WE SEEM to have had a note of anxiety creep into an appeal last week by Transport Secretary Nicholas Ng Wing-fui for legislative approval of the Route 10 superhighway.
He told legislators that the Government had to rush to build the Route 10 network so that it could link up on time with a cross-border bridge being built across Deep Bay.
His audience seems to have been unconvinced, which is not surprising as Route 10 will cost HK$22 billion and Legco apparently is of the view that the much less expensive option of linking the bridge to the existing Route 3 could be explored further.
Our topic of interest today, however, actually has more to do with another argument Mr Ng made for approval of this scheme on which legislators are due to vote on January 30. He estimated it could earn us HK$295 billion in economic returns over 20 years.
'The economic returns are so huge we should not overlook them,' he said.
It is, indeed, a big number. It amounts to more than 22 per cent of our annual gross domestic product at the moment - and all from a single road. Just think of that. For a paltry HK$22 billion, we could get HK$295 billion back, a multiple of more than 13 times.
Get your hands up in the air, you legislators. How could you possibly turn down a deal like this? If only it were so simple and, of course, it is not.
Economic return is a woolly concept. For starters, the most direct component of that HK$295 billion is the HK$22 billion construction cost. A little sleight of hand and what you thought was a minus becomes a plus - a miracle of economic-return analysis.
Then you can get fancier and make assumptions about how much of that HK$22 billion the recipients of it will spend in Hong Kong. This becomes part of economic return again. Instead of minus one, you now get not plus one but plus two - or even plus three if you start making further assumptions about what the recipients of the recipients will spend in Hong Kong.
Next let us think about road maintenance. The more money spent on it the better. It all goes under the heading of economic return and by that extension of recipient of recipient you may just get it from minus one to plus three again. Then you go to the other side of the equation. You may consider the tolls you will pay for using the completed roadway a cost but, no, they are an economic benefit once more. The higher the toll the bigger the return and, by that extension of recipient of recipient . . .
You have to think plus, not minus. There are no minuses in economic return.
Very well, let us take a real plus. You may find that delivery vans your firm uses get from one delivery to another faster by using the new road. This is definitely a plus, but economic-return analysis can do even more. If you want to do so, you can include in it not just the savings from faster delivery but the entire cost of delivery, the full value of the service your van and driver perform.
Of course, your van may be able to do it just as fast if we spent only HK$3 billion to connect that Deep Bay bridge to Route 3 and that would seem to give us a saving. It does not help economic return, however. We spend less and thus the economic return goes down.
And therein lies the fallacy of looking at economic return. It takes no account of whether we spend the money wisely or badly, only of how much we spend, and it takes no account of whether we could not generate just as much in economic return if we spent the money on something else.
Economic return is no argument for building this road. You pull the wool over your own eyes if you set any store by this HK$295 billion illusion.