CHIEF EXECUTIVE ELECTION COMMITTEE -- ACCOUNTING

C O N F I D E N T I A L SECTION 01 OF 04 HONG KONG 004398

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NOFORN
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DEPT FOR EAP AND EAP/CM
NSC FOR WILDER

E.O. 12958: DECL: 11/09/2031
TAGS: PGOV PHUM PINR PREL HK CH
SUBJECT: CHIEF EXECUTIVE ELECTION COMMITTEE -- ACCOUNTING
SECTOR POLITICS

REF: A. HONG KONG 4356

B. HONG KONG 4027

Classified By: E/P Chief Laurent Charbonnet. Reasons: 1.4 (b,d)


1. (C) Summary: Mandy Tam, the functional constituency
legislator representing the accounting sector, told us on
November 2 about the challenges of recruiting pro-democracy
accountants to compete for the twenty accounting subsector
seats in the Chief Executive (CE) Election Committee. Many
accountants were not interested in participating in the
Election Committee (EC) election because they were concerned
about political pressure and feared jeopardizing their
mainland business interests if they did not vote for the
Beijing-approved CE candidate. Tam was not optimistic that
the democratic CE candidate, Alan Leong, would gain the
necessary 100 nominations to stand in the election and
speculated that the majority of the accounting EC members
would nominate and vote for Donald Tsang in March. In what
is the first-ever break between a legislator and his or her
constituency, the Hong Kong Institute of Certified Public
Accountants (HKICPA) announced on October 10 that it would
distance itself from Tam and would no longer distribute her
newsletter to its 26,000 members. Tam, who no longer has
this means of access to her constituents, told us this has
seriously hampered her 2008 Legislative Council (Legco)
re-election campaign. She remained hopeful that she would
regain access to the mailing list and eventually retain her
seat in the 2008 election.


2. (C) Comment: From an outsiders' perspective, the issues
at stake in Hong Kong elections appear to be broad political
concepts, such as universal suffrage or constitutional
reform. A closer look at a microcosm such as the accounting
subsector, however, reveals that elections at the subsector
or functional constituency level may be won and lost based on
more parochial concerns or just personal rivalries. Our
contacts also make clear that Beijing continues to monitor
each subsector closely and exerts quiet pressure on
opposition candidates, or doles out support to its favored
candidates, where necessary. End Summary and Comment.

Mandy Tam: Representative for the Accounting Sector
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3. (C) Mandy Tam, the functional constituency legislator
representing the accounting sector, told us on November 2
about the challenges of recruiting pro-democracy accountants
to compete in the accounting subsector elections for the
Chief Executive (CE) Election Committee, as well as her own
chances of re-election in the 2008 Legislative Council
(Legco) election. Prior to her surprise win in the 2004
Legco election, Tam was a relative unknown in Hong Kong
politics. At the time, she ran as an independent in support
of democracy and beat out a crowded field of eight other
candidates, including a strong pro-Government favorite, Paul
Chan (3,393 votes to 3,356). Initially, Tam was cast as one
of three independent "swing" voters (the others were Kwok
Ka-ki, the medical sector legislator and Joseph Lee, the
health services legislator) and was wooed by both democrats
and the Government for her support on various issues. Last
December, however, Tam unwittingly ended up playing a crucial
role in defeating the Government's constitutional reform
package. Her last-minute decision to side with the democrats
prompted five legislators, reportedly "on the fence," to also
vote against the Government's reform proposal. Since that
legislative vote, Tam has alleged to us that the Hong Kong
Government (HKG) seemed to blame her above all other
democrats for the proposal's defeat and has sought to hinder
her re-election campaign by helping her likely opponent in
the 2008 Legco election, Paul Chan. In March, Tam ended her
status as an independent democrat and joined Hong Kong's
newest politicl party, the pro-democracy Civic Party.

ElectionProcess Favors Pro-Government Supporters
-------------- ---


4. (C Tam was not optimistic that the pan-democratic CE
candidate, Civic Party legislator Alan Leong (Re A),would
gain the necessary 100 nominations to tand in the March 25
CE election. The CE electin process contains several qirks
that prevents a candidate -- not supported by Beijing -- from
gaining the necessary nominations to run in the election,
explained Tam. Using the accounting subsector to illustrate
her point, Tam recounted how she had had a difficult time
recruiting pro-democracy accountants to run as candidates in
the subsector's EC election, and had only convinced three

HONG KONG 00004398 002 OF 004


candidates to join her list in contesting the twenty seats
allocated to the subsector. (Note: As a member of Legco, Tam
is automatically a member of the CE Election Committee. End
Note.) The problem with the election process, said Tam, was
that there was no such thing as an independent nomination in
the CE Election Committee, because nominations were public
knowledge. Accountants who might vote for the democratic CE
candidate generally were not interested in participating in
the EC election, due to concerns about possible political
pressure and reluctance to jeopardize their mainland business
interests. Despite her best efforts to encourage like-minded
democracy supporters to run in the EC election, Tam said she
expected the majority of the twenty accounting subsector EC
members to nominate and vote for Donald Tsang in March.

Beijing Bars Democracy Accountant from Annual Trip
-------------- --------------


5. (C) Tam also explained how Beijing had recently pressured
two democratic CE Election Committee candidates against
running in the accounting subsector election. Amy Yung, a
founding member of the Civic Party, also has organized a list
of candidates to run in the EC accounting subsector,
according to Tam. Each year, the Hong Kong Institute of
Certified Public Accountants (HKICPA) is invited by PRC
authorities to visit Beijing; Yung made the trip last year.
This year, however, Yung -- who is a member of the 23-member
council of the HKICPA -- was noticeably missing from the
delegation list prepared by the Central Government Liaison
Office (CGLO). Tam told us that Yung's exclusion from the
delegation was in response to her intention to organize a
list of candidates to run against conservatives in the
accounting subsector EC elections. Yung told the "South
China Morning Post" (SCMP) on November 2, "I hope this is a
short-term arrangement only intended for this sensitive
period...Elections are a very normal activity and I wasn't
breaking any laws or doing anything unpatriotic." She told
the SCMP on November 3 that "my understanding is that since I
have a valid home-return permit, I can return to the mainland
in my personal capacity in the future as I have done in the
past without problems."


6. (C) In another instance, Tam related how an EC candidate
running on Tam's list had experienced indirect pressure,
possibly from Beijing. This democratic candidate had made
all of the arrangements for an accounting association
conference but, rather unusually, was asked by his
supervisors not to take the stage on the day of the
conference to receive acknowledgement or recognition of his
work. Tam was told that PRC intermediaries had exerted
pressure on his supervisors to prevent him from going on
stage.

Accounting Institute Severs Ties with Tam
--------------


7. (C) The HKICPA announced on October 10 that it would
distance itself from Tam and would no longer distribute her
newsletter to its 26,000 members; this apparently is the
first-ever such break between a legislator and his or her
constituency. The HKICPA is the licensing authority for all
accountants in Hong Kong; its membership includes 20,000
registered voters and an additional 6,000 accountants who are
not registered to vote. Tam suggested that the HKICPA's
recent action, which essentially has cut off her
communication with her constituents and seriously damaged her
re-election campaign, might be retribution for her part in
the defeat of the Government's constitutional reform
proposals last December. In announcing the HKICPA's
decision, HKICPA Chief Executive Winnie Cheung reportedly
said that Tam had adopted an increasingly "political" stance
on many issues, and had made unsubstantiated accusations
against the HKICPA in her weekly "Oriental Daily News"
columns and newsletters to HKICPA members. Tam countered in
the media by saying that the HKICPA had taken a unilateral
step in denying her access to the Institute's mailing list,
and also stressed that she had only reflected the opinions of
the accounting sector in her columns. (Note: Paul Chan, whom
Tam defeated during the 2004 Legco election by a slim margin,
is currently the President of HKICPA. Chan, along with Civic
Party member Amy Yung (see paragraph 4),abstained from the
vote to sever ties with Tam; the remaining 21 council members
of the HKICPA voted to end relations with Tam. End Note.)

Tam's Election Rival Looms Large in the Accounting Sector
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8. (C) Tam speculated that Paul Chan had received indirect
assistance from the HKG and Beijing in his bid to win the
accounting functional constituency seat in 2008 and, despite
his abstention, suspected him of initiating the recent HKICPA
vote to sever ties with her. She noted that in addition to
his presidency of the HKICPA, Chan also had been appointed to
numerous Government advisory committees including the
Transport Advisory Committee, the Copyright Tribunal, the
Governing Committee of the Beat Drugs Fund Association, and
the Commission on Strategic Development's Committee on
Economic Development and Economic cooperation with the
Mainland. Tam suggested these appointments were intended to
raise Chan's public profile for the 2008 Legco election.


9. (C) Tam opined that three of Chan's actions in the past
two years may have turned off some voters in the accounting
functional constituency. First, immediately after losing the
2004 Legco election, Chan explored the idea of filing a
judicial review of the election, but eventually decided
against it. Many accountants criticized Chan for being a
sore loser and feared that his actions might further
politicize the accounting sector, said Tam. Second, Chan
criticized Tam's vote in Legco against the constitutional
reform package and claimed she had ignored the majority
opinion of the accountants. Tam told us, however, that an
internal poll initiated and conducted by the Institute in
early December -- which she criticized as asking poll
respondents biased questions -- showed that the accountants
were almost evenly split between those who wanted her to
support the reforms (54%) and those opposed to the reforms
(46%). Since the difference between the two views was
statistically insignificant and the poll was not binding, Tam
had decided to make up her own mind on how to vote. Third,
Tam believed most accountants did not want their sector
politicized, and many also criticized Chan for supporting the
Government's controversial and unpopular proposal to
introduce a goods and services tax (GST).

Tam Hopeful On Winning 2008 Legco Election
--------------


10. (C) Despite being formally cut off from her constituency,
Tam remained optimistic about winning re-election in 2008,
although she also said she had considered various legal
options to regain access to the HKICPA mailing list.
Although the Civic Party included many lawyers, Tam said the
party was focused on Alan Leong's CE campaign, so she did not
expect much assistance from her colleagues until after the CE
election. For the sake of her re-election campaign, however,
she said it was crucial that she take action relatively soon,
so she had enlisted the help of Democratic Party founder and
barrister Martin Lee to build her case.


11. (C) Tam cited a demographic change in the accounting
sector that likely would work in her favor. Acknowledging
that HKICPA members traditionally were considered
conservative, Tam was hopeful that an influx of approximately
5,000 young, overseas-educated and more independent-minded
accountants into the HKICPA since the last Legco election
would dilute the proportion of conservatives. Moreover,
since the legislator vote was conducted by sec-ret ballot, it
would be more difficult for Beijing to pressure the voters.
Tam concluded that she stood a good chance of winning in

2008.

Civic Party Funding
--------------


12. (C) Tam, who serves as Treasurer of the Civic Party (CP),
said the party had run into some fundraising problems. Many
of the local tycoons have told the party that Beijing had
asked them to withhold donations to the CP until after the
March CE election. (Note: Many Hong Kong tycoons tend to
hedge their bets by donating to both pro-Government and
pro-democracy political parties. End Note.) While the July
1 pro-democracy march has traditionally been a good time to
raise funds, the CP's current fundraising efforts have been
below expectations.

CE's Policy Address a Disappointment
--------------


13. (C) CE Tsang's policy address (Ref B) had been
disappointing but not necessarily unexpected, said Tam. She
did not find it unusual that Tsang, a lifelong civil servant,
would be very good at listening to directions and
implementing policies, but perhaps not as gifted at

HONG KONG 00004398 004 OF 004


articulating a vision for Hong Kong's future. Tam said Tsang
had relied far too heavily on economic integration with the
mainland rather than considering other options for Hong
Kong's economic future, such as making Hong Kong a stronger
regional financial center along the lines of a Singapore
model.
Cunningham