The $130 million government-sponsored event, due to be held at the Tamar site from next Wednesday to November 9, has also come under fire for 'dumping' huge amounts of cash without consulting key industry figures. They believe the fees will inflate the future costs of staging events in the city.

In a bid to defuse the dispute, Harbour Fest organisers yesterday scheduled a meeting for 3pm today. They are also expected to announce further details on programme and ticketing arrangements.

Concert promoter Pato Leung Pak-to said the local showbusiness industry had been shown scant regard by the event's organisers and the government. Harbour Fest is being organised by the American Chamber of Commerce and InvestHK, the government's investment arm, as part of post-Sars recovery efforts.

'They [the government] should consult the private sector, rather than rushing ahead and making lots of mistakes,' Mr Leung said. 'It should be done by professionals who have contacts in that field, this is very unprofessional ... they have not even contacted us.'

Another music industry source said: 'They are doing their own thing and the existing industry has not been consulted. Most people who are in the business are beside themselves, and without sounding too negative, it could be very damaging and undermine our future prospects.'

He likened the handling of Harbour Fest to the government 'coming into the retail sector, opening up a number of boutique shops across the city and giving away designer clothes for free'. He said asking local artists to perform for free showed 'nothing but contempt' for the local situation.

It is understood the Rolling Stones were offered about US$5 million to headline the festival. This is believed to be more than double the fee settled on to play in Hong Kong earlier this year.

Other superstars, including Sting, Kylie Minogue, Britney Spears, Santana, Cher, Craig David and Irish boy-band Westlife, have been offered up to US$1 million each to appear on the as-yet unconfirmed line-up, sources say.

But industry sources said organisers had approached some local artists and promoters asking for Hong Kong's top stars to appear for free. Local performers understood to have been invited include Nicholas Tse Ting-fung, Twins, Boy'Z, Eason Chan Yick-shun, Yumiko Cheng, Candy Lo Hau-yam, Leon Lai Ming and Andy Hui Chi-on.

Artists, record labels and talent promoters were told the event was in the interests of 'patriotism' and 'supporting Hong Kong', sources said.

The bold request has driven a rift into the city's entertainment industry, with some outraged by the disparity amid concerns from legislators about the use of public money from the $1 billion Sars recovery fund to support the festival.

Neither event organisers nor InvestHK were willing to discuss the dispute, except to say the showcase festival was 'a non-profit-making event'.

A spokeswoman for InvestHK added: 'The government is in full support of the event, which serves not only as a great attraction to both the local community and tourists, but will also help boost Hong Kong's image as Asia's world city.'

He said the government's financial commitment was not expected to top $80 million of the $130 million total cost.

'All revenues generated will be ploughed back to offset the operation costs. It is expected to generate revenue in the region of $50 million,' she said. '[After] the positive initial feedback to the festival, we are optimistic that more revenue will be generated from the proceeds of ticket sales and commercial sponsorship.'