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for. 1.
Swire loses appeal, faces $4.5b bill 2.
Small players set for bidding battle 3.
KCRC puts off land-premium settlement 4.
Oracle update pushes Linux 5.
HOS sales to go by 2006: Li 6.
HOS cuts could buoy prices 7.
Internet links to the office 'too slow' 8.
ID maker taps security fears 9.
Partnering is catching on 10.
Cartoon - Dilbert
1. Swire loses appeal, faces $4.5b bill Property
giant Swire Pacific faces a HK$4.5 billion bill for breaching a development agreement
with the government over Tai Koo Shing. The figure was estimated by the company
in a press release issued last night after the Court of Appeal upheld an arbitrator's
decision last year that the government had the right to demand Swire pay a premium
for extending its commercial development beyond 1.6 million square feet. The Swire
statement said: ``The company is deeply disappointed with this decision but will
consider its options before deciding how to proceed. As previously announced,
the company will not offer any comment until the final outcome of the proceedings
is decided.'' Swire did not mention whether the company would take its case to
the Court of Final Appeal. The dispute arose over the development of Cityplaza
Four, Cityplaza Three, Cityplaza One and Horizon Gardens between 1986 and 1997.
According to the original 1975 deed, Swire was allowed to develop 8.9 million
square feet for residential use and 3.6 million sq ft for commercial purposes
at Tai Koo Shing. Swire later asked to increase the residential area to 10.2 million
sq ft to develop nine blocks of Horizon Garden in the mid-1980s. Swire agreed
to pay the Lands Department HK$178 million as premium for the extra 1.3 million
sq ft of residential space. The price was said to be discounted from the original
HK$400 million as they were negotiating to reduce the developer's commercial area.
However, the sides could not agree and it went to arbitration in October 2000.
Three months later the arbitrator ruled that the commercial area should be reduced
to 1.6 million sq ft and that Swire should pay a premium for the extra commercial
area it had developed. But Swire insisted it could develop the original 3.6 million
sq ft provided for in the 1975 deed.Justice Wally Yeung Chun-kuen, one of the
three Appeal Court judges, said the group had agreed in 1986 to reduce the commercial
development to 1.6 million sq ft to cover the excess residential area in the site.
As Swire had developed 3.2 million sq ft for commercial purposes, the company
had to pay the premium of the extra 1.6 million sq ft, he said in the judgment.
Swire's shares closed at HK$44.2 yesterday, down 0.23 per cent. [Source:
The Standard, 12 June 2002] 2.
Small players set for bidding battle
Small and medium-sized developers are expected to bid aggressively for two residential
sites to be auctioned next Monday. Surveyors forecast that the two sites at the
second auction this financial year could earn more than HK$400 million for the
Government. The sale is also seen as a timely test of developer confidence in
the prospects following the Government's announcement last week on the resale
of Home Ownership Scheme (HOS) flats but a substantial cutback in long-term production.
On sale are a 15,074-square foot site at 632 King's Road, North Point and a 14,626
sq ft site in Sha Tin. Bidding is expected to be stronger for the North Point
site, a vacated government quarters, due to its urban location. Surveyors put
a price tag of about HK$280 million on the site while the Sha Tin lot was expected
to sell for HK$120 million to HK$127 million. Phileas Kwan, executive director
of developer Asia Standard International, said the group would be interested in
bidding at the auction. Andrew Choi Fook-ming, senior manager of property development
at New World Development, expected the auction to draw keen interest from small-
to medium-sized developers because big players had more alternatives. "Our
bottom-line [for bidding in the land auction] will be a bit conservative,"
he said. Mr Choi pinpointed the more attractive development potential of the North
Point site due to its proximity to an MTR station. Both the North Point and Sha
Tin sites can incorporate non-residential premises, usually shops, on the lowest
three floors of the development, with the area above for residential use. With
commercial elements, the North Point site can provide a total floor area of up
to 165,800 sq ft based on a plot ratio of 11 times while the Sha Tin lot can provide
up to 93,900 sq ft based on a ratio of 6.42. The plot ratio and hence developable
floor area could be lower if developers opted to build less shop space or made
it purely a residential development. CS Surveyors executive director Cheng Wing-ming
made his forecasts based on the maximum developable floor area. He projected a
HK$280 million price for the North Point site, representing an accommodation value
of about HK$1,700 per sq ft. He expected the Sha Tin lot to sell for HK$127 million,
representing an average of about HK$1,350 per sq ft. Mr Cheng said the HOS policy
revision had no impact on his forecasts, saying the subsidised housing changes
had so far had little effect on prevailing property prices. He expected to see
healthy bidding at the auction because the two sites were small in size and especially
attractive to smaller developers. "North Point is a traditional residential
district and Sha Tin is a developed new town. Both areas have strong underlying
demand for housing and developers should feel comfortable to buy and sell at reasonable
profits." Knight Frank valuation director Anthony Lau Chun-kuen also forecast
a HK$280 million price for the North Point site, based on a lower plot ratio of
10.5, assuming that only the two lowest floors were used for shops. The Sha Tin
lot's price was tipped to be HK$120 million, based on a plot ratio of 5.7. "The
HOS policy change is positive news although it has offered no stimulus to home
prices. "However, the auction results should be a timely gauge of developer
confidence to a certain extent," he said. SK Pang Surveyors & Co managing
director Pang Shiu-kee said developers should choose to build fewer shops because
the value of retail units on both sites was expected to be low. "The Sha
Tin lot may be even developed as a pure residential project. The North Point site
should receive stronger bidding due to the limited supply of land on Hong Kong
Island." [Source:
SCMP, 12 June 2002] 3.
KCRC puts off land-premium settlement
Kowloon-Canton Railway Corp (KCRC) has deferred the land premium settlement for
a one million square foot residential development in Tin Shui Wai following a
premium-charge rise. Sources said the Lands Department had raised the land premium
charged for the site after the April land auction result was better than expected.
KCRC had refused to accept the offer at this stage, a source said. The Government
has agreed to extend the acceptance deadline to the end of this month. The railway
company owns a site at Tin Shui Wai light railway station with a developable area
of 982,200 sq ft, including about 2,000 sq ft for retail space. Cheung Kong (Holdings)
had settled the land premium charged for a neighbouring site with a 1.7 million
sq ft developable area for residential use in April. A KCRC spokesman said Cheung
Kong had intended to combine its site with KCRC's for a joint development but
the plan had been revised and Cheung Kong was proceeding with the development
of its own site. The spokesman said: "We are prepared to seek a development
partner through a tender process but the schedule has yet to be decided."
He said the company was negotiating the Government's land premium and expected
the project would not be tendered soon. In the meantime, a larger KCRC development
in Tsuen Wan would close for expression of interest by developers on Friday, he
said. The 4.28-hectare site at Tsuen Wan West Station along the West Rail comprises
2.01 million sq ft for residential use, 409,000 sq ft for retail and 169,000 sq
ft for public parking. Surveyors estimated the project could require an investment
of more than HK$5 billion, assuming an average cost of HK$2,000 per square foot
- including construction, land premium and interest expenses. The KCRC spokesman
said the Tsuen Wan project could come up for tender in a few months. Another KCRC
railway development at Ho Tung Lau depot in Sha Tin would be offered soon, he
said. KCRC had received 12 expressions of interest from developers in March for
the 1.5 million sq ft residential-retail joint-venture development. The tender
could be launched next month, he said, taking into account a Hang Hau Station
residential project tender by MTR Corp along the Tseung Kwan O extension would
be closed on June 24. [Source:
SCMP, 12 June 2002] 4.
Oracle update pushes Linux
Oracle Systems, delivering a wake-up can to chief rivals IBM and Microsoft, has
released updated versions of e-business software suite that packs more support
for enterprises using the Linux operating platform. Senior officials said Release
2 of Oracle9i, database, application server and developer and developer programmes
would help widen the gap between the company and its competition in all markets
worldwide. Citing figures from research firm International Data Corp (IDC), Oracle's
SAR marketing director Tony Banham noted that Oracle had about a 40 per cent share
of the SAR's US$33.3 million market for database software last year. "We
actually gained 3.4 per cent market-share in Hong Kong wile IBM and Microsoft
database sales remained static over the last two years," he said. According
to IDC, Oracle remained the worldwide market leader for relational database management
system software last year even as demand for Microsoft's SQL Server grew and IBM
moved to increase the number of DB2 users by acquiring rival database firm Informix.
Robert Shimp, global vice-president for Oracle9i database marketing, said Release
2 provided higher data availability, business intelligence and support for the
Extensible Markup Language standard, which is a flexible way for enterprises to
create common c-business formats and share both the format and the data on the
Internet, intranets and extranets. Mr Banham said Oracle was also the first software
vendor to provide support for the Linux operating system in a commercially available
database, application server and complete set of developer tools. Market research
firms have forecast the low-cost Linux sys- tem will he the fastest-growing operating
platform used by enterpnses, challenging traditional Unix systems and Microsoft's
Windows. IDC predicted Linux would be the world's dominant computer server platform
by 2O06, while Gartner estimated that 15 per cent of Asia-Pacific fires had servers
that ran on Linux. IDC program director Carl Olofson said: "Given the right
development and support for Linux, the market revenue for database management
"systems on Linux will grow to US$5.9 billion by 2006 to surpass the database
revenues on Unix." Mr Banham said. 'With Release 2 of OracIe9i database,
application server and development tools, our customers win now be better equipped
to develop and deploy enterprise applications using low-cost Linux hardware while
preserving their existing information technology skills." Oracle9i database
has been in high demand from the world- wide community of Linux application developers.
Last year, Oracle's developer community Web site recorded nearly 370,000 downloads
of its database from Linux users. "Oracle9i application server and developer
suite also gained significant traction last year, logging more than 200,000 downloads
from our Oracle Technology Network developer site on the Web," Mr Banham
said. Carving a solid niche in Linux support is ~led to help brighten the outlook
for Oracle revenues, which have been hurt by the economic downturn. [Source:
SCMP, 12 June 2002] 5.
HOS sales to go by 2006: Li
Tycoon Li Ka-shing predicted yester- day that the Home Ownership Scheme (HOS)
would pass into history by 2006. He also said he believed property prices would
go up this year and next year but would never climb to the peak levels of 1997.
Li's comments followed a government announcement on Wednesday that it would limit
HOS flats to 4,900 in sales in September and next April and cap supply at 2,000
flats a year after April 2006. "As a property developer, I believe the government
had better stop building HOS flats because its historical mission is over,"
the chairman of Cheung Kong (Holdings) and Hutchison Whampoa told Sing Tao Daily,
the sister paper of The Standard. But the tycoon's remarks were in contrast to
those of Chief Secretary for Administration Donald Tsang who earlier said "its
historical role hasn't ended yet" when commenting on the scheme's future.
Tsang said the scheme offered a good safety measure for any sudden surge in demand
or any irregularities in the market. However, Li believed -that as buying a fiat
was no longer a remote dream for ordinary people, the scheme should be scrapped.
"The ups and downs of the property market will pose a great impact on the
local economy. I believe the SAR government will keep a close eye on the new HOS
policy. "If the property market collapses, it won't be good for society and
the economy. Since a tot of HOS flats have already been completed, the government
needs to strike a balance between the interests of different sectors. It's acceptable
to sell 5,000 flats this fiscal year. But who knows, 1 think by 2006, the scheme
may become part of the historical past." But Li said if the government continued
with a ceiling of 2,000 units annually after 2006, that was still acceptable as
it would not affect the market too much. "Now that the government has set
out a clear policy, the outlook for the market is clear and developers can have
better arrangements. The property market's prospects hinge on employment, economic
development and consumer confidence. 1 "I believe developers can make a fair
share of profit, but it's unlikely that they can earn two-fold or three- fold
profits as in 1997. We have to remember that, at that time, property prices in
the town centre were as high as about HM20,000 to HK$30,000 per square foot. [Source:
The Standard, 11 June 2002] 6.
HOS cuts could buoy prices
The government's reduction in the supply of subsidised flats could lead to a gradual
rise in property prices, the Royal Institute of Chartered Surveyors (RICS) said.
"I think all [government officials] are very well aware of how sensitive
the government's relationship with the private sector is and how important it
is to work in partnership with the private sector to put the confidence back into
the market," RICS chief executive Louis Armstrong said. He believed that
because the SAR government was sensitive, it was performing better than other
govern- merits in handling property issues. A delegation from RICS, a society
for professional surveyors with 110,000 members in 120 countries, ended a six-day
visit to the territory yesterday. The delegation, led by RICS president Peter
Faulkner, met senior officials responsible for land and housing policies, including
Secretary for Planning and Lands John Tsang. Chief Secretary for Administration
Donald Tsang last week announced the resumption of Home Ownership Scheme (HOS)
sales from July after they were suspended last September. The government plans
to offer 4,900 HOS flats for sale in the next 12 months, instead of the previous
"maximum" of 9,000 a year. RICS vice president Nicholas Brooke said
the decision to cut HOS supply was a positive move as it provided some certainty
to the market. Brooke said, however, that other issues such as extending discounts
for HOS flats still remained uncertain. Armstrong said he expected property prices
would gradually move upwards. "There will be a very gradual return to prices
moving up- wards. It's likely that this will start happening next year,"
he said. The Asian financial crisis helped drive Hong Kong property prices down
by more than 50 per cent from its peak in 1997. Primary market sales have picked
up in recent months, largely due to incentive packages offered by developers.
However, the residential market is still suffering from an oversupply of units.
Many analysts expected housing prices to remain sluggish this year, due partly
to the growing number of unemployed. The jobless rate has risen to a record high
of 7.1 per cent. [Source:
The Standard, 11 June 2002] 7.
Internet links to the office 'too slow'
Hong Kong employees working away from their offices say fast Internet and email
access is a priority, according to a survey. The SAR has the largest percentage
of workers in the Asia- Pacific region using the Internet and email for work,
and many are concerned that existing services are too slow. A survey by Lucent
Technologies found that 99 per cent of those interviewed in Hong Kong required
email access to do their jobs - the highest level in the region - with South Korea
second on 81 per cent. Lucent, which produces communications software, said the
survey also found that on a scale of 0-10, up to 6.6 of those surveyed in the
Asia-Pacific region were unhappy with the data speed. "Some of the Hong Kong
employees are very unhappy with, the existing data speed," Lucent's marketing
and strategy director, Amer El-Nahi said yesterday. He said insurance workers,
technicians and sales people relied heavily on Internet access to deliver vital
information, and they needed it to happen quickly and with confidence. The survey,
conducted in April, interviewed about 1,000 employees in about 1 00 leading companies
in the Asia-Pacific region. Up to 20 firms, each employing 200 workers in Hong
Kong, were involved in the study, which formed part of a worldwide survey. Hong
Kong, China, South Korea, India and Japan made up the Asia-Pacific study. Hong.
Kong also had the highest percentage of "on-the- road" workers who required
Internet access, with 91 per cent saying they needed it for their work. South
Korea had 77 per cent. The survey showed 1 00 per cent of workers from the SAR
and South Korea were willing to pay more for faster services, such as 3C. "This
study shows there is a significant pent-up demand among enterprise users for mobile
high-speed data services," said Scott Erickson, the senior vice president
of marketing and sales at Lucent. "We believe this will drive the development
of 3G communications networks in the Asia-Pacific region." Asia-Pacific was
a world leader in terms of employees using mobile phones (54 per cent), and this
figure is projected to climb to 61 per cent in two years. In addition, the region
led the world in laptop use for work with 42 per cent and a projection of 52 per
cent in two years. On a scale of 0-10, China was the most receptive to high speed
wireless connections on 9.4, followed by Hong Kong on 9.3. Internationally, the
Asia-Pacific region had the most to complain about when it came to mobile phone
coverage, with 6.6 saying it was very poor, ahead of the US on 6.5. Asia-Pacific
also had the biggest complaint about establishing data connections with 6.3, followed
by Europe and the Middle East on 5.6. [Source:
The Standard, 11 June 2002] 8.
ID maker taps security fears
ImageWare Systems of the United States has developed a Chinese-language software
version of its biometric security identification technology aimed at mainland
government agencies and companies seeking heightened security following the September
11 terrorist attacks. The Chinese version of ImageWare's biometric ID card design
system, Episuite, was launched in Beijing last week. "Since September 11,
the number of [ImageWarel projects has increased dramatically, while those companies
with projects under way . . . reevaluated their needs and asked for much more
comprehensive and ex- pensive systems," the company's Asia Pacific managing
director, Gerde Schaefer, said. "[China'sl government can use our technology
to develop things like national identification cards, passports and visas, [die
importance of] which are a direct outcome of 9/11." ImageWare specialises
in the development and marketing of personal identification systems that incorporate
individual fingerprint or face recognition data into a tamper-proof card. Biometric
identification cards en- sure that the bearers physically match the person to
whom the ID was issued. Schaefer said ImageWare was seeking to launch its China
business with a tender to supply high-tech identification cards for the Shenzhen
Special Economic Zone. The tender application, made in co- operation with local
partners, is to supply a total of 2.5 million biometric identification cards to
Shenzhen residents. If successful, Schaefer said, the contract could open the
door to other lucrative contracts supplying similar technology to China's other
four SEZs as well as government agencies. Schaefer said security-sensitive public
sectors in China offered rich potential returns for the company. "Major airports,
airlines, nuclear power plants ... all can benefit greatly 1 from this technology,"
he said. "When you look at the size of China and the sophistication of the
technology already in use, you see there has to be big potential but God knows
what it is." China-based multinationals, such as Volkswagen, that ImageWare
serviced in other markets would also be a sales target of its biornetric security
identification systems, he said. But Schaefer also held out great hopes for China's
evolving service and industrial sectors, which he said were reaching the stage
of development that required greater attention to internal security systems. "China's
economy is growing incredibly fast and there a need for [greater] corporate security
... and better management of their employees that require [biometrie] identity
solutions," Schaefer said. He said a final decision on where the company
would establish its China representative office in early 2003 would depend on
an evaluation of whether the bulk of the company's business would come from the
private or public sector. A reliance on the public sector would require an office
in Beijing, while a focus on the private sector would result in an office in Shanghai,
he said. Schaefer said ImageWare was aware of the linkage in China of identification
cards with emotionally charged issues of political and human-rights issues. For
decades, household registration booklets, also called hukou, have limited the
mobility and opportunities of China's rural farmers seeking to come to the cities
to escape poverty in the countryside. But, Schaefer said, ImageWare was forbidden
from entering into business contracts with companies associated with poor human-rights
records by both a strict company ethics policy as well as US export control rules.
A greater danger, he said, was the possibility that high-tech counterfeiters might
crack ImageWare's biometric identification system and gain access to sensitive
restricted areas. Schaefer noted that the company had moved to translucent holographic
security coatings for its products since international counterfeiters rendered
the traditional metallic holograms used in credit cards unsafe. "[Translucent
holographic technology] is only available from a handful of companies in Europe
and the US, but our partners are already stepping up their security ... to stay
ahead of the counterfeiters." [Source:
The Standard, 11 June 2002] 9.
Partnering is catching on
Partnering, which was discussed extensively in the Construct for Excellence report
published, by Henry Tang's Construction Industry Review Committee in January last
year, is starting to receive support from the Hong Kong construction industry.
The Mass Transit Railway Corporation says it has made cost savings of 40 per cent
on its Tseung Kwan 0 line largely as a result of its partnering techniques which
strike a more equitable balance of risk between clients and contractors. The MTRC
said partnering would also lead to an early opening of the line. Partnering attempts
to put communication back into the construction process. But successful partnering
is made more difficult by one-sided contracts. owners who insist on harsh, risk-
shifting contracts should recognise that partnering may prove more difficult.
it was for this reason that the Tang report recommended that the government should
lead the way and incorporate a more equitable allocation of risk in its contracts.
The Works Bureau is considering how this should be achieved but perhaps there
are a few pointers from the United States experience. In the US, partnering has
been embraced by the construction industry since the late 1980s after the US Army
Corps of Engineers most prominently advocated it after cost over-runs and litigation
plagued several projects. The corps' proposal involved a successful tenderer and
the owner discussing their project and their mutual expectations. They would define
goals and discuss issues of concern and potential challenges openly with a view
to identifying and sharing risks. The result was a partnering charter signed by
all participants outlining mutually agreed goals and principles. After early successes,
the Associated General Contractors in the early 1990s encouraged the use of partnering
and much of the US construction industry soon followed. Partnering has proved
successful. But, not surprisingly, it has its problems. Owners tend to be suspicious
when contractors enthusiastically advocate partnering. There is a perception by
owners that contractors use partnering as a mechanism to ignore the contract and
its allocation of risk and rely on relationships to avoid contractual obligations.
Equally, partners can often become adversaries when one partner perceives that
he is taking on more risk or losing money due to the actions of the others. This
mixed partnering experience in the US led to a focus on more specific contract
provisions relating to changes and recovery of losses and it is now recognised
in the US that Under common law, consequential damages are those damages that
arise out of unpredictable special circum- stances. The distinction between direct
and consequential or indirect damages is often blurred and this can lead to uncertainty
in the quantification of damages. Consequently, one court's consequential damages
may be another's direct damages. In order to avoid this confusion and to promote
openness between the parties, the American Institute of Architects (AIA) has amended
its conditions of contract for contractors to include a blanket waiver of consequential
damages between the con- tractor and the owner. The changes to the contract conditions
are significant and the concept is innovative. Similar, although not as extensive,
provisions have also been included in the international Federation of Consulting
Engineers (Fidic) contracts published in 1999. The Fidic provisions, clause 17.6
in the new Red Book, only include a short list of consequential loss or damage
examples and to this extent could be said not to effectively limit each party's
potential liability for consequential loss or damage. Similarly, creative quantification
of direct damages can also be used to frustrate the purpose of such clauses. Some
commentators have suggested that the AIA's amendments do not go far enough and
that a substantial list of excluded damages should be included. Clearly, the wider
the list, the less opportunity arises for ambiguity. Either way, these types of
pro- vision attempt to make it clear what losses, although not exhaustive, are
being waived and in this respect at least endeavour to promote predictability.
The need to even consider mechanisms to promote predictability reflects the recognition
that parties to construction projects need to better address the risk allocation
in their contracts. It is worth remembering that most of the provisions of a construction
contract are designed to control and predict three fundamental issues - quality,
time and cost. Each of these has an element of unpredictability and ultimately
the potential to divide the parties. Partnering- and contractor/owner/ operator
alliances are great in theory, but in reality can only work if the relevant risks
are properly defined and equitably allocated. Mechanisms such as the mutual waiver
of consequential damages are one method of allocating risk. By waiving claims
for consequential damages, the parties limit them- selves to direct damages and
this should eliminate some of the uncertainty as well as reducing the incentive
to escalate claims and should, in principle, encourage settlement. Experience
suggests that only a few owners agree to retain this clause in the AIA contract
conditions and most delete it. It is a rare owner who will agree to give up his%
right to claim consequential damages. Nevertheless, as with partnering, the acceptance
of this approach ultimately hinges on a change in mindset between the stakeholders.
This change was recognised and encouraged by Henry Tang's Construct for Excellence
report where reference was made to the need for a "new culture in the construction
industry". Unless the parties to construction contracts regard themselves
as partners instead of adversaries, they are unlikely to be. able to mutually
relinquish their entitlement to claim consequential damages. In this respect,
mutual waiver of consequential damages could be regarded as the ultimate form
of partnering. [Source:
The Standard, 11 June 2002] 10.
Cartoon - Dilbert
 [Source:
The Standard, 11 June 2002] |  |
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