Can Hong Kong Chief Executive Leung Chun-ying Survive?

With hundreds of police having cleared out the protesters in Hong Kong’s Mongkok district, it remains to be seen whether the back of the Occupy movement that has hobbled the city for week has been broken. It may not have been. Protesters are still clashing with police and appear unlikely to give up. But another question may be how badly damaged Hong Kong Chief Executive Leung Chun-ying is in the eyes of his political masters in Beijing, and whether he can survive in the longer term.

Leung is under fire not only for what is perceived as his mishandling of the universal suffrage question that brought the protesters to the street in the first place but for a clearly shady deal exposed by the Sydney Morning Herald in which he received a huge bonus in stepping down from a e real estate advisory company by an Australian engineering company firm dealing with the publicly owned MTR Corporation, which operates Hong Kong’s light rail system.

The Morning Herald, which first broke the secret US$6.4 million deal with engineering company UGL, earlier this week divulged emails in which Leung tried to pull US$4.8 million more after the original transaction. UGL CEO Richard Leupen balked, describing the squeeze as a “deal-breaker.” Leung accepted.

Payment was in two tranches over 2012 and 2013 during Leung’s current term as chief executive. The Australian engineering company was acquiring the distressed assets of DTZ Holdings where Leung was a board member in London and chairman of the Asia-Pacific subsidiary before resigning to run for the CE post in 2012.

Leung’s failure to inform fellow board directors of DTZ of the bonus, pay taxes on the deal or declare it to the Hong Kong government on taking office, shows a disturbing lack of ethical conduct. Regulatory authorities in the UK, Australia and the Independent Commission Against Corruption in Hong Kong have all received formal requests to investigate.

Why Leung’s leaving was worth US$6.4m to UGL raises questions of what favors he rendered and what further facilitation he was expected to provide. His board members did not figure in the golden handshake. Did he stiff DTZ, board members and shareholders? DTZ was sold to UGL for US$124 million. There was a US$160 million higher bid from a China-based company which seems not to have been given due consideration, according to a couple of bankers quoted.

UGL holds US$42 million MTR contract

UGL has a vested interest in HK government decisions regarding its long-term maintenance contract for 120 MTR coaches. MTR is a public corporation which runs Hong Kong’s subway rail system in which the government holds 77 percent ownership. Leung as chief executive, approved Raymond Ch’ien’s reappointment as chairman for a fourth three-year term at MTR in October 2012. Raymond joined the UGL board in September 2012.

That the chairman of the MTR is also on the board of its supplier company, is a shocking conflict of interest. That his chairmanship was approved by a leader of Hong Kong paid by the same supplier company for unspecified contributions, says everything that is wrong with Leung’s governance and his network of cronies.

Beijing leaked to scuttle Leung?

There is speculation that Beijing timed this leak to show CY the door. Beijing needs no such subterfuge to remove any political appointee, as none have any mandate from the people. Beijing just needs to tap his shoulder to whisper and Leung would vanish. He is already the most unpopular of the three CEs so far, sullied with his own muck in addition to a heavy cloud of malfeasance over many of his appointees. This is the most scandal-plagued administration since the handover in 1997.

Given Xi Jinping's anti-corruption purges convulsing the comrades across the border, Leung cannot be coasting in comfort. He is waiting to be instructed. Meanwhile, he is faithfully carrying out all party directives.

When the first CE Tung Chee-hwa did Beijing’s bidding to attempt to railroad through the legislature the Article 23 Security Bill, which would have given the government the power to charge opponents with sedition, among other issues, more than 500,000 Hong Kong residents marched to abort it. Tung was quietly allowed to resign for “health reasons” after a decent interval while chief secretary Donald Tsang completed Tung’s remaining term.

What the central government will not do is show any weakness in the face of student demands for Leung’s head. The power projection of the CCP requires it to face down challenges from the people, not concede. Because the students demanded Leung resign, Beijing will keep him there to make the point till it suits them to dump him.

Who after CY?

Leung is badly damaged. He cannot limp along with public anger and disgust swirling around him and his administration till 2017. That would only build more opposition to Beijing’s deeply resented formula for universal suffrage. Beijing has to line up his replacement by 2015. But what choices does the central government have?

Lest we forget, Regina Ip Lau Suk-yee has been straining to be noticed. She was demonized in 2003 for lustily championing the Article 23 Security Bill which was aborted. She resigned, took a sabbatical and returned to chair the Savantas Policy Institute and lead the New People’s Party. She disapproved of both Leung and Henry Tang who stood for CE 2012, finding both wanting in experience and leadership. She serves on Leung’s executive council in addition to being an elected legislator.

Spotting a vacuum in leadership during the student occupation of the streets, Ip quickly offered to mediate with the students and keep the government advised. Neither the students nor Leung took her up on her offer. Both sides instinctively shrank away.

If anyone really wants the job, it is Ip. She misses no opportunity to visit Beijing and hobnob with the leadership, offering her solutions to the many problems facing HK society. She is spouting all the right slogans and writing for any newspaper that will publish her wisdom. While people distrust Leung for being a Beijing tool, there is true dread about Regina Ip. They have seen her ugly side during her campaign to push the Article 23 Security Bill in 2003. She is too polarizing.

Someone who may be the right man at the right time is Tsang Yok-sing, current president of the legislative council and founder of the Democratic Alliance for the Betterment of Hong Kong (DAB) the largest pro-government party. Tsang will be 70 in 2017 and has said that is too old for the responsibility of being chief executive. He considered running in the 2012 CE election.

Surprisingly Tsang is acceptable across the political spectrum. Tsang has a mind of his own and doesn’t automatically salute all party diktats. He was upset at the 1989 Tiananmen massacre of students and said so on the public record. The more extreme members of the party faithful find that unsettling, even disloyal.

Tsang, however, may be the person to bridge what looks like irreconcilable positions on democratic development for Hong Kong. Somehow people feel they can trust him at a time when the city suffers a major trust deficit which makes it ungovernable. No other candidate can command that degree of trust today.