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1. Jobs before budget, say Tung aides

2. Job fears in deficit reduction plan

3. Industry counting on public works

4. Damper on MTRC tender

5. Peak house to attract strong interest

1. Jobs before budget, say Tung aides
Cannix Yau, The Standard 16 October 2002

Two executive councillors have vowed to oppose the delay or scrapping of ``unnecessary infrastructure projects'', if it sacrifices employment for the sake of controlling the ballooning deficit.

Cheng Yiu-tong, also chairman of the Federation of Trade Unions (FTU), said he would not support the move if it meant more jobs would go.

``Delaying or scrapping infrastructure projects would be detrimental to local economy and employment. Instead, I think the government should speed up the projects to boost employment,'' he said.

Tsang Yok-sing, chairman of the Democratic Alliance for Betterment of Hong Kong (DAB), agreed, saying jobs should not be sacrificed to maintain a balanced budget.

``We understand there is a conflict between tightening government expenditure and creating jobs. But the problem is that the government has promised tackling unemployment is its top priority,'' he said.

The two Exco members were responding to revelations by Financial Secretary Antony Leung on Monday that the government was planning to delay or cut back on unnecessary infrastructure projects that were less cost-effective or had poor return prospects..

The Chief Executive's undertaking in his policy address last year to invest more than HK$600 billion over the next 15 years on more than 1,600 projects to create more than 30,000 jobs would be reviewed, Leung said.

But Secretary for Environment, Transport and Works Sarah Liao yesterday gave assurances the move would not affect local employment because infrastructure spending for the next five years would be no less than HK$27 billion a year.

``It is actually not dropping, we have to prioritise. Actually that's what he [Leung] means. The total amount of HK$27 billion will not be reduced. But we need to really think hard as to what projects should be on the priority list,'' Liao said.

``It would sustain the employment opportunities within the infrastructure projects. Besides, the finished projects will generate high economic returns which will also help boost employment.''

Leung said last night that projects which helped the economy and involved public safety would still go ahead and the move would not affect employment.

The deficit for the first five months of this financial year already stands at HK$56 billion, well above the projected full-year deficit of HK$45 billion. Leung warned on Monday the deficit for the whole fiscal year could reach HK$60 billion.

2. Job fears in deficit reduction plan
ANTOINE SO and FELIX CHAN, SCMP 16 October 2002

Two executive councillors yesterday warned against shelving and delaying infrastructure projects, a day after Financial Secretary

Antony Leung Kam-chung revealed the plan as part of the goverment's cost-cutting moves.

The warnings were issued by Cheng Yiu-tong, chairman of the Hong Kong Federation of Trade Unions, and Tsang Yok-sing, who leads the Democratic Alliance for Betterment of Hong Kong, after the Executive Council meeting yesterday.

Mr Tsang said that while he understood the pressure was on for the government to cut spending to reduce the fiscal deficit, which according to Mr Leung could reach about $60 billion this year, job creation was his main concern.

"I understand there's inherent conflict between job creation and cutting government spending, but I think there's an agreement in the beginning that job creation is a priority," Mr Tsang said.

Mr Cheng said that the government must abide by its promise to create 30,000 jobs within five years by means of an infrastructure boost, as foreshadowed by Chief Executive Tung Chee-hwa last year.

"If we slow down on infrastructure, we actually slow down employment and thereby the recovery of the economy," he warned.

Mr Tung made the pledge just eight months ago when he promised to turn Hong Kong into "Asia's World City" by spending $600 billion in 15 years to boost infrastructure and tourism.

The 1,600 projects included new rail connections costing $400 billion and another $200 billion on a Disney theme park, the Southeast Kowloon tourism project, new towns in the New Territories and tourism projects in Lantau and Aberdeen.

Secretary for Environment, Transport and Works Sarah Liao Sau-tung yesterday moved to allay fears of a cutback on new jobs as a result of the re-prioritising of infrastructure projects.

Dr Liao said that the 30,000 jobs pledged by the government would not be affected in any case, although in the longer term some projects would be considered for shelving.

"It [the spending] is actually not dropping, we have to prioritise. Actually that's what he [Mr Leung] means.

"The total amount of $27 billion [a year] will not be reduced," she said.

"But we need to really think hard as to what projects should be on the priority list."

The financial secretary said last night that the infrastructure projects that could be postponed would be announced at "an appropriate time".

"I would like to be clear that the government would continue with infrastructure projects which should be done, but to postpone those with lower economic return," he said.

Democratic Party lawmaker Andrew Cheng Kar-foo said the government must provide more information on the issue.

"It is a bizarre change of attitude," he said.

"A couple of years ago it was talking about quickening infrastructure projects to create more jobs."

Choi Chun-wa, chairman of Hong Kong Construction Industry Employees General Union, said that the government should explore other ways to cut costs.

"How to determine which infrastructure projects carry added-value benefits is open for debate," Mr Choi said.

"For example, there are some loss-making investments that the government must proceed with whatever happens, due to its social duty."

Mr Choi said the government could deploy more government-private partnerships in new infrastructure projects as a way of easing public spending.

Chan King-chi, organising secretary of the Federation of Transport Worker Organisations, said any cutbacks on infrastructure projects would not only damage the employment prospects of construction workers directly but also affect those of other workers providing support services. felix.chan@scmp.com

3. Industry counting on public works
ANTOINE SO, SCMP 16 October 2002

Any slowdown in infrastructure projects could delay Hong Kong's economic recovery and risk jobs for building professionals, critics have warned.

They said yesterday that the government should consider outsourcing public works to the private sector.

Wong Wah-sang, honorary secretary of Hong Kong Institute of Architects, said there were no public works projects that yielded such low social returns that they should be shelved.

"There's actually none I can think of," Mr Wong said.

He said architecture firms were hit by the property-sector gloom and were putting their hopes in government projects.

"Cutting any [government projects] will definitely mean our sector would be pushed further to the edge," Mr Wong said.

He warned that by cutting down on infrastructure, the SAR risked lagging behind other cities.

"It will be short-sighted to try to cut spending and compromise Hong Kong's overall economy in the future," Mr Wong said.

Chan Yan-chong, associate professor of City University's department of management sciences, agreed that Hong Kong may need to cut down on infrastructure spending in the face of the government deficit.

But he said it was common practice of governments that they increased, rather than decreased, spending on infrastructure in bad times. "Jobs can be created immediately. What's more important is infrastructure could help accelerate economic growth later on," Dr Chan said.

He urged the government to follow the lead of the United States, Britain and Australia and involve the private sector in public works to achieve better efficiencies without the need to draw money from government coffers.

4. Damper on MTRC tender
SOPHIA WONG, SCMP 16 October 2002

Developers are expected to bid conservatively for the large property project at Tiu Keng Leng Station in Tseung Kwan O.

The Mass Transit Railway Corp (MTRC) tender of the 2.7 million square foot residential and retail development closes on Friday.

The cost of the two-phase development is estimated at HK$6 billion. Analysts expect the project to draw cautious bids, given the ample supply of land and flats in Tseung Kwan O.

The uncertainty in the economy and the property market would cause all but the biggest developers to hesitate to commit to such a huge investment, they said.

According to the tender document, the winning bidder must pay the government a land premium of HK$1.02 billion for the 1.32 million sq ft phase one development, while reimbursing the MTRC HK$770 million for foundation work and the cost of building a shopping mall.

MTRC property director Thomas Ho Hang-kwong said the tender would go to the company that offered the best terms to the MTRC. The tender documents require that at least 25 per cent of sales profits go to the MTRC.

He said the division of the project into two phases would keep the initial investment manageable.

"The winner has to pay the land premium for phase one and reimburse HK$385 million to the MTRC after the contract has been signed.

"The remaining reimbursement can be paid after 2-1/2 years while the land-premium application for phase two is taking place," he said.

The developer would be free to decide the timing of the phase-two land-premium application, Mr Ho said.

Nan Fung Development project director Donald Choi agreed that splitting the land premium and reimbursement into two installments would benefit the winning developer by limiting its capital tie-up.

"It's good to divide the land premium into two phases. If the market is going up, the paid land cost will be seen as cheaper. On the other hand, the developer is insured if the market is going down," he said.

He said the premium charge and the reimbursement cost appeared to be reasonable.

Mr Choi said the project would be profitable with development costs of about HK$2,500 per sq ft, against a selling price in the low HK$3,000 per sq ft range.

He said Nan Fung was studying the possibility of forming a consortium to bid.

"It should be considered very carefully due to the huge investment involved.

"The developers will be conservative [in bidding] as they have many choices," he said.

But Nan Fung would be more aggressive in bidding for the luxury residential sites to be auctioned by the government in December and next February, Mr Choi said.

New World Development senior property development manager Andrew Choi Fook-ming said the group had the project under detailed study.

"We might consider a possible venture partner.

"The development has transportation potential but should be considered very cautiously," he said.

He estimated that average flat prices in Tseung Kwan O were below HK$3,000 per sq ft, and market sentiment was deteriorating due to oversupply and economic stagnation.

Surpass Property Strategy Consultant managing director Charles Lai said property prices in Tseung Kwan O were under pressure, meaning developers would not bid keenly for the project.

"Prices in Tseung Kwan O are declining. They could slide to below HK$2,500 per sq ft," he said.

However, "the development can be attractive in terms of its relatively low premium," he said.

The land cost for the phase one development is about HK$770 per sq ft - 10 per cent less than the HK$850 per sq ft premium set in June for a development at Hang Hau Station which, like Tiu Keng Leng, is on the Tseung Kwan O MTR line.

Mr Lai expected a profit margin of more than 30 per cent for the phase-one development, given an estimated development cost of HK$2,300 per sq ft and a sale price of about HK$3,000 per sq ft.

SK Pang Surveyors managing director Pang Shiu-kee estimated the average cost for the project at HK$2,200 to HK$2,500 per sq ft. Finished flats at the nearby Ocean Shores development are priced at HK$3,200 to HK$3,500 per sq ft.

"It will be profitable, but only a few major developers are interested or able to commit to such a huge investment," he said.

Mr Pang said the completed foundation work would save much development time and cost, enhancing the attractiveness of the project.

Sixteen developers had expressed interest in the Tiu Keng Leng Station development.

They include Cheung Kong (Holdings), Sun Hung Kai Properties, Swire Properties, Henderson Land Development, Wharf (Holdings), New World Development, Hang Lung Properties, Sino Land, Kerry Properties, Nan Fung Development and HKR International.

Phase one comprises 1.32 million sq ft of developable area and includes 1,676 residential units and a 180,000 sq ft shopping mall. Phase two comprises a buildable area of 1.4 million sq ft to accommodate 2,096 residential units.

The MTRC has already awarded two property projects this year, one at Hang Hau Station and the other at Tseung Kwan O Station.

The Urban Renewal Authority also successfully tendered two projects in Tsuen Wan and Western.

Kowloon-Canton Railway Corp also plans to tender two projects - Tsuen Wan West Station along the West Rail line and Ho Tung Lau redevelopment in Sha Tin - but the process has been held back by premium settlements.

5. Peak house to attract strong interest
KENNETH KO, SCMP 16 October 2002

The detached house at 18 Peak Road has a pool, garden and garage.

John Swire & Sons, the privately held parent company of Swire Group, is offering a detached house on The Peak for sale by public tender.

Raymond W. F Ho & Co director Raymond Ho Wing-fai, who is handling the tender, said: "Although the marketing campaign officially commences today, several developers and homebuyers have already shown considerable interest."

The two-storey detached house at 18 Peak Road has views over Victoria Harbour. It spans a site area of about 14,000 square feet and the saleable area of the house is about 5,000 sq ft, with private swimming pool, garden and garage.

Mr Ho said the house was built in the 1940s but added that the construction, design and location had made it one of the finest and most desirable houses in Hong Kong.

He said vintage properties did not come on the market often and it would sell for a good price. The tender closes on November 20.

"Buyers may seek to retain the existing dwelling, by preserving the heritage and structure while carrying out a complete internal renovation," he said.

The property also presented redevelopment potential for a new single house or a townhouse complex.

The maximum plot ratio is 0.5 times, while the number of storeys can reach four, according to town planning restrictions.

It is understood that John Swire & Sons previously had secured an approved plan to build two three-storey houses totalling about 7,100 sq ft on the site.

Separately, the company's listed flagship Swire Pacific is building four houses totalling 14,500 sq ft on a 29,000 sq ft site at 3 Coombe Road, the Peak. Mr Ho said the single-house sector remained active, with many transactions and new buyers despite the sluggish property market.

While supply of single houses was scarce, owners had strong holding power, which enabled the market to outperform other sectors, he said.

Mr Ho said the house at 18 Peak Road would attract strong interest from buyers. "We anticipate this tender will create a new market price," he said.

Agents said transaction prices of single houses were in the region of HK$15,000 to HK$20,000 per square foot based on the saleable area of houses. The biggest transaction of luxury houses on The Peak in the past year was the HK$230 million sale of The Genesis, at 23 Severn Road. Publicly listed Shimao China acquired the property last December.

In February, a two-storey detached house at 16 Peak Road sold for HK$88 million. A four-storey 9,000 sq ft house at 20 Repulse Bay Road was recently sold for HK$136 million.

In 2000, a house at 71 Peak Road sold for about HK$80 million, while a house at 30 Peak Road changed hands for HK$130 million and a house at 22 Barker Road sold for HK$163 million.