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1. Construction Output for the First Quarter of 2002

2. Merger of rail rivals mooted

3. Tang exit won't halt building sector reform

4. Merger would create $148b giant

5. 'Bigger elephant' could be heading down the track

6. Commuters and construction staff to benefit from project

7. KCRC beats rival to Sha Tin link as possible merger announced

8. Chinachem zooms in on Tsuen Wan

9. Developers cool on Hang Hau project

10. Opportunity and challenge for new housing chief

11. Tom Hilditch and Vivienne Chow now have a section in the SCMP called S.A.R [Salacious And Repeatable].

12. CyberWorks to delay sale of Cyberport flats until next year

13. Cyber-age 'open sesame' can be so easy to decipher

14. A bridge too far?

15. Monitor

1. Construction Output for the First Quarter of 2002

1. The gross value of construction work performed by main contractors decreased by 6.4% in nominal terms compared with a year earlier to $26.8 billion in the first quarter of 2002, according to the preliminary results of the Quarterly Survey of Construction Output released today (June 25) by the Census and Statistics Department. 2. After discounting price changes, the gross value of construction work performed by main contractors decreased by 2.1% in real terms over the same period. 3. Gross values of construction work in real terms are derived by deflating the nominal values with appropriate price indices to the 2000 price level. The data series for the year 2000 and thereafter have been re-based to 2000 by applying the more up-to-date price structure in 2000 to value the overall amount of construction work done. For the years before 2000, the data series compiled on the base year of 1990 have been linked by simple splicing to the new 2000-based series. 4. Analysed by type of construction work, the gross value of construction work performed at private sector sites totalled $9.8 billion in nominal terms in the first quarter of 2002, representing an increase of 10.5% over a year earlier. In real terms, it rose by 16.9%. Increases in output occurred at both building sites and civil engineering sites. 5. On the other hand, the gross value of construction work performed at public sector sites decreased by 22.4% in nominal terms compared with a year earlier to $9.0 billion in the first quarter of 2002. In real terms, it fell by 17.4%. A further decline in output at public sector building sites, upon the continued scale-back in the Public Housing Programme, was the major contributory factor. 6. The gross value of construction work performed by contractors at locations other than construction sites amounted to $8.0 billion in nominal terms in the first quarter of 2002, representing a decrease of 2.1% compared with a year earlier. In real terms, it decreased slightly by 0.7%. Works at locations other than construction sites included minor new construction activities and renovation work at erected buildings and structures; and electrical and mechanical fitting work. 7. Analysed by end-use category, residential building projects accounted for the largest share in the gross value of construction work performed at construction sites in the first quarter of 2002. The gross value of construction work performed for these projects amounted to $8.9 billion in nominal terms, which was 16.5% lower than a year earlier. 8. Transport projects constituted the second largest category of construction site work. The gross value of construction work performed for these projects totalled $3.8 billion in nominal terms, representing a decrease of 3.5% compared with a year earlier. 9. Environment, sports and recreation, other utilities and plant projects represented the third largest category of construction site work. The gross value of construction work performed for these projects was $2.2 billion in nominal terms, representing an increase of 21.1% over a year earlier. 10. On a seasonally adjusted basis, the gross value of construction work performed by main contractors fell by 11.0% in nominal terms in the first quarter of 2002 compared with the fourth quarter of 2001. In real terms, the decrease was 9.0%. 11. Owing to the widespread sub-contracting practices in the construction industry, a construction establishment can be a main contractor for one contract and a sub-contractor for another contract at the same time. The gross value of construction work performed by main contractors covers only those projects in which the construction establishment takes the role of a main contractor, but not projects in which it takes only the role of a sub-contractor. However, sub-contractors' contribution to projects should have been included in the gross value of construction work performed by main contractors for whom they worked. 12. More detailed statistics are given in the "Report on the Quarterly Survey of Construction Output, 1st Quarter 2002". The report is now on sale at $11 per copy. It can be purchased in person from : (i) Government Publications Centre, Ground Floor, Low Block, Queensway Government Offices, 66 Queensway, Hong Kong (Tel.: 2537 1910); or (ii) Publications Unit of the Census and Statistics Department, 19th Floor, Wanchai Tower, 12 Harbour Road, Wan Chai, Hong Kong (Tel.: 2582 3025). 13. Internet users may purchase publications online at the "Statistical Bookstore, Hong Kong" (Address: http://www.statisticalbookstore.gov.hk) with payment made instantly. Softcopies of the publications purchased are available for immediate downloading while hardcopies purchased will be delivered by mail. Subscription to regular publications and advance ordering of up coming releases are also available. The Statistical Bookstore is hosted on the ESD portal (Address: http://www.esd.gov.hk) together with other public services. 14. A mail order form for ordering or arranging subscription to hardcopies of publications is available in most publications of the Census and Statistics Department. It may be completed and sent back together with a cheque or bank draft covering all necessary cost and postage. The order form is also available for downloading from the website of the Department (Address: http://www.info.gov.hk/censtatd/eng/service_desk/forms_index.html). 15. For enquiries about the survey results, please contact the Building, Construction and Real Estate Statistics Section of the Census and Statistics Department at telephone no. 2805 6426 or email building@censtatd.gov.hk. Table 1 (text version): Gross value of construction work performed by main contractors in Q1 2002 Table 2 (text version): Gross value of construction work performed by main contractors in 2001. Table 3 (text version):Gross value of construction work performed by main contractors in Q4 2001.

[Source: Hong Kong Government, 25 June 2002]

2. Merger of rail rivals mooted

Hong Kong's rival rail operators may be merged after the Kowloon-Canton Railway Corporation (KCRC) yesterday won the Sha Tin to Central line contract with a HK$31 billion bid. After announcing the winning bid, Treasury Secretary Denise Yue revealed the government would launch a feasibility study into whether the KCRC should merge with the Mass Transit Railway Corporation (MTRC), which lost out on the contract. The 17.1-kilometre line will run from Tai Wai to Central West and will have 10 stations. The railway, which will be built and operated by the KCRC, includes a fourth harbour crossing between Kowloon and Hong Kong Island. The project will start in 2004 and will create about 12,000 jobs. It will take more than four years to complete. Acting Secretary for Transport Paul Tang said the KCRC had put forward a better financial assessment for the project, adding that its fares would be 15 per cent lower than those proposed by the MTRC. Although it had been widely expected to lose the bid, the MTRC said yesterday its ``revenues will be negatively affected'' after the project becomes operational. It claimed its project costs were significantly lower than those of the KCRC. Yue said the study into the merger of the rivals would take ``at least a few months'' and the government had no preconceived idea on merging the firms, or calling off the KCRC's privatisation. ``It's just an objective feasibility study.'' The government would not sell a second batch of MTRC shares until the study had been completed, she said. MTRC shares have been traded since October 2000. KCRC chairman Michael Tien said he knew nothing about the study into a possible merger, but welcomed the proposal. ``To be a responsible government, it is good to think of different options,'' he said. ``No one knows what the result [of the study] will be. What I want to say, however, is the two corporations have their own distinct cultures and operation models. And we use different technology. ``There are pros and cons to a merger and we should keep a balance.'' Credit Suisse First Boston analyst Geoffrey Palmer said he suspected the merger was being considered because ``the government is having difficulty selling the second tranche of MTRC shares''.He added: ``Merging the MTRC and KCRC would probably make the company more attractive to investors.'' The KCRC became embroiled in controversy after a decision to pay an extra HK$1.63 billion to West Rail contractors. Ernst & Young conducted an investigation into the affair. The probe, while criticising the lack of adequate communication between KCRC management and board, described its reasons for making the payments as financially prudent. Tang had earlier told the Legislative Council the government would wait until the completion of the inquiry before announcing its decision on the Sha Tin to Central link. Tang said at the time the report's findings would have no bearing on the decision on whether to appoint the KCRC. The MTRC had offered to build two additional stations - at Diamond Hill and Whampoa Garden - if it won the bid, increasing the passenger catchment by 240,000 residents. The KCRC plan includes a major revamp of Hung Hom station to cater for an increase in traffic volume. MTRC shares fell 0.9 per cent to HK$10.85 yesterday.

[Source: The Standard, 26 June 2002]

3. Tang exit won't halt building sector reform

Reform of the scandal ridden construction industry is set to continue with moves later this year to introduce a workers' insurance scheme and a sub-contractors register, proposed by Henry Tang's Provisional Construction Industry Co-ordination Board. There had been industry concerns that the departure of Tang as head of the co-ordination board would create a vacuum and lead to a lack of direction. Tang has indicated he will step down as board chairman following his appointment as Secretary for Commerce, Industry and Technology in Tung Chee-hwa's ministerial government. One insider said: ``There were fears that with Henry Tang being very much the driving force behind the board, his departure would leave a floundering, rudderless ship much like the former Construction Advisory Board.'' The CAB was set up by the government as a discussion group with industry representatives, but quietly folded several months ago. But Clement Cheung, head of the co-ordination board's secretariat, said Tang had indicated his willingness to find a new chairman to keep the group focussed and operational. ``We feel Henry Tang has one or two people in mind because there is a consensus to keep it going. I think an appointment could be made quite quickly,'' Cheung said. He said that even with the gap left by Tang, the former chairman has given the five working groups clear tasks. ``I don't feel that at a working level much is going to change,'' Cheung added. He said one of the board's first achievements would be announced later this year when an insurance policy is introduced for self-employed construction workers. The scheme, to be launched in September or October, has been drawn up by the Hong Kong Federation of Insurers' (HKFI) to provide self-employed workers with insurance coverage comparable to the statutory entitlement of employees. Cheung said the second initiative to go-ahead this year would be the introduction of a consultation document on a proposed voluntary register of subcontractors, which has already been dubbed the Yellow Pages. The ultimate aim of the register is to improve construction skills and training so that major clients such as the Works Bureau can insist main contractors only use registered subcontractors. Cheung admitted there was some way to go before this goal was achieved, ``but we have to start somewhere''. He said the consultation document would outline who should be on the register, what experience they should have, who would manage the register and how membership renewals would be handled. ``The working group is also drawing up an operations manual that will assist subcontractors in their dealings with employers,'' Cheung said. This manual is likely to set out guidelines that subcontractors can use to reduce disputes with employers, including a request for written rather than verbal instructions for construction tasks. Cheung said the board also needed to replace Robin Whalley, former head of engineering consultant Mott Connell, who was also on two of the five working groups. Whalley has returned to Britain to head Mott FM, Mott's facilities management arm ``It will be difficult because he had the industry experience. He was also a former construction industry review committee member and had the continuity of being part of both groups,'' Cheung said.

[Source: The Standard, 26 June 2002]

4. Merger would create $148b giant

A possible merger of the Mass Transit Railway Corporation and the Kowloon-Canton Railway Corporation would create a transport giant with $148 billion in net assets. The Government said yesterday it would study the feasibility of combining the two railway corporations into one entity. It also said the Government would put on hold the planned $15 billion sale of the second batch of MTRC shares until the study was completed in a few months time. The study, which will focus on the merged entities operational and financial viability, drew mixed views from analysts and business leaders. They said a merger would create a transport giant, with the MTRC's net assets totalling $88 billion last year and the KCRC's $60 billion. While anticipating significant cost savings they said shareholders in the privatised MTRC faced uncertain prospects. "One overhang on share price has gone but another follows precipitously," a financial analyst said, referring to the market uncertainty stemming from the competitive tender for the Sha Tin to Central rail project. Property developer Hang Lung Group chairman Ronnie Chan supported the merger. "Personally speaking, as I spoke to some Government official friends, I think the KCRC and MTRC should be merged. They are doing the same thing, why are they separated into two companies?," he said. Mr Chan also called for the Government to review the business model of the two corporations, which depend on profits from property developments close to rail lines. HSBC Hong Kong chairman David Eldon, also a director of the MTRC's board, said he was neutral. "What comes to my mind is that if you have one company, you then have a lot of costs that can be cut. On the other hand, there will be people concerned about competition. When we see what comes out of the study, I think that would be the time to comment," he said. Analysts said the merger was likely to be achieved by the Government selling the entire KCRC to main-board listed MTRC, or the transaction completed as an "asset injection". "In this case, a big question mark hangs over MTRC on how much it is going to pay," the analyst said. "This question adds further uncertainties to its share price." An MTRC spokesman declined to comment yesterday as the corporation was studying the Government's decision to award the Sha Tin to Central rail project to the KCRC and to study the merger. KCRC chairman Michael Tien Puk-sun welcomed the potential merger, but warned it faced hurdles in being implemented. He cited differences in organisational culture, and operations. The Government owns 77 per cent of the MTRC after the corporation went public in 2000. It owns the entire KCRC. MTRC's share price declined 0.91 per cent to $10.85 yesterday. The share price has been hovering between $10 and $11 since last November as rumours of it losing its bid to run the Sha Tin to Central link intensified. Last year, Merrill Lynch analyst Gary Chiu estimated that the MTRC would see passenger numbers decline seven per cent when the project was completed.

[Source: SCMP, 26 June 2002]

5. 'Bigger elephant' could be heading down the track

Political parties last night expressed fears about creating a large rail monopoly, while welcoming the awarding of the Sha Tin-Central link to the KCRC. The Legco transport panel chairwoman, Miriam Lau Kin-yee, of the Liberal Party, warned a merger could create a "bigger elephant". "Both the KCRC and the MTRC are already sizeable firms. Merging them into one bigger elephant may not be an optimal way to achieve efficiency. Perhaps the elephant may have difficulty turning around," she said. "Development plans of the two companies are different. The KCRC serves the suburban area while the MTRC focuses on transport of passengers in the urban area." Andrew Cheng Kar-foo, the Democratic Party's transport policy spokesman, warned: "If there is going to be only one rail company to operate all rail routes, the Government must consider whether it will create a monopolistic market and thus damage competition." The Democratic Party welcomed the KCRC contract, saying it could encourage competition. The MTRC now operates three cross-harbour lines - between Central and Tsim Sha Tsui, North Point and Lam Tin and Central and Chek Lap Kok airport. The KCRC does not have a cross-harbour rail-link. The East Rail operates between Hunghom and Lowu. A Transport Bureau source last night promised legislators' concerns would be studied, adding: "The aim of the merger should be to combine the strongest points of both companies." Legislator Lau Kong-wah, transport spokesman for the Democratic Alliance for the Betterment of Hong Kong, urged the KCRC to speed up the Sha Tin-Central project to minimise congestion at the Tai Wai station when the Ma On Shan-Tai Wai Link is completed in 2004. The Sha Tin-Central project is scheduled to be completed in 2008 at the earliest.

[Source: SCMP, 26 June 2002]

6. Commuters and construction staff to benefit from project

Construction workers welcomed the announcement of the rail-link contract as an opportunity to create jobs, but district leaders said the project must be completed on time and fares kept at a reasonable level to benefit commuters. Kowloon City District Council member Chan King-wong said about 400,000 residents in Ho Man Tin, To Kwa Wan and Hunghom could enjoy rail services under the plan. "These are old districts and had been neglected in rail development in the past," he said. "This will help solve traffic congestion as well." Sha Tin District Council member Cheng Tsuk-man said: "Residents already spend a lot of money on transport so fares must be kept at an affordable level. "I don't think Sha Tin residents were too worried about which rail company gets the contract so long as the project is completed on time." The project will be finished in phases between 2008-2011. The Government expects it to create about 12,000 jobs. Choi Chun-wa, chairman of the Construction Industry Employees General Union, said: "We are facing a very serious jobless situation in the industry at the moment. [The KCRC link] doesn't mean everyone will get work again, but at least it will bring some relief." Polytechnic University civil and structural engineering lecturer Hung Wing-tat said the KCRC was better positioned than the MTRC to serve passengers travelling along the north and south route from Sha Tin to Central. He added the KCRC, unlike the MTRC, had enough money to finish the new rail link without needing extra government funding. "If the MTR had got the contract, you would probably have a situation like Kowloon Tong now where it's quite confusing for passengers having to switch between the two rail networks on different platforms and levels," he said. Conservancy Association chief executive Gordon Ng Ting-leung said he needed more details to determine the project's environmental impact. "The Government should not wheel out big projects in a hurry to solve unemployment without giving thought on environmental prospects," he said.

[Source: SCMP, 26 June 2002]

7. KCRC beats rival to Sha Tin link as possible merger announced

The KCRC yesterday beat rival MTRC to the $26 billion contract to build and run the new rail link between Sha Tin and Central as the Government announced a possible merger of the two operators. The Executive Council approved the awarding of the contract to the Kowloon-Canton Railway Corporation, putting an end to months of uncertainty. The Mass Transit Railway Corporation lodged a lower bid of $23 billion, but its tender asked for three pieces of land from the Government for property development and proposed 15 per cent higher passenger fares on full journeys. Under the KCRC plan, the 17.1km line will be completed by the end of 2008 and will create 12,000 jobs. It will run from Tai Wai to Central West and have 10 stations. This will combine with Ma On Shan Rail, allowing passengers from Ma On Shan to travel to and from Central directly. Passengers travelling on East Rail will be able to switch to the new line either at Tai Wai or Hunghom. From Central, it will take commuters only 38 minutes to get to Ma On Shan and 48 minutes to Lowu. The KCRC said fares between Tai Wai and Central would be no higher than $11.80, the same as the MTR charges for journeys from Diamond Hill to Central. Cross-border and New Territories passengers heading to Hong Kong Island will save up to $5 as they will be able to travel all the way on the same network. Acting secretary for transport Paul Tang Kwok-wai said both the MTRC and KCRC had submitted very competitive bids. But he said the KCRC's bid was better financially as it attracted a higher patronage level, set lower fares, generated higher returns on investment and required no government funding. Mr Tang also announced that a feasibility study would be conducted soon on the possible merger of the rail operators. A Transport Bureau source said last night that the Government had no fixed position on the issue. "It can be completed within several months and after that we shall decide on our next move. The proposed merging has nothing to do with the recent West Rail saga and we are not targeting the KCRC." The source said major factors to be considered in the review included the impact on fare structure, the co-ordination of the two rail companies after a merger and possible massive layoffs. KCRC chairman Michael Tien Puk-sun said he was happy with news of the award. "This is great news for the corporation and, more importantly, for commuters who will be able to travel between Hong Kong Island and the New Territories on one railway network," he said. Mr Tien also welcomed the decision to study a possible merger between his corporation and the MTRC. However, he warned there would be many hurdles to overcome first. "We are different in many areas such as corporate culture, operation model, use of technology and rolling stocks," he said. The MTRC last night expressed regret at the loss of the contract but maintained the proposed property developments were necessary to produce a proper commercial rate of return for the corporation and its shareholders. It declined to comment on the study into a possible merger.

[Source: SCMP, 26 June 2002]

8. Chinachem zooms in on Tsuen Wan

Chinachem Group has ambitions to expand its land bank in Tsuen Wan and is eyeing three residential sites neighbouring its new flagship commercial complex, Nina Tower. ''Nina Tower will be facilitated with comprehensive infrastructure when West Rail is completed. We'll have particular interest in acquiring the nearby residential sites,'' said Ng Song-mou, sales manager of Chinachem Group. ''We have been concentrated in Sha Tin and built up a substantial portfolio there. Now our focus is shifting to Tsuen Wan.'' Chinachem's completed Sha Tin residential projects include Belair Gardens, Lucky Plaza, Pictorial Garden and Marbella. Mr Ng said Chinachem's latest target of land acquisition was a 1.43-million-square-foot redevelopment project at Tsuen Wan town centre being tendered by the Urban Renewal Authority (URA). The site in Yeung Uk Road lies just opposite Nina Tower and will provide about 1,900 residential flats and some retail space. The tender will close on July 9. ''We do not possess much land bank and we'll be more active in acquiring land in the coming year,'' Mr Ng said. He said Chinachem's priority would be Tsuen Wan, with the developer scheduled to move its headquarters from current premises in Tsim Sha Tsui to Nina Tower when the complex is completed in 2004 or 2005. According to existing town planning, the Government will develop a commercial node near Nina Tower and a cross-border bus terminus may be incorporated in the area. Mr Ng said Chinachem had planned to build several footbridges to connect Nina Tower with the future Tsuen Wan West Station and the Tsuen Wan town centre site. Apart from the Tsuen Wan town centre project, the group also intended to acquire another smaller site, also held by URA in Yeung Uk Road. The site spans 77,800 sq ft and can yield 552 residential units and 44,800 sq ft of retail space. Chinachem has also submitted an initial interest to develop the site, which is expected to be released by URA for tender later. The site is adjacent to another 1.42-hectare residential-commercial site reserved in the Government's land-sale application list. Land on the list will be released for sale when a developer offers a minimum acceptable price. The third property has a minimum developable area of 764,000 sq ft for residential use or up to 1.45 million sq ft for commercial development. Mr Ng said Chinachem hoped to develop the adjacent lots jointly to maximise their potential. Together, the two sites could deliver nearly 2,000 residential units, he said. Nina Tower, named after Chinachem Group chairman Nina Wang, was originally designed to rise 108 storeys to become the tallest building in the world. But the plan had to be scrapped as the site was found to lie within the aviation path, limiting the height of the development. Instead, Chinachem revised its plan to develop two commercial towers - an 80-storey hotel and office tower and a 40-storey hotel. Mr Ng said the whole development, with a gross floor area of more than 1.5 million sq ft, would be the group's flagship property. It would provide more than 1,000 five-star hotel rooms. The top floor of the taller tower would be turned into an exhibition centre, he added. The project was rapidly taking shape, with the office phase next up for construction, he said. Mr Ng said while the occupation permit had been secured for part of the office and hotel development, this would not be released for lease until the entire complex was completed. ''The whole development will be ready when the Tsuen Wan West Station along the West Rail is completed,'' he said. Chinachem has a large portfolio of residential and commercial properties held for lease. It is also developing a luxury residential project in Repulse Bay.

[Source: SCMP, 26 June 2002]

9. Developers cool on Hang Hau project

Faced with a higher-than-expected land premium and up-front payment on MTR Corp's Hang Hau Station property, developers say they have been cautious in bidding for the project. Sources said the offers some developers made were not generous and at least one did not propose to share any profit with the MTRC, a term that has usually been included in the past. For example, New World Development and its consortium partners outbid six consortiums last year for the Tseung Kwan O Town Centre Station development right by offering MTRC more than 50 per cent profit sharing. The Hang Hau Station project tender closed on Monday and the winning bid is expected to be announced in a couple of weeks. "Developers can hardly afford to offer keen bids this time as the basic terms required by MTRC will squeeze their future profit margin," one source said. MTRC required the committed developers to pay HK$350 million up-front and a HK$60 million renovation fee, to surrender the ownership of a 37,600 square-foot shopping mall to MTRC and to bear the Government's HK$1.27 billion land premium. This would mean the land cost amounted to more than HK$1,100 per square foot. New World Development property development senior manager Andrew Choi Fook-ming said the group did not bid for the Hang Hau project as there were many choices on the market at the moment. "The Hang Hau project is similar to the Tseung Kwan O Station development within the same district but the land cost is much higher," he said. The land premium charge for the 1.04 million sq ft Tseung Kwan O Station was slightly less than HK$600 per square foot and MTRC charged a HK$50 million up-front payment. The 1.53 million sq ft residential-retail development at Hang Hau Station drew six tenders. Tenderers were Cheung Kong (Holdings), Sun Hung Kai Properties, Henderson Land Development, Nan Fung Development, a joint venture of Sino Land and Kerry Properties and a coalition of Kowloon Development and parent Polytec Holdings.

[Source: SCMP, 26 June 2002]

10. Opportunity and challenge for new housing chief

How to get more for less? That was a convenient slogan slapped on government housing policy last year, and the answer would seem to be wind up competing agencies, reduce expensive managers and scrap gargantuan public building programmes. Following last week's housing review it looks like a case of back to the future, with housing policy about where it was in 1991 before the boom years generated ill-fated ''demand'' management, only to be replaced with even worse ''supply-side'' solutions and Chief Executive Tung Chee-hwa's failed flat-building targets. Depending on your viewpoint, a lost decade has concluded or a brave new path has been forged. What is clear is that a clean break has been made with the post-1997 muddle. The implications run deep for home owners and public finances. Choosing last week to announce the reform of housing agencies seems to have served several ends. It allows incoming housing, planning and lands minister Michael Suen Ming-yeung a clean brief to enact changes. With attention on the ministerial shake-up, it also buried what ostensibly appears a huge policy U-turn. All mention of targeted home-ownership levels and planned flat building were dropped in last week's review document. The programme for sale of subsidised homes effectively has been wound up, even if its death is to be a lingering affair. The latest, implausible, explanation for keeping a tiny version of the Home Ownership Scheme is to ''stabilise'' the market should low supply conditions emerge. That suggests either 1990s-style market micro-managing dies hard, or the world's biggest public housing building programme is being phased out by stealth. It is being replaced by subsidised finance for income-qualifying buyers and means-tested cash subsidies for public housing tenants. There is no ''big bang'', but centralising policy under the roof of a single minister promises permanent change. The driver is likely to be budget savings. Consolidation of the Housing Authority on to the Government's books will put previously concealed housing subsidies firmly in the political space and on the Treasury's agenda. As a quasi-government body, the authority funded its public rental building programme with profits from its subsidised HOS units as they were built on land provided free by the Government. Without these ''profits'', the authority is forecast to run into deficit within three years. Its role is set for radical change, becoming a mortgage broker, approving subsidised home loans before the debt is securitised as bonds. This year the Government is to report its accounts on an accrual as well as the traditional cash basis. Such corporate style accounting, which recognises assets and liabilities rather than simply cash expenses and income, has powerful side-effects. It will confirm chronic cash deficits but an asset-rich Government that, if viewed as a business, is ripe for rationalisation. Of particular interest to the Treasury will be the authority's huge office and car park portfolio - planned for sale - and up to $400 billion of premium payments still to be paid by purchasers of HOS units. Such premiums are effectively deferred payment for land that HOS buyers only pay when selling their flat. A big problem for Hong Kong's moribund property market is that most HOS buyers would rather stay in their units than cough up a lump sum. Such rigidities are exacerbated as HOS units come with inheritance rightsthat provide little incentive to settle outstanding premiums. If a genuine on-sale market in the units is to develop, something has to give. Flexible premium payment terms have been announced and a practical solution is to grant discounts for early settlement. This would have the double benefit of raising revenue for the Treasury and increasing ownership. But if the Government is backing out of the private-homes market, its big headache is the public rental sector, where opposition to rent increases is fierce. Tenant groups are politically organised and have threatened to sue the administration should it breach a legal requirement that the median rent-income ratio not go above 10 per cent. Far from tackling the issue head-on, a cautious expansion of means-tested rental allowances seems likely. How quickly such pilot programmes expand remains unclear. But if the choice is a three-year wait for a public housing unit or a cash allowance to rent a flat of your choice, the potential for growth is clear. Taken to a logical conclusion, such changes point to privatisation of public housing and full withdrawal of the Government from managing the property sector. That may be premature, but given the budgetary constraints and last week's agency shake-up it is hard to see another outcome. Having jettisoned its post-1997 housing folly and largely handed the market back to private developers, the bigger question is how to stimulate genuine supply-side reform that ensures a responsive and flexible market. That asks fundamental questions about the way land is sold and taxed. Combining housing, lands and planning at least frees the minister from competing bureaucratic interests. Mr Suen has a blueprint for action. Now he must deliver.

[Source: SCMP, 26 June 2002]

11. Tom Hilditch and Vivienne Chow now have a section in the SCMP called S.A.R [Salacious And Repeatable].

"Selected And Rejected". What does SAR stand for ? Our Reclaim The Name competition has seen some great winners. But what about the one that didn't make it ? Here - by popular request - are a few of the also-rans. If you think you can do better, or you're an insomniac, or just stuck on the ferry with nothing else to think about, e-mail us your entries. This week's winner, to be announced on Friday, gets to spend a night learning how to bartend at Elite Concepts supercool and celebrity-draped One-fifth in Wan Chai.

Valiant runners-up we loved include:

Send all information and gossip to us at: SAR@scmp.com; fax: 2562 2485; tel: 2565 2222.

[Source: SCMP, 26 June 2002]

12. CyberWorks to delay sale of Cyberport flats until next year

Pacific Century CyberWorks has delayed the sale of Cyberport's residential units, analysts have been told. Alex Arena, CyberWorks' newly appointed chief financial officer, told analysts in a conference call on Monday that the company would not begin pre-sale of the units until early next year, rather than the fourth quarter this year. The Government and CyberWorks said the delay was due to poor market conditions and it expects higher prices next year. Information Technology and Broadcasting Bureau deputy secretary Annie Tam Kam-lan said: "The fourth quarter is the earliest we can begin to sell flats. But we are very flexible. We need to consider the market conditions to decide when is the best time to sell the units. "Of course we both want to make as much profit as we can." The delay was not a result of any hold-up in construction, a CyberWorks spokesman said. The company now faces having to pump more money into the project before it can be self-financed with sale proceeds. According to the agreement between the Government and CyberWorks, the telecommunications carrier has to finance the construction cost of the Cyberport project until it begins to sell the flats. Cyberport will build 2,800 luxury residential units, to be completed between 2004 and 2007. Mr Arena said CyberWorks had budgeted US$300 million on Cyberport this year, and that it was expecting to generate US$250 million free cash flow. The company hopes to reduce its overall debt by US$1 billion in the next five years once freed from its Cyberport obligations, Mr Arena said. Part of the target is expected to be achieved through surplus proceeds generated by the Cyberport unit sales. Analysts did not have much expectation of this, however. ABN Amro Asia telecoms analyst Joe Locke said: "We are slightly uncomfortable with the company's hope that cash flow breakeven will happen sometime in early 2003, as this is when pre-sale on the residential portions begin. Given the abundance of residential properties on the market and no clear recovery in sight, CyberWorks may struggle to see a very warm reception to pre-sales." Meanwhile, chief operating officer Michael Butcher told analysts on Monday that the company would adopt a wide range of cost-cutting measures by September, which would have a significant impact on operating costs. Many analysts yesterday interpreted that as meaning the cost-cutting programme might involve redundancies within the next three months. Lehman Brothers said it did not anticipate any "large-scale lay-offs", but rather an aggressive attrition type of reduction.

[Source: SCMP, 26 June 2002]

13. Cyber-age 'open sesame' can be so easy to decipher

How safe is your password? Just try to crack Technopedia's. It comprises the Klingon for modem deconstructed by an online code-scrambling machine then swallowed and spat out by the translation engine Babelfish and supplied with a tilde or two for added obscurity. This may appear paranoid but it pays to have an offbeat password in an age where information has become a precious possession. The value of information stored on your computer or network can vastly surpass the cost of hardware. Accordingly, hundreds and thousands of wayward strangers are trying to break into computer systems worldwide every minute of every day. So how do you come up with a good password? Beware complacency because any noun, verb or adjective you care to mention can be cracked easily enough via a fiendishly simple, devastating method known among the knowing as a dictionary attack. To the uninitiated this term may suggest a literal rendition of the expression throw the book, meaning rebuke, and if you wanted to extract a password from someone, pelting them with dictionaries might well work. Rather, dictionary attack means a time-tested method of violating password security. The villain responsible is a bot (an automated program that can execute a repetitive task). The bot tries to establish the password for a known user ID by drawing on two resources. The first is an inventory of common passwords from alfred and algebra to zombie and zorro. The second resource, which hardly requires the guile of a hacker to guess, is an actual dictionary. Since cutting edge dictionary attack applications exploit immense dictionaries, in a few hours - or even minutes - any password which comprises a single word will be broken. The usual way of protecting users from the threat of a dictionary attack is for a Web site to lock an account after several incorrect password entries have occurred. Typically, sites require customers whose accounts are locked to call their customer service departments and verify their right to access the account by giving information such as their mother's maiden name. Not every site uses this security method, however. Auction sites, for instance, balk. The reluctance stems on the one hand from concern that ruthless bidders might try to scupper rivals by locking their accounts. On the other hand, honest users could find themselves barred from logging in after an attempted dictionary attack. To reduce the chances of an attack being successful, experts recommend you use a strong password - a long one comprising random upper- and lower-case letters interspersed with a smattering of everyday keyboard hieroglyphics - the at sign, the ampersand, the asterisk and so on plus numbers. Such passwords appreciably lower the likelihood that a dictionary attack program will find a match. But even if you stick figures and special characters in your password, it can still be susceptible. The reason is that the passwords we artfully dream up are usually nonetheless about as subtle as a game of Splatter Punk III. These passwords mirror certain subconscious patterns of logic. As a result, a password starting with p is much more probable than one with k; the probability of encountering y in the final position is about as high as Singapore winning the next World Cup. That means a program using the smart force method based on linguistics and psychology can crack a human-created random password without much trouble. To tighten security still further you may adopt a pass phrase such as stop peeping you sneaky little *!. Unless, somewhere out there is a cracker who can recruit the proverbial 100 typing Shakespeare-wannabe monkeys, this should work. However, a password of this testing nature takes brainpower to remember. If you devise an astoundingly complex one, you will almost certainly forget and/or mislay the exact formulation, consigning the information you wanted to hide to that realm of ultimate security: oblivion.

[Source: SCMP, 26 June 2002]

14. A bridge too far?

How far is too far? When it comes to modern bridge building, economics and not engineering dictate the limits. For proponents of a 29km Zhuhai-Hong Kong link, HK$10 billion is a small price for connecting the SAR's western hinterland. For opponents it is a grand folly schemed by spendthrifts. All great cities have sprouted vast transport arteries connecting their vital commercial organs to the outside. From ancient Rome to modern New York, roads and bridges have been integral to the urban landscape and economic success. Few believe infrastructure guarantees growth yet without it you are an also-ran. Whether to build a super-bridge linking Lantau Island and Zhuhai - the self-proclaimed "Riviera" of the Pearl River Delta - raises basic questions about Hong Kong's integration strategy with neighbouring Guangdong. Pushing ahead with a plan vocally supported by maverick engineering tycoon Sir Gordon Wu Ying-sheung could radically alter development in the delta, opening its western side to direct competition with the Shenzhen-Dongguan manufacturing heartlands that have thrived because of close proximity to Hong Kong's land border. Who will fund the bridge remains a mystery. The Guangdong Government must be convinced of its worth but has other big transport plans that seem at odds with the project. Within the province different municipalities have conflicting agendas. Sleepy Zhuhai and adjacent Macau understandably love the plan but Guangzhou seems nonplussed. In Hong Kong divergent opinions have arisen. Sir Gordon is pushing the project and also proposes a major expansion of the SAR's port facilities to be built on Lantau. Sun Hung Kai Properties is believed to support the project while the Cheung Kong group is in opposition; managing director Canning Fok Kin-ning argues it is only viable with substantial subsidies. Sir Gordon says Hong Kong is missing the opportunity to consolidate its position as Guangdong's major logistics and shipping centre. Rather than expand its logistics role, SAR port operators were content to earn high returns in the tightly packed Kwai Chung terminal. "In Hong Kong there are only four port operators and the four say 'don't build any more as we've got a nice thing going'," he complained in March. Whether Hong Kong should seek to recapture its declining share of Guangdong's cargo trade by building ports and subsidising supporting infrastructure is a basic policy question that divides the SAR. Experience from around the world suggests such trade will inevitably seep to lower-cost port centres closer to the manufacturing heartlands. Mr Fok counters that transporting cargo from upstream in the delta is more economic than running cargo by road bridge into the SAR. He says official efforts should focus on speeding upcross-border traffic rather than subsidising a bridge it can ill-afford when running a deficit. A cross-delta bridge project would require approval from Guangdong and Beijing, including perhaps a financial commitment from them and extensive co-operation from the mainland in carrying out feasibility, environmental impact and other studies. Among the actors north of the border expected to lobby Guangdong and Beijing decision makers, Zhuhai stands out as the biggest winner should approval be given. Zhuhai and Shenzhen were designated as Special Economic Zones in the early 1980s in large because of who their neighbours were. But while Shenzhen has thrived next to Hong Kong, Zhuhai has gained little benefit from its proximity to Macau. Zhuhai's development has been constrained by the lack of either a rail link or even a completed expressway down the western half of the Pearl River Delta. A bridge connecting Zhuhai to Hong Kong would bring the Special Economic Zones that much closer to the delta's economic centre and consequently spur its development. Zhuhai's party secretary, Huang Longyun, also sits on the Guangdong Party Committee's 15-member standing committee, giving the city plenty of negotiating clout at the provincial level. Unfortunately for bridge proponents, Zhuhai is not an ideal ally. When it comes to large-scale investment projects the city has a chequered track-record and, consequently, poor credibility with provincial and central government decision-makers. In 1997, Zhuhai unilaterally began construction of its own cross-delta Lingding Yang bridge. Remarkably, it apparently did so with neither express provincial and central government approval, nor any communication with Hong Kong. The project was halted three years later after little progress, though abandoned concrete pillars stand as a monument to Zhuhai's misadventure. Moreover, the Lingding Yang folly was exceeded by that of Zhuhai Airport, which was built at a cost of 6.9 billion yuan (about HK$6.46 billion) but today operates at less than 5 per cent of capacity. The airport is a gaffe of gargantuan proportions in the eyes of provincial and central government planners. Asked about the construction of a cross-delta bridge on the sidelines of the Ninth Guangdong Party Congress, Mr Huang reiterated Zhuhai's support but emphasised the importance of first securing Guangdong's approval. The other key player is Guangzhou, which is also represented on the provincial standing committee by its party secretary and the front-runner to be the next governor of Guangdong, Huang Huahua. But unlike Zhuhai, Guangzhou has little to gain and arguably much to lose from a cross-delta bridge. The Pearl River Delta is already bridged, more sensibly, at its narrowest point between Nansha island in southern Guangzhou and Humen in Dongguan. More importantly, Guangzhou's long-term development plans centre on the construction of a deep-water port and heavy industrial zone just south of Nansha on Longxue island. Though Guangzhou officials have no stated opinion on the project, any bridge that funnels west-delta cargo traffic away from Nansha and directly to Hong Kong is likely to be a concern. Even if a cross-delta bridge project did progress to the bilateral discussions stage, considerable hurdles remain. Only one other cross-border project of this magnitude has made it to the bilateral table: the high-speed rail link between Hong Kong, Shenzhen and Guangzhou, possibly employing state-of-the-art Maglev technology that was proposed last year. Yet, less than four weeks after the first joint expert group meeting involving officials from the Ministry of Railways and Hong Kong's Transport Department in March, reports in the Guangzhou press cited municipal planning bureau officials as saying that the link would terminate in Nansha and thus require another cross-delta bridge or tunnel link. Such wish-lists are a dime a dozen in delta planning offices, says one consultant working on a regional study for the Guangdong Government. The consultant was last week treated to a local government plan for a cross-delta bridge that was similarly long on vision and short on specifics. Getting off the planning boards at all could well be the stiffest challenge for this bridge too far. Tomorrow Hopewell Holdings' Sir Gordon Wu Ying-sheung and Cheung Kong Group managing director Canning Fok Kin-ning put forward their views.

[Source: SCMP, 26 June 2002]

15. Monitor

And here are some of those gems that you knew you might expect from all the ballyhoo about the naming of the new principal officials. "Sometimes you have the best talents, like France, but they did not play well. It's important for each team member to have their [sic] expertise and for the leading echelon to put it together as a team. I'm confident we can do it." - Chief Executive Tung Chee-hwa. Yes, but so was France. What a strange choice of analogy. Did Mr Tung pause for thought before he made this comparison of his team to the biggest losers in the World Cup finals? Then again, who knows? It may just turn out to be a wonderfully prescient analogy. "Fairly good" - Vice-Premier Qian Qichen in reference to Mr Tung's performance in his first five years in office. Ouch. That one must have stung. A better example of damning with faint praise I have rarely encountered. Here is Mr Tung heralding the dawn of a new era with his first team, his best, the one that will feel the pulse of community . . . blah, blah, blah and the best Beijing can muster for his report card on this momentous occasion is "fairly good". I had heard the Beijing bosses were none too impressed so far. It seems they may be a degree less than that. With the rest of the old government structure still in place "it was very difficult for the chief executive to operate". - Mr Qian again. Pardon me, sir, but do you remember all that talk of the "through train" leading up to 1997? You had years to negotiate the structure of government you wanted and you professed yourself satisfied with it. Why now this back-handed slap at a team that you yourself swore in? I shall grant you that there may have been one or two instances of civil servants who could be suspected of divided loyalties post 1997. I recall one in particular who pointedly stood in the middle between the Chinese and British camps at the handover ceremony but she no longer holds office. Do you mean to tell us, however, that Mr Tung's difficulties over the past five years were principally attributable to a general subversion of his programme by the civil service? He might like us to believe it but I doubt that you would let such a complaint go unquestioned. I am sure you already have pointed out to him that many of his difficulties are of his own making or due to causes beyond the influence of anyone in Hong Kong. Please do not now let him pin the blame wholesale on past subordinates. "All the officials were civil servants who were employed by the governor and had of course to obey the governor. The Hong Kong people at the time had no rights to speak of." - Mr Qian once more. There is a great deal to ponder in this one. Do you now mean to tell us, sir, that the British governor's authority over civil servants did not carry through to the chief executive? And what is this about Hong Kong people earlier having no rights to speak of? I personally think that this present administration's record on civil liberties has been a good one but it has also been a continuation of what we had under British administration. Why unnecessarily slight the British record this way? Finally, as an indication of where these appointments may lead, we have the experience of Commerce and Industry secretary Chau Tak-hay, who was earlier tipped to belong in the line-up but possibly brought his exclusion from it on himself by publicly casting some doubts on the need for a ministerial system. If so, what a fine way to start things off for a new era of accountability. Can you not endure anyone who differs from you, Mr Tung? Is this accountability only to you and are we to have yes-men alone?

[Source: SCMP, 26 June 2002]