Conjuring trick with most valuable asset

PUBLISHED : Wednesday, 17 March, 2004, 12:00am
UPDATED : Wednesday, 17 March, 2004, 12:00am

OUR GOVERNMENT HAS a new sleight of hand that it wants to try out on us on an ever bigger scale. This dodge is championed by the Secretary for the Environment Transport and Works, Sarah Liao Sau-tung, who would like us to believe that money can be made to grow on trees.

It goes by the name of public-private partnership model. The idea is that government makes land available for a community centre or a sewage treatment plant or a West Kowloon reclamation and then gets a private sector partner to pay for, build and operate the facility under general government guidelines.

The private partner pockets the profits from running the facility and, if this is not enough to bring it to the party, it gets further development rights, which it can turn into residential or commercial property to sell or lease.

It is simple, you see. Just pluck that money off the money tree. We get community facilities or needed infrastructure and we pay not a cent for these things. They all come for free. The developer picks up all the costs and the public gets the services it wants.

Ahem ... We shall leave aside for the moment that one key attraction to the government of proceeding by this route is that it does not have to get approval from the Legislative Council. Legco gets involved when funding is required but, as there is no funding, there need be no Legco.

What a relief to government officials who would rather do entirely without Legco anyway.

The big difficulty, however, is that this sort of scheme treats public land as if it were as limitless in supply as air. It pretends that valuable property can simply be conjured up in defiance of the hard geography that we have a growing population of 6.8 million people in just a little over 1,000 square kilometres of territory, most of which is in any case unsuitable for development.

Land is by far our most valuable public asset and we have traditionally used it to defray a large proportion of the cost of the public expenditure. We waste it if we ignore its true value in this newfangled way.

The only proper way to allocate public land is not the public-private partnership model but the longstanding conventional public model. When we wish to make land available for development we sell it at auction or by tender for the best price we can get and we treat the proceeds as capital revenue.

If we wish to use it for public facilities, we can make it available at no cost but we should not ignore construction cost or pretend that it is not a cost to the public purse. It always is. We are dispensing treasure from our treasure chest and that treasure chest is not bottomless.

Ms Liao's conjuring trick does not give us anything for free. It is only a government stratagem to create the illusion that government expenditure is being cut when in fact it is revenue that is being cut.

It also encourages wasteful use of land, the inevitable result when true costs are ignored.

But there is more to consider here. Public-private partnerships have actually long been a fact of life in Hong Kong.

We have them everywhere that a monopoly of any form has been granted or that private entities have been allowed the use of public assets.

At the top of that list we can put the power utilities. We have granted them franchises to generate and sell power to us and it is government that determines the terms of those franchises.

We have done the same with the bus companies, with the Mass Transit Railway Corporation, now a privatised company, and with mobile-phone networks that use the radio spectrum over our heads. There are many such examples.

We are very far, however, from having arrived at a consistent and satisfactory framework on the returns that we allow them to generate for their private shareholders from these rights.

It is also becoming an ever more pressing problem for us as the old scheme for regulation of the power utilities is running out and a new one must be in place by 2008.

The bus companies and the MTRC meanwhile are essentially without any such framework at all at the moment and this will have a profound impact on the quality of public transport in our town if not remedied quickly.

So why is Ms Liao dithering with property give-aways for minor community centres when the real questions on the real public-private partnerships are becoming more urgent by the day?

It is time to focus on the things that really matter in your portfolio, madam. Stop playing conjuring tricks and get down to business.