date: 2 June 2005
This paper represents the views of the Hong Kong Sustainable Development Forum (hereafter HKSDF) regarding the HKSAR Governments (hereafter the Government) proposal plan to develop the west Kowloon harbour front area in to West Kowloon Cultural District (hereafter WKCD).
The Government's public consultation period commenced on 10th December 2004, initially at the Hong Kong Science Museum, TsimShaTsui, and has been subsequently extended until 30th June 2005 visiting various locations around the territory.
Whether or not Government's proposal to create a cultural district in the west Kowloon area is the best choice for Hong Kong is a subjective opinion, and beyond HKSDF's remit. However, ensuring that sustainability principals are upheld for government works is within our scope, therefore this paper represents the HKSDF's view regarding the sustainable development aspect.
Government's original invitation attracted five bids. However, it is disappointing to find that only three proposals are exhibited.
HKSDF is gravely concerned that sustainability principles are once again being violated, and that certainly falls within our terms of reference.
There are several critical questions that remain un-answered and the HKSDF believes the project, as presently structured, is critically flawed, unfairly biased, and not sustainable.
In 1996, the creation of a world class culture hub raised by government in response to a perceived need resulting from a survey of tourists visiting Hong Kong1.
Broadly, the plan requires that the area, formerly known as the west Kowloon reclamation should be developed to create a self-financing arts and cultural facilities. The harbourfront plot is approximately forty (40) hectares of land situated west of Canton road.
In April 2001, the Government launched a concept plan competition, inviting conceptual proposals for the development of a waterfront site at the southern tip of the West Kowloon Reclamation into an integrated arts, cultural and entertainment district.
The design competition results were announced by the chairman of the Jury, Lord Rothschild, at a press conference on 28 February 20022.
In September 2003, (05.09.2003) the Government announced the Invitation for Proposal to develop the West Kowloon Cultural District3 largely based on the winning competition entry from Sir Norman Foster.
On 10th November 2004 the Government announced the stage 1 results4. After vetting five proposals for the WKCD, the panel announced that two proposals were rejected. The remaining three proposals would be exhibited for consultation commencing in December 2004.
The Chief Executive's policy address in 19994 was historic, a promise, affirming that Sustainable Development, for the first time, would become a key policy objective.
Mr CH Tung announced the creation of The Council for Sustainable Development, the council being tasked to report upon, and announced that sustainability assessment reporting would become the norm for major Government initiatives5 with departments and bureaus charged with pursuing Sustainable Development policies.
Although reaffirmed in the 2000 policy address6 implementation and execution of the policy has failed to materialise. To date, the council only being able to conduct a solitary consultation.
After sweeping aside past assurances, stakeholders are now being asked to accept new assurances, presumably these are more reliable than the last.
The Government's attitude "trust us we know best" is not acceptable. Too many embarrassing incidents have shown the problems, Government which has an appalling track record since 1997, including the Sustainability Development Assessments, citied in the 1999 policy address5 which have not materialised.
The promised six month consultation period for WKCD, emerged in December 2004, was trimmed down to six weeks7. The immediate outrage sparked an immediate extension.
Increasingly, the general public have become sceptical of real motives of Government officials. There are many examples, for example in 1994, the Government assured stakeholders that a large public park would be a prominent feature - unfortunately this assurance was omitted for the Government written IFP (Invitation For Proposal) - no large public park is included (notwithstanding the roof top gardens included in one proposal).
After officials decided that Hong Kong needed additional cultural facilities, the question quickly turned to finance. Unfortunately, with the public purse suffering multi-billion dollar deficit, and revenue thought to be in decline, public funding couldn't be committed to the venture.
The Government's solution, employ BOT (Build, Operate & Transfer) strategy. However, the potential income from cultural facilities alone, likely be un-attractive to prospective investors, would need to supplemented. Therefore, the project area was widened to include residential development rights.
The WKCD is a pure property development, with culture district attached, that utilises a BOT (Build Operate Transfer) financial model.
A properly employed BOT is a valuable tool, leveraging the competitive and commercial advantages of the private sector to finance public works projects, an attractive option for Governments holding a significant budget deficit.
This is would not be a new strategy, and not new for Government. For example, the central cross harbour tunnel was constructed using a BOT.
The private sector provides the funding and operation of the asset for a pre-determined period, typically ten or twenty years, thereafter the asset reverts to Government (public) ownership. The Government gains a valuable public asset without drawing upon limited public funds.
A critical feature of BOT projects is the contract terms and conditions, in the case of the central cross harbour tunnel, toll rates were specified. However, the WKCD contract is weak, with little detailed requirements specified.
The detail and scope of the financial arrangements, land premium charges, rates, profit sharing, etc. between bidders and Government are deemed proprietary and Government has decided not to released details to the general public.
The Government have repeatedly stated that the WKCD project will be self-financing project, requiring no direct Government funding8 yet the value of the land in this transaction is overlooked.
The HKSDF believes that the WKCD BOT fifty year term is excessive. International banks and financial institutions dare not lend or offer terms for fifty year period, where ten years is the norm, simply because a valid risk assessment is not possible. However, it seems that the Government has better advice.
Where are the safeguards? it is easy to foresee a number of scenarios where the developer may escape the commitment. For example, war, flood, or civil commotion - all standard exclusion clauses, will that leave the public purse scrambling to fund the Governments icon?
These and other questions remain unanswered.
Don't you think it is puzzling, in a town where ninety eight percent (98%) of organisations are classified as SME (Small and Medium Enterprises), the proposed WKCD procurement route excludes everyone except the largest property development corporations.
The Government's chosen procurement method has been termed the single developer model for constancy we will use the same terminology.
The primary reason for selecting the single developer model for the WKCD project are believed to be:
The Government has chosen to appoint one organisation to be entirely responsible for planning, building and operating the district on a self-financing commercial basis. Every project, whether Governmental or private sector, each decision needs to be considered, having certain advantages and disadvantages:
The scale of the proposed development is vast, forty hectares is considerable portion of Kowloon under the control of one single developer, detailed consideration of the possible consequences must be demanded.
Although the community concern regarding the single developer model have been loudly voiced Government officials9,10 have repeatedly stated that the project can, and will only proceed using the one single developer model.
Real estate experts opine that the successful proponent, will effectively gain control over the Kowloon property market for the next fifty years - is that sustainable? Mr Michael Suen Secretary for Lands rebuffed the concept stating that it is extremely far-fetched to suggest that the WKCD will control or monopolise the market11.
There is no comfort to discover that HKSDF is not alone in its objection to the the procurement method. A review the Hong Kong Institute of Architects (HKIA) web-site (reviewed on 5.12.2004) revealed an identical view in its letter dated 18 October 200412
The HKSDF questions the validity and legality of this procurement method.
The Government, tasked with spending public money, is required to comply with the HKSAR Basic Law Article 106 and 110.
The Government developed procurement procedures13 providing a number of procurement methods. All methods are based on the WHO principles including openness, fairness and transparency.
The official tendering procedure was open, fair, and transparent. However, did Government stack the deck, un-fairly favouring one or more parties by only considering the single developer model - undoubtedly affirmative.
The theory is the Government is not funding the project, the BOT method as mentioned herein will mean private sector funding and expertise will develop the site. However, that blinkered view overlooks land value.
Unlike other developments, where land is sold transparently at public auction, this project will be different. At present day prices, various experts have estimated that the forty hectare site has a value of between $100-$200 billion dollars.
Conveniently, one might argue that since the Government is only providing land, this permits the administration to leapfrog public and LEGCO examination, and avoid sustainability issues.
Equally troubling, three out of five proposals that have been reviewed and push on to the next stage all violate the Government's own IFP, where the developments plot ratio14 of 1.8 is clearly stated.
These three proposals all exceed the IFP mandate, one with a plot-ratio of 4.3. - that is three times more than the allocation, equalling approximately 172 hectares of concrete.
Government officials with no compliant bids have defended the developers, and responded to the criticism citing stated that developers will have to justify their deviance - indeed.
The Canopy, the most visible and somewhat controversial element of the proposals, has sparked heated debate.
The Canopy, specified to enclosure fifty five percent (55%) of the development15 will cost billions to construct and and more millions to maintain. In addition seems to be the primary reason for choosing the single developer model.
As mentioned herein, the financial information including that for the Canopy is considered propriety and has not been released to the public.
It is interesting to recall that the Canopy concept emerged from the Sir Norman Foster's winning competition design. The terms of which excluded financial, plot ratio limitations, and ancillary residential developments.
Without doubt the single developer model is the easiest and simplest option for Government, demanding a Canopy supports the single developer model and certainly eases the administration if only one contract is required.
Many of the grave concerns detailed herein, the finance, the single developer model and the canopy are closely intertwined. The HKSDF believes that the Government must act, transparently, to resolve these concerns. The Government's response must consider the views of the community first, and not administrative convenience.
The primarily advantage of the single developer model is simple, contract administration is simpler, one developer, for the Government it is the path of least resistance.
The WKCD must serve the needs of community, not the desire for Government officials to reduce their workload.
Indeed, if the Government sincerely believes this concept is the most suitable method for reducing administrative tasks, one must apply the concept across the entire Government to reduce officers workload contracts for EMSD, Housing Authority, etc. must be outsourced.
Alternative viable solutions exist to address the elemental concerns raised herein. However, the root cause, Governments blinkered overly simplistic view, is in need of drastic measures to re-align with stakeholders views.
The HKSDF believes the Government should amend the project
This section is reserved for links to internet resources regarding the for the West Kowloon Cultural District:
What are your views? disagree with HKSDF's response paper? Let us know your thoughts and views contact HKSDF