That Hong Kong has slipped further down a global ranking of the world's most competitive economies wouldn't be all bad news should it serve as a wake-up call to our political fanatics.

It has been widely recognized that economic and social development in the city has been constrained by unfavorable factors such as a shortage of natural resources - particularly land, unsuccessful economic restructuring and a narrow tax base. But quite a few have yet to realize, or have refused to admit, that an obsessive inclination witnessed in the city in recent years to politicize just any social issue has also taken its toll on the local economy. The latest World Competitive Ranking report of the prestigious Swiss business school IMD has brought us face to face with this reality.

A poorer score in government efficiency, as a result of deterioration in public governance structure and political stability, has pulled Hong Kong further down to the fourth place from third in 2013, the report shows. The city's new ranking was its lowest in a decade, having slipped from the top spot in 2012.

The SAR government has found it increasingly difficult to carry out its policies in recent years as politicization gained pace, sparing few if any social issues. As a result, proposals on land reclamation, import of labor, medical reform, pension scheme reform, garbage treatment and tax reform, etc, have all been shelved or derailed. These are the major policies or projects the city badly needs to help maintain its economic competitiveness and long-term development, and more importantly to help grapple with many of its thorny social problems. These have bred social discontent and aggravated social divisions.

That said, if Hong Kong is to retain its economic vigor in the foreseeable future, it should continue with the unique role it has been successfully playing.

When it comes to the topic of Hong Kong's advantages that have led to its economic success, many experts and commentators naturally focus on its colonial legacy, or the so-called soft power. But former colonies are everywhere - in South Asia, Southeast Asia, Africa, Latin America and other parts of the world. They have failed to achieve the same kind of economic success as Hong Kong. Their economic performance pales before that of the Pearl of the Orient.

Hong Kong owes much of its success to the unique role the city has been playing for decades as a middleman for the mainland in her interaction with the rest of the world.

By catering to the various needs arose on the mainland from time to time, Hong Kong has been reaping huge economic benefits over the past several decades, leading to its current economic prowess.

The city's economic development has been mainly driven by four pillar industries, namely trading and logistics, tourism, financial services and business and professional services. Currently, these four sectors employ approximately 1.7 million people, or nearly half of the whole labor force, and contribute about 60 percent of the city's GDP, according to figures from the Census and Statistics Department.

Mainland demand has played a pivotal role in the making of all of these pillar industries of Hong Kong, as well as in maintaining their vitality over the years.

Transshipment has been the backbone of the city's trading and logistics sector, with re-exports now accounting for 98 percent of its overall export shipments. Most of the cargo comes from or goes to the mainland.

By providing a solid platform for mainland-based companies to raise international capital and for global businesses to invest in the rising mainland economy, Hong Kong has secured a steady flow of business opportunities for its financial services sector. Mainland companies now account for nearly 60 percent of the total capitalization of the Hong Kong stock market.

The city's inbound tourism flourishes on the enthusiasm of mainland visitors, who currently account for over 75 percent of total visitor arrivals, and take up around one-third of local retail sales.

Strong demand for services from the manufacturing bases in southern China, meanwhile, keep Hong Kong's business and professional services sector busy all year round.

An economic hinterland, be it a traditionally defined one or a redefined one, is an indispensable element in the making of a flourishing business hub. In this sense, Singapore has thrived by catering to the needs of its surrounding markets, initially, and the needs of international markets, subsequently. Hong Kong has written its success story in very much the same way, achieving prosperity through cooperation and its role as a middleman.

Of course, what Hong Kong has developed with the mainland is a mutually beneficial relationship. The country as a whole have benefited tremendously from strong cooperation between the two sides. And it is natural for us to see some conflicts in the course of interactions between the two sides. That is the flip side of the same coin, and perhaps is worthy of a separate piece on its own.

The author is a current affairs commentator.

(HK Edition 05/28/2014 page9)