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1. SAR takes $775m hit on Hung Hom flats

2. Harbour at risk from Exco error, court told

3. Illegal structures ‘going too slowly’

4. Cut-price sale of flats on harbour stirs anger

5. Appeal to speed cross-border zone

6. Wan Chai in danger of losing its unique character, academic says

7. Battle over future of Victoria Harbour enters round two

8. Tung Chung cable car wins monk's blessing

9. MTR maps out details for new lines on Hong Kong island

10. Super prison or big mistake?

1. SAR takes $775m hit on Hung Hom flats
Raymond Wang and Nicole Kwok, The Standard 10 February 2004

The government appears ready to forgo nearly HK$800 million in lost revenue to get out of a controversial subsidised housing project in Hung Hom that the developers could either tear down and replace with a more lucrative development, or refurbish and sell at far higher prices.

The agreement, announced yesterday, appears to give New World Development and its new partner, Sun Hung Kai Properties, the potential for a profit margin as high as 40 per cent, market analysts say.

The government agreed to forgo a settlement with the developer of HK$2,300 per square foot, settling instead for HK$1,800 because, a Housing Authority spokesman said, ``we consider the outcome of the mediation the best possible deal and the agreed premium is acceptable''.

Because it agreed to the lower price, the government is losing HK$775 million on the 1.55 million square feet of property in the project.

However, ``without the agreement of the developer, these flats would remain subject to the private sector participation scheme (PSPS) restriction in the land grant, and which the Housing Authority has no other rational means to dispose of'', the spokesman said.

The ill-fated PSPS scheme was a plan under which private developers were enlisted to build public housing and profit from it under the government-sponsored Home Ownership Scheme, which delivered low-cost housing to those who could not afford the market rates.

Disgruntled nearby residents virtually all said they hope the ill-starred development will be reduced to rubble.

``We strongly agree that the Hung Hom Peninsula blocks should be demolished,'' Donald Yeung, who bought a three-bedroom home next door for HK$5 million three years ago, said. ``It is a misuse of land from the very beginning. How can such a prime location with unblocked sea views be used for subsidised flats?''

The saga began in 1997, when the government, in an attempt to encourage home ownership, subsidised the building of the harbour-view flats in an upscale neighbourhood with the intention of selling them to lower-income buyers for HK$2,100 per square foot.

New World's construction affiliate, Wai Kee Holdings, and infrastructure subsidiary NWS Holdings set out to build the project against the objections of the real estate community which predicted it would end in disaster.

However, before the project was completed in 2002, Hong Kong's property market went into a prolonged and steep dive. Prices of flats in the area fell from HK$7,000 per square foot to as low as HK$3,000.

Developers and local residents who saw their property values drop as a result of the cheap housing nearby staged a protest against it.

New World sued the government in July 2003 for breach of contract and demanded compensation for losses and management fees. The litigation remains unsettled.

Ultimately, the 2,470 flats were never put on sale within 20 months of the November 2002 completion as they were supposed to. The government then entered into talks with New World to take back the project.

Last week, it was announced that New World had joined with Sun Hung Kai to either demolish the project or change it into luxury flats.

Centaline Surveyors managing director Victor Lai estimated the cost of the project after refurbishment at as low as HK$2,500 per square foot, with a possible selling price of up to HK$4,000 per square foot.

Lai and other market analysts say the two developers seem set to make hefty profits of more than 40 per cent on the project, about double their current profit margins of 20 per cent.

A JP Morgan analyst estimates developers could earn HK$700 million to HK$1.2 billion by renovating the project for sale. He said Sun Hung Kai could reap HK$2.8 billion after completion, estimated to be about three years off, if the market remains bullish.

As a condition of the settlement, the developers agree to give up their right to a guaranteed HK$1.914 billion from the Housing Authority for failing to nominate purchasers for the flats. It will also pay a premium of HK$864 million for being allowed to do what it wants to with the flats - tear them down or modify them.

But, the government spokesman said, ``if we hadn't clinched a deal, the Housing Authority would have had to pay the guaranteed price of HK$1.914 billion, the public coffers would forgo the HK$864 million as a modification premium, and the government would have been left with 2,470 flats that are not suitable for conversion into public rental housing''.

Royal Peninsula, located next to the Hung Hom Peninsula, was completed in 2001. Secondary prices range from HK$3,000 to HK$4,000 per square foot. Whampoa Garden, aged over 20 years, has sea-view flats at more than HK$4,000 per square feet.

2. Harbour at risk from Exco error, court told
Paris Lord, The Standard 10 February 2004

Victoria Harbour remains at risk from overdevelopment because the government has failed to allow for proper review of the latest Central reclamation plan, a high court was told yesterday.

The Executive Council acted ``erroneously'' in not sending the Central reclamation plan back to the Town Planning Board for review following a January Court of Final Appeal ruling, the Court of First Instance was told during the latest legal skirmish between the government and harbour preservationists.

The plan still being pushed by the government fails to pass an ``overwhelming public needs'' test established by the Court of Final Appeal for all proposed reclamation, according to the Society for the Protection of the Harbour, the group bringing the action.

Exco's role should not be to substitute its judgment for that of the Town Planning Board, Mok Yeuk-chi, the society's counsel, told the court.

A government-led engineering review in December found that the current plan, Phase III, was acceptable but opponents say that the review is incomplete and is therefore invalid.

The government, complains that contracts already signed for work on the project can be voided by delays and end up costing the SAR HK$600 million.

The society is embroiled in a long running legal war with the government. Preservationists say the harbour is a powerful natural symbol of Hong Kong and that it should not be tampered with any further.

The current court fight over the Central reclamation plan has already been in court for more than a year.

In January the appeals court agreed with the society and halted the government's plan to reclaim 23 additional hectares of land to build a road linking Central and Wan Chai commercial districts to ease traffic congestion.

Now the society has taken the administration to the High Court demanding a thorough review of Central Phase 3, which includes a harbourfront bypass, a promenade and commercial development in the area between the Star Ferry pier in Central and the Convention and Exhibition Centre.

The government argues that it must reclaim the land for the Central-Wan Chai bypass and other ``essential'' transport infrastructure like an extension of the Airport Express tunnel.

The society argues the government wants to reclaim more seafront than is necessary by using outdated traffic projection figures from 1982. Alternatives such as using electronic sensors to charge motorists for entering congested areas, an experiment that has proven successful in London, have not been adequately considered by the government, the society charges.

The government has had a tough time in the courts over the current reclamation attempt, losing consecutive cases to the preservationists.

Last July, Justice Carlye Chu ruled that the Wan Chai North reclamation was only approved because of a wrong interpretation of the Protection of the Harbour Ordinance.

Section three of the ordinance states that Victoria Harbour is a special asset and that there is a presumption against reclamation that all public officers should respect. In that ruling Justice Chu outlined three public needs tests that any proposed reclamation plan must meet - compelling, overriding and present need, no viable alternative and minimum impairment to the harbour.

Last month, the Court of Final Appeal dismissed the administration's appeal against Justice Chu's judgment, saying, ``Reclamation would result in permanent destruction and irreversible loss of what should be protected and preserved''.

At the time the court ruled that the proposed reclamation plan should be returned to the Town Planning Board for reconsideration.

The society sought the judicial review last September after it declared the administration did not subject the Central plan to Justice Chu's three tests.

``The entire town planning process, including the preparation, amendment and approval of the Central reclamation plan, has been tainted by a fundamental error of law, namely a misinterpretation of the harbour ordinance,'' Mok said yesterday.

``The error is so fundamental that the only proper course is to remit the plan to the statutory body that is exclusively responsible for its preparation to reconsider the plan with public participation.'' Even if Exco had the power to proceed with the plan and substitute its own judgment for that of the Town Planning Board, the council failed to satisfy the Court of Final Appeal's ``overriding public needs test,'' Mok said.

The High Court does not have the power to tell Exco to send the project back to the planning board, countered Teresa Cheng, representing the government.

The society insists that legally the government has a responsibility to protect the harbour and that the reclamation plan must be dramatically changed if that goal is to be met. ``Who has the duty to protect the harbour,'' Mok asked. ``The respondents, they are the ones entitled to protect the harbour. It is their duty.''

The review continues today.

3. Illegal structures ‘going too slowly’
Dennis Chong, The Standard 10 February 2004

Although the number of illegal structures removed last year hit a 10-year high, law enforcers believe the problem is still widespread and say enforcement efforts are being hampered by a lack of resources.

In old districts like Sham Shui Po and Wan Chai, rooftop flats and balconies built on to the side walls remain very much in evidence, with some dating back to the pre-war days.

The Buildings Department estimates there are still about 700,000 unauthorised structures in the territory.

Last year, 49,556 structures were removed from private buildings and nearly 700 summonses were issued to owners who did not comply with the removal orders.

The figures are the best for 10 years, but Director of Buildings Marco Wu said this does not mean the department is succeeding in removing the threat posed by unauthorised structures.

Rather, it illustrates the seriousness of the problem and the need to tackle it.

``Not only do the figures prove the department's efforts to crack down on illegal structures, it also shows the problem is widespread,'' he said yesterday.

Wu said a lack of resources coupled with unco-operative owners of the structures makes the job more difficult.

He said over the past eight years, some 40 per cent of the owners have refused to comply with removal orders.

This is because, in some cases, they stand to lose rent and, in other cases, would have to carry out renovations once the illegal structures are removed.

The owners are usually given a specific time in which to remove the illegal structures.

However, as the department does not have the resources to prosecute every defaulter, some are able to delay executing the order for several years.

According to a department spokesman, 18,000 removal orders issued before 2000 had not yet been carried out.

Despite this, only 2,000 offenders had been prosecuted in the past five years.

Wu expects the number of prosecutions to rise to 1,000 this year and 2,000 in 2005.

4. Cut-price sale of flats on harbour stirs anger
PEGGY SITO and SANDY LI, SCMP 10 February 2004

A harbourfront housing estate built for the government but left unsold to help stabilise property prices has been bought back by its developers for $1,800 per sq ft.

The price was so low they stood to make over $6 billion in profit, even after demolishing the flats and putting up luxury blocks, angry legislators said last night.

The government had been seeking $2,300 per sq ft for the 2,470 flats, with gross floor area of 1.55 million sq ft, in the Hunghom Peninsula development. A housing bureau source defended the deal as the best it could have got.

The flats - built under the now defunct Private Sector Participation Scheme (PSPS) - were sold for $2.778 billion to First Star Development, a joint venture between Sun Hung Kai Properties and a New World Development unit. New World, and a company acquired this month by Sun Hung Kai Properties, built the estate.

The deal brought strong criticism from politicians, who said the sale unfairly favoured big developers.

They said it could give the private consortium a windfall of nearly $7 billion, or $4,700 per sq ft - based on demolition costs of $300 per sq ft and construction costs of $1,200 per sq ft, and the $7,000 to $8,000 per sq ft that flats in the Harbourfront Landmark, a nearby high-end housing project, are being sold for.

Legislator Albert Chan Wai-yip said: "The deal will definitely give a windfall profit to the developer. Why doesn't the government turn the project into public rental housing?"

He criticised the fact the sale had been conducted behind closed doors.

Colleague Albert Ho Chun-yan criticised the government for not selling the estate by fair and open tender. He also questioned why the government did not buy back the project itself,

The Housing, Planning and Lands Bureau said negotiations for sale of the flats started in January last year and a contract was signed last month. The bureau source said: "It was a special case under the sudden change in housing policy in the past 14 months."

In November 2002, the government, under pressure from developers, halted sales of Home Ownership Scheme flats and PSPS projects to regulate home supply.

Under the PSPS scheme, land was granted at a discounted value to developers or contractors. The Housing Authority would then guarantee to buy back all units at a pre-set price after completion and sell them as subsidised housing to the public.

Under yesterday's sale deal, First Star agreed to give up its right to receive the $1.91 billion guaranteed payment and will pay a premium of $864 million for converting the PSPS project into private homes.

The government source said the flats at Hunghom Peninsula were too big and too good for public rental. He said buying back the estate and selling it to the public was not viable since the commercial and car-parking space within the development were owned by the developer.

The developers' claim for damages against the Housing Authority for alleged breaches of the terms of the land grant for Hunghom Peninsula is unaffected by the sale deal.

5. Appeal to speed cross-border zone
LOUISA YAN, SCMP 10 February 2004

Financial chief Henry Tang speaks at an economic growth forum. He visits Beijing next week to discuss Cepa benefits to Hong Kong. Picture by Robert Ng

Hong Kong manufacturers yesterday urged the government to set up a proposed cross-border industrial zone as soon as possible.

Representatives of the sector said the city could not solely rely on its service industries to sustain long-term economic growth.

They also said the industrial zone was urgently needed if Hong Kong was to fully benefit from the Closer Economic Partnership Arrangement (Cepa), under which 274 local products can enjoy zero tariffs.

A debate on the proposed industrial zone will be held in the Legislative Council tomorrow.

Deputy Director of Planning Ava Ng Tse Suk-ying told a conference on economic integration between Guangdong and Hong Kong that 96 hectares of land next to the Shenzhen river could be developed.

The Planning Department has also studied the development of Shataukok, Heung Yuen Wai and Kong Nga Po near the border.

Although the government has suggested turning the 96-hectare site - about the size of Tsim Sha Tsui - into a trade and expo zone in its proposal for the development of Hong Kong up to 2030, Mrs Ng said no final decision had been made.

"Developing this piece of land will cost a lot of money because quite a big part of it is toxic mud.

"We need to ensure that whatever we use the land for, it is cost-effective," she said, adding that the development was estimated to cost about $2 billion.

Stanley Lau Chin-ho, chief adviser of the Hong Kong Watch Manufacturers' Association, said the city needed manufacturing industries for its economic growth and urged the government to turn the site into a cross-border industrial zone.

"But the government doesn't have a clear policy to support manufacturers," he added.

King Li, chairman of the Hong Kong Jewellery and Jade Manufacturers Association, said that if goods wanted to enjoy zero tariffs under Cepa, which took effect at the start of the year, 30 per cent value must be added to the goods in Hong Kong.

"However, we can't enjoy the benefits of Cepa because there's simply no space for the value-adding tasks to be done. Most of the factories set up by Hong Kong people are still located in the Pearl River Delta," he said.

Hong Kong companies have proposed that the government allow them to employ low-cost mainland workers in the industrial zone.

In an effort to secure the full benefits of Cepa, Financial Secretary Henry Tang Ying-yen will lead a delegation to Beijing next Tuesday.

"[The mainland and Hong Kong] are determined to resolve any difficulties and bottlenecks expeditiously to allow our businesses or our service industries to reap the most benefits," he said.

6. Wan Chai in danger of losing its unique character, academic says
POLLY HUI, SCMP 10 February 2004

Town-planning and heritage experts have warned that the sparkle of Wan Chai will fade with the pulling down of decades-old shops and residential buildings in Lee Tung Street.

Sidney Cheung Ching-hung, a Chinese University anthropologist who specialises in cultural heritage and tourism, said the character of the district would be lost if the government demolished structures that residents saw as historic symbols.

"There are people who believe that the concept of heritage and tradition should be confined to buildings that are hundreds of years old. But I believe you don't need to rigidly stick to this old definition," he said.

The professor added: "The most important thing is whether the buildings and activities that go on inside are considered by the residents as a vital part of that place. In that sense, residents should be the ones to decide what is or is not their heritage."

Instead of demolishing the buildings, the government could add vitality to the area by building small museums to introduce tourists to the history of the place, Professor Cheung said.

"The Ruinas de Sao Paulo in Macau is a good example. It has become a vibrant tourist and cultural spot after the government repaved roads, built small museums and encouraged the growth of antique shops in the area."

Ada Wong Ying-kay, who chairs Wan Chai District Council and also represents the local cultural sector, said it was frustrating that the government often recreated historic buildings in museums after pulling them down. It was time to review the policy on heritage preservation, which currently applied only to individual buildings but not areas, she added.

Alan MacDonald, town planner with consultants Urbis Ltd, said the government should refurbish rather than demolish the buildings. The government could learn from Britain, where owners and tenants were given grants to upgrade their buildings, he added.

7. Battle over future of Victoria Harbour enters round two
SARA BRADFORD, SCMP 10 February 2004

The government is treating challenges to reclamation projects in Victoria Harbour as though they are private litigation instead of cases filed in the public interest, a court heard yesterday.

The Society for the Protection of the Harbour made the claim as it entered the latest round of its battle to curb the amount of land being reclaimed in the harbour.

In the past the society has expressed concern that unless reclamation is conducted in accordance with the Protection of the Harbour Ordinance, the harbour is in danger of turning into Victoria river.

Society lawyer Mok Yeuk-chi told a judicial review in the Court of First Instance yesterday that the government should not look at the challenge as if it were private litigation. It was the duty of the government, not society, to protect the harbour, he said.

"They have a duty to keep their options open . . . and not rush ahead," he said. "They should try their very best not to lead Hong Kong into reclaiming the harbour."

Yesterday marked the opening of round two of the society's legal challenge against the Central-Wan Chai Bypass project.

The first legal challenge centred on the Draft Wan Chai North Zoning Plan, which was heard before Madam Justice Carlye Chu Fun-ling in July last year. The judge ruled the Town Planning Board had breached the principles enshrined in the ordinance.

A government challenge to that ruling was rejected, with the Court of Final Appeal in January ordering that reclamation plans be sent back to the drawing board to comply with the requirement that all future reclamation works meet the principle of "overriding public need".

Mr Mok said the current judicial review of the 18-hectare Central Reclamation Phase III project, before Mr Justice Michael Hartmann, centred on whether the plans should also be sent back to the Town Planning Board by the Executive Council.

He said if the court decided the Executive Council did not have to remit the plans, a decision had to be made on whether the test of overriding public need had been applied.

Mr Mok pointed out that after Madam Justice Chu's decision the society "acted swiftly" in drawing the government's attention to the principles the Central plan should comply with.

However, he noted that work had continued on the Central project. The government said it had initiated a review - which has not been completed - and found that the plan satisfied legal requirements.

Mr Mok also said there had been "significant controversy" about the way the government had awarded contracts for the project.

He said a review panel chaired by former high court judge Neil Kaplan concluded the government acted unfairly and "with undue haste" in awarding the contracts.

The hearing continues today.

8. Tung Chung cable car wins monk's blessing
CARRIE CHAN, SCMP 10 February 2004

MTRC director Russell Black, Jackie Chan, Selina Chow, Chow Chung-kong, Eva Cheng, and islands council chief Lam Wai-keung. Picture by Oliver Tsang

The planned cable car, which will open in 2006. SCMP photo

After opposing the $950 million Tung Chung cable car project a year ago, the head of Po Lin Monastery helped launch the project yesterday.

At a ceremony attended by more than 100 MTR and government officials near Tung Chung MTR station, Sik Chi Wai blessed the project, which will open in 2006, with a prayer to boost the prosperity of the tourism industry.

Other guests to address the ceremony included MTRC chief executive officer Chow Chung-kong, Tourism Commissioner Eva Cheng Yu-wah, Tourism Board chairwoman Selina Chow Liang Shuk-yee and film star Jackie Chan.

But despite the friendly gesture, Sik Chi Wai - who is an appointed member of the Islands District Council - and tourism representatives are still negotiating rights to the 1.86-hectare ceremonial grounds in front of the monastery.

The plans also include shops and restaurants. Monastery leaders previously said they did not want the area to be turned into an overcrowded public piazza.

Sik Chi Wai left yesterday's ceremony without commenting to the media, but a spokeswoman for the Tourism Commission said talks were continuing. "We don't know when the talks will end," the spokeswoman said.

"It is mainly centred on how the land will be used, planned, as well as the usage rights."

The MTRC, which will own and operate the cable-car project, said negotiations would be handled by the government. It has estimated that about 1.5 million people a year will take the 17-minute ride from Tung Chung to the monastery and the Big Buddha in Ngong Ping.

The Tourism Board also said the cable-car project would attract more tourists to Lantau. A spokesman said about 4 per cent of Hong Kong's tourists visited Lantau in 2001, increasing to 7 per cent one year later.

"The cable car project will definitely increase the number of tourists to Lantau. It will be beneficial to those who don't have a long stay in Hong Kong," the spokesman said. "It will become more flexible to go to Lantau in a short period."

9. MTR maps out details for new lines on Hong Kong island
CHEUNG CHI-FAI, SCMP 10 February 2004

The proposed MTR West Island line will start in Sai Ying Pun while the South Island line will start in Admiralty, according to the latest study on the rail system.

The MTR Corporation yesterday briefed the Advisory Council on the Environment about the progress of its study of the two lines on Hong Kong island. The study, launched last year, is in its final stage with the preferred route and mode of rail system being identified. A final report will be submitted to the government next month.

The MTR has proposed the two lines adopt a medium railway system with trains of shorter lengths in order to keep the station size down. For the alignment of the West Island line, it will start in a new station at Sai Ying Pun, extended from the Island line in Sheung Wan.

There will be stations at major population and employment centres as it travels along the southwest coast until it reaches Wong Chuk Hang, where it will interchange with the South Island line. Stations at Queen Mary Hospital and Tin Wan might also be added.

The South Island line will start at Admiralty and have stations at Ocean Park and Wong Chuk Hang before it ends in Ap Lei Chau. Stations at Happy Valley and Wan Chai might be possible additions under other route proposals.

Despite adopting the less costly rail technology, the MTR said the two lines could not sustain themselves by fare revenue alone.

The MTR Corporation has already indicated it needs a $1 billion injection from the government to finance the rail construction.

It is estimated that the maximum passenger flow on the two lines will be about 20,000 passengers per hour, a third of that on existing lines.

The study also finds that there is no immediate need for Route 7, a highway linking Island west to Island southwest, if the lines are built. It is estimated that, by doing away with the need for Route 7, the two new lines could save the government $12 billion.

Lam Kin-che, chairman of the Advisory Council on the Environment, said: "From an environmental perspective, rail networks are much better than road networks."

10. Super prison or big mistake?
Letters to the Editor, SCMP 10 February 2004

Correctional Services Commissioner Kelvin Pang Sung-yuen paints an alarming picture of Hong Kong's prisons at boiling point because of overcrowding ("Security shake-up after prison attack", February 4).

Yet the solution he advocates is tardy, extravagant and environmentally destructive.

The commissioner's dream is for Hong Kong to build a $12 billion super prison on a new reclamation site, half the size of Kowloon West, between two unspoiled islands off south Lantau. This huge project would take a decade to complete and be visible to 25 per cent of the population of Hong Kong and almost every visitor arriving by air, land or sea. At an estimated cost of nearly $1.5 million per inmate, the proposed facility would permanently ruin this area of great natural beauty for recreational use and potential tourism.

The super prison would be linked to Silvermine Bay by a new bridge, about the same length as Tsing Ma, and destroy up to 3km of virgin coastline. Wastefully, this would be used only during typhoons, "super riots" and other emergencies. Mr Pang's enthusiasm for this grandiose scheme indicates he is seriously out of touch with mounting community sentiment to preserve what remains of Hong Kong's precious natural assets - and fiscal reserves.

The idea of a super prison, first hatched in the colonial era, should be scrapped. It reflects old, narrow and seriously flawed approaches to planning. Solutions to prison overcrowding should be found that are less costly, more practical and much more immediate, if Mr Pang's warning is to be heeded.

A public consultation and preliminary environmental impact assessment are under way. Legco will soon be asked to approve more funds for this bizarre project. We appeal to legislators to put a stop to this madness before Mr Pang's dream turns into the administration's next blunder - and a costly nightmare for Hong Kong.

TOM MASTERSON, Living Islands Movement, Central