New highway cutting through old village
of rural industrialisation (see below). A major reshaping of the institutional framework for guiding development is required.
Corruption
2.68 Corruption is growing. At present, much of it has to do with oiling the wheels of government - and, although undesirable, is not having a significantly deleterious effect on economic development - many would, in fact, argue that it is a positive influence, as it helps reduce bureaucratic delays. There is, however, much danger of the situation escalating and of corruption adding significantly to the cost of doing business (according to a 1991 survey by the Hong Kong ICAC, corruption presently adds 3 to 5 per cent to manufacturing costs). The Indonesian situation where "unofficial payments" often add 10 to 15 per cent to production costs needs to be avoided.
2.69 Another important feature of the corruption (as reported to the Consultants) is its increasing unpredictability and a lack of respect for contracts and the law. One major Hong Kong industrialist the Consultants talked to, who is now investing in Shanghai, is doing so partly because respect for joint venture and other legal contracts is greater there - "they strike a hard deal, but then stick to it" - in Guangdong they change the rules as they go along.
Inappropriate Regulations
2.70 Enormous changes are required to the regulatory environment. The many regulations which presume a planned economy by state owned industries acting in a spirit of "fraternal socialist cooperation" are no longer appropriate. More market orientated regulations which clearly stipulate the limits on free enterprise and sanctify contracts are required. Industries must not also be discouraged by bureaucratic delay in obtaining raw materials. They must, however, be prohibited from damaging the environment, unduly exploiting their workers and
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damaging publicly owned infrastructure (they must not, for example, damage the highways by overloading their vehicles).
2.71 New regulations to reform the financial and housing markets and control credit are also required.
2.72 There is also no proper market for labour.
Weak Local Planning Controls
2.73 Proper planning standards are required. At present, everything must be negotiated at the time a development is first proposed. Social amenities must usually also be provided by the developer. Few sanctions are available against those who do not comply with these agreements.
2.74 Another problem is the uncontrolled taking of land out of agricultural use and preparing it for development in the hope of finding a foreign investor. Much of this land is along the main highways. The extensive ribbon development that is resulting is highly inefficient in terms of transport and road congestion other service provisions (for example water, sewage and electricity supply) are also made more costly.
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Poor Environmental Control
2.75 There is a general unawareness of environmental matters at a non-official level. The recent acceptance of large amounts of pollution may detract other industries, particularly “high-tech” industries such as electronics, which require clean air and water supplies. This is particulary unfortunate given the keen desire to increase average wage levels. It is also a serious problem which may lead to long term health and other social problems.
2.76 The high level of pollutants and dust also makes much of the province an unattractive place to work or visit. This will, amongst other things, hinder tourism development. The recent policy of confining the worst offending industries to the edges of the delta may, however, begin to alleviate the situation.
2.77 The rivers which are the source of much water for drinking and irrigation must also be protected.
Poor Levels of Education and Training
2.78 The poor level of education and training (when compared to other developed parts of China) is a significant weakness which cannot be overcome