convenience, diversity, cleanliness and choice that the wet market does not. A more relevant concern in Hong Kong is the lack of cross-industry or cross-business competition. For example, a real-estate developer becomes the management company of the real estate, and the supermarket site in the estate is awarded to another company within the same chain of corporations. This can be a form of market abuse as choice is not provided to the buyers. The issue here is whether vertical and/or horizontal business relationships should be allowed and conducted by the same company that could reduce competition.

The competition law passed in Hong Kong recently was mild. The theory states that Hong Kong is so open a restrictive law may not be relevant. Moreover, competition is a process, with some companies or businesses just starting to compete, while others have reached a more mature stage of competition and the market has become stabilized. In addition, different products, say technological or non-technological, tend to face different degrees of competition. In Hong Kong, it is appropriate to have a two-tier policy on competition, with a general rule on competition that applies to all businesses.

Competitiveness is an economy-wide concept that relates to the economic survival of Hong Kong when compared to other economies. One simple question is whether or not Hong Kong competes with Singapore, Shanghai and Tokyo. The answer concerns a number of resource, systemic, policy, behavioral and cultural issues. Resource-wise, does Hong Kong have enough natural, financial and human resources to move forward and to perform stronger than others? System-wise, have we instituted an economic, social and political system that is transparent, sustainable and fair to all that would convince investors that Hong Kong works? Policy-wise, are we impartial, effective and efficient, or are decisions personality-driven? In addition, we need to have strong ethical standards that deter biasness and eliminate personality-driven decisions.

Improving Hong Kong's economic competitiveness is easier said than done as it involves collective actions and behavior, and strong and cohesive wills that consider the value of Hong Kong as a benefit to all citizens. The rule of law, economic freedom, market capitalism and strong ethical standards are part of the social fabric and infrastructure that Hong Kong has established. It is no doubt that we shall keep, maintain and deepen them. Competitiveness is a dynamic concept as it rightly asks what we can do to better the development of the local economy. While Hong Kong has excelled as a laissez-faire economy with only minimum government involvement, the "One Country, Two Systems" framework in the post-1997 Hong Kong is intended for the city to maintain its "stability and prosperity", and for the Hong Kong system to be upheld whenever necessary, as that is the only way to ensure Hong Kong's competitiveness, which will benefit further economic reform on the mainland.

There have been mistaken views on the marginalization of Hong Kong. As a more advanced economy than other mainland cities, Hong Kong should still welcome their advancement. Competitiveness is not a zero-sum game. Modernization and advancement of other mainland cities will see them compete as well as complement economic development in Hong Kong. After all, Hong Kong has been serving as a case study for numerous businesses and development plans on the mainland, and has remained an asset to the process of its economic reform. This will continue to remain so. Hence, one should take a positive-sum attitude in the matter of Hong Kong's competitiveness.

In the philosophy of "give and take", one should ask if everyone has given more to or taken more from Hong Kong in various dimensions. It is time to start promoting the overall competitiveness of Hong Kong. While we have established strong infrastructure and fabric, the remaining task of promoting competitiveness depends on individual's behavior and contributions by different firms, businesses and markets. Without an agricultural sector, Hong Kong does not have a backup economy that can provide substance should instability emerge. Hong Kong must move forward for the survival and benefit of all. Hong Kong must stay competitive.

The author is an associate professor of the Department of Economics and Finance at City University of Hong Kong.

(HK Edition 05/01/2013 page1)