It is rare to see government officials embarking on world record-setting, brave new acts these days. Yet Hong Kong is lucky to have witnessed one on September 3.
The Chief Secretary announced on that day an invitation to the private sector to submit a single bid for the West Kowloon Cultural District. The development covers 40 hectares, equivalent to one-third of Kowloon Peninsular, and comprises four museums, three theatres, one amphi-theatre among millions of square feet of shopping, residential and commercial facilities. By all measures, it resembles a condensed new town in the heart of Hong Kong .
When announcing the scheme, Mr Donald Tsang, head of the government steering committee, was proud that the authorities had adopted the Norman Foster design to put 20 hectares of facilities under the world’s single largest canopy. For all its mind-boggling luxury the proposal looks like another grand, exciting plan for Hong Kong until one starts to examine what is missing.
The scheme adopts a Public-Private-Partnership approach, under which a single developer will be asked to finance, construct and operate the facilities for 30 years or more. This approach, first practised in the UK in 1980s, is not new. It has been applied to single-purpose infrastructure facilities such as toll roads, bridges, power plants, hospitals and even jails in some countries. Yet the West Kowloon scheme sets two world records for PPP schemes: its sheer size of 40 hectares and its diverse mix of facilities under one scheme.
So we are sailing into uncharted territory where no city has attempted before. In essence, we are handing out a concession for a new town – designed as a special cultural icon for Hong Kong – to a single developer. Is this a blessing?
The essence of a PPP scheme is for a private sector developer to take up the risks of funding, building and operating public facilities with the promise that it is allowed to run the public facilities along commercial, private-sector principles. Note the interplay of the words public-private in the previous statement.
Two issues are most tricky in any PPP scheme: firstly, how to allocate equitably the risks between the public and the private sector and secondly, how to safeguard public interest when public facilities are controlled and run by private interests?
The first issue of risk allocation sounds like a mere technicality but it has a huge financial implication for either sides. One has to look only across the border: many PPP, or build-operate-transfer schemes as they are often called, such as power plants or toll roads in the mainland are re-negotiated after only a few years into operation because making long-term forecast, and hence allocating project risks in a changing environment is an enormously difficult task. This is difficult enough for a single-purpose facility; it is almost impossible for a new town like West Kowloon . When schemes become unstuck, concession contracts will be forced into re-negotiation and the side that has most at stake is often bullied into submission. Judging from past experience in Hong Kong , the public purse almost always loses out when confronted with hard-nosed private operators.
The second issue reveals a fatal flaw in the current scheme. Public interest in a PPP scheme can only be safeguarded by the participation of the third partner – the civil society.
A little dose of history here may help. The size of the first foreign concession in Shanghai was 55 hectares, only slightly larger than West Kowloon . It grew 60 times larger in a span of 70 years.