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1. Rivals size up West Kowloon arena

2. People's faith in cultural hub must be restored

3. Coral find in Victoria Harbour hailed

1. Rivals size up West Kowloon arena
PEGGY SITO and SANDY LI, SCMP 22 December 2003

Could an unholy alliance between Hong Kong's two largest property players be in the making?

Sun Hung Kai Properties (SHKP) and Cheung Kong (Holdings) have emerged as the only two developers to support the government's plan to hand the highly divisive West Kowloon cultural project to one bidder.

Property circles are abuzz with reports the two firms are set to seal a joint venture that will leave them in control of what may emerge as the most important single property project in Hong Kong for years to come.

The 40-hectare site of prime reclaimed land has pitted the government against a disparate partnering of artists, community groups, property professionals and most of Hong Kong's small and mid-tier developers.

No decision on the winning player will be made until June 19, the deadline having recently been extended by three months, but Chief Executive Tung Chee-hwa appears in a hurry and is unwilling to brook alternatives to the single developer plan.

Much of the public debate has centred on design aesthetics and culture politics - what kind of cultural monument? Serving what purpose? To be run by whom?

Property developers have come away bruised in this highly charged debate, being accused by Chief Secretary Donald Tsang Yam-kuen of deceit in pursuing their narrow self-interests by arguing for the project to be sub-divided among different firms.

Their fear is that the proposed glass entombed "culture hub" will mushroom into a gargantuan commercial and residential project with museum facilities as an after-thought.

An executive at a developer said: "Let's be honest; the way this thing is being set up means that the cultural facilities are nothing more than a land cost to be factored into negotiations."

Neither Cheung Kong nor SHKP have ruled out a joint effort, with the latter saying it was too soon to talk about partnerships and the former not returning calls on the matter.

Fears of a knock-out bid by the big two firms increased after the Town Planning Board's December 12 decision to yield control over key planning stages of the West Kowloon cultural district.

The largely unrestricted zoning decision for the site means the chosen developer will be given a free hand in planning density levels of cultural, commercial, hotel and residential space. Critics say the decision means any meaningful public oversight of the project has been yielded.

As a result, the final project will be carved up behind closed doors with the winning player dictating the shape and size of the project as a consequence of land premium negotiations.

That process will revolve around the cost of building and operating the yet to be decided cultural facilities for the 30-year term of the contract.

Speculation about a joint bid by Hong Kong's two big players is rooted in a belief the project is so critical, yielding the winner such control over future market supply and pricing, that a joint venture between the usually bitter rivals is inevitable.

A property analyst said: "Neither can afford to lose and you don't have to be a game theorist to work out that they have no choice but to co-operate."

Market sources told the South China Morning Post the two firms were in the final stages of securing an equity alliance.

That was disputed by SHKP's executive director Michael Wong Yick-kam, who last week said: "We have to formalise our proposed plan before thinking of seeking partnership."

He declined to comment on any alliance with Cheung Kong but said he did not rule out the firm seeking partners.

So far, submissions of interest have come from nine local property developers that include Wharf (Holdings), Sino Land and Henderson Land Development, and two overseas applicants.

Last week, Mr Tsang moved to quell the brewing suspicion of an oligarchic carve-up, arguing that at least 12 property developers were eligible under pre-qualifying criteria.

That was disputed by many developers and Hang Lung Group chairman Ronnie Chan dubbed the approach as "structurally unfair" because the capital involved ruled out most players.

Many in the artistic community argued that bundling the project as a composite commercial and cultural facility meant aesthetic concerns would inevitably be subsidiary to commercial demands.

Few see much evidence in the big two developers' building histories to inspire confidence that a world-class cultural facility will emerge.

The chances of a foreign group making a blockbuster bid appear slim, given the amount of money involved and the political nature of the project.

One executive said: "This is a local land play pure and simple."

Planning officials had said the venture would not deteriorate into a sprawling housing project with public facilities as an expensive add-on.

Deputy Secretary for Housing, Planning and Lands Thomas Tso Man-tai said: "I understand the market's concern that the cultural hub will eventually turn into the winning developer's land bank.

"But this is not the case."

He said he was not aware of a possible joint venture bid by Cheung Kong and SHKP and it was too early to comment on issues raised by consortium bids.

Under British architectural firm Norman Foster's chosen design, sponsored by SHKP, more than 30 per cent of 7.3 million sq ft of the site is designated for arts and culture, with the remainder slated for commercial, residential and government facilities. Those development densities are, however, only a starting point and subject to amendment by the winning bidder in consultation with government planners - a process greatly simplified by the Town Planning Board's decision to effectively remove all zoning constraints.

Market speculation is that a revised plan under a joint venture bid by the two big firms will probably be up to 10 million sq ft of residential development - sufficient to build up to 20,000 flats, based on an average size of 600 sq ft each.

A senior executive at a property firm said: "The best way to maximise profit from the project is to turn it into a residential-led development."

Rival developers were concerned that if the two big firms scooped the project on the basis of a cheap land premium they would be able to sell units cheaply for many years and still earn handsome margins.

One developer said: "The government would have handed control of private sector supply to the two biggest players and they would effectively set all benchmarks controlling the rate of new supply. The rest of us will be left fighting for scraps."

To give some idea of the size of the housing project apparently being contemplated, existing housing projects around the Kowloon Station area are slated to accommodate 5,500 flats.

The supply of new units across the whole market is expected to be 30,000 next year.

A collapse in private sector building activity in the past four years, together with cancelled subsidised housing schemes and the two public rail firms being held in abeyance means housing supply is expected to collapse in the medium term.

Mr Tso appears receptive to the fears being expressed. "We are not going to build another Taikoo Shing in Hong Kong. It is not what we want to see. Developers can apply to turn the project into residential use but we definitely will not approve it," he said.

Analysts said the question was whether the best laid plans can resist substantial vested interests, the relentless economics of Hong Kong property development and Mr Tung's apparent determination to push ahead at all costs. Memories are still fresh on the government's decision to grant the Cyberport project to one developer, in the name of a bigger purpose, in this case to foster high-technology development.

Other developers also point to the 1996 case of the Tuen Mun River Trade Terminal public tender that was awarded to a consortium led by Hutchison Whampoa and SHKP in a rare co-operation.

In that case, a separate $2.38 billion bid submitted by New World Development and Henderson Land was rejected despite it being more than double that submitted by the winners.

Hong Kong's smaller developers already seem resigned to their fate.

One executive said: "The partnership of the two heavyweights, if it materialises, will become unbeatable. Who else can defeat such a strong team?"

What kind of cultural project eventually emerges on the prime Kowloon waterfront is still up for grabs. However, one developer asked poignantly of the emerging tower blocks at the Pokfulam technology hub: "When you go to Cyberport today, what kind of project do you think it is?"

Additional reporting by Simon Pritchard

2. People's faith in cultural hub must be restored

An arts hub in West Kowloon has been a government ambition dating back to Chief Executive Tung Chee-hwa's 1998 policy address. With the tendering process under way and set to end next year, the plan will soon become reality. But before construction has begun on the 40-hectare reclamation set aside for the project, West Kowloon has already become shorthand for controversy.

That is because the government has decided on a very unorthodox method for building the cultural centre. The entire site will be handed over to one builder, which could be an individual developer or a consortium of developers. The responsible entity will have a contract to design and build the project, as well as rights to operate the site for three decades. Instead of funding the construction or the operation of the theatres, museums and galleries, the government's subsidy will come in the form of a land grant. This is a formula that we have supported because it allows the project to go ahead despite budget constraints.

But because this is the last large parcel of harbourside land and because it represents possibly Hong Kong's last chance to "get it right" with a showcase venue we can be proud of, it is in the city's interest to make sure the concerns that have been raised are addressed and that safeguards are in place to ensure the resulting project does serve the arts and the public.

As a privately led arts project of this scope has never been attempted anywhere else, Hong Kong is in uncharted territory. The government has used a similar approach for building infrastructure such as railway stations and the Airport Express, but the additional goal of creating spaces to host top-drawer entertainment acts and art exhibitions means that West Kowloon will be more complicated.

Some of the loudest objections have been heard from the city's property developers. Their fears stem from the project's inclusion of housing and commercial property. They wonder whether a sweetheart deal is being lined up for one or two of the city's largest developers, a deal that could distort the market for years to come because of its sheer size.

The Town Planning Board's decision this month to waive its right to review the land use of individual parts of the project has only fuelled such speculation. The arts community, likewise, is worried that handing the cultural hub over to companies that have far more experience building residential towers than with museums or galleries will mean the arts get short shrift in the end. Both groups point to the Cyberport development, meant to foster a Silicon Valley atmosphere in Pokfulam, as a cautionary tale. There, luxury flats have been selling at a swift pace, while technology labs and other hi-tech dreams have been slow to materialise.

Chief Secretary Donald Tsang Yam-kuen insists the tender process will be conducted with maximum transparency and that the final, approved project will be brought before the Legislative Council and the Town Planning Board for discussion. There are additional steps that could be taken in the interest of such transparency. The government should consider making the short list of finalists public. Revealing the winning project once it is virtually signed and sealed would give arts groups, lawmakers, planners and the public at large little room to object or call for changes. Presenting them with a fait accompli is not true consultation.

Much has also been made of the decision to bypass the Town Planning Board on land-use issues. Critics fear amendments could be made by agreement between the government and the selected developer even after the final plan has been approved. Closing this loophole would do much to restore public faith in the West Kowloon project

3. Coral find in Victoria Harbour hailed
CHEUNG CHI-FAI, SCMP 22 December 2003

Hard corals have been found on the seabed off Stonecutters island and Central, a sign of improving water quality in Victoria Harbour.

The findings have raised hopes among conservationists that the harbour's once-rich ecology may be restored.

They are also expected to spur renewed calls for a further cleanup of the harbour and to fuel opposition to the Central and Wan Chai reclamation.

John Wong Man-kong, chairman of the Hong Kong Society of Marine Conservation, said four types of hard corals were found under the Star Ferry pier, close to the Central reclamation site. The corals were found by divers commissioned to carry out engineering works in the area and are believed to be species commonly found within Hong Kong waters.

Mr Wong said the discovery of the corals was not surprising as Victoria Harbour used to be a rich marine habitat.

"Decades ago it was not unusual to find corals in the harbour. There was a variety of marine life in the harbour at that time - as cross-harbour swimmers back then would know," he said. "If these corals are under the Star Ferry, I believe other corals could also be found elsewhere in the harbour."

Benny Wong Yiu-kam, assistant director of the Environmental Protection Department, said he had heard nothing about the corals found off Central.

But he revealed that corals had been found off Stonecutters island, a naval base for the People's Liberation Army's Hong Kong garrison.

That finding was made in a just-completed study of selected sites for the Harbour Area Treatment Scheme.

"The study aimed to find out what's down there at the selected sites to help our planning for the harbour sewage treatment scheme. If there is anything significant, we will have to protect it if the scheme goes ahead. But what we have found is not uncommon," he said.

The ecology of the harbour was greatly damaged in past decades as untreated sewage was pumped into the sea.

But the situation improved after the Stonecutters island sewage treatment plant went into operation, handling about 70 per cent of sewage from urban harbourfront areas.

John Wong said the improving water quality had created better conditions, such as a high oxygen level in the water, for marine life to return.

"It has demonstrated that Victoria Harbour has not died or is dying. In fact, it could one day be restored if we continue to clean up the water and protect our harbour from further reclamation," he said.