1  Bridging the divide
Bonnie Chen in Guangzhou and DianaLee, The Standard 6 August 2008

The massive Hong Kong-Zhuhai- Macau Bridge is finally to get off the ground with Beijing set to pour billions into financing the long-awaited project.

Guangdong and the central government will put 7 billion yuan (HK$8 billion) toward the 37.45 billion yuan bill, Hong Kong 6.75 billion yuan and Macau 1.98 billion yuan, according to Chief Executive Donald Tsang Yam- kuen, who unveiled financing details during the 11th Hong Kong- Guangdong Cooperation Joint Conference with provincial governor Huang Huahua.

The remaining 21.72 billion yuan for the project will come from loans.

However, neither Tsang nor Huang revealed further details of the loan plan. Tsang said work will start no later than 2010.

The contribution was determined by the economic benefit to each place, the chief executive said. As the governments are financing the project, there will be less pressure over toll pricing, Tsang said.

Guangdong will manage the bridge as it is within its sea area and, therefore, under its jurisdiction, Tsang said. Asked exactly how much Beijing will contribute, Huang said it is too early to tell but he emphasized the central government's financial support for the project.

A Hong Kong government source denied that Beijing made the move to demand greater leverage over the bridge.

The funding by the central government shows its support of the work and to speed up the process. As to the issue of leverage, such details have not yet been decided, the source said.

Tsang revealed Beijing's financial support for the project in his opening speech at the conference yesterday and throughout the day talked more about the bridge than Huang.

Neither Tsang nor Huang revealed why the central government has joined the project or why the initial build- operate-transfer plan was abandoned. The three governments had planned to tender the project early this year with Hong Kong picking up half the remaining cost.

The change in the finance arrangements will lower the commercial pressure on pricing tolls - previously estimated at 150 yuan in papers submitted to the Legislative Council.

"It's too early to say whether the toll will be lowered," the government source said. "However, if there's no commercial pressure from the developer, the government certainly has more say based on the public's affordability."

As to how the remaining 21.72 billion yuan will be raised, the source said the most logical way is to set up a company owned by the three governments and collect funds from the public, such as by issuing debentures. The three governments are still to discuss details, such as tolls, the quota system for traffic flows on the bridge and legal issues.

The Hong Kong government hoped the bridge could be completed in 2015-16, and details for further funding will be submitted to Legco for approval in the coming legislative year.

Political analyst James Sung Lap- kung said Beijing having the biggest say was not the main reason for its funding.

"Whoever the major shareholder, it could not stop the central government having a say if it really wanted to. Yet I believe the funding genuinely shows [Beijing] really wants to speed up construction of the bridge after years of argument over the financing arrangement between the three cities."

Raymond So Wai-man, associate professor at Chinese University's department of finance, said the new arrangement will minimize the chance of negotiation between developers and the governments and will therefore reduce public perception of collusion between business and the government.

 

2 Beijing cash puts bridge a step closer Guangdong to pay the most under new funding model
Anita Lam and Chloe Lai, SCMP 6 August 2008

Construction of the Hong Kong-Macau-Zhuhai Bridge will be able to begin by 2010 after the central government agreed to inject funds to make sure the project does not suffer any more delays, Chief Executive Donald Tsang Yam-kuen said yesterday.

A new funding arrangement will see the cost of building the bridge split between the three regional governments, with Guangdong - after receiving subsidies from the central government - paying the most. However, 58 per cent of the cost will be funded by loans.

The three governments had agreed in February that the 37.45 billion yuan (HK$42.72 billion) project would be tendered out to the private sector under the build-operate-transfer model, with the three governments meeting the funding gap between the construction cost and the private sector investment under a cost-to-benefit principle. Hong Kong would have covered 50.2 per cent of the gap, Guangdong 35.1 per cent and Macau 14.7 per cent.

But under the new funding arrangement, Hong Kong will shoulder 42.9 per cent of the upfront payments, Guangdong and the central government 44.5 per cent and Macau 12.5 per cent. Mr Tsang announced the new plan after meeting Guangdong Governor Huang Huahua at the 11th annual meeting of the Guangdong-Hong Kong Joint Co-operation Conference yesterday.

"The three governments will now be responsible for contributing 42 per cent, or 15.73 billion [yuan], of the bridge's construction cost," he said. "We will raise loans for the rest."

That means Guangdong and Beijing would have to shoulder an upfront payment of 7 billion yuan, Hong Kong 6.75 billion yuan and Macau 1.98 billion yuan.

Veteran commentator Johnny Lau Yui-siu queried whether the switch in the contribution ratios meant Guangdong would assume a controlling stake in the joint-venture company which will be set up by the three governments to oversee the bridge's tendering process, construction and operation.

But a Hong Kong government source said the shareholders' stakes had not been confirmed yet and would be discussed thoroughly over the next few months.

The source said the central government had come to the table out of goodwill to speed up the project - which has been on the drawing board for 25 years. The source said the three governments had abandoned the earlier funding model because the tendering process could cause further delays and they wanted to exert greater control on the setting of tolls.

"Private contractors need to study their rate of return before submitting proposals, and that would have to be based upon car flows and tolls," the source said. "But we have not yet come up with a decision on the cross-boundary vehicle quota, which apparently would affect the bridge's utilisation."

A report submitted to the Legislative Council earlier projected the bridge would attract 14,000 vehicles a day at most with a toll of HK$150 if the quota system was not relaxed.

Each government will be responsible for the cost of connecting roads and border-crossing facilities to the bridge within their boundaries. In Hong Kong that would amount to another 2 billion yuan.

A government source expected the 29.9km, dual three-lane bridge to be completed by 2016. It is expected to bring significant advantage to the region by speeding up cargo flows and boosting tourism.